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

Saturday, January 14, 2017

week ending Jan 14

 The Story Of The Fed's Shrinking Balance Sheet Starts To Pick Up Speed -One of the bigger, if under-reported, stories to emerge from the various Fed speakers yesterday, is that Fed members, if maybe not Yellen herself, are actively contemplating the reduction of the Fed's balance sheet, and whether credibly or not, it launched not one but two trial balloon efforts to give those traders who are paying attention advance notice. The first one was when Philly Fed's Harker said that when rates hit 1%, the Fed will "need to look at unwinding its balance sheet"; several hours later St. Louis Fed's Bullard added that a "balance sheet rolloff may be better than aggressive hiking." Overnight, that theme was noticed by various sellside analysts, who are now making a Fed balance sheet rolloff their base case for 2017, most notably the head of rates strategy at RBC, Michael Cloherty, who in a note previewing the Fed's balance sheet over the next year, says that "the Fed's balance sheet will start shrinking in Q4 of this year. Fed Chairs usually like to get major initiatives under way before they leave, and Yellen is likely to feel more strongly about that because some potential successors have talked about a relatively disruptive balance sheet reduction " Here is the rest from RBC's Cloherty, who appears more concerned with the impact of such a rolloff on the MBS market rather than TSYs. We disagree, but we'll cross that bridge when Yellen does suggest that balance sheet reduction is indeed what she is contemplating. We think the Fed's balance sheet will start shrinking in Q4 of this year. Fed Chairs usually like to get major initiatives under way before they leave, and Yellen is likely to feel more strongly about that because some potential successors have talked about a relatively disruptive balance sheet reduction (sales). The Fed will not sell. When the Fed was buying they targeted the issues investors most wanted to sell, so liquidity was sufficient to do large volumes every month. But if the Fed sold, they could only sell what they own. And they primarily own a mix of high WALA mortgage pools and deep off-the-run Treasuries, which have a very different liquidity profile.  Instead they will stop reinvestment and mature their portfolio away. We look for an extended taper lasting almost three quarters.

Fed officials see quick economic boost from Trump, risks to follow | Reuters: Federal Reserve officials cautioned on Thursday that the fiscal and tax plans sketched out by the incoming Trump administration could trade a short-term economic boost for longer-run inflation and debt problems they might have to counteract. Fed regional bank presidents, in an array of appearances, agreed in principle that the policies President-elect Donald Trump is likely to pursue will increase economic growth - through direct spending, the consumption and investment spurred by tax cuts, and the boost to business from lighter regulation. In a recent survey of businesses in the southeast, said Atlanta Federal Reserve President Dennis Lockhart, executives expressed "optimism around the prospect of fiscal stimulus, tax reduction, spending on infrastructure and some amount of deregulation." But at this point the economy does not really need much short-term help, said Chicago Federal Reserve President Charles Evans, speaking to the American Council of Life Insurers. It needs longer term strategies to expand a labor force constrained by issues like population aging and lagging productivity. The new administration is taking over "at a time of arguably full employment," Evans said. "The U.S. economy could experience a burst of four percent growth for a year or two or more...But unless this is accompanied by sustainable structural improvement in labor and productivity growth, such GDP growth would ... ultimately lead to more restrictive financial conditions." Lockhart, who retires at the end of next month, said that if inflation moves too quickly the Fed may be forced into "preemptive" rate increases. Their comments and those of other colleagues showed the dilemma the Fed now faces. After years of hoping other arms of government would do more to help the economy, and ease the demands on the central bank, they now face a situation in which the White House and Congress may try too much too fast.

The Fed in an Age of Uncertainty -- On 14 December 2016, in a widely predicted move, the US Federal Reserve announced that it is raising the federal funds rate by one quarter of a percentage point, taking its target band for short term interest rates to between 0.5 to 0.75 per cent. More importantly, it signalled a change in the stance of monetary policy, by suggesting that there are likely to be three more rate hikes over 2017, and predicting that the long term interest rate, which has been in decline, would rise to 3 per cent. There has in recent times a growing consensus that the US Fed has continued with a loose monetary policy, with near zero interest rates and ample liquidity, for far too long. Low interest rates and large scale bond buying had led to asset price inflation that increased inequality and threatens another melt down in financial markets. Yet, each time the Fed was expected to reverse the low interest policy, it held back claiming that it feared it would abort a halting recovery from the Great Recession. That fear has not gone away. While there is talk that the US economy has recovered enough to approach near-full employment with a tight job market, that view does not take account of the large numbers who had dropped out of the labour market during the recession and need to be brought back to restore pre-crisis employment levels. The real reason that the Fed has chosen this time to go the way it should on the interest rate front is the conviction that political circumstances have shifted focus from monetary to fiscal policy when it comes to spurring growth. The source of this conviction is the Trump campaign that promised to cut taxes and boost infrastructural spending to stimulate growth. Trump’s victory based on an economic platform that promised such a stimulus, if implemented, would amount a major reversal in the macroeconomic stance adopted by developed county governments for quite some time now. Trump claims that what needs to be done is to stimulate demand and incentivise private investment with tax cuts and drive growth and jobs with substantially enhanced infrastructural spending. The logic of how this strategy could be pushed without a runaway increase in federal deficits and public debt, which financial investors and many in Trump’s transition team would object to, is nowhere near clear. There is little reason to believe that Trump himself would want to displease finance capital by allowing deficits to widen, especially given his decision to appoint ex-Goldman Sachs partner and hedge-funds manager Steven Mnuchin as the Treasury Secretary in his administration.

 Federal Reserve Sent $92 Billion in Profit to U.S. Treasury in 2016 - WSJ: Remittances from the Federal Reserve to the Treasury Department fell to $92 billion last year, the U.S. central bank said Tuesday, a long-anticipated decline that officials have said was likely once interest rates start to rise. In total, the Fed’s net income declined by $7.6 billion last year to $92.7 billion, primarily as a result of higher interest payments it made to banks on the reserves they park at the central bank. Those payments increased by $5.2 billion last year. The Fed also earned $2.5 billion less in interest income as a result of changes in the composition of securities held in its System Open Market Account. The Fed said the figures released Tuesday are preliminary and could be adjusted when its audited financial statements are released in March. Remittances to Treasury have grown substantially in recent years along with the size of the Fed’s balance sheet following a series of bond-buying programs the Fed launched to try to stimulate the economy. The Fed earns interest on those bonds as well as income from other sources. Under law, it uses the revenue to cover its own operating expenses and sends the rest to Treasury’s general fund to help pay the federal government’s bills. The Fed sent a then-record $97.7 billion to Treasury in 2015, which followed a previous record $96.9 billion payment in 2014. By contrast, the Fed sent just $31.7 billion to Treasury in 2008.

The Fed and fiscal policy: Ben Bernanke - Markets have responded strongly to Donald Trump’s election victory, pushing up equities, longer-term interest rates, and the dollar. While many factors influence asset prices, expectations of a much more expansionary fiscal policy under the new administration—higher spending, lower taxes, and larger deficits—appear to be an important driver of the recent market moves. The Federal Reserve’s reaction to prospective fiscal policy changes has been much more cautious than that of the markets, however. Janet Yellen in December described the central bank as operating under a “cloud of uncertainty,” and the forecasts of Fed policymakers released after the December FOMC meeting showed little change in either their economic outlooks or their interest-rate projections for the next few years. How does the Fed take fiscal policy into account in its planning? What explains the large difference between the reactions of the Fed and the markets to the change in fiscal prospects since the election? I’ll discuss these questions in this post, concluding that the Fed’s cautious response to the possible fiscal shift makes sense, given what we know so far. ... Consequently, to assess the appropriate monetary response to a new fiscal program, Fed policymakers first have to evaluate the likely effects of that program on the economy over the next couple of years. The econometric models used at the Fed for constructing forecasts tend to summarize fiscal effects in terms of changes in aggregate demand or aggregate supply. For example, a rise in spending on public infrastructure, or a tax cut that prompts consumers to spend more, increases demand. Fiscal policies also affect aggregate supply, for example, through the incentives provided by the tax code. To project the impact of a proposed fiscal package on the economy, Fed modelers and policymakers must assess the size and timing of these demand and supply effects, which they do based both on theory and historical experience. 

Monetary Policy Can’t Levitate a Broken Economy - Tom Ferguson - Central bankers today irresistibly bring to mind the Wizard of Oz. not just because of all the barely disguised political and economic cognates Frank Baum stuffed into his classic—William Jennings Bryan as the cowardly lion, “Oz” as an abbreviation for an ounce of gold, and so on. No, it’s the characters’ missing virtues that grab me: a heart, a brain, and courage. Central bankers today lack all three. First, the brain. Two generations ago, almost every economist knew what a catastrophe a deficiency of effective demand could create. And in a real crunch, they knew what to do about that. They realized you couldn’t push on a string, so somebody — the government — had to borrow and spend when private markets would not. From the 1980s on, though, the fundamental Keynesian point — the Principle of effective Demand —disappeared in a cloud of statistical double-talk that, when you deconstruct it, turns out to imply estimating potential output as a lagged function of whatever foolish policy is being pursued.  Next, courage. In the good old days, central bankers were given to heady talk about “taking away the punch bowl” before the party really got going. That may have been mostly rhetoric, but it at least paid lip service to some value bigger than banking. Contrast the Fed and the European Central Bank in recent decades. The European Central Bank barely moved a muscle as banks in the center moved wave after wave of money to the European periphery in the heady run-up to 2007–2008. The failure to take even a baby macro-prudential step to restrain the capital flow, along with the purely political decision to treat every country’s debt the same, were crucial in bringing on the disaster that is still unfolding in the eurozone. Ditto the Fed, waiving details, under Greenspan and Bernanke, especially in regard to real estate lending. They just kept cheering on deregulation, until the whole world collapsed. Is it any wonder so many people no longer trust “experts”? Finally, a heart. The European Central Bank aided and abetted the move to throw the costs of the bank crisis onto the unsuspecting populace of Europe. That was quite a trick: to have the states assume the debts then start beating gongs about excess debt. The Fed took risks to save the banking system, but is already telling us we are close to full employment and professing to be alarmed about “inflation,” when anyone can see that banks, insurers, and pension funds are clamoring for rate rises, just as in the 1930s.

 China and the Fed: how different this time? - Gavyn Davies -- Exactly a year ago this week, the mood in the financial markets started to darken markedly. As 2015 had drawn to a close, financial markets had seemed to have weathered the first increase in US interest rates since 2006 in reasonable shape. The Federal Open Market Committee had telegraphed its step to tighten policy in December 2015 with unparalleled clarity. Forewarned, it seemed, was forearmed for the markets. Meanwhile, China had just issued some new guidance on its foreign exchange strategy, claiming that it would eschew devaluation and seek a period of stability in the RMB’s effective exchange rate index. This had calmed nerves, which had been elevated since the sudden RMB devaluation against the dollar in August 2015. A few weeks later, however, this phoney period of calm had been completely shattered. By mid February, global equity markets were down 13 per cent year-to-date, and fears of a sudden devaluation of the RMB were rampant. It seemed that the Fed had tightened monetary policy in the face of a global oil shock that was sucking Europe and China into the same deflationary trap that had plagued Japan for decades. Secular stagnation was on everyone’s lips. We now know that the state of the global economy was not as bad as it seemed in February, 2016. Nor was the Fed as determined as it seemed to tighten US monetary conditions in the face of global deflation. And China was not set upon a course of disruptive devaluation of the RMB. Following the combination of global monetary policy changes of February/March last year, recovery in the markets and the global economy was surprisingly swift. A year later, the key question for global markets is whether the Fed and the Chinese currency will once again conspire to cause a collapse in investors’ confidence. There are certainly some similarities with the situation in January 2016. The Fed has, once again, tightened policy, and China is battling a depreciating currency. But there are also some major differences that should protect us this time.

 US’s flawed economic recovery divides Trump and Obama supporters - FT -- Having publicly trashed the US economy’s performance during the presidential campaign, Donald Trump has become its most prominent cheerleader.   The president-elect has in recent weeks claimed credit for surging consumer confidence, stellar equity prices and stronger end-of-year household spending, arguing there was “no hope” before he arrived on the scene.  To Barack Obama’s supporters, claims from Mr Trump that the US was cloaked in economic gloom before November 8 are risible. The seeds for accelerating wages, full employment and rebounding housing equity were laid in 2009 during the financial conflagration, they argue, with the subsequent recovery trouncing those of other advanced economies and forming the cornerstone of the outgoing president’s legacy.Yet while today’s US economy is indeed dramatically stronger than the one Mr Obama inherited, the recovery remains a flawed one, riddled with socially dangerous levels of inequality and hobbled by poor productivity growth. Some analysts fear it is an inheritance that Mr Trump could s hatter if he embraces hazardous policy choices such as barrelling into a trade war with China. Mr Obama took on an economy in freefall in January 2009. Mr Trump, by contrast, will next week inherit a country with per-capita GDP that is 4 per cent higher than its pre-crisis peak — outpacing recoveries in economies such as Japan and the euro area.  Real household income growth in 2015 was a record-breaking 5.2 per cent, the stock market is flirting with all-time highs and house prices are close to recovering the losses they suffered in the worst housing crisis since the Great Depression. Since the start of the 1980s no incoming president apart from George W Bush has arrived to a lower unemployment rate.  Still, even the president’s allies do not deny the vulnerabilities that remain in the US economy, among the most important of which is inequality. As Mr Furman’s report for the president showed, the top 1 per cent in the US population clinches a far larger share of income than in the other G7 countries.  While real household income growth jumped in 2015, analysis from the Economic Policy Institute shows that the bottom 95 per cent of households still had incomes that year that were lower than in 2007. 

Visualizing Donald Trump's $20 Trillion Problem - (video, graphics) Only a few days after Trump’s inauguration ceremony, the U.S. National Debt will creep across the important psychological barrier of $20 trillion. It’s a problem that’s been passed down to him, but, as Visual Capitalists' Jeff Desjardins notes, it certainly puts the incoming administration in a difficult place. The debt is burdensome by pretty much any metric, and the rate of borrowing has exceeded economic growth pretty much since the late 1970s. How Trump deals with this escalating constraint will be a deciding factor in whether his administration crashes and burns – or ends up re-positioning America for greatness. Partisans will squabble about who added what to the mounting debt, but the reality is that none of that really matters. Both parties have kicked the can down the road for the last 40 years, and that has culminated in the current situation: Back in 1979, the debt-to-GDP ratio was a modest 31.8%, and the federal government only had an outstanding tab of $826 billion. Fast forward to today, and the perpetual borrowing has added up. The debt-to-GDP is now 104.2%, with the total debt burden nearing the $20 trillion mark.

December 2016 CBO Monthly Budget Review: Total Receipts Down by 3 Percent in the First Quarter of Fiscal Year 2017: The federal budget deficit was $207 billion for the first three months of fiscal year 2017, CBO estimates - $8 billion less than the shortfall recorded during the same period last year. The federal budget deficit was $207 billion for the first three months of fiscal year 2017, the Congressional Budget Office estimates—$8 billion less than the shortfall recorded during the same period last year. But that result was affected by shifts in the timing of certain payments that otherwise would have been due on a weekend or holiday. If not for those shifts, outlays in the first quarter of this year would have been $33 billion greater than those in the same quarter last year, rather than $34 billion less, and the deficit would have risen by about $58 billion. Total Receipts: Down by 3 Percent in the First Quarter of Fiscal Year 2017 Receipts through December totaled $740 billion, CBO estimates—$25 billion less than the sum collected in the same period last year. The largest year-over-year changes were the following:

  • Remittances from the Federal Reserve to the Treasury, which are included in "Other Receipts" in the table below, fell by about $24 billion, largely because the Fixing America's Surface Transportation Act (Public Law 114-94) required the Federal Reserve to remit most of its surplus account to the Treasury in fiscal year 2016.
  • Individual income and payroll (social insurance) taxes together rose by $12 billion (or 2 percent).
  • Corporate income taxes fell by about $10 billion (or 12 percent). For most corporations, the first quarterly estimated payment of those taxes in the current fiscal year was due on December 15.

Outlays for the first three months of fiscal year 2017 were $948 billion, $34 billion less than they were during the same period last year, CBO estimates. If not for shifts in the timing of certain payments, outlays would have been $33 billion (or 4 percent) greater. (Those timing shifts decreased outlays in the first quarter of fiscal year 2017 and increased them in the first quarter of fiscal year 2016.) The discussion below reflects adjustments to remove the effects of those timing shifts. The largest increases in outlays were the following:

  • Outlays for the three largest mandatory spending programs increased by a total of $18 billion (or 4 percent):
    • Medicare spending rose by $7 billion (or 5 percent) because of an increase in the number of beneficiaries and growth in the amount and cost of services for those beneficiaries.
    • Social Security benefits increased by $6 billion (or 3 percent), reflecting typical recent growth in the number of beneficiaries and in the average benefit payment.
    • Outlays for Medicaid rose by $5 billion (or 6 percent), largely because of new enrollees added through expansions of coverage authorized by the Affordable Care Act.
  • Outlays for net interest on the public debt increased by $14 billion (or 23 percent), largely because of differences in the rate of inflation. To account for inflation, the Treasury Department adjusts the principal of its inflation-protected securities each month. (
  • Spending for the Commodity Credit Corporation in the Department of Agriculture, which is included in "Other" in the table below, rose by $3 billion (or 27 percent), mostly because of higher payments for agricultural support programs.
  • Outlays recorded for the Department of Homeland Security and for international assistance programs, which are included in the "Other" category below, increased by $2 billion each (or 18 percent and 38 percent, respectively). 

Who will play the Harlequin? -  J.d. Alt - In a recent essay (“A Strategic Thought”) I suggested that right now is an opportune moment for some brave progressive leader to step out and explain what modern fiat money is, why we’ve been using, in fact, it for the past half century, and how it changes the way we imagine our federal government pays for public goods. Whoever takes on this challenge, I suggested, would be treated as a harlequin by mainstream media and economic pundits—and would be marginalized and shunned by other political leaders on both sides of the aisle. No main-stream politician is ready to hear—let alone agree—that the federal government can issue and spend as many dollars as needed to accomplish whatever the nation has the real resources to undertake. No main-stream economic pundit is ready to hear that our federal “deficit” is a necessary aspect of a healthy fiat monetary system. No main-stream Republican or Democrat is ready to acquiesce to the reality that our national “debt” is not something we have to “repay” to anyone but is, in fact, the savings account of our private sector economy. No main-stream anybody who, by definition, depends on their position in the main-stream idea-flow for their livelihood and personal status, is ready or willing to hear, or even seriously listen to, any of those realities. Yet at some point all of it has to be formally presented and argued on the national stage—otherwise, modern fiat money, and the enormous possibilities it creates for human society, will continue to languish forever as a suppressed and poorly understood reality. Putting modern fiat money on the stage now, I suggested, would have the merit (in the near term) of keeping the conservative deficit hawks activated—which will pose the same difficulty for President Trump as it did for President Obama: it will force him to put any spending proposals through a “budget deficit” and “national debt” logic. This will, in effect, make it virtually impossible for him to spend in any meaningful way—which is strategically important because, as I noted, one of the essential tools of every authoritarian populist is to send a stream of dollars, perks, or rebates to his, or her, voters.

Fed official says strong jobs data rule out fiscal boost – FT - The US does not need a short-term fiscal boost from Congress given it is already at full employment and inflation is closing in on the Federal Reserve’s target, a senior policymaker said, giving a bullish assessment of the economy’s health. John Williams, the president of the San Francisco Fed, told the Financial Times that strong hiring and higher wage inflation, confirmed in Friday’s jobs figures, showed “the stars are aligning” in the US labour market as he signalled support for forecasts of three quarter-point interest rate increases this year. With Donald Trump due to take office next week, Republicans have been discussing radical tax reforms that by some estimates could drive up the federal debt by trillions of dollars over a decade, as well as potential support for public infrastructure. Central banks have over the past decade frequently demanded extra help from their governments amid concern that politicians are relying too heavily on monetary policy. But, given the rebound in the US economy, some within the Fed question whether a budgetary loosening is now needed. While Mr Williams has factored a modest lift to growth from potential tax and spending changes into his forecasts, he said economic policy would be best helped by federal action that ensures a sustainable budget deficit and boosts long-term productivity. He also warned Congress against impinging on the Fed’s ability to set rates by imposing audit requirements or policy rules, amid fresh Republican attempts to clip the central bank’s wings. “If you were to ask me three years ago, four years ago, when unemployment was still high and the economy was still digging out of a hole, I would have said, sure, fiscal policy would be great to help expedite getting back to full employment — short-term fiscal stimulus,” said Mr Williams in an interview. “But today I don’t think we need short-term fiscal stimulus. What we need is really better policies and investments in the long-term health of the economy.”

Deficits Matter Again – Krugman -- Not long ago prominent Republicans like Paul Ryan liked to warn in apocalyptic terms about the dangers of budget deficits, declaring that a Greek-style crisis was just around the corner. But tax cuts would, according to their own estimates, add $9 trillion in debt over the next decade. Hey, no problem. ...  All that posturing about the deficit was obvious flimflam, whose purpose was to hobble a Democratic president... But running big deficits is no longer harmless, let alone desirable.  Eight years ago, with the economy in free fall, I wrote that we had entered an era of “depression economics,” in which the usual rules of economic policy no longer applied... In particular, deficit spending was essential to support the economy, and attempts to balance the budget would be destructive.  This diagnosis was always conditional, applying only to an economy far from full employment. That was the kind of economy President Obama inherited; but the Trump-Putin administration will, instead, come into power at a time when full employment has been more or less restored. ...  What changes once we’re close to full employment? Basically, government borrowing once again competes with the private sector for a limited amount of money. This means that deficit spending no longer provides much if any economic boost, because it drives up interest rates and “crowds out” private investment. Now, government borrowing can still be justified if it serves an important purpose..... But while candidate Trump talked about increasing public investment, there’s no sign at all that congressional Republicans are going to make such investment a priority.

Paul Krugman goes all “crowd out” on us. Is he right? - Jared Bernstein - Progressives’ Keynesian economist in chief, Paul Krugman, has been second to none in calling out policymakers’ focus on reducing budget deficits when economies were still weak (also known as “austerity”). Given that record, his oped in today’s NYT may surprise some readers. He argued that, as the economy closes in on full employment, fiscal budget deficits could crowd out private borrowing, pushing up interest rates and slowing growth. Paul’s argument in the oped shouldn’t actually be surprising; he has long depended on a very simple and, as the record shows, very insightful, application of the ISLM model, a diagram of how interest rates and output interact in key markets in the macroeconomy. See here for his useful discussion of how the model ticks. But is Paul right? Despite the fact that he invariably turns out to be so–i.e., correct–I’m not nearly so worried about interest-rate crowd-out resulting from the big, wasteful tax cut team  Trump and his Congressional allies will pass, I fear, sometime later this year. What I’m worried out is what their raid on the coffers of the US Treasury will do to the programs we increasingly need to meet the many challenges we face. Let me explain. Here at OTE, we maintain that all economic models are wrong but some are sometimes useful. For years, at the end of the ISLM section of economics courses, there’s been this little section that shows how the model changes in a particular type of recession when two things happen: demand significantly contracts and interest rates fall to around zero (the dreaded liquidity trap). At that point you get the diagram Paul put in his link above (ignore for a moment the “IS Now” line, which I plugged in there, as did Paul in a post today). One implication Paul draws from these dynamics is that Republicans, motivated not by improving the economy but by bashing Obama and the D’s, inveighed against deficits when we needed them and are about to shift to not caring about them when deficits – again, according to the model – could actually do some harm. But how reliable is this crowd-out hypothesis? It’s actually pretty hard to find a correlation between larger budget deficits and higher interest rates in the data.

Kocherlakota’s argument for fiscal expansion - Is there a macroeconomic case for tax cuts in the United States right now? Paul Krugman and I say no, using the following logic. The Fed thinks we are close to full employment, if we use the term to denote the level of employment that keeps inflation constant. Generalised tax cuts (rather than just tax cuts to the very rich) will tend to raise aggregate demand, which will lead inflation to increase. The Fed will therefore raise interest raise rates further to offset this increase in demand before it happens. As a result, the tax cuts will have no impact on demand, but simply make funding investment more expense. There are clear grounds for saying that the Fed is wrong about the economy being close to full employment, and therefore any increase in aggregate demand from any source would not raise inflation. But a central bank that acts in the textbook manner will not wait for the higher inflation to materialise, but will anticipate it because it takes time for interest rates to influence demand and inflation. As a result, tax cuts will lead to higher interest rates and there will be no net impact on demand. Narayana Kocherlakota, who used to be on the committee that sets US interest rates, presents another possible reason why an increase in demand will not raise inflation. He argues that aggregate supply has been suppressed by low demand, and that rising demand might itself stimulate supply. For example, a lot of technical innovations might have been shelved while demand was depressed, but would be brought into production if demand looked like expanding rapidly. As these technical innovations would expand the capacity of firms to produce more, they would not raise prices as a result of any increase in demand. As these innovations would produce more from the existing labour force, there would be no inflation pressure coming from wages either. If this sounds like wishful thinking, remember than the US economy, like most, is still way below the level of output that pre-recession trends would have suggested were likely. Did research into new and better production techniques really slow down substantially during the recession years, or did the research still take place to be implemented at some later date?

Chuck Schumer Slams Republicans For Proposing $9 Trillion In New Debt - In an curious exchange in traditional roles, Senate Minority Leader Chuck Schumer slammed Republicans on Tuesday for advancing a fiscal year 2017 budget resolution which, while designed to repeal the Affordable Care Act, also contemplates more than a $9 trillion increase in the public debt over a decade, according to MNI, or fractionally less than the Obama administration added in 8 years. In remarks given on the Senate floor, signalling the multiple levels of defense that Democrats are likely to wage to protect Obamacare, Schumer cited a letter by White House budget director Shaun Donovan. Donovan's letter notes the Senate GOP's FY 2017 budget resolution allows the public debt to rise from $14.2 trillion in 2016 to $23.7 trillion in 2026.  A visibly angry Schumer then said Republicans have lectured President Barack Obama and congressional Democrats for eight years about the problems posed by rising  deficits and debt. "Be fair, be consistent," Schumer scolded Republicans and then chided them for their "180 degree reversal" by pushing a budget resolution that envisions massive deficits. "This is not being fiscally conservative," Schumer said. It was not clear if Schumer himself had become a "fiscal conservative", or was simply trying to put republicans in a bad light before their votes. Schumer's anger is the result of a 2017 Budget Resolution introduced last week by Senate Republicans, that is being used to set the stage for moving quickly on legislation to repeal the ACA. It also includes the $9 trillion debt provision.So far Senator Rand Paul is the only Republican senator so far to oppose on fiscal grounds the GOP's decision to use the FY 2017 budget resolution to begin the ACA repeal.Paul said the GOP should use the FY 2017 budget resolution to cut deficits and balance the federal budget.  Last Wednesday, the Kentucky Senator gave a fiery speech on the senate floor, blasting his own party for wanting to pass a budget that would add trillions to the national debt all in the name of repealing Obamacare.

The Major Potential Impact of a Corporate Tax Overhaul - The United States system for taxing businesses is a mess. If there’s one thing nearly everyone can agree upon, it is that. The current corporate income tax manages the weird trick of both taxing companies at a higher statutory rate than other advanced countries while collecting less money, as a percentage of the overall economy, than most of them. It is infinitely complicated and it gives companies incentives to borrow too much money and move operations to countries with lower tax rates.  Now, the moment for trying to fix all of that appears to have arrived. With the House, Senate and presidency all soon to be in Republican hands and with all agreeing that a major tax bill is a top priority, some kind of change appears likely to happen. And it may turn out to be a very big deal, particularly if a tax plan that House Republicans proposed last summer becomes the core of new legislation. Among Washington’s lobbying shops and policy analysis crowd, it’s known as a “destination-based cash flow tax with border adjustment.” It’s easier to think of it as the most substantial reworking of how businesses are taxed since the corporate income tax was introduced a century ago. And it could, if enacted, have big effects not just in the tax departments of major corporations but in global financial markets and the aisles of your local Walmart. This possible revamping of the corporate tax code is less politically polarizing than the debates sure to unfold in the months ahead over health care, or even over individual income taxes. But the consequences for business — and for the long-term trajectory of the economy — are huge. Right now companies are taxed based on their income generated in the United States. But there are countless tricks that corporate accountants can play to reduce the income companies report and to reduce their tax burden, and those tricks distort the economy.  The House Republicans’ approach, instead of taxing the easy-to-manipulate corporate income, goes after a firm’s domestic cash flow: money that comes in from sales within the United States borders minus money that goes out to pay employees and buy supplies and so forth. There’s no incentive to play games with overseas companies that exist only to exploit tax differences or to relocate production to countries with lower taxes because you’ll be taxed on things you sell in the United States, regardless.

Larry Summers on the new Republican tax plan - He summarizes the plan as follows: The central concept put forward by Mr Ryan, which appears to have the support of Mr Trump, is to turn corporate income tax from a tax on the return to capital into a tax only on extraordinary profits. This would be done by taxing corporate cash flows. In addition to the major reduction of the overall rate, the system would change in three fundamental ways. First, all investment outlays can be written off in the year they occur rather than over time. Second, interest payments to bondholders, banks and other creditors will no longer be deductible. Third, companies will be able to exclude receipts from exports in calculating their taxable income and will not be permitted to deduct payments to foreign suppliers or affiliates from income. I found this to be the paragraph I had not seen elsewhere: Second, the tax change will capriciously redistribute income, increase uncertainty and place punitive burdens on some sectors. Think of a retailer who imports goods from abroad for 60 cents, incurs 30 cents in labour and interest costs, and then earns a 5 cent margin. With a 20 per cent tax, and no ability to deduct import or interest costs, the taxes will substantially exceed 100 per cent of profits even if there is some offset from a stronger dollar. Businesses that invest heavily, hire extensively and export a large part of their product will have negative taxable income on a chronic basis. It is hard to imagine that the political process will allow annual multibillion-dollar refunds, so they too may be victimised. Then there are the still unresolved questions of what the rules will be on interest deductibility for banks and of the treatment of businesses organised as partnerships that do not pay corporate taxes. Here is the FT link, probably gated for most of you, WaPo link here.  Summers also argues the plan will worsen inequality, strengthen the dollar (possibly leading to EM crises), lead to a trade war, and erode the long-term tax base. Just to refresh your memories here is Jared Bernstein on the same plan (mixed but mostly negative), and Martin Feldstein (positive).

Thoughts on Proposed Corporate Tax Reform - Cecchetti & Schoenholtz - With a Republican government intent on major changes in fiscal policy, it’s useful to start thinking about the fundamentals of taxing and spending. The analysis below focuses narrowly on the House-proposed tax reform (pages 24-29) for large firms – what is commonly known as the corporate tax. Two principles are usually associated with efficient taxation. The first is to impose the lowest tax rate consistent with raising the required revenue. The second, to impose the tax as broadly and evenly as possible across all goods and services. Setting a low tax rate on a broad tax base limits the impact on incentives to work, save, invest, and produce, reducing distortions that weaken long-run growth. That is, such a strategy minimizes the “deadweight” loss from taxation—the income that is lost by all parties (consumer, producer and government) due to distorted incentives. And, since goods produced tomorrow are different from those produced today, the second principle implies that the tax rate should be steady over time. Beyond our focus on efficiency, we also consider the distributional impact of a tax. However, to the extent that distributive goals can be achieved by adjusting spending, this matters less. Moreover, the true burden of a tax, the incidence, can be difficult to measure and it is generally unrelated to the way the tax is collected. For example, in a small, open economy with free cross-border flow of capital, the required after-tax rate of return on investment is the world rate. Consequently, local taxes on capital are not borne by the owners of the capital used in production. Instead, the burden of the tax is passed on to those purchasing the output and to domestic labor. Finally, because most taxes distort behavior, assessing any specific tax raises the question “compared to what”? In considering tax reform proposals, since the revenue must come from somewhere, you are stuck comparing one set of distortions with another set.

Trump's tax cuts may pressure U.S.'s top credit rating: Fitch | Reuters: U.S. President-elect Donald Trump's plans to slash taxes could threaten the country's triple-A credit rating over the medium term, the head of EMEA sovereign ratings at the Fitch agency said on Thursday. "We do see increasing medium-term pressures (on the U.S. rating)," Ed Parker said at the agency's annual credit outlook conference in London. "Even before elections the U.S had the highest level of government debt of any triple-A country. If we add on top of that Trump's plans to cut taxes by $6.2 trillion over the next 10 years that could add around 33 percent to U.S. government debt," he added. Trump will take office on Jan. 20 but some of his promised policy changes have already sparked market and economic concern, including tax cuts, a repeal of the healthcare reform enacted under President Barack Obama and a threat to slap tariffs on companies moving jobs overseas. Parker said that in the short-term Trump did not pose a risk to the U.S. credit rating because the country continues to benefit from strengths such as the role of the dollar as the world's predominant reserve currency Fitch has a stable outlook on its AAA rating on the United States. Of the other two main agencies, Moody's also has the top rating for the No. 1 world economy but Standard and Poor's has it one notch lower at AA+.

Beware "Revenue Neutral" Tax Reform - Whenever politicians bring up the topic of "tax reform," what they usually want is a reshuffling of taxes so changes to the tax code will look like a tax cut — without reducing tax revenues or lessening the tax burden. In other words, policymakers usually want a tax reform that is "revenue-neutral," and this has been explicitly stated by lawmakers on both sides of the aisle for years now. Last month, for example, Kevin Brady, the chairman of the House Ways and Means Committee stated through his office that he will propose a new tax plan to Donald Trump that will not cut tax revenues: "rather than reducing tax revenue and increasing the US fiscal deficit, will 'break even within the budget, knowing it's going to grow the economy.'"This is standard operating procedure in Washington, and was also the case with the 1986 tax reform under Reagan. From the perspective of the policymakers, revenue-neutral tax reform is a good thing because it allows them to reward interest groups the party in power likes, while punishing the interest groups they don't like. That is, reform allows them to to pick winners and losers in the newly-rearranged tax situation. In many cases, tax reform also allows policymakers to make claims of "tax cuts" to groups of voters without actually cutting government revenues, and thus continuing to spend freely. With a newly invigorated Republican-controlled Congress in DC, we're looking at a spate of new tax reforms. Among the proposed reforms are changes to the home mortgage interest deduction and the elimination of the deduction for state and local taxes. Right now, the debate over tax reform continues to be speculative and technical in nature, but some specifics are appearing. For example, as noted by Hugh Hewitt in the Wall Street Journal: The day after President-elect Trump announced Steven Mnuchin’s nomination, the Treasury secretary-designate casually declared on CNBC that the administration’s plan would “cap mortgage interest, but allow some deductibility.” In other words, Mnuchin wants to change how much tax revenue is inhibited by the deduction.  The GOP, including House Speaker Paul Ryan, has already jumped on the bandwagon with new proposals to modify the deduction. In typical tax-reform fashion, this is being framed as a change that will benefit some groups (middle-income homeowners) at the expense of others.

Who Benefits from the Mortgage Interest Deduction? -- The mortgage income deduction is America's favorite middle-class tax preference—right? The trouble is, the middle class doesn't really get all that much out of it.The chart is based on data from a 2016 study by Chenxi Lu and Eric Toder of the Tax Policy Center. Following a definition used in a recent study by the Pew  Research Center, it defines "middle class" as households earning from 67 percent to 200 percent of the median household income, or approximately $40,000 to $125,000 per year. Just under half of all US households fall in that income bracket, but they receive less than a fifth of the tax benefits of the mortgage interest deduction. Higher-income households receive a far larger share.Several factors reduce the value of the mortgage interest deduction to middle-class households. First, only 21 percent of them claim the deduction at all, either because they do not own a home, because they do not have a mortgage, or because their tax bill is lower if they use the standard deduction instead of itemizing. Second, their income tax rates are lower than those of higher-income households. Third, their homes are worth less, on average. Putting all of this together, the average middle-class household receives just $191 annually in benefits from the mortgage deduction. In contrast, as the next chart shows, higher-income households, on average, receive benefits of thousands of dollars per year, because more of them claim the deduction, their tax brackets are higher, and their homes are more valuable.

The Folly of Trumponomics - Simon Johnson - Donald Trump’s administration will implement large tax cuts and substantial financial deregulation. President Trump may also change U.S. policies on trade, although precisely what he will do is less clear—and the shift may be more rhetorical than real. Trump is also likely to substantially cut or privatize federal spending. To the extent that his policies add up to a coherent economic strategy, they are reminiscent of Ronald Reagan’s, but with an extra dose of cronyism and the wild card of economic nationalism. Trump himself and several of his key appointees are also poster children for oligarchy and even kleptocracy—government operated to serve the business interests of elites, including top officials. The intermingling of business, family, and government as the Trump administration takes shape unfortunately parallels what I have observed in corrupt developing countries over the past 30 years, including during my time as chief economist for the International Monetary Fund. President Trump is likely to please his supporters in the short run. Despite emerging contradictions between his presidency and who he purported to be during the campaign, President Trump is likely to please his supporters in the short run. His tax cuts, promoted by supporters for their supposed supply-side benefits, could provide a temporary Keynesian jolt to demand. His gestures on trade, like pressuring Carrier to keep jobs in Indiana, will strike a tough posture and save a very small number of jobs. But over time, Trump supporters—and the rest of the country—will become profoundly disappointed as economic security, opportunity, and prosperity are undermined for most Americans.Amid this muddle, one thing is clear. There will be a big tax cut for upper-income Americans—this is the implication of Trump’s pledges during the presidential campaign, and this is also what Senate and House Republicans want. Steven Mnuchin, the nominee for Treasury secretary, says there will be no reduction in the amount of tax actually paid by rich Americans—arguing there will also be a limit on the deductions they can take. But the math of Trump’s proposals is quite straightforward, and the result of the planned reductions in personal, corporate, capital gains, and inheritance taxes is that the rich will undoubtedly pay less.

Trump’s Defective Industrial Policy - Dani Rodrik – US President-elect Donald Trump has yet to take office, but his brand of flawed industrial policy has been on full display since his surprise win in November.  Within weeks of the election, Trump had already claimed a victory. Through a mix of inducements and intimidation, he prevailed on the heating and cooling firm Carrier to keep some of its operations in Indiana, “saving” around 1,000 American jobs. Touring the Carrier plant subsequently, he warned other US firms that he would impose stiff tariffs on them if they moved plants overseas and shipped products back home.  His Twitter account has produced a stream of commentary in the same vein. He has taken credit for Ford’s decision keep a Lincoln plant in Kentucky, rather than move it to Mexico. He has threatened General Motors with import tariffs if it continues to import Chevrolet Cruzes from Mexico instead of making them in the United States.   Trump has also hounded defense contractors for cost overruns, berating the aerospace giants Boeing and Lockheed Martin on separate occasions for producing planes that are too expensive.  Trump’s policy style represents a sharp break from that of his predecessors. It is highly personalized and temperamental. It relies on threats and bullying. It is prone to boasting, exaggeration, and lies about actual successes. It is a type of public spectacle, staged on Twitter. And it is deeply corrosive of democratic norms.  Economists tend to advocate an arm’s-length relationship between government and business. Public officials are supposed to insulate themselves from private firms, lest they be corrupted and engage in favoritism. Government agencies need to be close enough to private enterprises to elicit the requisite information about the technological and market realities on the ground.   But they cannot get so close to private firms that they end up in companies’ pocket, or, at the other extreme, simply order them around.   And that is where industrial policy à la Trump fails to pass the test. On one hand, his appointments to key economic positions indicate he has little intention of severing government ties to Wall Street and big finance. On the other hand, his policymaking-by-tweet suggests he doesn’t have much interest in building the institutionalized dialogue, with all the required safeguards, that sound industrial policy requires.

Making America Great Again Isn’t Just About Money and Power - Robert Shiller -- “Make America Great Again,” the slogan of President-elect Donald J. Trump’s successful election campaign, has been etched in the national consciousness. But it is hard to know what to make of those vague words. We don’t have a clear definition of “great,” for example, or of the historical moment when, presumably, America was truly great. From an economic standpoint, we can’t be talking about national wealth, because the country is wealthier than it has ever been: Real per capita household net worth has reached a record high, as Federal Reserve Board data shows. But the distribution of wealth has certainly changed: Inequality has widened significantly. Including the effects of taxes and government transfer payments, real incomes for the bottom half of the population increased only 21 percent from 1980 to 2014. That compares with a 194 percent increase for the richest 1 percent, according to a new study by Thomas Piketty, Emmanuel Saez and Gabriel Zucman. That’s why it makes sense that Mr. Trump’s call for a return to greatness resonated especially well among non-college-educated workers in Rust Belt states — people who have been hurt as good jobs in their region disappeared. But forcing employers to restore or maintain jobs isn’t reasonable, and creating sustainable new jobs is a complex endeavor. Difficult as job creation may be, making America great surely entails more than that, and it’s worth considering just what we should be trying to accomplish. Fortunately, political leaders and scholars have been thinking about national greatness for a very long time, and the answer clearly goes beyond achieving high levels of wealth.

Top Economists Grapple With Public Disdain for Initiatives They Championed – WSJ --The nation’s leading economists are suffering an identity crisis as many of the institutions they helped build and causes they advanced have come in for public scorn and rejection at the ballot box. The angst was on display this weekend at the annual conference of the American Economic Association, the profession’s largest gathering. The conference is a showcase for agenda-setting research, a giant job fair for the nation’s most promising young economists and, this year, the site of endless discussion about how to rebuild trust in the discipline. Many academic economists have been champions of free trade and globalization, ideas under assault among rising populist movements in advanced economies around the world. The rise of President-elect Donald Trump, with his fierce rhetoric against elites, in particular, left many at this conference questioning their place in the world. “The economic elite did many things to undermine their credibility while people’s economic fortunes were taking a turn for the worse,” said Steven Davis, an economist at the University of Chicago. But a road map for regaining trust is elusive. “I used to think facts and analysis will ultimately carry the day but now I’m not quite sure.” Surveys from the Pew Research Center have documented dwindling support for free trade. In 2014, 60% of Democratic voters and 55% of Republican voters supported such trade agreements. In an October survey, however, support among Democrats had fallen to 56% and support among Republicans had nose-dived to 24%. The profession sees its successes as overlooked—the U.S. is wealthier than ever. The unemployment rate is below 5%. Challenges facing those who enjoyed little economic gain in recent years are among the topics economists are trying to diagnose and the subject of dozens of papers at this year’s conference. This year, academics are out in the cold. During the election The Wall Street Journal contacted every former member of the CEA, including those going back to President Richard Nixon. None had been tapped as an adviser to Mr. Trump’s campaign, nor did any publicly endorse him.  The president-elect is “not particularly interested in hearing from the academic economist club,” Mr. Davis said.

Trump's trade policy is 'economic equivalent' to denying climate change, Larry Summers says -- Democratic economist Larry Summers on Tuesday blasted an analysis published by top Donald Trump advisors touting the benefits of the president-elect's trade proposals. The analysis was a policy paper authored by Wilbur Ross, the billionaire investor Trump picked for Commerce secretary, and Peter Navarro, the economics professor Trump chose to head the new White House National Trade Council. It was published late in the campaign against Democrat Hillary Clinton. On CNBC's "Squawk Box," Summers accused Ross and Navarro of "repeating the oldest cliches about protectionism," calling their report "the economic equivalent of denying climate change or being for creationism." The Ross-Navarro analysis pointed to $2.37 trillion in addition federal tax revenue from 2017 to 2026 as a result of Trump's trade, energy and regulatory reforms. But when coupled with proposed spending cuts, Trump's overall economic plan is revenue neutral, they wrote. Summers, who was Treasury secretary in the Clinton administration and was an economic advisor to President Barack Obama, also took Trump to task over his proposals to spend about a trillion dollar on infrastructure. Summers called them "a giveaway to the contractors for the pipelines they're already going to build." "There's [also] nothing that makes it be the most important infrastructure, which is fixing and maintaining" bridges, highways and airports, he added.

Does NYT Require Reporters to Needless Add “Free” to References to Trade Policy? -- Dean Baker - Reporters always complain about not having enough space to give the full story, which makes it a mystery as to why they so frequently add the word "free" to references to trade policy. We got an example of this wasteful wordiness in a NYT article on Donald Trump's decision to ignore nepotism and conflict-of-interest rules and appoint his son-in-law Jared Kushner as a top adviser. The piece told readers that Kushner, along with other responsibilities, would work on "matters involving free trade." The use of "free" in this context is misleading since much of the U.S. trade agenda is about increasing protectionism in the form of longer and stronger patent, copyright, and related protections. These protections are equivalent to tariffs of many thousand percent in the economic distortions they produce. They are 180 degrees at odds with free trade. There also has been little, if any, effort to remove protectionists barriers that benefit highly paid professionals, such as the ban on foreign doctors who have not completed a U.S. residency program. For these reasons, it is inaccurate to include the word "free" in reference to U.S. trade policy. It is difficult to see why the NYT and other news outlets feel the need to do it. 

GOP Senator looking at ways to stop Trump on trade -Don’t expect lawmakers to quietly accept President-elect Donald Trump’s plan to use congressionally granted authorities to hike tariffs against offending countries, which could potentially spark trade wars. Sen. Mike Lee (R-Utah) is already leading an effort to find ways to rein in some of the executive power Trump would have on trade.  “We are not looking at repealing existing statutes, but putting brakes on the system,” Daniel Bunn, an aide to Lee, said at a lunch event Wednesday at the free market-oriented Cato Institute. Lee was a vocal critic of Trump during the campaign and voted for independent candidate Evan McMullin.  Trump has vowed to invoke any number of trade authorities Congress has granted the executive branch, including the ability to take “emergency” actions to unilaterally raise tariffs and withdraw from trade agreements. In a press conference Wednesday, Trump reiterated his threat to place a “border tax” on U.S. companies that move production overseas and ship goods back into the U.S. for sale. The New York billionaire has already claimed to have pressured Carrier, Ford and other companies to reverse decisions that would have sent jobs elsewhere.  The Constitution gives Congress the power to “regulate commerce with foreign nations,” but the legislative branch has delegated much of that authority to the president over the past century. Lawmakers could especially focus on pulling back Trump's trade powers if he takes actions that target specific companies, Bunn said.

Yet Another Glaring Flaw With Trump Infrastructure Plan: Dependence on Vagaries of Tiny, Slow-Moving Tax Equity Market - Yves Smith -  I must confess to holding back from saying much about Trump’s infrastructure plan since it has only been sketched out at a high level. But even so, despite infrastructure being the new darling of economists as a high octane way to stimulate growth, there’s plenty not to like about the Trump version even at the 50,000 foot level:Public/private partnerships” mean using middlemen with very high profit requirements, making the process more costly than if handled by government entities directly. The Federal government has repeatedly executed large scale investment programs successfully of vastly more complexity than anything the private sector has undertaken (see Felix Rohaytn’s Bold Endeavors for examples; consider the space race for starters).  Private-sector deals will go whether the returns, which includes looting, is greatest, rather than where the need or long-term growth opportunities are best. First, Trump implicitly promised to help revitalize parts of America that lost factory jobs, and many of those are in small to medium-sized towns. But for a project to be attractive to investors, it will need to serve large or at least large-ish numbers of users. That means even if downtrodden states do get some investment dough, it will almost certainly go to their cities, and not the boonies.  Second, the well-documented fact that investors demand excessively high returns make them prefer opportunities where cash flows are front-ended. That is not the profile of societally-desirable infrastructure project. By relying on known-to-be-myopic private investors, Trump’s plan would double down on a known investor bias. Infrastructure investment will provide an economic stimulus only to the degree it is truly incremental spending. If it merely moves government projects that would have been executed regardless into private hands and/or diverts private investor funding from private investments (not secondary investments, but the funding of corporate growth projects, such as financing smaller-tier private companies) it will not additive.

Kellyanne Conway Discusses The "Trump Effect" On Economy -- Earlier this morning, Kellyanne Conway appeared on Bloomberg to discuss Trump's economic policies regarding everything from job creation to tax cuts, energy investment, infrastructure spending, Obamacare and China.  Of course, she started by taking the opportunity to boast about the "Trump Effect" that has already resulted in manufacturing jobs coming back to the United States and record high-er stock prices."First of all, you already see the Trump effect.  You see that manufacturing jobs are already coming back to the U.S., or staying here.  Plans to build factories in Mexico, to ship jobs over the border there, take them away from hardworking Americans have stopped. That's the Trump effect.""You see that the stock market loves that fact that he was elected.  We've had record highs over a number of days." After the brief commercial introduction, Conway addressed Trump's plans to "roll back corrosive regulations" that have suffocated job creation, lower taxes across the board and work with companies to develop America's energy resources "in a responsible and profitable way for all of us.""His job creation plan includes a number of things.  First of all, it's just rolling back some of these corrosive regulations.  We hear from business owners and aspiring business owners daily that it's the regulatory framework that is suffocating them.""In addition, he has a very ambitious, very doable tax relief plan.  He will create 25 million jobs over 10 years and he will reduce taxes across the board. Middle class tax relief.  Those who don't pay taxes will have relief as well.""Also in there is energy investment.  This is something that we just haven't had in the past 8 years.  We've been pretty hostile as a nation toward energy investment.  You know what is made in America, our energy sources.  It's under our feet and it's off our shores.  And it's time we have Presidential leadership that will help develop it in a responsible and profitable way for all of us." Conway also took aim at the Pharma industry saying "to repeal and replace Obamacare without having a conversation about drug pricing seems like not a reasonable prospect."

Democrats can’t win until they recognize how bad Obama’s financial policies were - Matt Stoller -- During his final news conference of 2016, in mid-December, President Obama criticized Democratic efforts during the election. “Where Democrats are characterized as coastal, liberal, latte-sipping, you know, politically correct, out-of-touch folks,” Obama said, “we have to be in those communities.” In fact, he went on, being in those communities — “going to fish-fries and sitting in VFW halls and talking to farmers” — is how, by his account, he became president. It’s true that Obama is skilled at projecting a populist image; he beat Hillary Clinton in Iowa in 2008, for instance, partly by attacking agriculture monopolies . But Obama can’t place the blame for Clinton’s poor performance purely on her campaign. On the contrary, the past eight years of policymaking have damaged Democrats at all levels. Recovering Democratic strength will require the party’s leaders to come to terms with what it has become — and the role Obama played in bringing it to this point.  Two key elements characterized the kind of domestic political economy the administration pursued: The first was the foreclosure crisis and the subsequent bank bailouts. The resulting policy framework of Tim Geithner’s Treasury Department was, in effect, a wholesale attack on the American home (the main store of middle-class wealth) in favor of concentrated financial power. The second was the administration’s pro-monopoly policies, which crushed the rural areas that in 2016 lost voter turnout and swung to Donald Trump.Obama didn’t cause the financial panic, and he is only partially responsible for the bailouts, as most of them were passed before he was elected. But financial collapses, while bad for the country, are opportunities for elected leaders to reorganize our culture. Franklin Roosevelt took a frozen banking system and created the New Deal. Ronald Reagan used the sharp recession of the early 1980s to seriously damage unions. In January 2009, Obama had overwhelming Democratic majorities in Congress, $350 billion of no-strings-attached bailout money and enormous legal latitude. What did he do to reshape a country on its back?

America is Inching Even Closer to a Constitutional Convention - Term limits are a central demand for a growing movement of states-rights activists focused on weakening the federal government—and they are dangerously close to convening the first state constitutional convention in U.S. history. According to Article V of the U.S. Constitution, the states can convene a constitutional convention without the federal government’s go-ahead if two-thirds (34) of them pass a resolution in favor. Right-wing organizations—and their billionaire funders—have been working feverishly for decades to get state legislatures to call for such a convention, with the explicit aim of limiting the powers of the federal government. And now, they may be closer to their goal than ever. They have already passed resolutions in 28 states, and after November’s elections, Republicans will hold control of both chambers in 32 states, up from 30 before the election. Conservatives also dominate in Nebraska’s officially nonpartisan, single-chamber legislature, giving them 33. This puts them “just one state shy of the 34 needed to propose an Article V convention and permanently take back our government,” Daniel Horowitz wrote in theConservative Review one week after the election. Republicans also hold 34 governorships and increased the states where they hold a trifecta (governor and both chambers) from 23 to 25, according to Ballotpedia. (This number includes Nebraska.) In Kentucky, where Republicans won a trifecta, and Minnesota, where they gained control over both legislative chambers, the movement may push for a pro-convention resolution. Nevada, on the other hand—which had previously passed a resolution but whose House and Senate flipped to the Democrats—could present an opportunity for progressives to rescind its resolution.If the convention gets triggered, state legislators from across the country will convene to propose amendments, which would then need ratification by three-fourths (38) of the states, either through the state legislatures, with governors having power to break a tie, or through a state ratification convention. While term limits are one demand of the movement, its galvanizing issue has been a “balanced budget amendment” to force the federal government to balance its finances every year. This would hamstring the federal government and prevent it from stimulating the economy and undertaking robust public programs—effectively institutionalizing austerity.

Can Trumpian Triangular Diplomacy Work? - In December, Trump broke decades of diplomatic protocol by talking with Taiwanese President Tsai Ing-wen. I wrote then that this was either a simple – but consequential – mistake or the sign of a broader realignment that Trump had done little to prepare the groundwork for.  But some commentators suggest Trump may have a coherent and far-reaching strategy behind all this bluster. What if this is triangular diplomacy for a new age? Instead of splitting China off from and leveraging it against the Soviet Union, as Nixon did in 1972, the United States would corral Russian support against a rising China.  But this vision of a grand strategic bargain rests on faulty premises. The geostrategic conditions that led to the Sino-Soviet split do not hold today, and the U.S. would pay much more and receive much less from Russian assistance against the Chinese than it did from Chinese assistance against the Soviets. Hints of this triangular policy emerged during the election. Alexander Gray and Peter Navarro – two Trump campaign advisers – described a muscular American foreign policy in the Asia-Pacific that directly challenges the Chinese. In the Washington Post, Marc Thiessen outlines several ways in which the incoming Trump administration could revamp stale relations with Taiwan, including by signing a free trade agreement and upgrading the island’s political representation. The president-elect has fanned these flames, stating that he may not uphold the One China policy, but also seeming to view Taiwan purely as a disposable bargaining chip.  All of this raises broader questions about American foreign policy. Vox suggests that Trump is flipping Obama’s script, working with Russia and attempting to isolate China. Richard Weitz at the Hudson Institute explicitly links Trump’s warmth toward Russia and his disruption of U.S.-Chinese relations, directly raising the comparison to Kissinger’s triangular diplomacy, which split China off from the Communist bloc. That echoes policy recommendations made by John Mearshiemer and Stephen Walt earlier this summer. They argue that the United States should pull Russia into Washington’s orbit as a counterweight to a rising China. Russia, in their view, is a critical “swing state,” and the U.S. should create some geopolitical deal that cedes ground to Russia to contain the Chinese and allow the United States to act as an offshore balancer.

Trump Says Only ‘Fools’ See Good Ties With Russia as Bad -- Facing calls to strike back at Russia for what U.S. intelligence agencies have termed Moscow’s interference with the 2016 U.S. presidential election campaign, Donald Trump instead suggested warmer relations between the two countries. The president-elect took to Twitter on Saturday to discuss the potential U.S.-Russia relationship under his administration, a day after U.S. spy chiefs briefed him on the Russian measures they said were directed by President Vladimir Putin. Read the full report here (PDF).“Having a good relationship with Russia is a good thing, not a bad thing,” Trump said in a series of three tweets. “Only ‘stupid’ people, or fools, would think it is bad! We have enough problems around the world without yet another one.”“When I am President, Russia will respect us far more than they do now,” Trump assured his 19 million Twitter followers. On Friday, top U.S. intelligence officials met with the president-elect at Trump Tower in New York to present evidence that Putin personally ordered cyber and disinformation attacks on the U.S. campaign. Putin developed “a clear preference” for Trump to win, the agencies said in a declassified summary of their findings. The agencies said they “assess Putin and the Russian government aspired to help President-elect Trump’s election chances when possible by discrediting Secretary Clinton and publicly contrasting her unfavorably to him,” according to the report.

US Aristocracy Panics That Maybe Trump Is Serious --On January 2nd, the U.S. Republican Party’s Wall Street Journal headlined «Tensions Within GOP Rise Over How to Handle Russia», and reported that the policy toward Russia by the incoming Republican President Donald Trump is being opposed not only by Democrats in the U.S. Congress, but also by some Republicans, and perhaps even by enough Republicans to jeopardize confirmation of his nominee for U.S. Secretary of State, as well as some nominees for other crucial diplomatic and military positions. Trump is being significantly opposed by both Parties regarding his foreign policies, even though his domestic policies are being opposed on a far more partisan basis, by Democrats, and have a higher chance of congressional passage than his international initiatives do, because of the almost-solid support for his domestic policies on the part of Republican members of Congress — and because Republicans control both the Senate and the House. The «realignment across the board within American political parties» is actually a realignment only in the field of foreign policy — not at all in domestic policy. What used to be «Republican foreign policy» ever since the time of Richard Nixon, has been called «neoconservatism» — referring to a hard line against communism and then against Russia and any country that’s friendly toward Russia — but the incoming Republican President Trump campaigned consistently against neoconservatism, and now Democrats are almost solidly neocons, while some Republicans are actually joining the Republican President in condemning neocons. Whereas Trump is generally called «conservative» on his domestic policy statements, he could possibly turn out to be more of a «progressive» than his Democratic Party predecessor, President Barack Obama, was, regarding foreign affairs. And this terrifies the U.S. aristocracy in both of the political Parties, because the U.S. aristocracy — both its Republicans and its Democrats — has been solidly neoconservative: they are virtually united, on this, against Trump.

The potential for military confrontation due to Trump’s foreign policy – Ed Harrison - A few weeks ago I was writing about a likely pivot away from China toward Russia in the Trump administration. And my conclusion was that a violent pivot created a lot of unknown unknowns – to use a Rumsfeld phrase. It is the uncertainty and unpredictability that is the biggest problem in my view. I was mostly talking about trade and the economy though. But given China’s latest statements about potential military confrontation, I wanted to follow up with some brief thoughts on the geopolitical side of things. Let me start with Russia first. There has been a sharp deterioration in US-Russian relations during the Obama administration. And in December, when announcing measures to punish Russia for alleged US election interference, the President outlined that the deterioration is as a result of his administration’s view that Russia has become dangerously aggressive in its foreign policy. Now, the cooling of relations goes back to the Bush Administration and the South Ossetia conflict. But it has accelerated under Obama after the annexation of Crimea. Will this deterioration change under Trump though? Does it matter?  President Obama acts as if Russia doesn’t matter. For example, in that December press conference, he saidThey are a smaller country, they are a weaker country, their economy doesn’t produce anything that anybody wants to buy except oil and gas and arms. They don’t innovate. I think Russia does matter though. And it’s for exactly the reasons that the President dismisses Russia. First and foremost, Russia is a country with an arsenal of nuclear weapons. That matters. Second, the Russians are one of the largest producers of oil in gas in the world. And these are the most precious commodities for every economy in the world. Again, oil and gas matter.  And this seems to be the message from Trump’s pick for Secretary of State. I watched the senate confirmation hearings of Trump’s nominee, former ExxonMobil CEO Rex Tillerson. And he said a few things that I think represents a big shift in policy but that offers both a chance for detente and a degree of predictability. Here’s the most important quote: Russia, more than anything, wants to re-establish its role in the global world order. … They believe they deserve a rightful role in the global world order because they are a nuclear power. And they are searching as to how to establish that.  think that now what we are witnessing is an assertion on their part in order to force a conversation about what is Russia’s role in the global world order. So the steps being taken are simply to make the point that Russia is here, Russia matters, and we are a force to be dealt with. To me, this seems to be the absolutely vital recognition that the Russians want to be taken seriously, but that they haven’t been taken seriously — and that while in the initial post-Soviet era they could be written off, they can no longer be written off.

Trump Is Letting Go the People in Charge of Maintaining Our Nuclear Arsenal -- Between the Trump transition team’s infighting, incompetence, and high-profile resignations, any decisions that signaled even a modicum of stability for the country would come as a relief at this point. Unfortunately, the nascent Trump Administration isn’t inclined to calm anyone’s nerves. According to an official within the Department of Energy, the Trump transition team has declined to ask the head of the National Nuclear Security Administration and his deputy to temporarily stay in their roles after Trump takes office on January 20th. The NNSA is the $12 billion-a-year agency that “maintains and enhances the safety, security, and effectiveness of the U.S. nuclear weapons stockpile.” It’s unclear when the two officials will be replaced. Their offices will remain vacant until they are. Traditionally, all political appointees of an outgoing presidential administration turn in resignation letters effective on noon of inauguration day, January 20. But appointees in key positions—like the people who make sure our nukes work—are often asked to stay on in their roles until a replacement can be found and confirmed by the Senate, helping ensure a smooth transition and allowing our government to continue functioning. In fact, for the entirety of Obama’s first term and into part of his second, the NNSA Administrator remained a Bush appointee.  Trump, however, appears determined to be free of anyone who was appointed by Obama, regardless of whether or not he has anyone in line for the job. Or, as our source put it: “It’s a shocking disregard for process and continuity of government.”

Trump Backs Delay Of Obamacare Repeal After Pressure From Rand Paul --As we reported earlier today, while many items on the Trump agenda for both the "first day" and the rest of 2017, could take a substantial amount of time and effort before they are legislated and implemented, one thing that there was virtually unanimous consensus on, was that Trump would immediately launch the repeal of Obamacare, even if replacing the Affordable Care Law would take considerably longer (as it would require bipartisan support). 
However, it now appears that even the prompt repeal of Obamacare is in question as Trump has now backed waiting to repeal the Affordable Care Act until a replacement proposal is in hand, following in a Friday night phone call with Rand Paul, the Kentucky Republican said Monday, adding to momentum for changing GOP leaders’ strategy on dismantling the 2010 health-care law. Paul has emerged a vocal leader of a growing group of Republican senators expressing concerns with GOP plans to vote to repeal the health law early this year, then to hammer out over weeks or months what would replace it after a two- to three-year transition. Cited by the WSJ,  Paul said in an interview “I believe we should vote on replacement the same day we vote on repeal,” and added that Trump called the senator on Friday night “to say he agrees completely." As the WSJ adds, a Trump transition official confirmed that the incoming president spoke with Mr. Paul on Friday, and said meetings are under way to determine how a replacement law could be approved at the same time—or close to it—that a repeal of the law is approved. Last week, Trump personally warned congressional Republicans on Twitter to “be careful” about the political consequences of moving quickly to repeal the law. The push from both Trump and Paul, as well as at least five other GOP senators, will put pressure on Republican leaders to accelerate the process of crafting a unified GOP replacement plan. Republicans have proposed dozens of ideas over the years for overhauling the health-care system but have yet to coalesce around a plan.

Obamacare: Republican Leaders Trying to Quell Revolting Senators -- Yves Smith -- At least some Republicans seem mindful of the concept, “If you break it, you own it.” Even though Obamacare polls as having more opponents than supporters (see here and here), many of the people who have benefitted from the program are strong supporters. In addition, those who have gotten coverage via Medicaid expansion may not realize that the ACA is the reason. And even with a majority of the public typically polling as not liking Obamacare, only 20% are willing to ditch it with no replacement.  So it should not come as surprise to find that the Republicans, finding themselves in the unexpected position of being able to end Obamacare, are in a squabble over what to do about the, um, opportunity. Obamacare repeal was not a Trump priority and as Lambert has pointed out, Trump has even made statements that sound remarkably un-Republican, like copy the Canadians.  And the Republicans are divided enough to potentially forestall quick action. Politico and Bloomberg put different spins on the same story. Politico goes with the party line: GOP leaders vow to plow ahead with Obamacare repeal. The wee problem is that GOP leadership isn’t what it is cracked up to be.  That means there’s good reason to regard the fracture over what path to take with Obamacare as serious. From Bloomberg:A breakaway group of five moderate Senate Republicans pushed Monday to delay a bill repealing Obamacare until March — potentially enough pressure to force the party’s leadership to comply.The step is the latest sign of some Republicans’ growing uneasiness about their leadership’s plan to repeal the law with no consensus on a replacement as part of an effort to deliver swiftly on one of President-elect Donald Trump’s top campaign promises.  Senators Bob Corker of Tennessee, Rob Portman of Ohio, Susan Collins of Maine, Bill Cassidy of Louisiana and Lisa Murkowski of Alaska offered an amendment Monday to the budget resolution that would extend the target date for the committees to write an Obamacare repeal bill to March 3 from Jan. 27. The story points out that any more than one defection in the Senate would stymie their plan to use budget reconciliation to kill Obamacare before Trump is sworn in. And the ranks of the refusniks is growing:On Monday, more senators said they agreed with a delay on the tax front, including Senator Mike Rounds of South Dakota.John Cornyn, the No. 2 Senate Republican, told reporters that the taxes used to subsidize insurance for millions of Americans could be dealt with later this year in a larger tax overhaul.Republicans senators are also grappling with the risks of repealing the law before a replacement is ready.

 Healthcare Chaos Emerges After Trump Backtracks, Demands Immediate Repeal Of "Catastrophic" Obamacare -- Perhaps as a result an angry backlash to last night's report by the WSJ that President-elect Donald Trump had allegedly sided with Rand Paul in pushing to delay the repeal of Obamacare until such time as there is a suitable replacement option, which as we explainedare two entirely distinct processes, and that an ACA replacement could take years as it would require bipartisan support, moments ago the the NYT reported that Trump appears to have backtracked on his position as recently as yesterday, and has pressed Republicans to move forward with the "immediate repeal" of the Affordable Care Act and to replace it very quickly thereafter, saying, “We have to get to business. Obamacare has been a catastrophic event.” Trump’s position undercuts Republicans who want a quick vote to repeal President Obama’s signature domestic achievement but who also want to wait as long as two to three years to come up with an alternative. But more to the point presented last night, Trump's latest statement also is challenging the resolve of Republicans in Congress who do not want any vote on a repeal until that replacement exists such as Rand Paul, with whom Trump was said to have sided over the weekend. According to the NYT Trump, "who seemed unclear about the timing of already scheduled votes" in Congress this week, demanded a repeal vote “probably some time next week,” and said “the replace will be very quickly or simultaneously, very shortly thereafter.” That, however, as the NYT correctly notes, is impossible as republicans in Congress are nowhere close to agreement on a major health bill that would replace President Obama’s signature domestic achievement. A number of Republicans in the House and Senate have said publicly that they wanted to hold off on voting to eviscerate the health law until a replacement measure could be negotiated. Additionally, Democrats and Republicans would have to agree on a replacement to the existing law, which as Goldman explained yesterday afternoon, is likely the bottleneck that could take as much as 2 years.

The Cost of Repealing the PPACA -- Would love to tell you; but, Randian House Leader Paul Ryan along with most of the Republicans voted on a Bill restricting the CBO from examining what the cost would be. The vote was 234 Repubs “for” restricting the CBO to 193 (190 Dems + 3 Repubs) against restricting the CBO examining the cost automatically. I wonder why they are afraid of the CBO examining the cost resulting from the repeal of the PPACA?An earlier June 2015 study had this information. “Excluding the effects of macroeconomic feedback—as has been done for previous estimates related to the ACA (and most other CBO cost estimates)—CBO and JCT estimate that federal deficits would increase by $353 billion over the 2016–2025 period if the ACA was repealed.” CBO Estimate. I chose the harsher number as this I believe is a fairer numeric to take into consideration. A lesser number is $137 billion over the same 10 years. I suspect the number is higher as the Repubs are restricting the CBO from weighing in on their plans.

Today in Obamacare: Congress thought it would write Obamacare’s replacement. Trump has other ideas. Of the many major questions about just how the Obamacare repeal fight will play out, one of the biggest has been what role President-elect Donald Trump will play. When asked about the topic at his press conference Wednesday morning, Trump helped clarify that somewhat — though he left a whole lot unsettled.First, rather than leaving it to Congress to hash out what the replacement should look like, Trump made clear he’s going to release his own plan after all — after his secretary of health and human services pick, Rep. Tom Price, is confirmed by the Senate.Second, Trump is very much picking his own timeline too. He confirmed that he has no interest in the “repeal and delay” plan Republican leaders have pushed, a plan that would put off the “replace” step for some time. “It will be repeal and replace. It will be essentially simultaneously,” Trump said. “Very complicated stuff.”Though this plan will inevitably end up being known as Trumpcare, the president-elect didn’t say much about what it would contain. But his mention of Price seems to indicate that the HHS secretary will have a leading role in developing it. For a potential preview, read up on the Empowering Patients First Act, the plan Price submitted to Congress back in 2015.Trump’s formal role in this process will simply be to sign (or veto) whatever gets through Congress. Technically, the House and Senate have no obligation to go along with the plan he releases. But the president has a big megaphone, and, so far at least, he’s still quite popular among Republican voters — so when he releases his plan, Congress will take note. Afterward, though, they’ll have to hash out the details themselves.

Trump Just Stumbled Into a Canyon on Obamacare - David Dayen - Asked about Obamacare, Trump largely reiterated comments made to The New York Times, that any overhaul of the system must both repeal the bulk of the Affordable Care Act and replace it “essentially simultaneously.” In addition, Trump said that he would introduce his own plan as soon as Representative Tom Price, the nominee for secretary of Health And Human Services, is confirmed.  This delivers a Viking funeral to the absurd “repeal and delay” concept, which would have built a two-to-four-year cliff for Obamacare in an attempt to force Democrats to collaborate in its elimination. That idea had already been teetering, with multiple senators balking at voting to end the current system without a plan for the future. On Monday, five Republican Senators introduced an amendment to the budget resolution, which tees up instructions for repeal, to give committees until March 3 to return a replacement plan (under the current resolution that deadline is January 27) along with repeal, so they could occur mostly in tandem.  This looks like the new strategy. Paul Ryan pronounced himself on board with a concurrent repeal and replace as well. But delaying the ultimate vote was critical. With no consensus, time would be needed to fashion something that could be credibly called a replacement. Even conservatives in the House Freedom Caucus wanted more time for this purpose.  Trump blew the timeline. He told the Times that he wanted an “immediate” repeal-and-replace package, within weeks of his inauguration. That’s a virtual impossibility, but now congressional Republicans feel obliged to give it a shot. In the emerging game plan, Congress would complete reconciliation instructions this week; then, once the committees release a plan, they would repeal through reconciliation in late February. And finally, they would vote on a replacement before the end of March, likely through multiple legislative pieces. That gives Republicans two months to come up with something they haven’t been able to decide on for six years. And at least some of that would go through regular order and require the cooperation of eight Democratic senators. Trump has said that he would campaign against the 10 Democratic senators up for reelection in 2018 in states he won, to force them to vote for a replacement. So Democratic pliability is a key to the strategy.

Debate Over Health Care Yet Again Omits Elephants In the Room: Excessive Costs Due to Terrible Incentives and Pricing, Administrative Costs, Pharma Looting -- Yves Smith --A new Wall Street Journal story, Health Care’s Bipartisan Problem: The Sick Are Expensive and Someone Has to Pay, is narrowly very good and broadly terrible. Despite the fact that the US health care system is doing a worse and worse job of delivering results yet is chewing up ever more of national resources, the press and punditocracy almost without exception refuse to question the basic premise of how the system operates. Remember that the cost of the US health care system is roughly twice that in GDP terms of that of other advanced economies, yet delivers worse results. A reminder from 2014: Despite having the most expensive health care system, the United States ranks last overall among 11 industrialized countries on measures of health system quality, efficiency, access to care, equity, and healthy lives, according to a new Commonwealth Fund report. The other countries included in the study were Australia, Canada, France, Germany, the Netherlands, New Zealand Norway, Sweden Switzerland, and the United Kingdom. While there is room for improvement in every country, the U.S. stands out for having the highest costs and lowest performance—the U.S. spent $8,508 per person on health care in 2011, compared with $3,406 in the United Kingdom, which ranked first overall. That is roughly the same sort of performance Soviet manufacturing showed in the decade before the implosion of the USSR. The causes include: A pay-for-piecework system that rewards doctors for over-treatment. These incentives are reinforced by encouraging patients to expect too much of doctors and demand surgeries and medications rather than accept that they may have to live with limitations or a slow recovery. And ads like this only encourage this sort of thing. I only watch TV an itty bit when on the treadmill, yet I’ve seen this commercial on CNN in prime time repeatedly. Mind you, this is for a diabetes medication, yet it sure looks like they are selling a great club drug:

13 Democrats vote against Sanders amendment to lower prescription drug prices --During Wednesday night’s ACA repeal-athon, a number of Democratic Senators offered amendments designed to soften the blow by preserving the ACA’s most popular provisions. But while the issue is mostly being framed along partisan lines, there was at least one amendment that a handful of Democrats and Republicans switched sides on: One introduced by Bernie Sanders (D-VT) and Amy Klobuchar (D-MN) that would have lowered prescription drug prices by allowing the importation of cheaper drugs from Canada.As it now stands, Medicare and Medicaid are prohibited by law from negotiating with drug companies for better prices, mainly because of expensive lobbying by the powerful pharmaceutical industry, which enjoys the highest profit margins in the world. This costs taxpayers billions of dollars a year. While it would make the most sense to simply lift this ban, that’s not happening anytime soon, so Sanders and Klobuchar thought up a clever way around it: Allowing drug buyers in the United States to import the exact same drugs from Canada, which has stronger price protections.When arguing for this amendment on the Senate floor, Sanders invoked the words of Donald Trump, who attacked Big Pharma in his press conference Wednesday, striking a blow to their stock prices:“The power and wealth of the pharmaceutical industry and their 1,300 lobbyists and unlimited sums of money have bought the United States congress. Today, Mr. Trump, a guy I don’t quote very often, he said that pharma gets away with murder, that’s what Trump said, and he’s right.”In an interview with The Huffington Post, Sanders noted that he’d actually said it first: “Sometimes he copies my statements. I don’t know if he got that one from me.” (He totally did.)  Perhaps due to Trump’s own statements, a number of Republicans broke rank and voted for the amendment including Ted Cruz (TX), John McCain (AZ) and Rand Paul (KY), giving it a decent chance of passing. Unfortunately, 13 Democrats also broke rank and voted against it, including Cory Booker (NJ) and Robert Menendez (NJ), both of whom made a point of theatrically opposing Trump appointments Jeff Sessions and Rex Tillerson, respectively, in their confirmation hearings. The full vote tally can be found here.

Senate Takes First Step To Repeal Obamacare With 51-48 Vote - Early on Thursday morning, in a 51-48 vote, the Senate took the first concrete step toward dismantling Obamacare, when it voted to instruct key committees to draft legislation repealing Barack Obama's signature health insurance program. Republicans needed a simple majority to clear the repeal rules, instructing committees to begin drafting repeal legislation, through the upper chamber, with the vote falling largely along party lines. Rand Paul was the lone Republican to vote against the budget resolution because it didn’t balance. Paul said in a statement after the vote that while he supports nixing ObamaCare "putting nearly $10 trillion more in debt on the American people’s backs through a budget that never balances is not the way to get there."Meanwhile, no Democrat supported the repeal rules. Instead, Democrats rose one by one from their seats on the Senate floor in protest to state why they were voting against the resolution. In dramatic fashion, Bernie Sanders warned that if the GOP resolution moved forward Americans would die. "Up to 30 million Americans will lose their health care with many thousands dying as a result," he said. "Because when you have no health insurance and you can't go to a doctor or a hospital, you die."

House Expected to Follow Senate's Lead on Rush to Repeal Health Law— The House is expected to give final approval on Friday to a measure that would allow Republicans to speedily gut the Affordable Care Act with no threat of a Senate filibuster, a move that would thrust the question of what health law would come next front and center even before President-elect Donald J. Trump takes office. House approval would come after the Senate narrowly approved the same measure, a budget blueprint, in the pre-dawn hours on Thursday. Americans woke up Thursday to the realization that a Republican Congress was deadly serious about eviscerating President Obama’s signature domestic achievement — a move that could leave 20 million Americans unsure of their health coverage and millions more wondering if protections offered by the Affordable Care Act could soon be taken away. “This is a critical step forward, the first step toward bringing relief from this failed law,” Senator Mitch McConnell of Kentucky, the majority leader, said. Democrats said the headlong rush to repeal was the height of legislative irresponsibility and would endanger the health of millions.“For the life of me, I can’t understand the need to take health care away from people, and why in the world anybody would even contemplate doing that without something to replace it,” said Representative Louise M. Slaughter of New York. “Just snatching it out from under them and it’s gone. I think that there’s going to be a mighty rumble in this country, an outburst of anger and fear.” What comes next may be the most pressing problem facing Republicans, who may find that dismantling the health law is far easier than replacing it with one that can unite their fractious members — and win over some Democrats.. As the House approached its vote, some Republicans remained reluctant to approve the budget measure without a clear strategy to replace the health law. “We’d like to see a little more flesh on the bone before we sign on the dotted line,” said Representative Andy Harris of Maryland, an anesthesiologist and a member of the conservative House Freedom Caucus. Republicans skeptical of moving forward risked looking hostile to the repeal effort. And there was a prevailing sense of the importance of following through on a campaign promise upon which so many House Republicans had staked their political reputations.

Obamacare Repeal Is Moving Forward. When Will Changes Affect Consumers? - Senate Republicans took a major first step in repealing Obamacare this week. Consumers, though, should keep in mind that many steps remain before any changes will affect individuals with health insurance. If you’re one of the estimated 20 million Americans who gained coverage through the health law, you are extremely unlikely to lose coverage this year. If you get your health insurance through work or Medicare, the repeal legislation alone will have minimal effects on your coverage, even in the long run. Here’s our guide to what still needs to happen before any laws change.

  • 1) The House needs to pass its own version of the budget resolution. The Senate passed a budget resolution early Wednesday morning that sets the stage for a bill that could strip major provisions from Obamacare. But even for that stage-setter to become official, the House has to pass its own version of the same bill. That vote is expected Friday, and passage is likely, but not yet guaranteed.
  • 2) A repeal bill needs to be drafted and introduced. Republicans plan to use a special process to pass the bill that will protect it from a filibuster in the Senate. But that means it can change only some parts of Obamacare. Congress passed such a bill in 2015, and it could be a possible blueprint for what’s coming. (President Obama vetoed that one.) But there are various details that are still under negotiation. The detailed repeal proposal is expected to be introduced by Jan. 27, a nonbinding deadline included in the budget resolution.
  • 3) That bill needs to pass through the House and Senate. That is not a given. Several Republican senators have expressed concerns about the repeal plan. Their objections are not all the same, so it is difficult to predict how they will ultimately vote. Some object to individual provisions, while others are concerned about timing, and still others are worried about the budget impact. Republicans hold a narrow edge in the Senate, with 52 seats, and no Democrats are expected to support the measure.

GOP governors fight their own party on Obamacare - POLITICO: Republican governors who reaped the benefits of Obamacare now find themselves in an untenable position — fighting GOP lawmakers in Washington to protect their states’ health coverage. This rift between state and federal GOP officials is the real battle on Obamacare at a time when Democrats have only marginal power in Congress. The voices of even a handful of Republican governors intent on protecting those at risk of losing coverage could help shape an Obamacare replacement and soften the impact on the millions who depend on the law. Story Continued Below President-elect Donald Trump heaped more pressure on lawmakers to find a resolution of the issue this week when he vowed to “repeal and replace Obamacare essentially simultaneously” after the Senate confirms Rep. Tom Price, his pick for Health and Human Services secretary. But Trump’s push comes as at least five of the 16 Republican governors of states that took federal money to expand Medicaid are advocating to keep it or warning GOP leaders of disastrous consequences if the law is repealed without a replacement that keeps millions of people covered. They include Govs. Charlie Baker of Massachusetts, Rick Snyderof Michigan, John Kasichof Ohio, Asa Hutchinson of Arkansas and Brian Sandovalof Nevada. And more Republican governors might join with a Friday deadline to submit written proposals to Republican leadership on the Hill.If anyone could sway congressional Republicans, it’s these officials who are closest to the millions affected and more likely to be in the direct line of fire, said several former state and federal health officials. Members of Congress have close working relationships with state leaders and are also representatives and taxpayers, said Tommy Thompson, a former Wisconsin governor and HHS secretary under George W. Bush. “They will have a much more or a substantial influence on things like Medicaid,” said Thompson, who met with Trump in December to discuss Obamacare. There are signs they are getting a hearing, at least: In the House, GOP lawmakers are speaking with four or five expansion-state governors to see if they can find ways to address their concerns, said Rep. Chris Collins, a New York Republican acting as a liaison between the House and the incoming Trump administration.

Trump’s “executive orders” are a communications strategy. --According to Vice-President-elect Pence, “We’re working now on a series of executive orders that will enable that orderly transition to take place even as Congress appropriately debates alternatives to and replacements for ObamaCare.” This talk about using executive orders to assure an “orderly transition” is a bit confusing. An E.O. has legal force “only if the presidential action is based on power vested in the President by the U.S. Constitution or delegated to the President by Congress.” Authority to implement the ACA, however, is vested in the Secretaries of HHS, Treasury, and Labor—not the President. In the context of the ACA, an executive order won’t be anything more than a document containing a president’s instructions to his subordinates. That’s why, as Tim Jost details here, President Trump can’t use E.O.s to change the rules that have been adopted to implement the ACA. To do that, agency officials would have to undergo cumbersome rulemaking processes. Guidance documents are easier to withdraw and amend, but an E.O. probably can’t do the job (although strong proponents of the unilateral executive might argue otherwise). It’s true that President Trump doesn’t need an E.O. to tell Secretary Price to reconsider the rules governing contraception coverage or essential health benefits. He can issue instructions in all sorts of other ways: in meetings, memos, press conferences, telephone calls, or even tweets. Yet executive orders have three distinctive features that make them attractive to the incoming president. First, they are public, which enables Trump to signal that he’s following through on his campaign promises and that he wishes to be judged on that. Second, executive orders are formal, allowing the President to communicate to stakeholders and the public his seriousness of purpose and resolve. Finally, and most interestingly, the vigorous (and often misplaced) controversy over executive orders during the Bush and Obama administrations has lent such orders a patina of presidential unilateralism and disregard for law. At the same time, it’s become an article of faith among Republicans that Obama systematically abused his powers in implementing the ACA. Promising to issue executive orders thus allows Trump to signal that he’s not afraid of committing the same sorts of abuses to undo Obama’s. It’s a way of cultivating his image. To his base, he’s saying, “I may be a son of a bitch, but I’m your son of a bitch.”

Pass a Regulation, Repeal Another: House Approves Provision Tied to Koch Industries - On January 5, the U.S. House of Representatives passed the REINS (Regulations from the Executive in Need of Scrutiny) Act of 2017 in a 237-187 vote, a bill pushed for years by Koch Industries-funded entities, which will make it harder for federal agencies to enact regulations.  Passing mostly along party lines, the bill also included an amendment introduced by U.S. Rep. Luke Messer (R-IN) and passed by the House, which states that for every federal regulation created, another must be amended or retired. In announcing the amendment on the House floor, Messer said Canada has a similar law on the books. A DeSmog investigation shows that the amendment is actually a clone of the SCRUB (Searching for and Cutting Regulations that are Unnecessarily Burdensome) Act, a bill lobbied for by America's Natural Gas Alliance, the Business Roundtable, the U.S. Chamber of Commerce, and others, which passed in the House in January 2016 but not the U.S. Senate. And the Canadian law it's based on, the Red Tape Reduction Act of 2015, is oft-cited by Koch- and industry-funded think-tanks — who also pushed the Canadian bill before it passed — as something the U.S. should emulate.“The American economy and taxpayers are being crushed by endless and often unnecessary federal regulation,” Messer said in a press release after his amendment passed. “We have got to get this under control and rein in the ever-growing federal bureaucracy. The collective weight of federal regulations puts a giant tax on the American people, and enough is enough.” Messer, serving in his second term in office, maintains Koch Industries and ExxonMobil as two of his top campaign contributors.

House Passes Koch Brothers-Backed REINS Act that Weakens Gov’t Regulatory Agencies – naked capitalism - Yves here. The Hill had a good opinion piece on the same topic covered in this Real News Network interview. Key sections of the article, Congress must stop undermining agencies that protect Americans by Jeremy Symons, associate vice president of climate change policy at the Environmental Defense Fund:  Rather than challenge popular agencies openly, some in Congress hope to hobble them with one fell swoop of bills that prevent their ability to update rules and regulations—in essence, a slow-rolling shutdown of government safety. These reforms will not just affect environmental protections like clean air and water, but also critical safeguards for children and families across all spheres of life, including food safety, workplace protections, financial protections, consumer product safety and more… The Regulations from the Executive in Need of Scrutiny (REINS) Act, which passed in the House of Representatives on Jan. 5, is a bill that aims to obstruct even basic protections by requiring all new covered regulations to be approved by both chambers of Congress.Under REINS Act, If either branch of Congress does not approve any covered rule within 70 legislative days, the rule becomes null and void and cannot be re-issued. This effectively gives one chamber of Congress veto power over any new significant public health and safety protection, no matter how non-controversial or sensible it may be. With the power to block crucial standards resting in the hands of just one chamber of Congress, the REINS Act would give enormous power to deep-pocketed, powerful lobbyists in Washington who favor the status quo. If there is one thing corporate lobbyists are good at, it’s stopping Congress from getting things done. With the REINS Act in place, Congressional gridlock would create a permanent system of regulatory stagnation and obsolescence that is unable to protect our safety, health and wellbeing in a rapidly changing world… The Midnight Rules Review Act, which also passed in the House last week, would allow Congress to disapprove multiple rules finalized near the end of a president’s term in one single vote. However, under current law, Congress already has the authority to review and reject these rules. But this bill is only about one thing—hiding the ball. By bundling many rules together, the sponsors hope to undermine accountability and avoid public scrutiny about what rules are being rolled back. (incl Real News Network video & transcript)

The Most Dangerous Bill You’ve Never Heard of Just Passed the House -  Last, week, under the cover of a media bliss-out except among Koch funded right-wing channels, the House of Representatives passed a bill which would effectively repeal future standard setting under every important environmental, public health, consumer protection, labor standards, occupational safety and civil rights law on the books.  The bill, called the REINS Act, requires that any future major regulation adopted by an Executive Agency—say a new toxic chemical standard required by the recently enacted Chemical Safety Act, or a new consumer protection rule about some innovative but untested kind of food additive—must be approved by a specific resolution in each House of Congress within 70 days to take effect. To give a sense of the scale of this road-block, in 2015 there were 43 such major federal regulations passed to protect the public; among them were food safety regulations, the Clean Power Plan regulating pollution from electrical generating facilities, net neutrality rules protecting the internet from monopoly, restrictions on predatory lending and energy efficiency standards for appliances.  If the REINS Act had been in effect, it unlikely that the Tea Party dominated Republican caucus in the House would have approved of any of these rules. Future standard setting under the entire body of legislation enacted over the past 40 years to protect the public, from the Clean Air Act to the Dodd Frank financial sector reforms, would be frozen. Over time, as new health, safety, consumer and labor protection issues arise, all of these laws will effectively have been repealed, with no public debate and no accountability. It will also be impossible to restore them as long as the REINS Act is in effect, because by requiring Congress to approve every regulation, it makes it impossible to pass technically complex and scientifically valid rules on any topic of controversy.

New feds could be fired for ‘no cause at all’ by Trump under planned legislation -- A range of Republican proposals on federal hiring, firing and retiring will have them under fire during the Trump administration. One flying under the radar poses a fundamental threat to the purpose of the civil service. It would essentially dispose of federal employee due process rights. Rep. Todd Rokita (R-Ind.) considers his bill “a tool for … President [-elect Donald] Trump to use in draining the swamp.” In the process, it would eviscerate civil service protections for all new federal employees. His deceptively named “Promote Accountability and Government Efficiency Act” says staffers hired one year after enactment or later “shall be hired on an at-will basis.”That raises the question — why would the Trump administration hire potential swamp dwellers? They would be the only folks affected at least for the next four years. The bill’s potential consequences are nonetheless ominous. In current form, it provides an appeal process for suspended staffers, but not for the fired.Rokita’s bill makes the meaning of at-will status clear: “Such an employee may be removed or suspended, without notice or right to appeal, from service by the head of the agency at which such employee is employed for good cause, bad cause, or no cause at all.”Think about that. Political appointees could fire civil servants for “no cause at all.” That’s dangerous.

US ethics office struggled to gain access to Trump Team, emails show -- The office tasked with overseeing ethics and conflicts in the federal government struggled to gain access to leaders of the Trump transition team, and warned Trump aides about making decisions on nominees or blind trusts without ethics guidance, according to new emails obtained by MSNBC. Office of Government Ethics Director Walter Shaub emailed Trump aides in November to lament that despite his office's repeated outreach, "we seem to have lost contact with the Trump-Pence transition since the election." Trump aides may also be risking "embarrassment for the President-elect," Shaub warned, by "announcing cabinet picks" without letting the ethics office review their financial information in advance. The perils for White House staff were even more severe, Shaub argued, because they might begin their jobs without crucial ethics guidance, raising a risk of inadvertently breaking federal rules."They run the risk of having inadvertently violated the criminal conflicts of interest restriction at 18 USC 208," Shaub wrote, citing a federal conflicts law in an email to Trump Transition aide Sean Doocey."If we don't get involved early to prevent problems," he added, "we won't be able to help them after the fact." Shaub also warned that if Trump tried to create his own "blind trust" without the ethics office, the effort could be dead on arrival.

Senate Confirmation Hearings to Begin Without All Background Checks - NYTimes: — As Senate Republicans embark on a flurry of confirmation hearings this week, several of Donald J. Trump’s appointees have yet to complete the background checks and ethics clearances customarily required before the Senate begins to consider cabinet-level nominees. Republicans, who are expected to hold up to five hearings on Wednesday alone, say they simply want to ensure that the new president has a team in place as soon as possible. “I believe all the president-elect’s cabinet appointments will be confirmed,” Senator Mitch McConnell of Kentucky, the majority leader, said. But Democrats are calling for the process to be slowed and for the hearings to be spread out. That, they say, would allow more time to vet the nominees. “Our first overarching focus is getting tax returns and ethics forms,” said Senator Amy Klobuchar, Democrat of Minnesota. In a letter to Senators Chuck Schumer of New York and Elizabeth Warren of Massachusetts, the leader of the Office of Government Ethics, Walter M. Shaub Jr., said on Friday that “the announced hearing schedule for several nominees who have not completed the ethics review process is of great concern to me.”  said the packed schedule had put “undue pressure” on the office to rush its reviews of the nominees and he knew of no other occasion in the office’s four decades when the Senate had held a confirmation hearing before the review was completed.

Democrats Use Trump-Rescued Ethics Office To Delay Trump Nominees -- In an ironic twist, following president-elect Trump's urging to kill a bill that would have severely diminished Congress' Ethics Office power, The Hill reports that Democrats are calling on Senate Republicans to delay hearings for Trump's Cabinet picks, citing an incomplete ethics screening of several nominees. As a reminder, House Republicans abruptly voted on Monday night to eliminate the independence of the Office of Congressional Ethics, the chamber’s nonpartisan ethics board which investigates lawmakers' alleged misconduct, largely stripping it of its power, leading to pushback from Democrats and government watchdog groups. House Republicans, meeting as a group Monday night, approved an amendment from House Judiciary Committee Chairman Bob Goodlatte that would place the office under the oversight of the lawmaker-run House Ethics Committee. Trump responded... With all that Congress has to work on, do they really have to make the weakening of the Independent Ethics Watchdog, as unfair as it  Which led House Republicans to hold an emergency meeting, resulting in... (via The Hill)House Republicans at an emergency conference meeting on Tuesday withdrew a proposal to gut an ethics watchdog. And so now, as The Hill reports, Democrats are using that rescued 'power' to try to delay confirmation of Trump's cabinet picks... Early on Saturday, the director of the federal Office of Government Ethics, a watchdog agency that conducts ethics reviews of all Cabinet appointments, said that the plan to hold confirmation hearings before the ethics reviews are complete is "of great concern." “It is unprecedented and deeply worrisome to hold confirmation hearings on President-elect Donald Trump's nominees before basic ethics reviews are completed," Democratic National Committee (DNC) spokeswoman Adrienne Watson said in a statement.

 Republicans, Facing Pressure, Delay Hearings for 4 Trump Cabinet Nominees — Senate Republicans, under increasing pressure to ensure that President-elect Donald J. Trump’s nominees are fully vetted by federal authorities, have delayed the hearings of four potential cabinet members, three of whom have not been cleared by the agency charged with unraveling potential conflicts of interest. As frustrations over confirmations grow, a group that supports Republicans accused the ethics office and its leader — in a highly unusual attack on the nonpartisan agency — of politicizing a process long viewed by both parties as arduous but essential for anyone serving in government. Hearings for Betsy DeVos, Mr. Trump’s choice to lead the Department of Education; Andrew Puzder, his labor secretary nominee; and Representative Mike Pompeo, Republican of Kansas, Mr. Trump’s pick to lead the Central Intelligence Agency, have all been pushed back as Democrats clamor for more time to collect and review the standard background checks that nominees traditionally undergo before their hearings commence. Wilbur Ross, Mr. Trump’s pick for secretary of commerce, will also be delayed several days because his ethics agreement is not complete, according to the chairman and ranking Democrat of the commerce committee. The delays represent a stumble for the incoming Trump administration, which has vowed to run government with a businesslike efficiency, and highlights how in several respects its preparation to take office is behind that of predecessors.

A Complete List Of What Trump Can, And Can Not Do, On Day One And For The Rest Of 2017 - With the Trump inauguration just over 10 days away, attention has now shifted to what Trump will do the moment he steps foot in the White House, and as The Hill reported this morning, judging by his campaign promises, Donald Trump will be a busy man starting on his first day in the Oval Office: "Trump has pledged to take sweeping, unilateral actions on Jan. 20 to roll back President Obama’s policies and set the course for his administration. Many of Obama’s policies he can reverse with the simple stroke of a pen."The Hill then lays out some of the key agenda items in terms of Immigration, Environment, Lobbying, Trade and Healthcare.The reality, however, is a bit more nuanced than captured in the report, and has to take into consideration not only what Trump's intentions are, but how they would integrate with Congress, where simply  structural limitations could put hurdles ahead of the Trump agenda.So, for a more comprehensive preview of what Trump can - and can not do - both on day one, and for the rest of 2017, we present a recent analysis by Alec Phillips of Goldman Sachs (which, now that Trump has surrounded himself with Goldman alumni will be as critical when it comes to fiscal policy as Goldman was when it came to advising the Federal Reserve on monetary policy), which notes that the political agenda for 2017 is starting to take shape, with tax reform and Obamacare repeal seemingly at the top of the agenda. Trump will be delighted to know that both items can be passed without Democratic support via the budget reconciliation process.

Priebus affirms: No meddling with entitlements under Trump - Incoming White House chief of staff Reince Priebus affirmed Sunday that President-elect Trump will not seek cuts to entitlement programs like Social Security and Medicare, indicating that Trump won't be swayed by congressional Republicans who have pushed to reform the programs. "I don't think President-elect Trump wants to meddle with Medicare or Social Security," Priebus said in an appearance on CBS. "He made a promise in the campaign that that was something he didn't want to do." Instead, Priebus suggested, Trump seeks to shore up the two programs' finances by boosting economic growth and bringing jobs back to the U.S. from overseas. On the campaign trail, Trump set himself apart from other Republicans by claiming that he would protect benefits, while they would shred them.Yet many of the people in the transition, including Vice President-elect Mike Pence and members of the landing team for Social Security, hold more conventionally Republican views on entitlement reform. Paul Ryan, the Speaker of the House, has long favored a reform of Medicare for future retirees, one that would give beneficiaries funding to purchase approved private plans, along with an option for traditional Medicare.

Trump's Double-Barreled Supreme Court Nomination Strategy - As inauguration day nears for President-elect Donald Trump, the Supreme Court arm of his transition team has reportedly trimmed the list of potential nominees to replace the late Justice Antonin Scalia from nearly two dozen conservative jurists to just three -- and is focusing on filling two vacancies instead of just one.  Though the Scalia vacancy is the only current opening, Politico reported Wednesday that Trump's top advisers are anticipating another vacancy early in the president-elect's first term.  As a result, the team is preparing to nominate Scalia's replacement within days of Trump's inauguration, and is putting a second conservative jurist on deck. Should a new opening occur, the theory goes, the new president could nominate someone quickly -- delivering the prospect of a reliable, 6-3 Supreme Court conservative majority.  "He clearly understands he may have a chance to define the court for a generation or more and he is taking it very seriously," former Speaker Newt Gingrich, a Trump confidante, told Politico.But the Senate's top Democrat delivered an unequivocal message to the incoming administration Tuesday night: Don't measure anyone for Supreme Court robes just yet. "It's hard for me to imagine a nominee that Donald Trump would choose that would get Republican support that we could support," Senate Minority Leader Chuck Schumer told MSNBC's Rachel Maddow Tuesday night. Asked if he would block confirmation of anyone who didn't meet that standard, Schumer answered, "Absolutely." The Trump team's strategizing, and Schumer's warning shot, are some of the increasing signs that the high-stakes battle for the direction of the nation's highest court -- both short-and long-term - is already underway.

Trump's son-in-law, Jared Kushner, expected to join White House as a senior adviser | McClatchy DC: Jared Kushner, the son-in-law of president-elect Donald Trump and one of his closest confidants, is expected to join the White House as a senior adviser to the president, according to a person close to the transition. Trump relied heavily on Kushner's advice during the campaign, and his move to the White House was expected. But ethics experts have raised questions about whether Kushner's role in the new administration will run up against a federal anti-nepotism law and how he will separate himself from his real estate business to avoid conflicts of interest. His appointment is expected to be formally announced later this week. Kushner, 35, is married to Ivanka Trump and has run his family's multibillion-dollar business over the past decade, after his father pleaded guilty to corruption-related charges.Kushner's appointment was telegraphed over the weekend by a statement from his lawyer that said that Kushner is preparing to resign from his position overseeing his family's real estate empire and to divest "substantial assets" if he takes a role in Trump's White House. Some ethical experts question whether a Kushner appointment would violate a federal anti-nepotism statute. The 1967 law, which came about after President John F. Kennedy named his brother as attorney general, forbids public officials from hiring family members in agencies or offices they oversee. It explicitly lists sons-in-laws as prohibited employees. Some lawyers argue that the White House is exempt because it is not considered an agency.

Tillerson Ethics Plan Foreshadows Knotty Trump Confirmations - Rex Tillerson’s disclosure that he stands to receive a $180 million cash payout from Exxon Mobil Corp. if he becomes the next U.S. secretary of state offers a preview of the thorny ethical questions that may be raised this week over a presidential cabinet stacked with tycoons. And with confirmation hearings scheduled for Tillerson and eight other appointees of President-elect Donald Trump, the head of the federal office that helps ensure compliance with conflict-of-interest rules told lawmakers his agency is hard-pressed by too much work and too little time.Tillerson ironed out an agreement with the State Department under which Exxon would pay the cash into an independent trust for him, a move designed to separate his financial interests from the oil company that he led as chairman and chief executive officer until he stepped down Jan. 1. Some compensation specialists question whether Exxon departed from its official compensation policies to extend its former leader a special arrangement; the company says it hasn’t. Regardless, Tillerson’s ethics filing last week foreshadows the complexity that will attend a busy week of hearings. “This schedule has created undue pressure” on ethics officials “to rush through these important reviews,” wrote Walter M. Shaub Jr., director of the federal Office of Government Ethics, in a letter to Democratic senators. “More significantly, it has left some of the nominees with potentially unknown or unresolved ethics issues shortly before their scheduled hearings.” While he didn’t name any particular appointees, Shaub’s letter said: “In fact, OGE has not received even initial draft financial disclosure reports for some of the nominees scheduled for hearings.” Senate Minority Leader Charles Schumer, who released Shaub’s letter Saturday, said in an e-mailed statement that the letter constituted evidence that Senate Republicans are trying to “jam through unvetted nominees.”

 Steven Mnuchin is About to Get Eviscerated by Senate Democrats - As you may have heard, Steven Mnuchin, the president-elect’s pick to run the Treasury Department, has a couple items on his résumé that don’t totally thrill Senate Democrats. That he spent 17 years working at Goldman Sachs, the bank Donald Trump spent his campaign railing against, is one. But the other, which makes his time at Goldman (where Hank Paulson also worked, after all) look like volunteer work in South Sudan, is his time at OneWest. The lender, which Mnuchin and a group of investors bought from the carcass of IndyMac in 2009 for pennies on the dollar before flipping it for millions in 2015, has been charitably referred to as a “foreclosure machine.” During Mnuchin’s reign, it attempted to kick approximately 36,000 people out of their homes, reportedly including a 90-year-old woman over the matter of 27 cents. And that’s just what Mnuchin has put on his professional highlight reel. He doesn’t, for example, want to discuss the 2013 memo that was leaked last week alleging “widespread misconduct” and a call for the California attorney general’s office to sue the bank. But Senate Democrats have other plans! Per the Financial Times: On Friday Maxine Waters, the ranking Democrat on the House Financial Services Committee, urged her colleagues in the Senate to reject Mr. Mnuchin’s nomination, saying that his “mistreatment” of homeowners “clearly disqualifies” him from serving as the nation’s next Treasury Secretary. Ms. Waters is the latest high-ranking Democrat to turn her fire on Mr. Mnuchin ... Last month senators Jeff Merkley, Elizabeth Warren and Bernie Sanders unveiled a website dubbing Mr. Mnuchin “the foreclosure king” and urging borrowers to share stories of how they were affected by OneWest’s foreclosure practices. According to a spokesman for Mnuchin, OneWest was a totally great company and memos like the one that came to light last week “belong in the garbage, not the news.” And the Foreclosure King has also found a few friendly supporters on Wall Street. A sympathetic banker who nevertheless didn’t want his name printed told the F.T., “I think he’s getting a bum rap. There’s no way to foreclose in a pretty way.”

Brown Is the First Senator to Say ‘No’ to Jeff Sessions -- People of conscience, regardless of party or ideology, are going to have to reject President-elect Donald Trump’s nomination of Alabama Senator Jefferson Beauregard Sessions III to become the the 84th attorney general of the United States.   The first senator to do just that is Ohio Democrat Sherrod Brown, who as a state official, member of the US House and the US Senate has established a record of standing on principle on issues of economic and social justice.   Brown met with Sessions last Wednesday, reflected on what he had heard, and announced his decision late in the week: “The U.S. Attorney General’s job is to enforce laws that protect the rights of every American. I have serious concerns that Senator Sessions’ record on civil rights is at direct odds with the task of promoting justice and equality for all, and I cannot support his nomination.”   After discussing the Alabaman’s record on civil rights and opinions on a range of issues—including the need to restore the full protections of the Voting Rights Act of 1965 and what can be done to improve police-community relations in cities across the country—Brown said, “Now, more than ever, we need leaders who can bring Americans together to improve police-community relations, ensure that all Americans have access to the ballot, and reform our criminal justice system.”   Brown gave Sessions a chance, but he wasn’t reassured that Alabaman would meet that reasonable and necessary standard. Brown’s assessment is sound. It should be echoed and embraced by his fellow senators.

Trump's choice for U.S. attorney general says he can stand up to him | Reuters: U.S. President-elect Donald Trump's pick for attorney general, Jeff Sessions, promised on Tuesday to stand up to Trump, his close ally and future boss, saying he would oppose a ban on Muslims entering the country and enforce a law against waterboarding even though he voted against the measure. Questioned for 10-1/2 hours by a U.S. Senate committee responsible for confirming his appointment, Sessions, a U.S. senator from Alabama, distanced himself from comments he had made defending Trump from criticism over a 2005 video that emerged in October showing Trump boasting about grabbing women's genitals. At the time, Sessions told The Weekly Standard magazine he would not characterize the behavior as sexual assault. He later said the comments were taken out of context. Asked on Tuesday whether "grabbing a woman by her genitals without consent is ... sexual assault," he replied: "Clearly, it would be." With 10 days to go before Trump takes office, Sessions, 70, was the first Cabinet nominee to face questioning. He appeared before the Senate Judiciary Committee. Trump's pick to run the Department of Homeland Security, retired Marine Corps General John Kelly, later went before the Homeland Security Committee. As attorney general, Sessions would serve as the top U.S. law enforcement officer and be responsible for giving unbiased legal advice to the president and executive agencies. With that in mind, lawmakers from both Trump's Republican Party and the Democratic Party sought to establish how closely Sessions hewed to Trump positions and whether he could put aside his staunchly conservative political positions to enforce laws he may personally oppose. A senator since 1997, Sessions was widely expected to be confirmed by the Republican-controlled Senate.

Sessions Will Recuse Himself Of Any Probe Into Hillary Clinton, Does Not Support A Ban On Muslims -- As the Jeff Sessions confirmation hearing continues, Trump's nominee for attorney general said that he would recuse himself from any potential future investigations or probes involving Hillary Clinton’s use of a private email server while working as secretary of state, as well as any questions about her family’s philanthropic foundation. Responding to senator Chuck Grassley if he could approach issues involving Trump’s presidential challenger impartially and objectively, Sessions said "I believe that could place my objectivity in question," Sessions said. "I believe the proper thing would be for me to recuse myself." He added the politically charged comments he made about the Clintons during the contentious campaign would give the appearance that he isn't impartial. Trump has called into question Clinton’s use of a private email server while serving as secretary of state during the campaign, and questioned whether her family’s solicitation of donations for the foundation could pose a conflict of interest. During the hearing, Grassley noted that Sessions – who supported Trump – had also made comments critical of her handling of sensitive emails and certain actions of the Clinton Foundation.  During the hearing, Sessions also denied accusations or racism. Calling it a “caricature,” Sessions denied the charges brought against him in his hearing for a federal judgeship in 1986 accusing him of being a racist.  "I do not harbor those kinds of animosities and race-based ideas I was accused of," Sessions said under questioning from Feinstein. The comment followed his opening remarks, in which Sessions addressed allegations that he is racist and that as a U.S. attorney he wrongly pursued a voting rates case against black civil rights activists. "I was accused, amazingly of harboring sensibilities for the KKK. These are false allegations...I abhor the klan and what it represents and its hateful ideology."

Jeff Sessions has deep ties to a big electric utility, and that could create major conflicts of interest -- Confirmation hearings began Tuesday for Sessions, the president-elect’s pick for attorney general. In addition to asking questions about the Alabama senator’s racist, homophobic, anti-woman, and anti-immigrant positions, Democrats might want to probe Sessions’ connections to Southern Co., one of the largest electric utilities in the U.S. The company, worth $47.8 billion, is the senator’s single largest corporate campaign donor, Bloomberg reports; Southern’s PACs and employees have funneled nearly $175,000 to his political campaigns since 1997. If Sessions is confirmed as the nation’s chief law enforcement officer, he would be in a position to do favors for the company. Southern would be seriously affected by the Clean Power Plan, which regulates carbon emissions from electric utilities. And a power plant Southern is building in Kemper, Mississippi, is being investigated by the U.S. Securities and Exchange Commission.  Sessions has also received campaign contributions from ExxonMobil, which has been accused of hiding its knowledge of climate change from shareholders and the public. There have been calls for the Justice Department to investigate Exxon’s actions, but they wouldn’t get anywhere under Sessions, who last year came out loudly against any such investigations. As Jamie Henn at said, “There’s never been such a strident advocate for the fossil fuel industry nominated for the role of attorney general.”

Sessions Would Enforce Federal Pot Laws, May End Choke Point | American Banker: Attorney General-designate Sen. Jeff Sessions, R-Ala., could pose a roadblock for marijuana businesses seeking financial services, but might also end a controversial Justice Department program targeting payment processors and financial institutions."It's not so much the attorney general's job to decide what laws to enforce. We should do our job and enforce laws effectively," said Sen. Jeff Sessions, R-Ala., the nominee for attorney general.

Opposition Comes From Different Quarters For Sessions and Tillerson - NBC News: The confirmation hearings for two of President-elect Donald Trump's most important cabinet nominees have completed their initial steps but the road forward for both remains somewhat bumpy. Senate Democrats have begun lining up in opposition to Attorney General-designate Sen. Jeff Sessions on ideological grounds while Republican reservations are complicating the nomination of ExxonMobile CEO Rex Tillerson to be secretary of state.There's no evidence their nominations are in serious trouble and it's rare for a cabinet nominee to be blocked by the Senate. Many are confirmed nearly unanimously. Hillary Clinton was confirmed to be secretary of state in 2009 in a 94 to 2 vote, for example. But sometimes controversy derails a candidate, or at least peels off support. Following his full-day hearing Wednesday, some key Republicans and a large number of Democrats remain on the fence, at best, about their support for Tillerson to become the nation's top diplomat. The major issue impacting Tillerson is Russia. Not only is Trump under fire for his seemingly cozy relationship with Russian President Vladimir Putin, Tillerson himself has engaged in extensive business dealings with Russia in his position at Exxon. At his hearing, Tillerson refused to say that he'd support sanctions against Russia and he also refused to say that Putin was a war criminal for atrocities in Syria, a position widely held on Capitol Hill.

Secretary of State nominee Tillerson veers from Trump on key issues | Reuters: Secretary of State nominee Rex Tillerson expressed views on Wednesday at odds with President-elect Donald Trump's positions on key foreign policy issues like nuclear proliferation, trade deals, climate change and relations with Mexico. In a nine-hour Senate confirmation hearing, the former chief executive of oil company Exxon Mobil said he favored maintaining U.S. sanctions against Russia for now and that NATO allies were right to be alarmed by Moscow's growing aggression. Russia dominated much of the hearing because of concerns by Democrats and Republicans over Moscow's interference in the U.S. presidential election and its 2014 annexation of Crimea from Ukraine and involvement in the Syrian civil war. Questions soon moved to the threat posed by Islamic State, China's behavior in the South China Sea, human rights and Tillerson's ability to make a clean break from a career at Exxon Mobil to become America's top diplomat. Tillerson said his differences with Trump on some major issues would not necessarily put him at loggerheads with the White House. He said everyone in Trump's Cabinet would have the chance to discuss issues "and the president will decide." He described himself as open and transparent. In a stark departure from Trump, Tillerson said it would not be acceptable for some U.S. allies to acquire nuclear weapons. He also did not see the need for a Muslim registry, saying he did not support targeting any particular group.

In Rocky Hearing, Rex Tillerson Tries to Separate From Trump - — Rex W. Tillerson on Wednesday told a Senate committee weighing his nomination as secretary of state that he would push back hard against President Vladimir V. Putin’s effort to expand Russian influence from Ukraine to Syria to cyberspace. But in a rocky all-day hearing, Mr. Tillerson also found himself on the defensive when it came to Exxon Mobil’s lobbying activities and his reluctance to declare that some dictators were violators of human rights. One especially skeptical Republican was Senator Marco Rubio of Florida, whose vote on the Foreign Relations Committee might well decide the fate of Mr. Tillerson, the former chief executive of Exxon. In one contentious exchange with Mr. Rubio, who ran against President-elect Donald J. Trump last year for the Republican nomination, Mr. Tillerson rebuffed an effort to get him to describe Mr. Putin as a war criminal for ordering the bombing of civilians in Chechnya. “I would not use that term,” he said. By the end of the day, Mr. Rubio would not commit to supporting Mr. Tillerson, saying he was “prepared to do what’s right,” even if it meant siding with Democrats, which would most likely result in a 11-to-10 committee vote against the nomination. Even so, the committee could still send it to the full Senate, where Mr. Tillerson’s chances would be tenuous.On issue after issue — the dangers of letting Japan and South Korea obtain nuclear weapons, his opposition to a ban on Muslim immigration, the need to push back hard against Mr. Putin’s efforts to expand Russian influence — Mr. Tillerson showed considerable independence from Mr. Trump, separating himself from many of the president-elect’s campaign pronouncements. While Mr. Trump described an America that would defend allies only if they paid their fair share, Mr. Tillerson repeatedly emphasized fulfilling alliance commitments.

Could Marco Rubio Actually Bring Down Rex Tillerson's Nomination? --As we enter the third day of hearings for Donald Trump’s nominees, Rex Tillerson appears to face the toughest confirmation fight of all of them. After a day of questioning Wednesday, Sen. Marco Rubio wouldn’t commit to voting for Tillerson, saying he was “prepared to do what’s right” even if fellow Republicans vote for the nominee for secretary of state. Rubio had pushed Tillerson throughout the hearing to condemn human rights abuses in Russia, Saudi Arabia, and the Philippines, which the nominee stubbornly refused to do, insisting that he would wait until he had access to more information. He also pointedly asked Tillerson if Vladimir Putin is a war criminal. (Tillerson answered, “I would not use that term.”)  Tillerson’s long-standing ties to Russia as Exxon Mobil CEO were controversial even before this week’s round of Trump/Russia accusations. In his testimony, Tillerson did condemn Russia’s annexation of Crimea, called the country an “unfriendly adversary,” and said “we’re not likely ever to be friends” (a strange statement from a man who’s literally received Russia’s “order of friendship”). But it evidently wasn’t enough to convince Rubio. Republicans only have a one-vote majority on the foreign-relations committee, so if Rubio and all 10 democrats vote against Tillerson, it could stall his nomination. The Senate can then bypass the panel and bring his nomination to the full chamber for a vote, where he would need only a simple majority. There, his nomination would be likely, but not guaranteed. South Carolina Sen. Lindsey Graham says he’s also still undecided. Blocking Tillerson would still require one more Republican (John McCain?) and all the Democrats to reject his nomination. As my colleague Josh Voorhees wrote earlier this week, that’s only happened nine times in the history of the Senate, most recently in 1989.

In Praise of Tillerson, Trump's Secretary Of State Pick SubmittedMish - The Financial Times reports Tillerson Gets Rough Ride from Russia Hawks on the Hill. The rough ride was from Senator John McCain, Senator Marco Rubio, and Senator Lindsey Graham. Rex Tillerson, Donald Trump’s pick for secretary of state, faced a tough grilling over his relationship with Russia and its president Vladimir Putin on Wednesday, while also stumbling on whether ExxonMobil had lobbied against Russian sanctions. Mr Tillerson faced pointed questions from Marco Rubio, a Republican member of the Senate foreign relations committee, who several times said he found some of Mr Tillerson’s answers “troubling” and “discouraging”. Leaving the committee hearing into Mr Tillerson’s nomination, Mr Rubio told reporters he was “prepared to do what is right” in regards to confirming or blocking Mr Tillerson’s appointment, leaving open the possibility that he could be leaning towards the latter. In addition to Mr Rubio, two other Republican senators — John McCain and Lindsey Graham — have also stated that they have concerns about Mr Tillerson’s relationship with Mr Putin. That’s about all I need to know. Anyone the collective neocon trio of McCain, Graham, and Rubio is displeased with, is assuredly a better choice than someone they like.

Rex Tillerson couldn’t recall ExxonMobil subsidiary’s work with Iran. Here’s the proof it happened - Secretary of state nominee Rex Tillerson faced several questions on Wednesday about his tenure as chief executive of ExxonMobil — and several times, Tillerson said that he couldn’t recall certain details of his four decades of work.  Democrats tried to show that ExxonMobil had done business with sanctioned state sponsors of terrorism including Iran, Syria and Sudan. On Thursday, the company asserted that its transactions with those countries were modest in size and did not violate sanctions law. Sens. Robert Menendez (D-N.J.) and Jeff Merkley (D-Ore.) quizzed Tillerson about Infineum, a European joint venture of ExxonMobil and the Royal Dutch Shell oil company that conducted business with Iran, which the State Department had listed as a state sponsor of terrorism as well as a state pursuing weapons of mass destruction. In particular, the senators wanted to know why the firm sold chemicals and fuel additives to the Iranian National Oil Company, listed by the Treasury Department as an affiliate of the Iranian Revolutionary Guard Corps, which the United States has labeled a direct sponsor of terrorist groups. “I do not recall the details of the circumstances around what you just described. The question would have to go to ExxonMobil for them to be able to answer that,” Tillerson told Menendez.On Thursday, Exxon spokesman Alan Jeffers said that Infineum was “independently managed” and that Exxon didn’t “have any control over them.” He added that Exxon had not violated U.S. law. Documents obtained by The Washington Post show that the Securities and Exchange Commission contacted ExxonMobil in 2006 and 2010 about Exxon’s dealings with Iran, Syria and Sudan, including Infineum and its work with Iran. On Jan. 6, 2006, the SEC wrote to Tillerson noting press reports about company sales and the lack of any mention of them in the company’s Form 10-K, an annual report to the agency.

Chinese Paper Calls Tillerson’s South Sea Threat ‘Foolish’ - China’s state media rebuffed a suggestion by President-elect Donald Trump’s nominee for secretary of state that Beijing must be denied access to reclaimed reefs in the disputed waters of the South China Sea.  “Unless Washington plans to wage a large-scale war in the South China Sea, any other approaches to prevent China access to the islands will be foolish,” the Communist Party-run Global Times newspaper wrote in an editorial. The English-language China Daily took a similar line: “It is certainly no small matter for a man intended to be the U.S. diplomat in chief to display such undisguised animosity toward China.”  In his Wednesday confirmation hearing before the U.S. Senate Foreign Relations Committee, Rex Tillerson compared China’s actions in the South China Sea to those of Russia in Crimea, saying a failure to respond had allowed it to “keep pushing the envelope” in the waters. “We’re going to have to send China a clear signal that first the island-building stops and second your access to those islands is also not going to be allowed,” Tillerson said.  Should the former Exxon Mobil Corp. chief executive’s remarks reflect future U.S. policy, it would represent a fundamental shift toward a more confrontational response to Beijing’s claims to more than 80 percent of the South China Sea. In recent years, China has reclaimed thousands of acres of land and shooed away boats from other claimant states like the Philippines and Vietnam.  China’s official response was relatively mild, with Ministry of Foreign Affairs spokesman Lu Kang saying Thursday that “like the U.S., China has the right within its own territory to carry out normal activities.” The People’s Daily newspaper last month argued for “strategic composure,” and urged policy makers to remain calm in response to criticisms from the Trump camp before he takes office.

Gen. Mattis: "Russia Is The Principal Threat To US Security" --The cold war is officially back.The Senate Armed Services Committee is currently hearing the testimony of retired Marine General James Mattis, picked by Donald Trump to take over the Department of Defense.Mattis retired from the US Marine Corps in 2013 after serving as the 11th commander of US Central Command, replacing General David Petraeus as the overseer of US operations in the Middle East and Afghanistan. His appointment requires a congressional waiver because federal law states that service members must wait seven years after retiring from active duty before they can hold senior civilian defense positions.As the WSJ notes, "so far, there is no sign that he will face any resistance on for his Senate confirmation. He's winning a fair amount of praise from Democrats. It this continues to hold, he could have one of the smoothest confirmation votes of any Trump administration nominee."“Our Armed Forces must remain the best led, best equipped, and most ready force in the world,” Mattis told the Senate.  “We must also embrace our international alliances and security partnerships. History is clear: nations with strong allies thrive and those without them wither.”“My watchwords will be solvency and security in providing for the protection of our people and the survival of our freedoms,” Mattis said. “America has two fundamental powers. One is intimidation,” Mattis told Senator Gary Peters (D-Michigan). “The other power, which we’ve used less in the last 20 years, is the power of inspiration.” The US should not be turning to military power as the answer to all of its concerns around the world, the retired Marine general added.

Mattis sails through confirmation hearing and waiver vote.: Retired Gen. James Mattis sailed through his confirmation hearing Thursday as a hardened warrior who cherishes allies, prefers diplomacy to conflict, deeply distrusts Russian President Vladimir Putin, and promises to speak his mind “frankly and forcefully” whenever he disagrees with President Trump. To many Trump skeptics, this has always been Mattis’ main appeal—that his street cred as a retired four-star Marine general and a noted scholar of history and strategy would serve as restraining influence to Trump’s unpredictability and to the extreme belligerence of the president-elect’s national security adviser, retired Lt. Gen. Michael Flynn. The appeal is so strong that most senators are willing to overlook the law prohibiting officers from serving as secretary of defense until seven years after they’ve retired. Mattis retired just four years ago, and so required a waiver to take office. Congress has passed such a waiver just once, in 1950, when President Harry Truman nominated five-star Gen. George Marshall to the position. After Thursday’s hearing, the Senate Armed Services Committee approved a waiver for Mattis by a margin of 24–3. Two hours later, the full Senate voted the same way, 81–17. Sen. John McCain, the committee’s chairman, cited testimony from earlier this week by two scholars on civil-military relations who strongly supported the law barring recently retired officers from taking the job but also strongly supported making an exception for Mattis. One of those scholars, Eliot Cohen, a noted author and professor, former State Department official, and, during the presidential campaign, an instigator of the “Never Trump” movement launched by conservative national-security specialists, said at this earlier hearing that Mattis “would be a stabilizing and moderating force, preventing wildly stupid, dangerous, or illegal things from happening.”

 At His HUD Confirmation Hearing, Ben Carson Displayed He Knows Nothing About HUD - Back in November, Ben Carson expressed reticence about serving in government under President-elect Donald Trump. “Dr. Carson feels he has no government experience, he’s never run a federal agency,” said business manager and close friend Armstrong Williams, speaking on behalf of the former presidential candidate. “The last thing he would want to do was take a position that could cripple the presidency.” But then Trump nominated Carson to lead the Department of Housing and Urban Development, and suddenly, Carson thought he was qualified to run a federal agency. “I know that I grew up in the inner city,” Carson said. “And have spent a lot of time there. And have dealt with a lot of patients from that area. And recognize that we cannot have a strong nation if we have weak inner cities. And we have to get beyond the promises and start really doing something.” Carson still isn’t qualified. He has little to no experience with, or serious knowledge of, the issues HUD confronts, from home financing and affordable housing to efforts at racial and economic diversity in communities that receive federal funding. But his profound inexperience didn’t stop him from having a smooth confirmation hearing on Thursday, when he was questioned for several hours by the Senate Committee on Banking, Housing, and Urban Affairs. “Questioned” is a little generous. For the Republican members of the committee, Carson’s confirmation was a given. Rather than challenge the former surgeon on his qualifications, they asked leading, highly ideological queries. And so, for example, North Carolina Sen. Thom Tillis asked Carson what government could do for people receiving assistance. Carson’s response? “Get them off of it.” Later, Tillis asked whether the government has “gone from providing housing to providing warehousing for an unacceptable number of people who are supported by the federal government.” Carson affirmed the premise: “The key to your question was the word ‘unacceptable,’ and yes, absolutely.”

Trump picks Veterans Affairs insider to lead troubled agency (AP) — President-elect Donald Trump on Wednesday tapped the Department of Veterans Affairs' top health official to lead a beleaguered agency struggling to meet the health needs of millions of veterans. David Shulkin's nomination signals a more modest approach to change at the VA after Trump repeatedly pledged an overhaul. During the presidential campaign, Trump described the VA as "the most corrupt agency" and "probably the most incompetently run agency." If confirmed, Shulkin would have the rare distinction of being an ex-Obama administration official serving in the Trump administration. Trump announced Shulkin's selection at a news conference in New York and said he had interviewed at least 100 people for the job. "Sadly our great veterans have not gotten the level of care they deserve, but Dr. Shulkin has the experience and the vision to ensure we will meet the health care needs of every veteran," Trump said. The choice is likely to soothe some of the largest veterans organizations and pave an easy path to confirmation in the Senate, where Shulkin was approved unanimously to be undersecretary of health in 2015. Veterans groups and Democrats have praised steps taken by VA Secretary Bob McDonald's team and feared that other possible picks might push for greater privatization. Shulkin has supported closer ties with the private sector, but opposed full privatization. As undersecretary, Shulkin manages a system responsible for 9 million military veterans in more than 1,700 facilities. He was charged with improving wait times for medical care following the 2014 scandal involving long waits at the Phoenix VA medical center.

Trump, tech tycoons talk overhaul of H1B visas | Reuters: President-elect Donald Trump's transition team has been actively considering ways to revamp a temporary visa program used to bring foreign workers to the United States to fill high-skilled jobs, according to sources familiar with the discussions. Possibilities for reforming the distribution of H-1B visas, which are used largely by the tech industry, were discussed at a meeting last month with chief executives of tech companies at Trump Tower, said two sources, who asked not to be named because they were not authorized to talk about the closed-door talks.Trump senior policy adviser Stephen Miller proposed scrapping the existing lottery system used to award the visas. A possible replacement system would favor visa petitions for jobs that pay the highest salaries, according to the sources. H-1B visas are intended for foreign nationals in "specialty" occupations that generally require higher education, which according to U.S. Citizenship and Immigration Services (USCIS) includes, but is not limited to, scientists, engineers or computer programmers. The government awards 65,000 every year. Companies say they use them to recruit top talent. But a majority of the visas are awarded to outsourcing firms, sparking criticism by skeptics that say those firms use the visas to fill lower-level information technology jobs. Critics also say the lottery system benefits outsourcing firms that flood the system with mass applications. The H-1B visa program tends to be more critical to outsourcing firms than U.S. tech firms. For instance, more than 60 percent of the U.S. employees of Indian outsourcing firm Infosys are H-1B holders, and the company in its annual report has cited an increase in visa costs as among factors that could hurt its profitability.

Why Donald Trump's Choice of RFK Jr. as Vaccine Czar Is a Terrible Idea -- There’s been a mesmerizing kind of destructive physics at play in the appointments Donald Trump has made since winning the White House. Just as a particle of matter and a particle of antimatter will destroy each other instantly on contact, so too can precisely the wrong person appointed to precisely the wrong position blow up the very purpose of the job that’s supposed to be getting done. Department of Energy, meet former Governor Rick Perry, the man who once said he wanted to eliminate you entirely. Boom. Department of Health and Human services, meet Rep. Tom Price, who wants to throw out the Affordable Care Act, allow insurers to quit covering patients with pre-existing conditions and make Medicare less available to the people who need it most. Boom. Now comes the Trump team’s latest planned explosion: the appointment of celebrated anti-vaccine crusader Robert F. Kennedy, Jr. to chair a commission on, yes, vaccine safety and integrity. The through-the-looking-glass news broke today in the lobby of Trump Tower, when Kennedy descended from the presidential aerie and told the gaggle of reporters camped around the elevators that Trump had called and offered him the job and he had accepted. His new responsibilities, Kennedy said, included making sure “we have scientific integrity in the vaccine process for efficacy and safety effects.” He also stressed that “everybody ought to be able to be assured that the vaccines we have [are] as safe as they can possibly be.” Finally, he added that Trump “is very pro-vaccine, as am I.”

Trump’s Debts Are Widely Held on Wall Street, Creating New Potential Conflicts -- The debts of President-elect Donald Trump and his businesses are scattered across Wall Street banks, mutual funds and other financial institutions, broadening the tangle of interests that pose potential conflicts for the incoming president’s administration. Hundreds of millions of dollars of debt attached to Mr. Trump’s properties, some of them backed by Mr. Trump’s personal guarantee, were packaged into securities and sold to investors over the past five years, according to a Wall Street Journal analysis of legal and property documents. Mr. Trump has previously disclosed that his businesses owe at least $315 million to 10 companies. According to the Journal’s analysis, Trump businesses’ debts are held by more than 150 institutions. They bought the debt after it was sliced up and repackaged into bonds—a process known as securitization, which has been used for more than $1 billion of debt connected to Mr. Trump’s companies. As a result, a broader array of financial institutions now are in a potentially powerful position over the incoming president. If the Trump businesses were to default on their debts, the giant financial institutions that serve as so-called special servicers of these loan pools would have the power to foreclose on some of Mr. Trump’s marquee properties or seek the tens of millions of dollars that Mr. Trump personally guaranteed on the loans. “The problem with any of this debt is if something goes wrong, and if there is a situation where the president is suddenly personally beholden or vulnerable to threats from the lenders,”

Understudied conflicts of interest in American government - Roger Barris emails me:  I am not sure that this is a suitable subject for a blog post, probably more a project for an aspiring PhD student, but with all the discussion of conflicts of interest in the Trump cabinet, it strikes me that the most glaring conflict in the public sector is ignored: The CoI between state and local politicians elected with the support of public sector unions who then participate in compensation negotiations for the members of those unions.  Here the temptation of the politicians to buy the support of the unions with public money is overwhelming.  The impact of this is potentially trillions when public pension liabilities are included.This is such an obvious conflict that I have looked to see if there are laws preventing this, but my initial research shows nothing.It would be interesting to see if there is a statistical relationship between union support and subsequent pay rises.  I would expect this relationship to be especially strong with deferred compensation (such as pensions) since this is very difficult for voters to monitor and can be easily gamed with unrealistic assumptions about, for example, investment returns. Are you aware of any work that has been done in this field?  I think that the looming disaster with underfunded public pension funds is one of the biggest financial risks in the economy, with ZIRP making it even worse.

Trump Unveils 'Conflicts Of Interest' Solution: No Divestment, Hands Business Over To Sons And "Ethics Officer" - Earlier today, in what turned out to be at times a very contentious press conference, Trump and his attorney laid out the details behind plans to place his business interests into a trust to be run by his two adult sons during his presidency.  Even though he opened by noting that, by law, he could very well ignore the criticism of the media and "run my business and run government at the same time" he concluded by noting that he just doesn't "like the way that looks."  Per Bloomberg: “I could actually run my business and run government at the same time,”Trump said at a press conference Wednesday, adding that he recently turned down an offer of $2 billion to do a deal in Dubai. “I don’t like the way that looks, but I would be able to do that if I wanted to.” As laid out by Trump's attorney, Sheri Dillon of Morgan Lewis, his roughly 500 business entities will be placed into a trust to be run by Eric, Don Jr. and Trump's current CFO Allen Weisselberg who will make decision regarding day-to-day operations without consulting the President.  Moreover, the trusts strictly forbid entering into new international business arrangements while new domestic arrangements will have to be approved by an "independent ethics officer" who has yet to be named.

Conflicts and Corruption --James Kwak -  To be clear, the idea that Donald Trump will be president while he or his children effectively own a company that does business all over the world is preposterous. (Quick primer on trust law: A trust is managed its trustees for the benefit of its beneficiaries. In this case, we know the trustees include two of Trump’s children, and the beneficiary is likely to be either Trump or his children.) If people, companies, and foreign governments want to pay bribes to the president of the United States, they need only give favorable deals to the Trump Organization. An in any of his official actions, the president will have the temptation to do what’s right for his company, not for the country.The point I wanted to make in my Atlantic column today, however, is that this is just the most obvious and egregious example of the larger problem of corruption: government officials acting in the interests of themselves, their family and friends, or their business associates. The example I focus on is estate tax repeal, because that one thing alone would be worth more than $1 billion to the Trump family. It’s a classic example of a president doing what’s in his own personal interests and the interests of his core constituency of gazillionaires, while pretending it’s for the good of the country. Betsy DeVos is another great example, perfectly illustrated by this graphic from the AFL-CIO:  The way American politics works is that people and organizations with money—today, largely billionaire families—invest in politicians and demand policies that favor their private interests. Donald Trump just eliminated the middlemen—not only winning the presidency, but also inviting fellow billionaires like DeVos into his cabinet. This is why, beyond the ongoing catastrophe that is the Trump presidency (which technically hasn’t even started yet), we still need to fix our democracy, so everyone has an equal say in our government.

 Transition Team Assures Public Trump Has Too Many Conflicts Of Interest To Favor Any Specific One —Seeking to allay concerns about how the incoming commander-in-chief’s business ties would affect the way he governs, members of Donald Trump’s White House transition team assured the American public Friday that the president-elect has far too many conflicts of interest to favor any individual one. “The American people have absolutely nothing to worry about regarding Mr. Trump’s ethical integrity, as his conflicts of interest are simply too extensive for him to give preferential treatment to any one of them in particular,” said Trump senior advisor Kellyanne Conway, noting that the real estate magnate’s foreign and domestic holdings are so expansive and complex that it would be almost impossible for him to keep track of them all, let alone isolate one specifically and exploit it. “Every single citizen can rest assured that none of Mr. Trump’s vast array of investments will ever take precedence over any of the others. And even if one of his many business interests did stand to sway his position on an issue, another one of the thousands of other ventures he has a stake in would surely exert pressure to counteract it. So there’s no reason for concern at all.” Conway added that given how committed every member of the incoming administration was to upholding such rigorous principles, the American populace should not even waste their time by scrutinizing the White House’s ethics at all for the next four years.

N.S.A. Gets More Latitude to Share Intercepted Communications — In its final days, the Obama administration has expanded the power of the National Security Agency to share globally intercepted personal communications with the government’s 16 other intelligence agencies before applying privacy protections. The new rules significantly relax longstanding limits on what the N.S.A. may do with the information gathered by its most powerful surveillance operations, which are largely unregulated by American wiretapping laws. These include collecting satellite transmissions, phone calls and emails that cross network switches abroad, and messages between people abroad that cross domestic network switches. The change means that far more officials will be searching through raw data. Essentially, the government is reducing the risk that the N.S.A. will fail to recognize that a piece of information would be valuable to another agency, but increasing the risk that officials will see private information about innocent people. The Run-UpThe podcast that makes sense of the most delirious stretch of the 2016 campaign. ttorney General Loretta E. Lynch signed the new rules, permitting the N.S.A. to disseminate “raw signals intelligence information,” on Jan. 3, after the director of national intelligence, James R. Clapper Jr., signed them on Dec. 15, according to a 23-page, largely declassified copy of the procedures.. Previously, the N.S.A. filtered information before sharing intercepted communications with another agency, like the C.I.A. or the intelligence branches of the F.B.I. and the Drug Enforcement Administration. The N.S.A.’s analysts passed on only information they deemed pertinent, screening out the identities of innocent people and irrelevant personal information. Now, other intelligence agencies will be able to search directly through raw repositories of communications intercepted by the N.S.A. and then apply such rules for “minimizing” privacy intrusions.

Snowden Slams Obama After Expanding "Unchained NSA" Surveillance Powers For Donald Trump - The Obama administration just handed even more power to the incoming Trump administration to invade the privacy of American citizens. The recent approval of new procedures for an existing executive order will allow the NSA to share the private data it collects with all 16 agencies of the United States intelligence community. The 23-page outlineof the new procedures lifts previous limits placed on the way information was filtered before being disseminated to individual agencies. “As he hands the White House to Trump, Obama just unchained NSA from basic limits on passing raw intercepts to others,” NSA whistleblower Edward Snowden tweeted Thursday.  Gone are the already-flimsy privacy protections that required NSA analysts to review data before handing it over to other agencies like the CIA, DEA, DHS, or others. Whereas prior restrictions required analysts to shield the identities of innocent parties and other personal data before sharing only the information deemed pertinent, there are now no filters whatsoever.All agencies will have the freedom to dig through “raw signals intelligence information” under the new procedures, which were signed by Attorney General Loretta E. Lynch. After evaluating the information, the agencies can apply rules “minimizing” violations of privacy. That’s correct — only after privacy has been violated can it be protected. That’s not exactly how it works, but it is now the law according to Section 2.3 of Executive Order 12333. The document was originally signed on December 15, 2016, by the director of national intelligence, James R. Clapper Jr. According to Clapper’s general counsel, Robert S. Litt:“This is not expanding the substantive ability of law enforcement to get access to signals intelligence. It is simply widening the aperture for a larger number of analysts, who will be bound by the existing rules.”ACLU lawyer Pat Toomey disagrees, explaining: “Rather than dramatically expanding government access to so much personal data, we need much stronger rules to protect the privacy of Americans. Seventeen different government agencies shouldn’t be rooting through Americans’ emails with family members, friends and colleagues, all without ever obtaining a warrant.”

Wall Street wins big from Trump transition - Wall Street is emerging as one of the biggest winners of the Trump transition with two of its biggest banks reporting stellar earnings off the back of the post-election market rally and Goldman Sachs veterans looking set to secure at least five top jobs in his administration. Although the president-elect attacked the financial sector during the campaign — and directly criticised rival Hillary Clinton for her ties to Goldman — the prospect of sweeping deregulation in banking and other US industries has buoyed global stock markets, helping Wall Street to record trading revenues.  JPMorgan Chase’s trading business, the largest in the world by revenues, reported its best ever fourth quarter. Net income jumped 96 per cent from a year earlier to $3.43bn. At Bank of America’s global markets business, net income soared from $171m a year earlier to $658m, helped by cost-cutting.  Anthony Scaramucci, a Goldman alumnus, put his fund management group SkyBridge Capital up for sale as he prepared to become a Donald Trump economic adviser. He would join the incoming Treasury secretary, National Economic Council chair and chief White House strategist as Goldman veterans in Mr Trump’s inner circle when the president-elect is sworn in next Friday.  Goldman partner Dina Powell is to become a White House economic adviser, while Jay Clayton, a Wall Street lawyer picked to head the Security and Exchange Commission, represented Goldman in private practice. “The Goldman and Wall Street takeover of government raises incredibly serious concerns,” said Dennis Kelleher of Better Markets, which backs tougher financial regulation. “They’re not evil people. The problem is their whole life — their thinking and net worth and measure of success — is invested in the mentality that what’s good for Wall Street is good for America.” Financial stocks have been on a historic rally since the election, with total gains since November 8 for the 63 largest groups in the sector of $459bn. The S&P 500 Banks index is still up 24 per cent since Mr Trump’s election.

Here’s How Goldman Sachs Became the Overlord of the Trump Administration -- Pam Martens --During his political campaign, Donald Trump repeatedly railed against Wall Street with a specific focus on Goldman Sachs. In the final days of his campaign, Trump released an advertisement (see video below) that featured his opponent, Hillary Clinton, shaking hands with Goldman Sachs CEO Lloyd Blankfein as Trump does a voice over, stating: “”It’s a global power structure that is responsible for the economic decisions that have robbed our working class, stripped our country of its wealth, and put that money into the pockets of a handful of large corporations and political entities.” How did a candidate who repeatedly demonized Goldman Sachs as the poster child for a corrupt establishment that owned Washington end up with Goldman Sachs’ progeny filling every post that even tangentially has the odor of money or global finance? One answer is family ties; another may be something darker. Trump’s non-stop nominations and appointments of Goldman Sachs alumni have left his supporters stunned. Trump nominated Steven Mnuchin, a 17-year veteran of Goldman Sachs to be his Treasury Secretary. Stephen Bannon, another former Goldman Sachs banker, was named by Trump as his Chief Strategist in the White House. The sitting President of Goldman Sachs, Gary Cohn, has been named by Trump as Director of the National Economic Council, which, according to its website, coordinates “policy-making for domestic and international economic issues.”  Last week, in a move that stunned even Wall Street, Trump nominated a Goldman Sachs outside lawyer, Jay Clayton of Sullivan & Cromwell, to serve as Wall Street’s top cop as Chairman of the Securities and Exchange Commission. Adding to the slap in the face to Trump’s working class supporters, Clayton’s wife currently works as a Vice President at Goldman Sachs.But the Goldman Sachs’ ties don’t stop there. When Alexander Blankfein, the oldest son of Goldman Sachs’ CEO Lloyd Blankfein was married in 2013, Joshua Kushner attended the wedding. Joshua had been Alexander’s roommate at Harvard according to the New York Times. Joshua is the brother-in-law to a woman who will play a major role in the Trump administration – Ivanka Trump, daughter of the President-elect and wife of Joshua’s brother, Jared. Goldman Sachs partner, Dina Powell, President of the Goldman Sachs Foundation, is Ivanka’s “top adviser on policy and staffing.” Then there is Erin Walsh who had worked at Goldman Sachs since 2010 as an Executive Director and head of its Office of Corporate Engagement for Asia Pacific. Walsh also previously worked in the Bureau of Near Eastern Affairs at the U.S. Department of State.

 Peter Thiel Explains Why Hedge Funds Changed Their Mind About Trump, Says "Age Of Apple Is Over" -- Donald Trump's sole Silicone Valley supporter, Peter Thiel, has been notoriously media shy (recall he personally funded the destruction of Gawker for "outing" him), so when the NYT's Maureen Dowd posted an extensive interview with the Paypal cofounder and first Facebook investor, many were were curious to get some insight into his thinking. In the interview, Thiel spoke candidly about how he views the world, just a week before Trump's inauguration, and while he touched on many topics, some that stood out to us were the following.On why rich people and hedge fund managers changed their opinion of Trump virtually overnight:“Somehow, I think Silicon Valley got even more spun up than Manhattan. There were hedge fund people I spoke to about a week after the election. They hadn’t supported Trump. But all of a sudden, they sort of changed their minds. The stock market went up, and they were like, ‘Yes, actually, I don’t understand why I was against him all year long.’”It remains to be seen what "they" think of Trump once the market suffers its next correction.Theil also discussed Apple, and when asked if the age of Apple is over, he confirmed:"We know what a smartphone looks like and does. It’s not the fault of Tim Cook, but it’s not an area where there will be any more innovation."Speaking about the Billy Bush sex tape, Thiel said that Silicon Valley is "hyper-politically correct about sex" simply because "people there just don't have that much sex."

House Democrats fail to muster support to challenge Trump’s Electoral College win - POLITICO: A challenge by several House Democrats to Donald Trump’s election on Friday collapsed when they failed to persuade a single Democratic senator to join their protest. The short-lived, doomed-from-the-start effort — spearheaded by Reps. Sheila Jackson Lee of Texas and Barbara Lee of California — came during a joint meeting of the House and Senate to certify Trump’s Electoral College victory. Without sufficient support to challenge Trump’s victory, the Republican-led Congress moved ahead with an easy confirmation of Trump’s presidency. The only remaining step is for him to take the oath of office on Jan. 20. “It is over,” said Vice President Joe Biden, presiding over the meeting, after three Democratic House members lodged objections but failed to secure required support from any senator. His comment drew a standing ovation and cheers from the assembled Republicans in the room. The joint session of Congress is a legally required — and typically ceremonial — event to ratify the results of the presidential election. But members are permitted to challenge the validity of electoral votes, and for just the fourth time since 1877, they did so. There was no expectation that the protests would succeed — backers acknowledged that the Republican-led House and Senate would never act to impede Trump’s imminent presidency. But it’s a continuation of efforts by Democrats to poke Trump in the eye before he takes office and undermine what his team has described as a “mandate” to govern. Democrats have routinely cited Trump’s 2.9 million-ballot popular vote loss to Hillary Clinton and pounced on Russian meddling in the election to undermine Trump’s victory.

An Intelligence Report That Will Change No One’s Mind - The Office of the Director of National Intelligence released its most detailed report on alleged Russian hacking aimed at interfering with the presidential election on Friday. The 25-page report states that the CIA, FBI, and NSA have concluded that Russia was behind a series of attacks, as well as disinformation disseminated via various media, with the goal of undermining faith in U.S. elections and harming Hillary Clinton’s presidential prospects and her prospective administration. They have concluded, however, that there was no meddling in vote tallying. Although the unclassified report, which is based on a longer, classified report, uses the strongest language and offers the most detailed assessment yet, it does not or cannot provide evidence for its assertions. That virtually guarantees that it will not change many minds in the debate, which has become heavily partisan. The intelligence community is in effect telling readers, “trust us”—something the president-elect, among others, has been unwilling to do.Donald Trump has repeatedly refused to accept the conclusion that Russia was behind the hacks, and has questioned the judgment of the intelligence community. The president-elect was briefed on ODNI’s findings Friday, and based on a bland statement he released after the meeting, Trump apparently has not gotten any closer to crediting them. He appears to continue to view the debate as essentially a partisan one between Republicans and Democrats, and sniped at the Democratic National Committee’s cyberdefenses in his statement.

Trump and the IC "consultants." - I would think that the Trump Administration will go through the ranks of the SES/SIS position holders at CIA/DIA/NSA, etc. like a scythe. These folks, of whom I was one (SES-4) are not career protected like the lower members of the federal civil service. In return for their elevated rank (equivalent to military flag officers) they lack actual legal job security and can be much more easily removed. They are usually highly politicized schemers and enablers for their presidential appointee bosses at the very top of the food chain. But who will run things!? Well, pilgrims there are lots of eager beaver GS-15s awaiting their turn and eager to prove their loyally to the administration. Hey, why not ? Payback is a bitch and people like Clapper and Brennan could not have staged this intelligence "coup" without the cooperation of the SES corps. And then there is the little matter of the chain of command in the federal government. NEWS FLASH!! The IC agencies work for the president. He does not work for them. If he does not accept their analysis - so be it! They are not semi-divine creatures endowed with some special gift of understanding the world, Well, some are, but not many. Any intelligence is destined to support decision making for policy. It should NEVER be prescriptive. The news idiots keep asking old intelligence hands what policy should be... What a sad joke. For Trump, the IC is just another consultant group.

Two Senate Republicans to Seek Added Sanctions on Russia Over Hacking - Two leading Senate Republicans said Sunday they will introduce a bipartisan bill to impose additional sanctions on Russia over hacking the U.S. election, a move that threatens to deepen the divide between Capitol Hill and president-elect Donald Trump over U.S. relations with the Kremlin.  Speaking on NBC's "Meet the Press," Sens. Lindsey Graham of South Carolina and John McCain of Arizona said the bill would give the incoming administration additional tools to sanction Russia in light of the intelligence community's assessment that President Vladimir Putin orchestrated a campaign to undermine and interfere in the 2016 U.S. presidential election  "We're going to introduce sanctions that are bipartisan, that go beyond the sanctions we have today against Russia, that will hit them in the financial sector and the energy sector where they're the weakest," said Mr. Graham.  But rather than impose further sanctions, Mr. Trump has proposed improving relations with Russia after years of disagreements between the U.S. and the Kremlin over Russian military actions in Syria, Ukraine and elsewhere.  Mr. Trump wrote on Twitter this week: "Having a good relationship with Russia is a good thing, not a bad thing. Only 'stupid' people, or fools, would think that it is bad!"  "We have enough problems around the world without yet another one. When I am President, Russia will respect us far more than they do now and both countries will, perhaps, work together to solve some of the many great and pressing problems," the president-elect added.  Mr. Graham's efforts are a sign that the new administration's proposed rapprochement with Russia is being met with continued resistance on Capitol Hill, where many congressional Republicans have long advocated for a tougher posture against Russia. The widening rift also could be on display this week as the Senate begins the confirmation process for Mr. Trump's nominee for secretary of state, Rex Tillerson.

Priebus: Trump "Accepts" That Russia Played A Role In Election Hacking --In a surprising twist, incoming White House chief of staff Reince Priebus said Sunday on Fox News that President-elect Donald Trump accepts that Russia played a role in hacking the Democratic National Committee and Clinton campaign Chairman John Podesta. Priebus, the former RNC chairman, said Trump understands that Moscow was behind the intrusions into the Democratic Party organizations. "He accepts the fact that this particular case was entities in Russia so that’s not the issue" and added that Trump "is not denying that entities in Russia were behind this particular hacking campaign.""But here's the thing that I think everyone needs to understand — when this whole thing started, it started from the Russians 50 years ago ... This is something that's been going on in our elections for many, many years." Priebus said it "happens every election period.""In this particular case, it started way back in 2015 before either nominee of either party was chosen," Priebus said. "And it started ... as a spearfishing expedition over many different institutions."  Additionally, Priebus blasted the Democratic National Committee (DNC) for its lack of IT defenses. The DNC was warned multiple times by the FBI before being hacked, Priebus added, and officials didn't respond. "So yes, we have bad actors around the world," Priebus said."But we also have a problem when we have a major political institution that allows foreign governments into their system with hardly any defenses or training." As Reuters notes, Priebus' comments marked a major shift in the official Trump narrative: the president elect has repeatedly dismissed claims that the Russians were trying to help him, arguing that those charges are the product of his political opponents trying to undermine his victory.

Russia’s RT: The Network Implicated in U.S. Election Meddling -- RT, a state-run Russian television network that broadcasts around the world in English, was implicated in a recently declassified United States intelligence report that accused the Russia government of meddling in the American presidential election to tip the vote in favor of Donald J. Trump. The Russians are accused of hacking the email systems of the Democratic National Committee and conducting a widespread disinformation campaign that included the propagation of fake news stories on the internet and the airwaves.  RT’s coverage of Hillary Clinton “throughout the U.S. presidential campaign was consistently negative and focused on her leaked emails and accused her of corruption, poor physical and mental health and ties to Islamic extremism,” the declassified intelligence report said.  RT, formerly called Russia Today, was founded in 2005 as part of the state-owned news agency RIA Novosti. The network describes itself on its website as the first “Russian 24/7 English-language news channel which brings the Russian view on global news.” President Vladimir V. Putin of Russia said the network was created to “break the Anglo-Saxon monopoly on the global information streams.” Though the network is owned and operated by the Russian government, its executives say their journalists are independent. One anchor, however, quit her job during a live broacast in 2014, after saying she could no longer work for a network that “whitewashes the actions of Putin.”  In the United States, RT America is broadcast by cable companies in some cities, is carried by Dish, the satellite television provider, and can be found free online. Larry King, the former CNN host, and Ed Schultz, a former MSNBC host, both have programs on the network.

Democrats Call For Sept 11-Style Commission To Probe Russia -- Congressional Democrats, and by extension the now concluded Clinton campaign, refuse to end pointing fingers for the turmoil rocking the Democratic party (and/or take responsibility) and instead Democratic members of Congress are trying to compare the "Russian hacking of the elections" to the Sept. 11 terrorist event, and called on Monday for the creation of an independent commission to probe Russia's attempts to intervene in the 2016 election, similar to the Sept. 11 panel that probed the 2001 attacks on the United States. Of course, it took some 15 years for the true, unredacted findings of that particular panel to finally emerge, when the extent of Saudi involvement in the Sept 11 attacks was finally revealed, leading to the Sept 11 legislation allowing Americans to sue Riyadh for terrorism on US soil. According to Reuters, the proposed "Protecting our Democracy Act" would create a 12-member, bipartisan independent panel to interview witnesses, obtain documents, issue subpoenas and receive public testimony to examine attempts by Moscow and any other entities to influence the election. The panel members would not be members of Congress. The latest legislation proposal is one of many calls by lawmakers to look into Russian involvement in the presidential contest whose outcome stunned so-called experts. Republicans also kept control of the Senate and House of Representatives by larger-than-expected margins. U.S. intelligence agencies on Friday released a report saying that Russian President Vladimir Putin ordered an effort to help Trump's electoral chances by discrediting Clinton. "There is no question that Russia attacked us," Senator Ben Cardin, the top Democrat on the Senate Foreign Relations Committee, told a news conference.

"Putin's Not On Our Team": Obama Worried Americans Trust Russia More Than U.S. Govt -- The people are no longer buying the lies. Period, end of sentence.And it has outgoing-president Obama all worked up.So does this mean war?  Underlying the post-election hysteria surrounding “Russian hacking” and “fake news” is the basic issue of trust – the U.S. Government, the Congress, the media and most leaders in Washington just don’t have it. So that have to make up reasons.  Anyway you slice it, the complete lack of trust was a major reason for the defeat of Hillary Clinton – widely perceived as corrupt and untrustworthy. In his most recent statement, an exiting Obama expressed his concerns that Russia’s alleged-meddling in the election went so far as to win over the hearts and minds of the American people – in what would supposedly amount to the ultimate blowback of disinfo and propaganda after decades of pure B.S…. At heart, it is one of his most ridiculous assertions yet. via RT: Outgoing US President Barack Obama has warned Americans and his successor Donald Trump that Vladimir Putin is an “adversary” who should never be trusted over the US intelligence community. […] “I think that what is true is that the Russians intended to meddle and they meddled. And it could be another country in the future,” President Obama told the host of ABC’ ‘This Week’… The outgoing president spoke of a need to unite the country amidst the cyber hysteria that has split the country over the extent of Moscow’s influence in the US presidential race. […] “One of the things that I’ve urged the president-elect to do is to develop a strong working relationship with the intelligence community,” Obama said.“We have to remind ourselves we’re on the same team. Vladimir Putin’s not on our team,” Obama added. “If we get to a point where people in this country feel more affinity with a leader who is an adversary and view the United States and our way of life as a threat to him, then we’re gonna have bigger problems than just cyber hacking.” It appears to him that some politicians and reporters “seem to have more confidence in Vladimir Putin than fellow Americans because those fellow Americans are Democrats… That cannot be,” Obama stressed.

FBI Reportedly Sought FISA Court Warrant To Spy On Trump Campaign Officials - A new report released today features both the FBI seeking to launch a surveillance operation against an active US presidential campaign, and the ultra-rare case of the FISA courts actually turning down an FBI request to conduct surveillance against somebody.The report, originating at the Guardian, claims that the FBI had sought broad surveillance powers over four high-ranking members of President-elect Donald Trump’s campaignduring the election, claiming them to have had contact with Russian officials.The FISA court turned the request down, telling investigators they needed to narrow the request.Though the four are not directly named in the report, it is related to claims in a dossier of Russia having substantial blackmail dirt on Trump, and that d ossier centered heavily around accusations against a handful of Trump campaign personnel, including Carter Page, Paul Manafort, and Lt. Gen. Michael Flynn, along with Trump’s personal lawyer Michael Cohen, meaning some of them may well be among the targets.

The Deep State Goes to War with President-Elect, Using Unverified Claims, as Democrats Cheer – Greenwald - The serious dangers posed by a Trump presidency are numerous and manifest. There are a wide array of legitimate and effective tactics for combating those threats: from bipartisan congressional coalitions and constitutional legal challenges to citizen uprisings and sustained and aggressive civil disobedience. All of those strategies have periodically proven themselves effective in times of political crisis or authoritarian overreach.But cheering for the CIA and its shadowy allies to unilaterally subvert the U.S. election and impose its own policy dictates on the elected president is both warped and self-destructive. Empowering the very entities that have produced the most shameful atrocities and systemic deceit over the last six decades is desperation of the worst kind. Demanding that evidence-free, anonymous assertions be instantly venerated as Truth — despite emanating from the very precincts designed to propagandize and lie — is an assault on journalism, democracy, and basic human rationality. And casually branding domestic adversaries who refuse to go along as traitors and disloyal foreign operatives is morally bankrupt and certain to backfire on those doing it. Beyond all that, there is no bigger favor that Trump opponents can do for him than attacking him with such lowly, shabby, obvious shams, recruiting large media outlets to lead the way. When it comes time to expose actual Trump corruption and criminality, who is going to believe the people and institutions who have demonstrated they are willing to endorse any assertions no matter how factually baseless, who deploy any journalistic tactic no matter how unreliable and removed from basic means of ensuring accuracy? All of these toxic ingredients were on full display yesterday as the Deep State unleashed its tawdriest and most aggressive assault yet on Trump: vesting credibility in and then causing the public disclosure of a completely unvetted and unverified document, compiled by a paid, anonymous operative while he was working for both GOP and Democratic opponents of Trump, accusing Trump of a wide range of crimes, corrupt acts and salacious private conduct. The reaction to all of this illustrates that while the Trump presidency poses grave dangers, so, too, do those who are increasingly unhinged in their flailing, slapdash, and destructive attempts to undermine it.

Here Is The Full 35-Page Report Alleging Trump Was "Cultivated, Supported And Assisted" By Russia  --As reported moments ago, CNN is leading with a story about a 35-page dossier compiled by a former member of British intelligence, which had been distilled into a 2-page appendix presented to Trump last Friday by the US intel community, and which contains "explosive, but unverified, allegations" that the Russian government has been "cultivating, supporting and assisting" President-elect Donald Trump for at least 5 years and "endorsed by Putin" gained compromising information about him, with the aim of "encouraging splits and divisions in the western alliance."The memo has allegedly been circulating among elected officials, intelligence agents, and journalists for weeks.The dossier, which is a collection of memos written over a period of months, "includes specific, unverified and potentially unverifiable allegations of contact between Trump aides and Russian operatives, and graphic claims of sexual acts documented by the Russians" according to Buzzfeed. Of course, the question on everyone's lips is what are these "unverified and potentially unverifiable allegations" contained in the memo. We now know the answer, courtesy of Buzzfeed which fill published the full document "so that Americans can make up their own minds about allegations about the president-elect that have circulated at the highest levels of the US government."

NYT Suggests CNN, BuzzFeed Peddled "Fake News" --In a fascinating retort by the NYT to the story of the day, namely the CNN-BuzzFeed narrative based on an unverified 35-page memo allegedly prepared by a UK intelligence officer, even the paper of record takes the two media outlets to town, and in an article titled "BuzzFeed Posts Unverified Claims on Trump, Stirring Debate" essentially accuses them of doing what CNN has accused so much of the 'alternative media' in doing when distributing "fake news."Here are the key excerpts:The reports by CNN and Buzzfeed sent other news organizations, including The New York Times and The Washington Post, scrambling to publish their own articles, some of which included generalized descriptions of the unverified allegations about Mr. Trump. By late Tuesday, though, only BuzzFeed had published the full document.BuzzFeed’s decision, besides its immediate political ramifications for a president-elect who is to be inaugurated in 10 days, was sure to accelerate a roiling debate about the role and credibility of the traditional media in today’s frenetic, polarized information age.  And the punchline, where the NYT essentially accuses both CNN and BuzzFeed of stooping to the level of "fake news" disseminators:  Of particular interest was the use of unsubstantiated information from anonymous sources, a practice that fueled some of the so-called fake news — false rumors passed off as legitimate journalism — that proliferated during the presidential election.

The Deep State Versus Donald Trump – New Smears And The Ukrainian Connection -- The deep state campaign against Trump opened new grounds today with the publication of completely fake and thereby unverifiable anonymous assertions which include the smear that Trump had some fun in a Moscow hotel and that Russian secret services is using that to manipulate him.  Like many smears against Trump via proxies of the Clinton presidential campaign these new ones seem to origin from Ukraine related sources and Ukrainian "nationalist" (aka fascist) putsch supporters. The new assertions about Trump come in 35 pages of "reports" by an anonymous (claimed) former British intelligence operator working for a private U.S. company with dates ranging from June 20 2016 to December 13 2016. They say that Russia has some tapes of Trump watching sex games in 2013, they claim that Trump campaign officials coordinated the Clinton campaign leaks with Russia and that the Russian President Putin was highly involved in all of this. Here is how the claimed former intelligence operator typically describes his sources in these "reports": Speaking to a trusted compatriot in June 2016 sources A and B, a senior Russian Foreign Ministry figure and a former top level Russian intelligence officer still active inside the Kremlin respectively, the Russian authorities had been cultivating and supporting U.S. Republican presidential candidate, Donald TRUMP for at least five years. Source B asserted that the TRUMP operation was both supported and directed by Russian President Vladimir PUTIN. The anonymous former British operator hears from an anonymous asserted compatriot what two anonymous sources, asserted to have access to inner Russian circles, claim to have heard somewhere that something happened in the Kremlin. They assert that Trump was supported and directed by Putin himself five years ago while even a year ago no one would have bet a penny on Trump gaining any political significant position or even the presidency. There is a lot more of such nonsense in these new Hitler diaries. It is bonkers from a to z. Neocon senator John McCain, friend of Ukrainian fascists and Trump enemy, passed (<-details) the "report" to the FBI and thereby made it into an official document.

McCain Admits He Gave Dossier Containing "Sensitive Information" On Trump To The FBI -- While hardly surprising considering the copious amounts of bad blood between the President elect and John McCain, earlier today the Arizona senator confirmed that he passed along the 35-page report to the FBI that details unverified allegations that President-elect Trump's team coordinated with the Russian government to defeat Hillary Clinton. In a statement released Wednesday, McCain said passing the report along was the extent of his involvement in the process. "Late last year, I received sensitive information that has since been made public," McCain said. "Upon examination of the contents, and unable to make a judgment about their accuracy, I delivered the information to the director of the FBI. That has been the extent of my contact with the FBI or any other government agency regarding this issue." As The Washington Examiner notes, reports surfaced Tuesday night that a foreign contact of McCain's passed along the report detailing alleged compromising information the Russian government has on Trump. That report was published in full by Buzzfeed Tuesday evening, despite being unverified information. The website stated it was publishing the report because the American people deserved to know about information being passed through the upper levels of the government. Readers could decide for themselves if they believe it is true or not, Buzzfeed stated. The NYT promptly slammed both CNN and BuzzFeed, accusing them of engaging in distribuing what amount to unverified, "fake news."

How 4Chan McFooled John McCain, Buzzfeed, and the CIA Into Believing Trump's Golden Showers Ok, there is a lot to go through with this story, which is going to end up being one of the biggest embarrassments for Buzzfeed, the CIA, and old man McCain ever. First let's go over what happened, in reference to the pesudo intelligence report aka 'dossier' published by the high level retards over at Buzzfeed. I know this appears to be unbelievable, but it's all verifiable. The neocon shill of a reporter from Buzzfeed, Rick Wilson, was catfished by some autist from the Hitler loving 4chan message boards and made to believe Trump enjoyed getting urinated on and all sorts of outlandish stuff. Truly, this is incredible. Let me post some screen shots.

Kremlin Denies It Has "Compromising" Dossier On Trump, Calls Intel Report "Complete Fabrication"  --Responding to the latest report accusing Trump of being a Russian pawn (which may at least partially have been the spawn of a 4Chan hoax), the Kremlin said on Wednesday it was "total nonsense" that Russian officials had assembled a file of compromising information on Donald Trump.  Speaking to reporters on a conference call today, Kremlin spokesman Dmitry Peskov said the dossier containing the claims was a hoax which had been dreamt up to further harm U.S.-Russia relations, which are already at their lowest level since the Cold War. Peskov told reporters that Russia had no “kompromat” – a term for ‘compromising material’ - on Trump, as claimed in an unsourced report widely shared among the highest levels of US government, and which had been distributed months ago, and also available to the Clinton campaign. “The information is not true and is nothing other than a total fabrication,” Peskov said, according to Interfax. “It’s a complete fake, it’s a complete fabrication, it’s total nonsense.”

Trump Press Conference Addresses Russian Dossier's Pedestrian Claims - Kompromat, as they call it in Moscow, is the mother’s milk of Kremlin espionage, and given Trump’s larger-than-life persona, with its decades of dodgy finances and edgy dalliances with women, it should surprise no one that Russian spies have juicy information there which the public hasn’t seen, particularly given the president-elect’s numerous trips to Russia going back to 1987. CNN noted that a dossier compiled by a former British intelligence official with long experience in Russian matters had been circulating in Washington since late last year, and was causing heartburn for American spies, since its allegations were explosive. Most seriously, it posited an on-going clandestine relationship between the Trump campaign and the Kremlin to swing the election Trump’s way. Just as the commentariat began to shudder at the implications of this bombshell, Buzzfeed released the actual dossier, 35 pages crammed with allegations of grave wrongdoing, including espionage by Trump surrogates against fellow Americans. This was a rather standard example of raw human intelligence reporting, a mishmash of claims, some of them obviously untrue. But the essence of its case—that Trump has been playing footsie with Vladimir Putin for years and knowingly accepted his secret help to win the White House—may well turn out to be true. The media, unaccustomed to seeing raw HUMINT reports, acted aghast at the salacious nature of some of the claims in the dossier: Trumpian sex romps caught on camera by Russian spies, our new commander-in-chief paying prostitutes to urinate on a hotel bed where President Obama had slept. Whether those particular claims are true or not—and they ought to be looked at with immense skepticism and even the PEOTUS himself said today that his infamy as a germophobe, which way predates these accusations, ought to raise concerns about some of these tales—there’s no doubt that Putin’s Federal Security Service, the all-seeing FSB, keeps close tabs on foreign VIP’s when they’re on their turf. If Trump was unwise enough to engage in randy behavior in Russia, the FSB unquestionably has it on video. Some of the dossier’s other claims are almost pedestrian. Putin long ago showed his hand, so the idea that he ordered his spy-minions to help Trump move into the White House isn’t exactly shocking, even if the alleged details of that sordid game may be. Moreover, claims that people like Paul Manafort and Carter Page, who were both officially purged from the Trump campaign last year for their glaringly obvious Kremlin links, kept talking to the Russians, sub rosa, right up to election day, are wholly credible.

Trump Slams CNN Reporter "You Are Fake News", Calls BuzzFeed "Failing Pile Of Garbage --In an epic (mutual) trolling between president-elect Trump on one hand and BuzzFeed and CNN, on the other, the two media organizations which issued yesterday's unsubstantiated report about Russia having compromising information on the president-elect, Trump first addressed the question of why he referred to Nazi Germany, saying it is "disgraceful" that intelligence communities would allow the release of any information. "That's something Nazi Germany would have done and did do," he says.He then unleashed on Buzzfeed which published the 35-page memo, saying "Buzzfeed which is a failing pile of garbage... will suffer the consequences" Trump slams BuzzFeed, calling it a "failing pile of garbage," for publishing Russia-Trump intel report— CBS News (@CBSNews) January 11, 2017 And then, in the following episode, Trump slammed CNN's journalist Jim Acosta, telling him "your organization is terrible" and adding "you are fake news." "You're attacking us, can you give us a question?” Acosta replied. "Don't be rude. No, I'm not going to give you a question. You are fake news," Trump responded, before calling on a reporter from Breitbart

At His First News Conference As President-elect, Trump Owns the Press -- Trump being Trump, he didn’t show any interest in directly answering questions. He opened with a rambling monologue that included the pronouncement: “I will be the greatest jobs producer that God ever created.” When asked by a reporter if Russia aided his win, Trump said, “Well, if Putin likes Donald Trump, I consider that an asset.” Questioned whether the American people wanted him to finally release his tax returns, he replied, “No, I don’t think they care at all.” Challenged on the potential conflicts of interest for his cabinet appointees, Trump explained that Rex Tillerson and Jeff Sessions were “brilliant.” Judged on a policy basis, it was a disaster. Trump came across as just as unprepared and unfocused as he did during his shambolic campaign. He let his lawyer speak for nearly a quarter of the allotted time to explain why he wouldn’t be putting his company into a blind trust and instead would be turning it over to his sons Don Jr. and Eric. For visual effect, aides stacked manila folders on a table next to the lectern. Trump said they were filled with legal papers. But observed as spectacle, Trump came away with a resounding victory. That’s because Trump won even before he stepped before the microphone, by making the media the story. Last night, BuzzFeed published a salacious 35-page oppo-research dossier on Trump that alleged Russia possessed sexual and financial dirt on Trump that could be used to blackmail him. BuzzFeed justified reporting the unverified oppo-research document — which had been compiled during the presidential campaign by a political operative working for Trump’s Republican rivals — by stating that intelligence agencies had briefed Trump on a summary of the findings last week. But BuzzFeed’s article boomeranged back on the website as journalists were quick to denounce its decision to publish unconfirmed claims and errors. (CNN broke news of the intelligence briefing, but did not print the sensational details.) Trump exploited this wedge. From the outset, he worked to isolate BuzzFeed and CNN. Trump also deflected attention from the urgent questions at hand by taking aim at the intelligence agencies, which he accused — without proof — of the leak. “It was disgraceful that the intelligence agencies allowed any information that turned out to be so false and fake out … [T]hat’s something that Nazi Germany would have done, and did do.”

Stop publishing unverified information, you numbskulls. Donald Trump feeds on your rumors - In the midst of Sen. Jeff Session’s confirmation hearing for attorney general and hours before President Obama’s final address yesterday, Buzzfeed News published an “unverified dossier,” which overshadowed both. The document, “compiled by a person who has claimed to be a former British intelligence official,” suggests that the Russian government has unreleased dirt on President-elect Donald Trump, meaning he’s firmly under their thumb. Finally, after months of wondering why Trump would be consistent only in his dyed-in-the-wool dedication to a foreign despot, we’ve got an answer. Except we don’t. As an answer to the public’s speculation, BuzzFeed’s piece is so thin and disclaimer-laden as to be worthless; it offers the shape of scandal without actionable content. .I’ve been lucky enough to learn from seasoned reporters who have broken deeply reported, rigorous stories. Some of these stories have changed the course of history; all have led to the improved administration of justice, be it social, political or legal.  But if pressed to condense the rich range of what I’ve learned from my teachers and colleagues in a single sentence, it would be thus: Don’t publish unverifiable information, you numbskulls.  As a person, I have no love for Donald Trump; as an investigative reporter, I have no interest in protecting the powerful from scrutiny. But taking cheap shortcuts is not the way to nail him. It was wrong when FBI Director James B. Comey made eleventh-hour content-free rumblings about Hillary Clinton’s emails. It’s wrong each time Trump demurs “there’s something going on” about an insane premise or rumor he should disavow. Sometimes taking the high road, as Michele Obama urged progressives to do, absolutely, 100% sucks. And yet: An unverified piece of gossip thirstily repackaged as adversarial journalism is still an unverified piece of gossip, no matter how much we might long for proof of or intuitively agree with the points it advances.If we don’t believe the right should be able to sling mud without sourcing it or “just put things out there for the public to decide,” the left can’t do it either.

How a Sensational, Unverified Dossier Became a Crisis for Donald Trump -  NYT - Seven months ago, a respected former British spy named Christopher Steele won a contract to build a file on Donald J. Trump’s ties to Russia. Last week, the explosive details — unsubstantiated accounts of frolics with prostitutes, real estate deals that were intended as bribes and coordination with Russian intelligence of the hacking of Democrats — were summarized for Mr. Trump in an appendix to a top-secret intelligence report. The consequences have been incalculable and will play out long past Inauguration Day. Word of the summary, which was also given to President Obama and congressional leaders, leaked to CNN Tuesday, and the rest of the media followed with sensational reports. Mr. Trump denounced the unproven claims Wednesday as a fabrication, a Nazi-style smear concocted by “sick people.” It has further undermined his relationship with the intelligence agencies and cast a shadow over the new administration. Late Wednesday night, after speaking with Mr. Trump, James R. Clapper Jr., the director of national intelligence, issued a statement decrying leaks about the matter and saying of Mr. Steele’s dossier that the intelligence agencies have “not made any judgment that the information in this document is reliable.” Mr. Clapper suggested that intelligence officials had nonetheless shared it to give policy makers “the fullest possible picture of any matters that might affect national security.” Parts of the story remain out of reach — most critically the basic question of how much, if anything, in the dossier is true. But it is possible to piece together a rough narrative of what led to the current crisis, including lingering questions about the ties binding Mr. Trump and his team to Russia. The episode also offers a glimpse of the hidden side of presidential campaigns, involving private sleuths-for-hire looking for the worst they can find about the next American leader.

US spy agencies in crisis over Trump claims - FT - An escalating civil war between incoming president Donald Trump and the US intelligence community is presenting America’s spies with their biggest crisis since the failures in the run-up to the Iraq war. By blaming intelligence agencies for the possible leaking of a dossier detailing alleged efforts by the Kremlin to cultivate and compromise him and likening it to “Nazi Germany”, Mr Trump has opened a new offensive against officials who pride themselves on their non-partisan professionalism. “This is the first time that I know of where a president has accused [intelligence agencies] of having a political position . . . and that really challenges this industry that works very hard to be non-partisan,” said Cortney Weinbaum, a former intelligence officer now at the Rand Corporation. Late Wednesday night, James Clapper, the outgoing director of national intelligence, issued a statement saying he had phoned Mr Trump to express his “profound dismay” at the press leaks — but insisting his spies were not to blame.On Thursday morning, Mr Trump sought to portray the call as a sign the intelligence leadership was backing him in the fight, saying Mr Clapper had called him to “denounce the false and fictitious report that was illegally circulated”. But former intelligence professionals worry the damage has been done, adding to already frayed relations between a president-elect due to move into the White House in just over a week and an intelligence leadership convinced his ascent was aided by a foreign rival.

Trump and spy chief differ on what was said in call on Russia dossier | Reuters: U.S. spy chief James Clapper and President-elect Donald Trump gave different accounts of a phone conversation they had about a dossier of unverified, salacious claims linking Russia to Trump, who is locked in a war of words with the intelligence agencies he will command in eight days. A newcomer to politics, businessman Trump has been at odds with U.S. spy agencies for months, disputing their conclusions that Russia used hacking and other tactics to try to tilt the 2016 presidential election in his favor. On Wednesday, he acknowledged the point but opened a new battlefront, responding to media reports of unsubstantiated claims that he was caught in a compromising position in Russia by accusing intelligence agencies of practices reminiscent of Nazi Germany. In a Wednesday night statement Clapper, director of national intelligence, said that in a call with Trump he expressed his dismay over media leaks. Clapper added that he did not believe the leaks came from U.S. intelligence agencies. Clapper said he emphasized to Trump that the report was not produced by U.S. intelligence agencies and that they had not judged whether the information was reliable. He did not say the document was false. By contrast, Trump suggested in a tweet on Thursday that Clapper agreed that the report was untrue. "James Clapper called me yesterday to denounce the false and fictitious report that was illegally circulated. Made up, phony facts. Too bad!" Trump wrote."Sadly, you cannot rely on the president-elect’s tweets or statements about what he's receiving in intelligence briefings. And that’s a real problem," said Schiff, the leading Democrat on the House Intelligence Committee.

Former MI6 officer Christopher Steele, who produced Donald Trump Russian dossier ‘terrified for his safety’ - Telegraph - A former MI6 officer who produced a dossier making lurid allegations about Donald Trump is “terrified for his safety” after he was unmasked by a US publication.Christopher Steele, 52, fled from his home in Surrey on Wednesday morning after realizing it was only a matter of time until his name became public knowledge. A source close to Mr Steele said on Wednesday night that he now fears a prompt and potentially dangerous backlash against him from Moscow. Mr Steele, the co-founder of London-based Orbis Business Intelligence Ltd, prepared a 35-page document that alleges the Kremlin colluded with Mr Trump’s presidential campaign and that the Russian security services have material that could be used to blackmail him, including an allegation that he paid prostitutes to defile a bed that had been slept in by Barack and Michelle Obama. His research was initially funded by anti-Trump Republicans, and later by Democrats. Mr Trump has branded the allegations in the dossier “fake” and has said he feels as though he is living in Nazi Germany. With his cover about to be blown, Mr Steele hurriedly packed his bags and went to ground hours before his name was published on Wednesday.

Here I Am Again, My Friends! – by Guccifer2 -- I really hope you’ve missed me a lot. Though I see they didn’t let you forget my name. The U.S. intelligence agencies have published several reports of late claiming I have ties with Russia. I’d like to make it clear enough that these accusations are unfounded. I have totally no relation to the Russian government. I’d like to tell you once again I was acting in accordance with my personal political views and beliefs.The technical evidence contained in the reports doesn’t stand up to scrutiny. This is a crude fake.Any IT professional can see that a malware sample mentioned in the Joint Analysis Report was taken from the web and was commonly available. A lot of hackers use it. I think it was inserted in the report to make it look a bit more plausible.I already explained at The Future of Cyber Security Europe conference that took place in London in last September, I had used a different way to breach into the DNC network. I found a vulnerability in the NGP VAN software installed in the DNC system.It’s obvious that the intelligence agencies are deliberately falsifying evidence. In my opinion, they’re playing into the hands of the Democrats who are trying to blame foreign actors for their failure. The Obama administration has a week left in office and I believe we’ll see some more fakes during this period.

Confirmed: Unknown Republican, Democrat Paid For "Anti-Trump" Report --Having learned previously both the identity of the former British intelligence officer whocompiled the "Trump dossier", revealed by the WSJ earlier this week as former MI-6 staffer Christopher Steele, currently director of London-based Orbis Business Intelligence, and thatJohn McCain was the person who delivered the report to the FBI, one question remained: who commissioned the original report meant to uncover a material,i.e., campaign-ending, weakness in Donald Trump's past.  […] ... Curiously, according to Steele, this spy whose "track record is second to none", has no idea. Says Corn, "the former spy said he was never told the identity of the client." Well, that's not exactly true. He does know that the private research firm from the US "was conducting a Trump opposition research project that was first financed by a Republican source until the funding switched to a Democratic one."In other words, while Steele didn't know the identity of the actual source of funds, he did know their ideological leanings. However, someone who did seem to know the identity emerged on Wednesday, when BBC News' Paul Wood reported that "the opposition research firm that commissioned the report had worked first for a superpac - political action committee - supporting Jeb Bush during the Republican primaries." The interview in which the Jed Bush connection emerged, was the following, in which Ted Malloch, a Trump insider, said the following: Let me tell you what the British intelligence told me this morning. [Christopher Steele] was also an FBI asset at one point in time so he has an intelligence background, but he was paid for people that were working for Jeb Bush in order to discredit him. The democrats took over the contract. He kept adding to the dossier and using information given to him by the FSB in Russia, most of it fabricated, the more he put into the dossier, the more he got paid. So he made a sensationalist dossier, as fat as possible just like your lawyer charges you more billable hours in order to get paid more. (video)

Tucker Carlson and Glenn Greenwald Discuss Deep State War Vs. Trump, While Ex-Spook Hints At Assassination --Journalist Glenn Greenwald, who is not a fan of President-elect Trump, appeared on Tucker Carlson tonight to discuss the dangerous ongoing efforts among powerful anti-Trump factions within the US Government's "Deep State," who have collaborated with members of the Democratic Party and traditionally liberal media, to do maximum damage to the incoming President. Recall Senate Minority Leader Chuck Schumer's ominous "six ways from Sunday" comment from 10 days ago.Greenwald, an accomplished litigator, journalist, and author, does a masterful job illustrating the players, motives, and potential fallout from this dangerous effort within the US Government's intelligence apparatus. Greenwald goes deep, discussing how Trump's election ruined the plan for regime change in Syria, specifically mentioning, among other things, that the deep state was waiting for Obama to leave office before executing their plan: The number one foreign policy priority of the CIA over the last four to five years has been the proxy war they're waging in Syria to remove Bashar Al Assad - and Hillary Clinton was quite critical of Obama for constraining them. She wanted to escalate that war to unleash the CIA, to impose a no-fly zone in Syria to confront Russia, whereas Trump took the exact opposite position. He said we have no business in Syria trying to change the government, we ought to let the Russia and Assad go free and killing ISIS and Al Quaeda and whoever else they want to kill. He [Trump] was a threat to the CIA's primary institutional priority of regime change in Syria. Beyond that, Clinton wanted a much more confrontational and belligerent posture towards Moscow, which the CIA has been acrimonious with for decades, whereas Trump wanted better relations. They viewed Trump as a threat to their institutional pre-eminence to their ability to get their agenda imposed on Washington. What you're seeing is actually quite dangerous. There really is at this point obvious open warfare between this un-elected, but very powerful faction that resides in Washington and sees Presidents come and go - on the one hand, and the person that the American democracy elected to be elected on the other.There's clearly extreme conflict and subversion taking place. ' This really is a must-watch, and goes hand-in-hand with Tucker's interview with Dr. Stephen Cohen this week:

Is This The Coup In America? "U.S. Troops On Russian Border" To Start War Before Inauguration -- Is there a coup underway, while America is in the transition period, and before Trump swears in as the 45th president of the United States? How real is the clash between the rogue Manhattan billionaire and the intelligence gang behind the throne? Who will win the struggle for power over foreign policy? These are serious times and require serious considerations.The U.S. sent an entire armored brigade to the Russian border, and Vladimir Putin is preparing as if for war. Missile defense systems are raised; tall claims and serious charges have been leveled; diplomatic relations have chilled to a permafrost. Several Russian diplomats have turned up dead recently, including one murdered in front of cameras during a dramatic assassination in Turkey. Russia has bucked U.S. order in the Middle East, and carved out a potential peace deal in Syria without their consultation.Things are reaching a flashpoint, and the system is concerned about controlling President-elect Trump given his rumored friendliness with Putin and plans to drop sanctions.Will there be a “shock” designed to correct Trump’s foreign policy, and set-off the ticking time bomb between East and West into all-out hostilities? Though these two world powers have clashed repeatedly in recent years, there several key factors that make this round extra alarming – and put a peaceful transition into question of exploding into total war, and an undermining force from within the deep state, CIA and shadow government:

Dollar, Futures Slump; Gold Spikes Over $1,200 After Trump Disappoints Markets -- Risk assets declined across the globe, with European, Asian shares and S&P 500 futures all falling, while the dollar slumped against most currencies after a news conference by President-elect Donald Trump disappointed investors with limited details of his economic-stimulus plans, and the Trumpflation/reflation trade was said to be unwinding."The risk was always that a president like Trump would end up upsetting that consensus (of faster U.S. growth, stronger dollar) view by introducing more political uncertainty," said asset manager GAM's head of multi-asset portfolios Larry Hatheway.The biggest mover, and perhaps the key driver of risk since the election, was the dollar which tumbled as much as 0.8%, falling below its 50DMA for the first time since the election, and back to where it was during the December 14 Fed rate hike announcement, while Treasuries gained alongside commodities, as Donald Trump’s press conference sent a wake-up call to the market about exalted expectations for fiscal stimulus in the U.S. "Overall, investors are wary ahead of Trump's inauguration – a case of buy the talk (Trumpflation), but sell the news,

Trump, Spy Stories, Prostitutes and the U.S. Dollar -- By Pam Martens -- The President of the United States is typically viewed as the person whose top job is to inspire confidence in the dignity, integrity and sanity of his leadership of the country. But the presser held by President-elect Donald Trump yesterday, the first in six months and likely viewed by world leaders around the globe, was short on confidence building and long on slandering the American media and U.S. intelligence agencies. In short order, the U.S. dollar took a dive. Trump has yet to assimilate the concept that his words no longer belong just to him but attach themselves like flypaper to the credibility of the most powerful nation on earth.At times, the press conference felt more like an unruly street fight than a media Q&A by the man who will be sworn in as the 45th President of the United States in just nine days. Trump had his gang lined up on one side: his lawyer, the Vice President-elect, his two sons and one daughter. On the other side was the media, filled with questions on newly leaked documents about Trump’s relationship with Russia.On Tuesday, BuzzFeed reporters Ken Bensinger, Miriam Elder and Mark Schoofs (a 2000 Pulitzer Prize winner for his work at the Village Voice) released an article that included a 35-page dossier of unsubstantiated allegations of misconduct by Trump with prostitutes in Russia and coordination between some of his campaign aides and Russian operatives. When asked about the report during his press conference, Trump used the words “sick,” “crap,” and “something that Nazi Germany would have done.” Trump also referred to one media outlet as “a failing pile of garbage,” leaving diplomats around the world shaking their heads and sending dollar traders to the exits. As evidenced by the video clip below from the press conference, things became completely unhinged 52 minutes into the event.

The Released Trump Dossier Is Not the Complete Dossier - Marcy Wheeler - I want to return to a point I made here about the dossier — billed as an oppo research project — on Donald Trump’s ties to Russia. This is not the complete dossier. It was selectively released. The gaps are immediately identifiable from the report numbering, which (as released) goes like this: […] You might think some of this is just about pages being out of order but someone — perhaps Buzzfeed? — wrote in page numbers by hand on the lower right. So the reporting was frequent, sometimes more than daily. It must have started sometime in April, if not before (which explains how a project started by a Republican challenger to Trump ends up with a June 2016 report; we just don’t have the first 79 reports); it’s even possible the earlier reporting included more details on Hillary. Over that time, the reporting protocol changed (no longer identifying each source with a letter). And the reports continue into December, well past the election, and well past the time a Hillary supporter — ostensibly the funder for this project — might want to influence the election. Update: Also note that these reports are not done in the same typeface, with variations between sans serif and serif fonts, changes to margins, and at least one report changing font size mid-report. I’ve marked those below as well, and will continue to work on margin size. I’ve been informed that this is a way the Brits track leakers, which means this copy should be identifiable to a particular leaker.

Who’s Blackmailing the President & Why Aren’t Democrats Upset About It? - Gaius Publius - Until now, getting into the news and reports about Russia and Trump meant getting into some rather dense weeds (PDF of declassified report here), but with the recent release by Buzzfeed of the full 35-page dossier on Trump and Russia (the explosive one, with the women peeing on Obama’s former hotel room bed), which was distilled into a two-page appendix in the classified version of the report, the road to clarity just presented itself.  So I offer the text of three tweets (mine), a longer discussion of those main points, and comments by Glenn Greenwald on the latest Trump-Russia-intel community contretemps. Everything else, as I now see it, is detail, a gloss on these three points. First, the tweets, a bullet-point capsule of all the main points up to now:

    • 1) It certainly looks like our Security State is using Russian blackmail material against Trump to blackmail him for their own purposes.
    • 2) Where's the outrage from the usual Dem suspects about federal agents interfering in the political process now?
    • 3) is this difference in treatment obvious only to me, or is the nation noticing as well? If so, not good for "usual Dems" & their cred.

This hits, I think, the main elements to watch in tightly compressed form. Read on for the long version of these three points. Click here to jump ahead to Greenwald’s take on all this. As I said above, there only three elements to “get” to get this story. First, there’s the blackmail element. According to the 35-page dossier, Russia (supposedly) prepared blackmail material on Trump but isn’t using it. But it’s clear that American intelligence services certainly are using it, or using the threat of using it, and doing so very publicly (per CNN, quoted here, my emphasis): One reason the nation’s intelligence chiefs took the extraordinary step of including the synopsis in the briefing documents was to make the President-elect aware that such allegations involving him are circulating among intelligence agencies, senior members of Congress and other government officials in Washington, multiple sources tell CNN. “For your information, sir”? Or “Careful; you don’t know what all us intel types know about you … sir”? Again, Trump was presented with just a two-page summary of the full dossier. The actual information, which we have thanks to the later publication of the 35-page dossier, was reportedly not presented to him, perhaps to leave to his imagination what it contained.

Trump Impeachment Now Even Odds At Bookies -- Ladbrokes are offering bettors 'even' odds that president-elect Donald Trump will leave office via impeachment or resignation by the end of his first term... Interestingly, they are also offering 5/1 odds that Obama is still the sitting President on February 1st 2017. However, PaddyPower appears to have 'jumped the shark' with its Trump proposition bets. From 4/1 odds of being impeached in the first 6 months to 500/1 odds that Trump will paint the entire White House gold, there is something for everyone here...

Legal team for NC man guilty of hacking say CIA director left ‘door wide open’ -  A 24-year-old North Carolina man accused by federal prosecutors of hacking into CIA Director John Brennan’s personal AOL email account and posting sensitive government information on WikiLeaks pleaded guilty on a felony charge Friday in court. Justin Liverman, of Morehead City in eastern North Carolina, was arrested in September 2016 along with another North Carolina man from Wilkes County, according to the U.S. Department of Justice.  FBI officials in Charlotte helped investigate the case.  Liverman avoided federal indictment by entering a plea, in return for a reduced sentence, according to a news release from the Courage Foundation, a group that raises money for defendants who it says are valuable whistleblowers. The organization has also raised money for Edward Snowden’s legal defense. Snowden is best-known as the former CIA employee and National Security Agency contractor who leaked classified information about NSA’s once-secret, mass surveillance programs.  In Liverman’s case, Sarah Harrison, acting director of Courage, said his actions revealed Brennan “did not take adequate precautions around his own security clearance questionnaire.” She blamed high-level U.S. officials for “leaving the front door wide open” to cyberattacks.

Justice Department's internal watchdog to investigate FBI's handling of Clinton email inquiry - The Justice Department's internal watchdog launched a sweeping inquiry Thursday into how the FBI handled its Hillary Clinton email probe, including Director James B. Comey’s controversial decision to publicly discuss the case in ways the former Democratic nominee has complained contributed to her loss. The inquiry by the Justice Department's inspector general, likely to keep open the wounds of the bitter 2016 presidential race, will focus on whether "policies or procedures were not followed" by the FBI and Justice Department. Of particular focus will be the letter sent by Comey to Congress just 11 days before the Nov. 8 election that disclosed that his agents were reviewing newly discovered emails possibly pertinent to the then-closed investigation on Clinton’s handling of classified material while serving as secretary of State.The disclosure immediately refocused negative public attention on Clinton’s actions. Then Comey made a second surprise announcement a few days later, revealing that the new emails had no impact on the status of the case, which had concluded with no criminal charges.  The FBI director’s statements and a July news conference at which he discussed the details of the case were criticized at various times by members of both political parties as being inappropriate and violating long-standing guidelines that prohibit the public release of information about investigations, especially if such disclosures might affect the outcome of an election.

Intelligence community publishes all classified material online to stop leakers — In an unprecedented attempt to prevent the further unauthorized disclosure of classified information, the Director of National Intelligence has released all of the nation’s secrets onto the Internet, Duffel Blog has learned. President Obama approved the move by signing an executive order between the ninth and tenth holes at the Congressional Country Club in Bethesda, Md. Previously held under strict security standards established by over 200 years of experience, America’s most precious information is now available to anyone with a web browser. People around the world can view classified material ranging from the current status of North Korea’s nuclear weapons program to real-time signals intelligence collected by the National Security Agency. They can also learn than 9/11 was an inside job. “The Intelligence Community (IC) has suffered too long from egregious cases of unauthorized disclosure,” said Aldrich Pollard, spokesman for DNI Chief James Clapper. “From Montes and Walker to Hanssen and Snowden, leaks have gravely impacted our nation’s security.” Pollard spoke while handing reporters copies of a previously-undisclosed gun-sharing agreement between the Department of Justice and Mexico’s Sinaloa Cartel.

Moral panic over fake news hides the real enemy – the digital giants - Democracy is drowning in fake news. This is the latest reassuring conclusion drawn by those on the losing side of 2016, from Brexit to the US elections to the Italian referendum.Apparently, all these earnest, honest and unfashionably rational grownups are losing elections because of a dangerous epidemic of fake news, internet memes and funny YouTube videos. For this crowd, the problem is not that the Titanic of democratic capitalism is sailing in dangerous waters; its potential sinking can never be discussed in polite society anyway. Rather, it’s that there are far too many false reports about giant icebergs on the horizon. The problem is not fake news but a digital capitalism that makes it profitable to produce false but click-worthy storiesHence the recent surfeit of misguided solutions: ban internet memes (proposed by Spain’s ruling party); establish commissions of experts to rule on the veracity of news (a solution floated by Italy’s antitrust chief); set up centres of defence against fake news while fining the likes of Twitter and Facebook for spreading them (an approach suggested by German authorities).This last proposal is a great way to incentivise Facebook to promote freedom of expression – the same Facebook that has recently censored a photo of the nude statute of Neptune in the centre of Bologna for being too obscene! A tip for authoritarian governments: if you want to get away with online censorship, just label any articles you do not like as fake news and no one in the west will ever complain about it. Will the fake news crisis be the cause of democracy’s collapse? Or is it just a consequence of a deeper, structural malaise that has been under way for much longer? While it’s hard to deny that there’s a crisis, whether it’s a crisis of fake news or of something else entirely is a question that every mature democracy should be asking.

 Data Could Be the Next Tech Hot Button for Regulators NYT -- Wealth and influence in the technology business have always been about gaining the upper hand in software or the machines that software ran on.Now data — gathered in those immense pools of information that are at the heart of everything from artificial intelligence to online shopping recommendations — is increasingly a focus of technology competition. And academics and some policy makers, especially in Europe, are considering whether big internet companies like Google and Facebook might use their data resources as a barrier to new entrants and innovation. In recent years, Google, Facebook, Apple, Amazon and Microsoft have all been targets of tax evasion, privacy or antitrust investigations. But in the coming years, who controls what data could be the next worldwide regulatory focus as governments strain to understand and sometimes rein in American tech giants. The European Commission and the British House of Lords both issued reports last year on digital “platform” companies that highlighted the essential role that data collection, analysis and distribution play in creating and shaping markets. And the Organization for Economic Cooperation and Development held a meeting in November to explore the subject, “Big Data: Bringing Competition Policy to the Digital Era.” As government regulators dig into this new era of data competition, they may find that standard antitrust arguments are not so easy to make. Using more and more data to improve a service for users and more accurately target ads for merchants is a clear benefit, for example. And higher prices for consumers are not present with free internet services.

Why 2017 is Blockchain's Make or Break Year - That may sound dire, but poll anyone in the financial services industry and they will likely tell you that the technology is still in need of its break-out moment. If significant headway isn't made – or real value delivered, whether in cost savings or new revenue generation – by the end of 2017, I suspect the technology will risk developing fatigue in executive suites. A key part of the issue is that while progress has been made, the technology has not yet reached widespread adoption – the market is crowded with proofs-of-concept (PoCs), but not enough live implementations. And while some successes have been achieved, nothing with significant volume, staying power or appropriate scalability has emerged. As a result, the small size of existing applications means that the cost of running blockchain platforms might still be greater than the value derived from them. Urgency and progress, rather than more of the same, will be essential to move forward.Financial institutions have the power and ability to move blockchain to the next level. To get there, companies will likely need to do two key things. First, they will need to move away from churning out proofs-of-concept, shifting instead toward full-blown solutions. Second, it will be critical for them to come together and further form industry consortiums to unlock mass-scale value. For blockchain to remain relevant, the entire industry should come together.

Bring on the Bots | American Banker - Artificial intelligence is moving from science fiction to practical reality fast. AI — technology that teaches machines to learn so they can perform cognitive tasks and interact with people — is suddenly accessible to many companies. Costs associated with the advanced computing and data-storage hardware behind AI are plummeting. A growing number of vendors also offer AI tools such as robotic processing automation that can be configured without the help of a rocket scientist. So this is clearly an area more banks will need to pay attention to going forward. Already some AI pioneers have emerged in the financial industry just over the past year: Bank of New York Mellon's use of robotic process automation in trade settlement and other back-office operations; Nasdaq's search for signs of market tampering with an assist from AI; UBS' initiative to answer basic customer-service questions through Amazon's virtual assistant, Alexa; and USAA's development of its own virtual assistant. Most large banks are considering using AI wherever mundane or repetitive tasks could be offloaded to a computer fairly easily.  BlackRock uses AI to improve investment decision-making. The startup Kensho combines big data and machine-learning techniques to analyze how real-world events affect markets.  However, some people question whether AI programs can be trusted to make sound, unbiased lending decisions.

Morgan Stanley partners with Thiel-backed fintech startup - Investment banks have been disproportionately mired in regulation in recent years, compared to retail banks and wealth management institutions, resulting in lackluster internal innovation. However, there are signs that investment banks are now waking up to the need to bring their technology up to date to remain competitive. Morgan Stanley, for instance, is partnering with data aggregation startup Addepar to automate administrative tasks, which will allow its wealth managers to dedicate more time to clients in person, Bloomberg reports. Addepar, founded in 2013 and backed by tech billionaire Peter Thiel, has assets of around $560 billion on its platform. Addepar aims to free up wealth managers' time. Addepar's platform connects to financial institutions' data warehouses to track and analyze wealthy clients' portfolios. These investors typically hold assets across a wide range of institutions, which can make it difficult to perform tasks such as calculate their net worth and assess their portfolio exposure. Currently, many wealth management teams at investment banks have to perform these tasks using outdated technology and rudimentary spreadsheets. Addepar aims to solve this problem by collecting a client's portfolio data in one place, allowing wealth managers to better manage clients' money, spend less time on administrative tasks, and dedicate more time to the in-person relationships that most rich clients value. Morgan Stanley is right to focus on keeping its wealth managers happy. According to Addepar CEO Eric Poirier, Addepar's platform will help Morgan Stanley retain employees who might otherwise leave and work independently, unencumbered by their employer's legacy technology and aided by more modern tools such as Addepar's. This is an important fix because, unlike in other areas of banking, individual employees are still key for investment banks, due to the close relationships they form with clients.

Deloitte opens blockchain lab in New York to push for working prototypes - Deloitte announced Thursday the opening of a laboratory in New York devoted to exploring blockchain solutions for the financial services industry. It is the second lab dedicated to blockchain in Deloitte's growing global network of innovation hubs. The company's first blockchain lab opened in Ireland last May and more are expected to open throughout the year. The firm has 800 people in 20 countries dedicated to blockchain. The New York lab will be staffed with more than 20 blockchain specialists, who will work with Deloitte's clients to build market-ready applications that take advantage of the technology's unique features. Blockchain technology garnered a lot of hype throughout 2015 and 2016, as financial institutions seized eagerly on the concept of an automated shared ledger that eliminated the need for third parties to verify transactions. Large technology firms did the same. To them it holds out the promise of huge cost savings. But that enthusiasm has so far yielded few real-world applications. In a recent Deloitte survey of executives familiar with blockchain, just 12% of respondents said that their companies had actually deployed blockchain solutions. “With the technology not yet having reached widespread adoption, 2017 could be the make-or-break year for blockchain technology,” said Eric Piscini, a Deloitte principal who leads its digital transformation and innovation efforts in financial services, in a press release. “Companies will need to move away from churning out proofs of concept and begin producing and implementing solutions. That’s a big part of the goal with Deloitte’s blockchain lab.” Deloitte itself has developed plenty of proofs of concept to demonstrate blockchain's potential — 35 of them in the past year alone, covering everything from digital identity and cross-border payments to loyalty programs and insurance.

OCC's New Charter — Only Serious Fintechs Need Apply -  The Office of the Comptroller of the Currency's fintech charter will do more than just remove one of the business moats protecting incumbents. It will also give rise to fintech-versus-bank competition. Before the OCC announced last month that it would consider applications from fintech companies, traditional financial institutions such as commercial banks were the only ones that obtain charters enabling direct lending in all 50 states. Fintech companies, by contrast, have needed to obtain a separate lending license in every state, making it almost impossible to operate efficiently nationwide. This is a burden that no bank experiences today. Of course, fintech companies will likely still have a choice whether or not to pursue a charter.  Chartered fintech companies will need to prove to the OCC and other regulatory bodies that they are managing risk and keeping a healthy reserves balance to preserve appropriate liquidity. For some, the benefits will outweigh the increased scrutiny. For others, the costs of more regulation might be too steep. Indeed, a possible outcome of this new ruling will be a thinning of the ranks of fintech companies. The truly innovative companies that invest in new technologies have the resources and scale to take on a national charter. For example, machine learning algorithms are enabling fintech companies to underwrite applicants previously untouched by banks. These new market opportunities bring scale through automation and a customer's willingness to pay through the uniqueness of the offering. Others that could benefit from the proposed charter are the hedge funds and banking partners that issue credit facilities to fintech companies.   Many fintech companies use some of their own cash in their financing arrangements with customers, and fintech companies supplement the rest from a credit or warehouse facility from a larger institutional lender. As fintech can scale and operate in all 50 states, these credit facilities will grow under tighter inspection and controls from the regulator. Hence these lenders would benefit from a decreasing risk, while growing origination volumes.

OCC Fintech Charter Sparks Opposition from Senate Dems | American Banker: — The Office of the Comptroller of the Currency's plan to offer a federal charter for fintech companies is facing a challenge from two top Senate Democrats. In a letter Monday to Comptroller Thomas Curry, Sens. Sherrod Brown, D-Ohio, and Jeff Merkley, D-Ore., opposed the creation of the charter, which would allow certain types of fintech companies to avoid state licensing requirements by obtaining a limited-purpose bank charter. The OCC's plan "could also allow predatory alternative financial services providers to spread more quickly given the blessing of the federal government and elimination of state-based protections for working class Americans," wrote Merkley and Brown, the top Democrat on the Banking, Housing, and Urban Affairs Committee. "Offering a new charter to non-bank companies seems at odds with the goals of financial stability, financial inclusion, consumer protection, and separation of banking and commerce that the OCC has upheld under your tenure." In the letter, the senators cast doubt on the OCC's authority to grant the charter to nondepository institutions, which appear to be the primary candidates for the charter. "It is far from clear whether the OCC has authority to grant national bank charters to them," the letter states. "Congress has given the OCC a very narrowly-defined authority to charter only three specific types of special-purpose national banks ... that do not accept deposits." Those comprise bankers' banks, credit card banks and trust banks, the senators wrote.The lawmakers warned that the charter could encourage companies to sidestep certain consumer protection laws by obtaining the preemption privileges of a national charter, a tactic they called "charter shopping.""This charter allows non-bank firms to negotiate which provisions of a national banking charter they want, including preemption of state consumer protection laws, while avoiding the rules and regulations that would apply to a full-service bank," they wrote. The lawmakers also doubted the OCC's plans on a deeper level, asserting that companies with single lines of business should not be able to obtain the status of a bank.

Industry Caught Off Guard By Senate Dem Opposition to Fintech Charter | American Banker: Two influential Democratic senators' surprise objections to the Office of the Comptroller of the Currency's fintech charter show that the initiative may be more politically fraught than the industry and agency expected. "Congress has given the OCC a very narrowly-defined authority to charter only three specific types of special-purpose national banks," wrote Sens. Jeff Merkley, D-Ore. (pictured) and Sherrod Brown, D-Ohio.

Democrats, Too, Are Needed to Overhaul Dodd-Frank - American Banker - The Dodd-Frank Act is a jobs and business killer. Both candidate Trump and now his presidential transition team have promised to "dismantle" it. But success will depend on how President-elect Trump and congressional Republicans frame the issue of financial regulatory reform for the public. Whether Republicans can gut Dodd-Frank and rein in regulatory absolutism matters enormously for the banking industry, economic growth, and the welfare of Joe Sixpack and Sally Soccer-Mom. But Washington pundits disagree about the best approach and prospects for overhauling regulation of the financial system in 2017. One thing that is clear is a successful reform effort will need to include both Republicans and Democrats driving the train. Legislative tactics and regulatory appointments will matter in turning the regulatory tides to banks' favor. But it will also be paramount for Trump to use his bully pulpit to make the case — over the heads of his critics in Congress and the media — directly to the American people that oppressive financial regulation is hurting the economy and that overhauling Dodd-Frank, while bringing financial regulators to heel, is a pro-jobs and pro-growth reform. The economy is in the doldrums. Voters aren't much interested in capital levels, the Federal Reserve's stress tests, interchange price controls, debit routing, the Consumer Financial Protection Bureau being funded by the Fed rather than Congress, or the CFPB regulating out of existence products it doesn't like. They want better economic prospects for their families. In pitching reform to the American people, Republicans need to make a big-picture, positive, and intuitive argument that small-business owners, blue-collar workers, and both the unemployed and underemployed will understand and support. Dodd-Frank's straitjacket forces banks to prioritize the wishes of regulators over those of customers and shareholders, and stifles growth. Democrats' 2018 electoral landscape is daunting, making them susceptible to pressure to do the right thing. They will be defending 25 Senate seats (two are occupied by independents who caucus with Democrats.) The Democrats will be playing defense in 10 states that Trump carried. Trump carried West Virginia by 42 points, North Dakota by 36, Montana by 21, and Indiana and Missouri by 19 each. The Democrats up for reelection in those states — Joe Manchin, Heidi Heitkamp, Jon Tester, Joe Donnelly and Claire McCaskill — could be particularly receptive to joining Republicans in curbing regulatory excess. If the climate of opinion is changed, Democrats from solid blue states too could feel pressure to dismantle Dodd-Frank.

  Regulatory Relief Shouldn’t Be Limited to Dodd-Frank | Bank Think: Now that a long-awaited opportunity has arrived to make the regulatory and examination framework more conducive to community and regional banks, how will we measure the success of any reforms? For me, a satisfactory outcome cannot just be changes to the Dodd-Frank Act? The time has come for bankers to be active and bold in urging policymakers to achieve common-sense changes that will benefit banks' customers and communities, and lessen the wear and tear on those working at the bank. But it isn't just the fallout from the financial crisis, with the pendulum swinging toward regulatory toughness, that has had bankers concerned. There has been acknowledgement that regulatory burden has been a problem for community banks since at least 1996, when Congress passed the Economic Growth and Regulatory Paperwork Reduction Act. The law requires regulators to conduct a review every 10 years to identify any outdated or unnecessary rules. Dodd-Frank is just the latest in a long string of policy out of Washington that harmed the greatest banking system devised by man. What I hear from Louisiana bankers goes beyond Dodd-Frank. It's a host of onerous regulations and accounting standards along with an examination process that often seems devoid of collaborative problem-solving and at times unnecessarily heavy-handed. We can do better than this.First, the regulatory framework needs to be rationalized in a way that results in cost savings to bank operations and enhances institutions' ability to serve bank customers. The cost savings must be real or the burden will continue to have unintended consequences. We have heard bankers speak of lowering the benchmarks used to measure bank performance due to the increased expense of regulations. Second, Congress needs to rebalance the relationship between the examined bank and the bank examiner. The Financial Choice Act, authored by House Financial Services Committee Chairman Jeb Hensarling, which is the regulatory relief garnering the most attention, includes provisions to restore greater transparency and accountability in the bank exam process. Of the proposals made thus far, the Financial Choice Act has the best opportunity of achieving these benchmarks. What jumps out when reading this bill is the reform of the regulatory process in Title VI.

How much do we need to worry about ‘financialization’ and corporate short-termism? A Q&A with Rana Foroohar - Pethokoukis - Throughout the recent election, politicians painted Wall Street banks as the reigning lords of the American economy, such that Bernie Sanders urged we break up the banks in order to protect the little guy. Save Main Street! In her 2016 book, Makers and Takers: The Rise of Finance and the Fall of American Business (shortlisted for the Financial Times/McKinsey & Co Book of the Year prize), journalist Rana Foroohar argues that this trend of “financialization” has incentivized companies to engineer their balance sheets and their bottom lines – corporate short-termism — to the detriment of real job creation, business investmen, and long term growth. Hillary Clinton would agree. We discuss. Foroohar was an assistant managing editor at Time and the magazine’s economics columnist, and starts soon at the Financial Times as chief business columnist and associate editor. She is also a global economic analyst for CNN. Lightly condensed bits of our conversation are below; check out the whole thing on my Ricochet podcast.

What’s Going on with the Banks? Citi Cuts Goldman to “Sell,” after Goldman Cut Citi to “Neutral” - Wolf Richter - Citigroup hit back at Goldman Sachs, after Goldman Sachs had slammed Citigroup in September. Citi analyst Keith Horowitz, in a note to clients, downgraded Goldman from the already dismal “hold” to a rare “sell” rating, citing Goldman’s valuation. He said Goldman would need an additional $4 billion in full-year revenues above current estimates – which, according to Reuters, are pegged at $32.3 billion – to get to a return on equity (ROE) that would justify the valuation. “While we expect Goldman will see improved trading revenues going forward, the path is relatively uncertain and the bar is relatively high,” he wrote. Goldman is scheduled to report earnings on January 18. So time to take profits and move on, according to Citi. Shares of Goldman Sachs have jumped 55% since early October when the possibility of a Trump victory started moving into the foreground. Stock market participants have been betting that Trump would be a boon to Goldman, and they drove up the stock price. It was one of the big winners of the “Trump Trade” (via By now, Goldman’s former executives are accumulating in the Trump administration. So the bet might have been a wise one in that regard. But the “Trump Trade” has gone a long way and has recently been sputtering. So the risk/reward relationship of owning Goldman shares, at this nose-bleed price, has flipped, according to the analyst. But is there more to Citi’s downgrade of Goldman? In September, it had been Goldman’s turn to downgrade Citigroup, from “buy” to “neutral.” Analyst Richard Ramsden, in a note to clients, cited the prospect that Citi might miss its profitability goals.  Goldman’s Ramsden justified his downgrade of Citi in September with the same concerns over ROE, figuring that “growth in higher return businesses and expense discipline will not be enough to take ROE all the way to its 10% ROE target.” Tit for tat? We’ve seen that before. During the Financial Crisis, banks belatedly got bearish on each other, slapping each other with downgrades, back and forth, sort of like a circular financial firing squad. It took them a long time to get to a sell rating, often long after the shares had already collapsed. And they were right, even if late.

Big banks worked with pot industry, despite denials, records show -- Time and again, the nation's largest banks have said that they do not do business with firms in the marijuana industry because pot, while legal in 29 states, remains illegal under federal law. "At Bank of America, as a federal regulated financial institution, we abide by federal law and do not bank marijuana-related businesses," the Charlotte, N.C.-based bank said in December 2015. Citigroup, Wells Fargo and JPMorgan Chase have all made similar comments to the press in recent years. These blanket denials have helped the megabanks keep a low profile on a sensitive issue: the cannabis industry's touch-and-go relationship with the U.S. banking system. But the reality inside of big banks is murkier than their public statements suggest. Newly examined records show that numerous marijuana-related entities have had accounts at the four biggest U.S. banks in recent years. The records, which are publicly available from the state of Massachusetts, were analyzed for American Banker by MRB Monitor, a Chicago-based firm that helps financial institutions identify the risks associated with the marijuana industry. The analysis found that out of 84 applicants to operate medical marijuana dispensaries in Massachusetts, 29 reported having access to funds in at least one account at Bank of America, Citi, Wells or JPMorgan, or at one of their subsidiaries. Of the 29 applicants that had access to funds at one of the four big banks, 17 had a connection to B of A. The analysis covered applications filed between June 2015 and September 2016. For 19 of the 29 applicants, these bank accounts were in the names of individuals who were involved in efforts to open pot dispensaries, whose connection to the cannabis industry may not have been obvious to bankers. But in other instances, the accounts were in the names of well-known cannabis firms that were operating in other states. The findings raise questions about the extent to which the big banks are screening customers to determine whether they are part of the cannabis industry.

Moody's pays $864 million to U.S., states over pre-crisis ratings --- Moody's Corp has agreed to pay nearly $864 million to settle with U.S. federal and state authorities over its ratings of risky mortgage securities in the run-up to the 2008 financial crisis, the U.S. Department of Justice said on Friday. The credit rating agency reached the deal with the Justice Department, 21 states and the District of Columbia, resolving allegations that the firm contributed to the worst financial crisis since the Great Depression, the department said in a statement. "Moody's failed to adhere to its own credit-rating standards and fell short on its pledge of transparency in the run-up to the Great Recession," Principal Deputy Associate Attorney General Bill Baer said in the statement. S&P Global's Standard & Poor's entered into a similar accord in 2015 paying out $1.375 billion. Standard and Poor's is the world's largest ratings firm, followed by Moody's. Moody's said it would pay a $437.5 million penalty to the Justice Department, and the remaining $426.3 million would be split among the states and Washington, D.C. As part of its settlement, Moody's also agreed to measures designed to ensure the integrity of credit ratings going forward, including keeping analytic employees out of commercial-related discussions.

Credit-Card Surcharge Bans Questioned at U.S. Supreme Court -- U.S. Supreme Court justices grappled with a New York law that says merchants can’t impose surcharges on credit-card purchases, hearing arguments in a free-speech clash with implications for billions of dollars of transactions. Merchants are trying to topple — or at least scale back — surcharge bans in New York and nine other states, saying the laws strip them of an important tool for telling their customers about the cost of credit-card transactions. Retailers say they pay $50 billion in “swipe fees” each year to card companies. The justices spent much of the hour-long session trying to understand exactly what the New York law prohibited. A lawyer for the state said the law merely bars hidden charges that come on top of a regular price. He said that under the law, retailers still can offer discounts for cash and even post two different prices for cash and credit-card purchases. A core question for the high court is whether no-surcharge laws regulate speech or instead target conduct. While speech regulations must meet a demanding legal test, states are required to show only a rational reason for rules governing commercial conduct. Several justices said they weren’t sure the New York law prohibited speech at all. “I just don’t see anything about speech in the statute,” said Justice Sonia Sotomayor.Justice Samuel Alito, however, said the state was “forcing the merchants to speak in a particular way.” And Chief Justice John Roberts aimed sharp questions at an Obama administration lawyer’s partial defense of the law, saying it was based on the notion that “American people are too dumb” to perform basic math.

US Supreme Court loaded with First Amendment cases - The First Amendment is being put to the test on multiple levels this term before the US Supreme Court. The high court will hear cases about the right to trademark offensive names and whether merchants have a right to inform customers that a credit-card surcharge is actually a surcharge. Two cases involve the free exercise of religion clause of the First Amendment. The first is about whether Missouri breached that clause by supplying recycled tire material for playgrounds to public and secular schools, but not to religious schools. The court has already decided to hear the Missouri case, but it has not decided whether it will consider a request to revive a challenge to Utah's law against polygamy. That lawsuit claims the law is a violation of "religious liberty rights protected by the First Amendment." (PDF) At this stage, however, the justices most likely could decide this case without actually having to weigh in on polygamy or the First Amendment. More on that later. First up on the docket is Expressions Hair Design v. Schneiderman, which the justices are to ague Tuesday. A law in 10 states forbids merchants from imposing a surcharge on goods paid for via a credit card. Surcharges help merchants recover the so-called "interchange" fees banks charge them for accepting credit cards. Strangely, in those 10 states, merchants may offer "cash" discounts. Either way, the result is the same: people who use credit cards can be charged more. But how this pricing structure is described to customers is at the heart of the First Amendment battle. The laws require that merchants inform customers that price differences for cash or credit purchases are cash "discounts" and not credit card surcharges. This means merchants are not allowed to charge a base price before tacking on a fee to those using credit cards.  In New York, breaching that law, heavily backed by the banking industry, is punishable by up to a year in jail.  Merchants brought a challenge to the Supreme Court contending the measure is a violation of their First Amendment rights of speech because it restricts what they can say about their prices, not how much they can charge. What's more, they say the law does not protect consumers. "Its effect is to criminalize truthful speech conveying price information," they argue. New York maintains the law is designed to minimize profiteering. "... the imposition of a surcharge is not an act of speech that the First Amendment restricts the government from regulating."

Feel threatened by a debt collector? You're not alone, survey finds  --The CFPB said the study expands public understanding of debt collection in the providing the first comprehensive and nationally representative data on consumers' experiences with a multibillion-dollar industry that includes more than 6,000 collection companies.More than 40 percent of consumers who said they were approached about a debt requested that a creditor or collector stop contacting them. More than one-in-four of USA consumers contacted by debt collectors say they felt threatened by the encounter, a new government study shows. Almost 40% of those surveyed said a collector had attempted to contact them four or more times per week.There are debt collection scams, so it's important to verify that both the debt and the collector are legit before making any arrangements to pay, she said. The Bureau is encouraging more consumers to tell their stories. While debt collection agencies are not allowed to abuse or harass consumers, many collectors apparently don't play by the rules. While it's certainly not okay for consumers to feel threatened by collectors, another area the CFPB shined a light on with its report is the wealth of misinformation provided by debt collectors. But only one out of four people reported the debt collector actually stopped. Under the Fair Debt Collection Practices Act, debt collectors are forbidden from using threats of violence or harm.They are also barred from claiming borrowers have committed a crime, or that the borrower may be arrested for non-payment. Even worse, more than half of the time, debt collectors are calling about a overdue bill or unpaid loan that's not even yours, or it's for the wrong amount.

 Two GOP senators want Trump to remove consumer bureau chief Richard Cordray -- A pair of Republican senators are calling on President-elect Donald Trump to immediately fire one of the nation’s top financial regulators. In a letter sent to the Trump transition Monday, Sens. Ben Sasse (R-Neb.) and Mike Lee (R-Utah) made the case for the immediate removal of Richard Cordray, the director of the Consumer Financial Protection Bureau. Echoing long-term GOP gripes that the agency is too powerful and lacks sufficient oversight, they waded into a murky legal debate about Cordray’s future running the agency.  "It's time to fire King Richard," said Sasse. "President-elect Trump has the authority to remove Mr. Cordray and that's exactly what the American people deserve." In their letter, the pair argued that a recent federal court ruling that the CFPB’s structure is unconstitutional gives Trump the power to remove Cordray from his post as soon as he becomes president. That would run counter to Cordray’s stated plans, as he has said he has every intention of serving out his full term, which does not expire until July 2018. As the lone director of the agency, which was created as part of the Dodd-Frank financial reform law, Cordray or any CFPB director would exert huge influence on the direction of the agency.And the bureau has been a partisan battleground ever since its creation, with Republicans repeatedly trying to scrap Cordray’s position and install a bipartisan commission at the agency instead.But with Democrats holding firm against those changes, Republicans are now calling on Trump to simply remove Cordray outright. Sasse and Lee argued that an October ruling by the U.S. Court of Appeals for the D.C. Circuit gives Trump the greenlight to scrap Cordray. There, a three-judge panel ruled that the agency’s status as an independent agency with a single director was unconstitutional, as it placed too much power in the hands of a single person. The CFPB is currently requesting a review of that ruling, but if it stands, it would give Trump the power to remove Cordray at will. Under current law, Cordray could only be removed for cause, if he is found to have misused his position in a serious fashion.

House Dems Urge Trump Not to Fire CFPB s Cordray: House Democrats sent a letter Tuesday to President-elect Donald J. Trump, urging him to reject calls by Republicans to fire Richard Cordray, the director of the Consumer Financial Protection Bureau. The letter, signed by Rep. Maxine Waters, D-Calif. and 20 other Democrats on the House Financial Services Committee, cautioned Trump against "entering into a protracted — and likely unsuccessful — legal battle to oust" the CFPB's Cordray before his term expires in July 2018. "Any attempts to remove Director Cordray from his position are without historical precedent, and intended solely to distract the director and the bureau from its important work protecting servicemembers, students and other borrowers from financial predation," the lawmakers wrote. "We caution you not to engage in partisan litigation, particularly since it is likely to be unsuccessful and will needlessly divert government resources away from other important priorities." House Democrats are hoping to avert a collision course with Trump because firing Cordray could devolve into a nasty legal and political showdown over the limits to executive power. A key question is whether Trump will attempt to fire Cordray soon after assuming the presidency. Under the Dodd-Frank Act, Trump can only fire a director "for cause," but a court decision in November struck down that language, saying a president could fire a director for any reason. That decision, however, has been stayed pending appeal.House Democrats wrote that removing Cordray "for cause" would be an "extraordinary remedy whose use must be subjected to enhanced congressional, judicial and public scrutiny." "While we understand that many powerful special interests would like to see Director Cordray leave, we urge you not to bow to their demands to initiate costly, meritless litigation, and we stand ready to oppose any efforts you may make to do so," the letter stated.

 Dear Mr. Trump: Please Don't Destroy the CFPB | Bank Think: This election showed that families across the country struggle with economic instability. Millions of people still face financial challenges, and we need strong regulators to ensure that financial companies do not mistreat them. Congress created the Consumer Financial Protection Bureau in 2010 when it became apparent that financial regulators were not protecting consumers. Consumer regulation was spread across seven agencies; the authorities and focus of each agency was not keeping pace with the increasing complexity of the financial markets, particularly the imploding mortgage market. Since its creation, the CFPB has shown what good government can look like when it puts people first. Richard Cordray, as the first director of the agency, inherited a financial crisis that impacted millions of people. Despite the uphill battle, Cordray led the CFPB in taking strong action against financial abuses, which has yielded $12 billion in consumer relief. This relief revealed abuses in a startling range, including credit card companies improperly billing for unwanted services, student loan servicers overcharging service members, and companies discriminating against minorities. Yet from day one there has been persistent and puzzling opposition to the agency. Much of this opposition has cloaked itself in misleading terms about the structure of the agency; opponents of the CFPB say the agency is unaccountable, unprecedented and unconstitutional. They say this despite strong evidence to the contrary: every other financial agency, the first of which was created during the Civil War, has a roughly similar structure to the CFPB.Most of those agencies are not appropriated by Congress; many are subject to extensive annual audits; several of them are led by single directors; and many of their leaderships cannot be removed without cause. To say the CFPB is unprecedented simply ignores the long history of financial regulatory agencies.

Trump Moves Closer To Gutting Elizabeth Warren's Consumer Watchdog ― Big business and congressional Republicans salivate at the idea of gutting the Consumer Financial Protection Bureau, the brainchild of Sen. Elizabeth Warren (D-Mass.). Now, President-elect Donald Trump is moving toward what they’ve long wanted: a weak agency that sides with financial predators over consumers. Trump met with former Rep. Randy Neugebauer (R-Texas) on Wednesday and is considering Neugebauer to run the CFPB, Trump spokesman Sean Spicer confirmed on a Thursday call with reporters.A source close to the transition team told HuffPost that Neugebauer has yet to be offered the job, but that no other candidates are being looked at yet. HuffPost previously reported that Neugebauer’s name was being floated as agency chief if Trump decides to fire the current director, Richard Cordray.When he was in Congress, Neugebauer opposed CFPB actions like the first-ever federal rule cracking down on payday loans. He labeled the agency’s effort to require payday lenders to take basic steps to ensure consumers can pay back their loans and not get trapped in a cycle of debt as a “paternalistic erosion of consumer product choices.” He introduced a bill to overhaul and weaken the agency.As the CFPB was originally designed, the president could not fire its director at will before his five-year term expired. But a federal appeals court ruled last year that the agency structure is unconstitutional. Unless that ruling is overturned by the Supreme Court or reconsidered by the lower court that decided it — the CFPB petitioned that court to vacate the earlier ruling — Trump will be able to remove the Obama-appointed Cordray at any time for any reason.

Warren Outlines Plan to Save the CFPB - Sen. Elizabeth Warren, D-Mass., rallied progressives on Tuesday night to launch a campaign to defend the Consumer Financial Protection Bureau and the Dodd-Frank Act. "A dedicated grassroots effort can beat Wall Street at their own game," Warren told 3,000 consumer advocates on a conference call Tuesday night. "If the Trump Administration, big bank lobbyists and their Republican friends in Congress want to get rid of Dodd-Frank, they are going to have a big fight on their hands."

California Consumer Group Calls for Mnuchin Investigation After Leaked Memo: A California consumer group on Thursday urged the Senate Finance Committee to delay an upcoming nomination hearing into Treasury Secretary-designate Steven Mnuchin after a leaked 2013 memo described alleged illegal foreclosure practices at OneWest Bank when he was chairman and CEO. The California Reinvestment Coalition said the claims against Mnuchin should be investigated by Congress. The memo, published Tuesday by the news site The Intercept, documented alleged evidence "suggestive of widespread misconduct," in OneWest's foreclosure operations. Mnuchin’s nomination hearing is expected soon, but has not yet been scheduled because he has not submitted all the required paperwork. The memo recommended that a civil enforcement action be filed against OneWest; ultimately no case was filed by Sen. Kamala Harris, D-Calif., who was California's attorney general at the time. The memo described how the California investigation was hampered by an inability to subpoena OneWest, and the bank's efforts to block third parties from turning over loan files to investigators. "The Senate should demand that Mr. Mnuchin turn over all evidence that the bank clearly obstructed an investigation and determine whether he broke the law," said Paulina Gonzalez, the California Reinvestment Coalition's executive director, in an interview. "Is the Senate going to vote in favor of a Wall Street insider who profited at the expense of the American people and flouted the law, when they promised to protect working class families?"

Steven Mnuchin Donated To One Democrat In 2016 – The Woman Who Declined To Prosecute His Bank --Wednesday’s post, Donald Trump Has an Enormous and Very Dangerous Wall Street Blind Spot, highlighted the fact that the bank run by Trump’s Treasury Secretary nominee, Steven Mnuchin, was given a pass by California attorney general Kamala Harris, despite the discovery of over a thousand legal violations. Kamala Harris has since been (s)elected to the U.S. Senate.Let’s recap some of what we learned:In the memo, the leaders of the state attorney general’s Consumer Law Section said they had “uncovered evidence suggestive of widespread misconduct” in a yearlong investigation. In a detailed 22-page request, they identified over a thousand legal violations in the small subsection of OneWest loans they were able to examine, and they recommended that Attorney General Kamala Harris file a civil enforcement action against the Pasadena-based bank. They even wrote up a sample legal complaint, seeking injunctive relief and millions of dollars in penalties.But Harris’s office, without any explanation, declined to prosecute the case.  Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, warned: “Given Mr. Mnuchin’s history of profiting off the victims of predatory lending, I look forward to asking him how his Treasury Department would work for Americans who are still waiting for the economic recovery to show up in their communities.” The consistent violations of California foreclosure processes outlined in the memo would indicate that Mnuchin’s bank didn’t merely act callously, but did so with blatant disregard for the law. In the days since this story broke, there’s been a lot of well deserved scrutiny pointed in the direction of Ms. Harris, yet she’s failed to provide a satisfactory answer as to why her office failed to prosecute. Which got me thinking about another paragraph from the above article:  Harris’s prodigious fundraising also raises questions about how attentive she is to the needs of campaign contributors. Prior to signing on with Trump, Mnuchin donated to members of both parties. He gave $2,000 to Harris’ Senate campaign in February 2016. Among the investors in OneWest Bank was major Democratic donor George Soros, who maxed out to Harris’ campaign in 2015. Did he really “donate to members of both parties.” Technically, yes, but it appears Kamala Harris was the only Democrat he donated to in 2016. Which raises all sorts of obvious questions. Democrats Use Trump-Rescued Ethics Office To Delay Trump Nominees -- In an ironic twist, following president-elect Trump's urging to kill a bill that would have severely diminished C

Mnuchin Vows to Sell Fund with Ties to GSEs: Treasury Secretary-designate Seven Mnuchin said he will divest himself of his investments and interests in a number of companies and funds once confirmed, including a fund that has bet that Fannie Mae and Freddie Mac will be recapitalized and released from government control. According to disclosures made public by the U.S. Office of Government Ethics on Wednesday, Mnuchin has an investment of between $500,000 to $1 million in a fund run by hedge fund manager John Paulson. That fund has reportedly bought shares of Fannie and Freddie, which have been in conservatorship, in the hopes the two government-sponsored enterprises will be released from government oversight and shareholders will reap benefits. Mnuchin has already made comments that have been widely interpreted as favoring recapitalization and release of the GSEs. He told Fox Business in an interview after his nomination that he wanted the GSEs restored to the private sector as soon as possible — a break from congressional Republicans who want them eliminated entirely. As Treasury secretary, Mnuchin would play a key role in determining the fate of the GSEs, which currently must give their profits to the Treasury Department and are not allowed to build capital. The potential conflict of interest drew the attention of Sen. Sherrod Brown, D-Ohio, who will participate in hearings on Mnuchin's nomination."How will your past business — and presumably social — connections to hedge fund partners who invested in preferred shares of the government-sponsored enterprises, Fannie Mae and Freddie Mac, inform your views on efforts to reform those enterprises?" wrote Brown in a December letter to Mnuchin that included 11 questions. Mnuchin declined to respond to those questions. In addition to Mnuchin's investment in the Paulson fund, he was also on the board of Sears Holdings along with Bruce Berkowtiz of Fairholme Capital Management, another large investor in Fannie and Freddie stock.

America’s Fastest-Growing Loan Category Has Echoes of Subprime Crisis  - Deanna White told a contractor she couldn’t afford the $42,200 loan he recommended for improvements to her house in Inglewood, Calif. The contractor, she recalled, said she wouldn’t be on the hook because the loan was part of a “government program.” She applied and was approved.Two years later, Ms. White is struggling to make payments on the loan, which was packaged with more than 10,000 similar loans into bonds and sold to investors. Under its terms, Ms. White’s five-bedroom house could be foreclosed on if she defaults.Her loan is part of a booming corner of the lending industry called Property Assessed Clean Energy, or PACE. Such loans, set up by local governments across the U.S., are designed to encourage homeowners to buy energy-efficient solar panels, window insulation and air-conditioning units.About $3.4 billion has been lent so far for residential projects, and industry executives predict the total will double within the next year. That would likely rank PACE loans as the fastest-growing type of financing in the U.S.As the loans spread, so do problems that echo the subprime mortgage crisis. Plumbers and repairmen essentially function as loan brokers but have scant training and oversight. They often pitch PACE loans to help land contracting jobs and earn referral fees from lenders, according to loan documents and more than two dozen borrowers, industry executives and employees. Creditworthiness matters little to lenders, because loans are based on the value of a homeowner’s property. PACE loans typically require no down payment, and the debt is added to property-tax bills as an assessment. Ms. White’s annual property taxes soared to $6,500 from $1,215.

Financial Crash Analysis: $22.6 Billion in Homeowner Relief; $7.8 Trillion to Four Wall Street Banks - Pam Martens  - As Goldman Sachs guys prepare to take the reins of power in Washington under the Trump administration, the Government Accountability Office (GAO) provided a tragic reminder on Monday regarding the power of the U.S. citizen versus their Wall Street overlords. The GAO released a study showing that as of October 31, 2016, the government “had disbursed $22.6 billion (60 percent) of the $37.51 billion Troubled Asset Relief Program (TARP) funds” that were directed at helping distressed homeowners as a result of the 2008 Wall Street financial crash and the resulting housing bust.  Those paltry billions stand in stark contrast to the $7.8 trillion in near-zero interest loans that the Federal Reserve secretly funneled to just four Wall Street banks from 2007 to 2010. The Fed funneled $2.5 trillion to Citigroup; $2 trillion to Morgan Stanley; $1.9 trillion to Merrill Lynch; and $1.3 trillion to Bank of America. The total amount that the Fed secretly loaned to both U.S. and foreign banks came to $16.1 trillion. (See the chart below from the 2011 GAO report for the full list of bailed out banks.) The American people would still be in the dark about the Federal Reserve’s covert money spigot to the banks except for Senator Bernie Sanders. In 2010, as Congress was debating the Dodd-Frank financial reform legislation, Sanders introduced an amendment that would force the GAO to conduct a one-time audit of the Fed covering its emergency lending programs from December 1, 2007 through July 21, 2010, the date the legislation was signed into law by President Obama. When the one-time audit of the Fed was released by the GAO in 2011, Sanders said in a statement: “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

Here's what really caused the housing crisis – Thoma - One story of the housing crisis goes like this: Government programs that helped low-income households purchase houses led to widespread defaults on the subprime loans they held, sparking the entire the financial meltdown.   For example, Lawrence Kudlow and Stephen Moore, both of whom have been named as economic advisers to Donald Trump, argue that the financial crisis and recession were caused by policies Bill Clinton implemented that were designed to stop discrimination in housing loans, known as “red-lining,” in poor areas. In particular, they argue that the Community Reinvestment Act (CRA), legislated in 1977, is to blame: However, according to new research from the Sloan School of Management at MIT, that isn’t what happened. As the author of the research, Antoinette Schoar, explained in an interview: “A lot of the narrative of the financial crisis has been that this [loan] origination process was broken, and therefore a lot of marginal and unsustainable borrowers got access to funding. In our opinion, the facts don’t line up with this narrative. … Calling this crisis a subprime crisis is a misnomer. In fact, it was a prime crisis.” There are other reasons to doubt that subprime borrowers were responsible for the financial crisis. For one, a large number of subprime mortgages originated in non-CRA banks, and “none of the 300+ mortgage originators that imploded were depository banks covered by the CRA.”   A second question to ask is why, if the CRA and subprime borrowing were the problem, did a very similar housing bubble and financial crisis occur in scores of other countries that didn’t have legislation like this? A third argument, the one Kudlow and Moore cite, is that declining lending standards by Fannie and Freddie brought about by the requirements of the CRA helped fuel subprime loans. But once again, this argument doesn’t stand up to scrutiny. As Barry Ritholtz pointed out in 2011, “The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06.”

Castro’s Parting Gift: One Last Cut to FHA Premiums: The Federal Housing Administration is cutting its annual mortgage insurance premium by 25 basis points, lowering it to 60 basis points starting Jan. 27, the agency said Monday. The move comes in the final days of the Obama administration and it gives Department of Housing and Urban Development Secretary Julian Castro an opportunity to tout the financial recovery the FHA's mortgage insurance fund has made during his term. "After four straight years of growth and with sufficient reserves on hand to meet future claims, it's time for FHA to pass along some modest savings to working families," said Castro. "This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers." The annual fee was as high as 135 basis points when FHA was dealing with high delinquency rates and foreclosures. After cutting the annual fee in early 2015, the FHA experienced a surge in mortgage applications that helped the fund recapitalize and exceed its statutory 2% minimum capital requirement. In addition to the annual fee, FHA also charges a 175-basis-point upfront fee, which was as high as 225 basis points during the housing crisis. The move Monday may draw Republican complaints, as many GOP lawmakers have warned Castro not to lower premiums again, citing concerns about the health of the mortgage fund and the government's role in the mortgage market.But it is certain to please mortgage lenders who have been calling on FHA to make a cut.

Will Trump Reverse FHA s Premium Cut?: — Within minutes of the Federal Housing Administration's announcement that it was cutting annual mortgage insurance premiums, observers were already wondering whether the incoming Trump administration would put a stop to the plan. The FHA said it would cut the premium by 25 basis points, down to 60 basis points, starting on Jan. 27, a week after President-elect Donald Trump is scheduled to take office. That gives Trump and his team a limited window to delay or scrap the cut. The first clue as to Trump's plans will likely come Thursday, when Housing and Urban Development Secretary-designate Ben Carson is scheduled for his confirmation hearing. Observers said it will likely be a close call, but there are reasons why Trump may want to allow the premium cut to go through. "The timing of this announcement allows the Trump administration to benefit from any positive market impacts while leaving the bulk of the political downside risk with President Obama," wrote Isaac Boltansky and Lukas Davaz, analysts with Compass Point, in a note to clients. They pegged the odds that Trump would reverse the move at 40%. Jaret Seiberg, an analyst with Cowen Washington Research Group, said stopping the premium cut could be a political liability for the new president. "The Trump administration would be accused on day one of raising mortgage costs for average Americans if it reverses the FHA move," he wrote to clients. "In addition, Trump's career has been real estate. It would seem out of character for him to be aggressively negative on real estate in his first week in office."

Fannie, Freddie Raise Mortgage Modification Benchmark Rate: Fannie Mae and Freddie Mac have hiked the standard modification benchmark interest rate. The new rate, which will become effective Jan. 13, is 4.25%, representing an increase of 37.5 basis points from the previous benchmark rate set in December. This is the first time that this rate has been moved above 4% since February 2016 and the highest it has been since September 2015. The benchmark rate is provided by the government-sponsored enterprises and is used in determining the terms of trial period plans for standard modifications, streamlined modifications, capitalizations and extension modifications for disaster relief. The rates used in trial period plans are required to be used for final modifications. The benchmark rate for modifications is adjusted periodically based on the GSEs' evaluation of prevailing market rates. In December, Fannie and Freddie detailed a new loss mitigation option called the Flex Modification to replace the Home Affordable Mortgage Program.

New York proposes new rules for reverse mortgages --In addition to unveiling new legislation that would grant the New York Department of Financial Services the authority to ban individuals from working in the financial services industry, New York Gov. Andrew Cuomo also announced on Monday a series of new laws that would add financial protections for the state’s senior citizens. Included among those proposals are new rules for reverse mortgages, which are similar to a traditional mortgage in that it is a loan with the borrower’s home as collateral, but unlike a traditional mortgage, borrowers do not have to repay the loan as long as they remain in their home. Reverse mortgages are only available to borrowers that are 62 or older and either have already paid off their forward mortgage or be able to pay it off with proceeds from the reverse mortgage. But as Cuomo’s office notes, some New York senior citizens face foreclosure from their home due to the complexity of reverse mortgages. “Misled and misinformed by advertisements, seniors often choose reverse mortgages for an additional income without fully understanding that payments are still required for all taxes, insurance, and home maintenance,” Cuomo’s office said. “As a result of these deceptive practices, many senior citizens face foreclosure because of a missed tax or insurance payment.”

Foreclosure Inventory Declines by Nearly a Third: CoreLogic: The national foreclosure inventory fell by 30% year over year in November, according to CoreLogic. As of November, the foreclosure inventory represented 325,000, or 0.8% of all homes with a mortgage, down from 465,000 homes, or 1.2%, a year earlier, CoreLogic said Tuesday. Similarly, the number of completed foreclosures fell by 25.9% during the same time span to 26,000. The number of mortgages in serious delinquency, meaning they were 90 days or more past due including loans in foreclosure or REO, decreased 22.1% from November 2015 to November 2016 to 1 million mortgages, or 2.5%, in serious delinquency. The continued drop in defaults in part stems from rising home prices, according to CoreLogic CEO and President Anand Nallathambi. But the serious delinquency rate, though down overall, varies from state to state. "The decline in serious delinquency has been substantial, but the default rate remains high in select markets," Frank Nothaft, chief economist for CoreLogic, said in a news release. "Serious delinquency rates were the highest in New Jersey and New York at 5.6% and 5%, respectively. In contrast, the lowest delinquency rate occurred in Colorado at 0.9% where a strong job market and home-price growth have enabled more homeowners to stay current."

Foreclosure Inventory Declines by Nearly a Third: CoreLogic: The national foreclosure inventory fell by 30% year over year in November, according to CoreLogic. As of November, the foreclosure inventory represented 325,000, or 0.8% of all homes with a mortgage, down from 465,000 homes, or 1.2%, a year earlier, CoreLogic said Tuesday. Similarly, the number of completed foreclosures fell by 25.9% during the same time span to 26,000. The number of mortgages in serious delinquency, meaning they were 90 days or more past due including loans in foreclosure or REO, decreased 22.1% from November 2015 to November 2016 to 1 million mortgages, or 2.5%, in serious delinquency. The continued drop in defaults in part stems from rising home prices, according to CoreLogic CEO and President Anand Nallathambi. But the serious delinquency rate, though down overall, varies from state to state. "The decline in serious delinquency has been substantial, but the default rate remains high in select markets," Frank Nothaft, chief economist for CoreLogic, said in a news release. "Serious delinquency rates were the highest in New Jersey and New York at 5.6% and 5%, respectively. In contrast, the lowest delinquency rate occurred in Colorado at 0.9% where a strong job market and home-price growth have enabled more homeowners to stay current."

Florida outpaces all states in foreclosure rates, CoreLogic reports - Florida still led the nation with the highest number of completed foreclosures — more than 48,000 — for the 12 months ending in November. The next closest state was Michigan at 31,000, followed by Texas (25,000), Ohio (22,000) and Georgia (20,000). These five states account for 36 percent of completed foreclosures nationally, according to data released Tuesday by CoreLogic, an analytics and data provider. But the overall foreclosure inventory declined by 30 percent in the U.S., and completed foreclosures declined by 25.9 percent compared with November 2015, CoreLogic reported in its November 2016 National Foreclosure Report. The number of completed foreclosures nationwide decreased year over year from 35,000 in November 2015 to 26,000 in November 2016, representing a decrease of 78.2 percent from the peak of 118,339 in September 2010. The foreclosure inventory represents the number of homes at some stage of the foreclosure process and completed foreclosures reflect the total number of homes lost to foreclosure. Since the financial crisis began in September 2008, there have been 6.5 million completed foreclosures nationally, and since homeownership rates peaked in the second quarter of 2004, there have been 8.6 million homes lost to foreclosure. As of November 2016, the national foreclosure inventory included approximately 325,000, or 0.8 percent, of all homes with a mortgage, compared with 465,000 homes, or 1.2 percent, in November 2015.

 Black Knight November Mortgage Monitor – Black Knight Financial Services (BKFS) released their Mortgage Monitor report for November today. According to BKFS, 4.46% of mortgages were delinquent in November, down from 4.92% in November 2015. BKFS also reported that 0.98% of mortgages were in the foreclosure process, down from 1.38% a year ago. This gives a total of 5.44% delinquent or in foreclosure. Press Release: Black Knight’s Mortgage Monitor: 2.2 Million Homeowners in Negative Equity, Fewest Since Early 2007; $4.6 Trillion in Tappable Equity is Within Six Percent of Peak Today, the Data & Analytics division of Black Knight Financial Services, Inc. (NYSE: BKFS) released its latest Mortgage Monitor Report, based on data as of the end of November 2016. In the first three quarters of 2016, as home prices continued to appreciate, one million previously underwater homeowners returned to positive equity positions, while tappable equity totals continued to rise. This month, Black Knight looked at the extent and impact of these changes on the market. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, there is a distinct geographical component at work, with regard to both the negative and tappable equity sides of the equation.  “The negative equity situation has improved substantially since the height of the great recession,” said Graboske. “There are now just 2.2 million homeowners left in negative equity positions, a full one million fewer than at the start of 2016. Whereas negative home equity was once a widespread national problem – with roughly 30 percent of all homeowners being underwater on their mortgages at the end of 2010 – it has now become much more of a localized issue. By and large, the majority of states have negative equity rates below the national average of 4.4 percent. There are, though, some pockets where homeowners continue to struggle. Three states in particular stand out: Nevada, Missouri and New Jersey, all of which have negative equity rates more than twice the national average."

 U.S. property foreclosures at 10-year low in 2016 - (Reuters) - Foreclosure proceedings affected nearly a million U.S. homes and other real estate last year, down 14 percent from 2015 and down 70 percent from the worst of the housing crisis in 2009, a report released Thursday shows. Foreclosures hit a 10-year low and property owners in all but 15 states experienced fewer of the early stages of foreclosure, usually begun after owners have missed four mortgage payments, according to the report by ATTOM Data Solutions, formerly called RealtyTrac. Final repossessions of properties also dropped overall, but did increase in 21 states and the District of Columbia, including Massachusetts, Alabama, New York, Virginia and New Jersey. Daren Blomquist, spokesman for the Irvine, California, data company, said just over half of the foreclosures that did take place were related to the housing crisis, which began in 2008 amid turmoil in the financial markets and the bursting of a years-long bubble in U.S. real estate prices. Altogether in the United States last year, about 379,000 owners lost their property to banks under foreclosure, down from 1.05 million in 2009 at the height of the mortgage and housing crisis. Another 479,000 properties were under the early stages of foreclosure, which do not always lead to repossession. That is down from a peak of 2.14 million in the early stages in 2009.

Minority Neighborhoods More Likely to Have Underwater Homes: Homeowners in predominantly black and Hispanic neighborhoods are more likely than their counterparts in predominantly white neighborhoods to be underwater on their mortgages, according to a report from Zillow. Zillow found that the negative equity rate in census tracts where the majority of residents are black was 20% during the third quarter, versus 9.9% for majority white census tracts and the national rate of 10.9%. Similarly, the negative equity rate was also elevated in census tracts that are predominantly Hispanic at 12%. For census tracts where there was no racial majority, the negative equity rate was 11.9%. At the metropolitan level, the disparities between predominantly minority neighborhoods and predominantly white neighborhoods become even more pronounced. For instance, in Detroit the share of homeowners underwater on their mortgages in majority black communities was 35.1%, versus 9.5% for majority white communities. And in Las Vegas, the negative equity rate in majority Hispanic neighborhoods stood at 26.5%, while the rate in predominantly white communities was 13.4%. "Negative equity is not an equal opportunity offender, with certain markets still being more affected than others," Zillow Chief Economist Svenja Gudell said in a news release. "Our previous research has shown that negative equity is more concentrated among less expensive homes, and now we know that it is also more prevalent in minority neighborhoods than in white communities, which are also trailing in the overall housing recovery. These gaps can and will have long-lasting implications for growth and equality."

Carson Open to Alternatives to 30-Year Fixed: Housing and Urban Development Secretary-designate Ben Carson is open to finding alternatives to the 30-year fixed-rate mortgage, but believes there must be some government backstop to the housing market. Carson, a retired neurosurgeon, made those remarks at his confirmation hearing Thursday in front of the Senate Banking Committee, where he also said he was going to carefully evaluate the Federal Housing Administration's plan to cut annual premiums. "I, too, was surprised to see something of this nature dropped on the way out the door," Carson told Sen. Pat Toomey, R-Pa., in response to a question about the premium cut. "If confirmed, I am going to work with the FHA administrator and other financial experts to examine that policy." The Department of Housing and Urban Development announced Monday that it was cutting the annual premium by 25 basis points, but it does not take effect until Jan. 27. If Carson is confirmed quickly, he could be in office in enough time to delay or reverse the decision. During the hearing, Toomey expressed reservations about the premium cut, arguing that the FHA's mortgage fund had not sufficiently recovered from the financial crisis. He noted that the portfolio of FHA loans had ballooned to $1.2 trillion in 2015 from $245 billion in 2006. "Do you share my concern that his massive explosive growth in FHA mortgage guarantee business has interfered with a viable private alternative that does not involve taxpayer risk at all?" Toomey asked.

Embrace the Digital Mortgage as a Competitive Advantage - The digital mortgage is more of an ideal than it is a concrete product. While precise definitions vary, the term generally describes a smooth customer experience that may not even require a phone call or branch visit. It could be an intuitive process for applying for a loan online, perhaps with prepopulated data to save on typing. Borrowers upload financial documents and electronically sign disclosures. It can go as far as a fully paperless experience where all documents are executed electronically. Embracing the concept can provide a competitive advantage in the mortgage market at a time when nonbanks are gobbling up banks' share of originations. Digital mortgages are different than e-mortgages, which have been around for more than a decade. The latter term refers specifically to a loan that is backed by an electronic promissory note with an electronic signature. Digital mortgages may sometimes meet that definition, and they may have electronic closings. What makes them distinctive, though, is not the technological gizmos involved but the end result for the borrower. "I would describe that as the capability to provide a mortgage experience for a borrower from application all the way to funding without human intervention on the lender's side," said John Harrell, vice president of mortgage product management at USAA Bank. "I don't know if that will ever be widespread, but if that's the goal then we'll end up having a ton of automation where the consumer is basically self-serving."

MBA: Mortgage Applications Increase in Latest Weekly Survey - From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 5.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 6, 2017. The most recent week’s results include an adjustment to account for the New Year’s Day holiday, while the previous week’s results were adjusted for the Christmas holiday. ... The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 45 percent compared with the previous week and was 18 percent lower than the same week one year ago.  ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.32 percent from 4.39 percent, with points decreasing to 0.41 from 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. It would take a substantial increase in mortgage rates to see a significant increase in refinance activity - although we might see more cash-out refis. The second graph shows the MBA mortgage purchase index.  Even with the increase in mortgage rates, purchase activity is still holding up.  However refinance activity has declined significantly.

 Suddenly, Home Sale Agreements Are Falling Apart Across the U.S. - Spending months to find the perfect home in your price range, only to have your mortgage application rejected, or a home inspection turn up expensive repairs, is a nightmare—one that is coming true with increasing frequency, according to a new report from real estate listings website Trulia. A Trulia analysis of U.S. listings shows that 3.9 percent of homes that moved from for-sale to pending moved back to for-sale again, nearly double the rate in 2015. Such “failed sales” increased in 96 of the 100 biggest U.S. metros, with big swings in areas large and small, rich and poor. That includes Los Angeles and Charleston, S.C., as well as San Jose and Akron, Ohio. In Ventura County, Calif., where the median home value is $548,000, 11.6 percent of prospective sales failed to close in 2016. That’s the highest in the U.S., up from 3.1 percent in 2015. Tucson, where the median home price is $176,000, had the second-highest rate of failed sales, at 10.8 percent, up from 3.5 percent the year before. The problem of failed sales has been most acute for cheaper homes and older ones: Some 6.3 percent of sales of starter homes fell through last year, according to Trulia’s analysis, compared with 3.6 percent of so-called premium home sales. Homes built in the 1960s had the highest fail rates, while sales of newer and older houses were more likely to go through.

  Value Increases Dont Mean Housing’s in a Bubble: Arch: Housing is not in a bubble even though home prices are unlikely to decline in the next two years, according to a new report from Arch MI. The likelihood of a decrease in home prices over the next two years is only 4%, the latest Risk Index results reported by Arch show. That figure is down from the averages of 6% last year and 8% in 2015. The growing housing shortage is the driving force behind its expectations of home value increases going forward. The mortgage insurer also pointed to the low supply of housing as more important than other factors that could negatively influence home prices and lending such as low wage growth and higher levels of student debt. "Housing is not in a bubble relative to incomes or monthly payments, either in a historical or international context," Ralph DeFranco, global chief economist of mortgage services at Arch Capital Services, said in a news release. "Even as homeownership remains out of reach for many people, a growing housing shortage will continue to push up national home prices faster than inflation for the foreseeable future." Positive fundamentals for the housing market that DeFranco noted include below-normal mortgage rates and employment growth. While the housing risk remains low nationwide, it still remains elevated in states that have large energy-extraction industries due to the continued low energy prices.

 Lawler: New “Household” Numbers, Same Old Conundrum - From housing economist Tom Lawler: Housing Survey (AHS) for 2015, and the “Families and Living Arrangements” data from the Annual Social and Economic Supplement to the Current Population Survey (or CPS/ASEC) for 2016. Both surveys produce estimates (wildly different, of course) of – among other things – the number of US households and the homeownership rate.Starting with the American Housing Survey, 2015 marked the first time since 1985 that the AHS was based on new national and metropolitan area “longitudinal” samples based on the latest available Master Address File. From 1985 through 2013 the AHS sample was mainly based on housing units selected from the 1980 Census as well as samples of housing units subsequently constructed in areas requiring building permits. Not surprisingly, the previous methodology was subject to sizable “sampling” issues. The 2015 “national’ estimates are based on (1) a “national case” sample of 34,769 representative of the US and nine divisions; (2) a 45,270 “over-sample” of top 15 metropolitan areas; (3) a 30,111 over-sample of 10 additional metropolitan areas; and (4) a 5,248 oversample of subsidized renter units. The AHS household estimates are “controlled” to independent estimates of the US housing stock in much the same was as are the household estimates from the Housing Vacancy Survey, a supplement to the Current Population Survey. And while the AHS-based US household estimates for 2015 in aggregate aren’t massively different from that of the HVS, the characteristics of the AHS-based households for 2015 are vastly different, and are more in synch with those of the 2015 American Community Survey, as shown in the table below.

How Rising Rates Are Hurting America's Largest Mortgage Lender, In One Chart -- While one can argue that both JPM and Bank of America posted results that were ok, there was little to redeem the report from the scandal-ridden largest mortgage lender in America, Wells Fargo. Not only did the company miss revenues significantly, reported $21.6bn in Q4 topline, nearly $1 bn below the $22.4bn consensus, but it had to reach deep into its non-GAAP adjustment bag to convert the $0.96 EPS miss into a $1.03 EPS beat (net of "accounting effect"), but the details of its core business were, well, deplorable, which perhaps was to be expected following the recent drop in new credit card and bank account growth, following last year's fake account scandal.  But back to Wells results, which revealed that in Q4, the bank's ROE, one of Buffett's favorite indicators, fell to 10.94%. which was the lowest quarterly level posted in years accordint to the WSJ. "While the return had been grinding lower for some time, largely due to the declining interest-rate environment, the fourth quarter also marked the first, full reporting period since the bank’s sales-tactics scandal erupted in September." More troubling however, was that in Q4, Wells overall profit fell to $5.27 billion, or 96 cents a share (excluding the various non-GAAP addbacks), down from $5.58 billion, or EPS of $1 in Q4 2015. So back to Wells Fargo's retail banking business. Here the bank reported that while credit card outstanding rose 5% compared to $33.14 billion last quarter and jumped 8% from $34.04 billion in the year-earlier period, new accounts tumbled 52% to 319,000 from 667,000 last quarter and fell 47% from 597,355 in the year-earlier period, once again this is a reflection of the bank's ongoing legal scandals. But it was the bank's bread and butter, mortgage lending, that was the biggest alarm because as a result of rising rates, Wells' residential mortgage applications and pipelines both tumbled, and after hitting multi-year highs in the third quarter when mortgage rates were likewise hugging multi-year lows, in Q4 Wells' mortgage applications plunged by $25bn from the prior quarter to $75bn, while the mortgage origination pipeline plunged by nearly half to just $30 billion, and just shy of all time lows recorded in late 2013 and 2014.   This should not come as a surprise: just one month ago, Freddie Mac warned that as mortgage rates continue to surge, "expect mortgage activity to be significantly subdued in 2017." Wells Fargo did not even have to wait that long, and as shown in the chart below, the biggest US mortgage lender is already suffering.

Higher Rates Weigh on Consumer Housing Sentiment: Fannie: Americans' desire to be homebuyers decreased for the fifth consecutive month in December as interest rates continued their post-election climb, according to Fannie Mae. Fannie Mae's Home Purchase Sentiment Index declined by 0.5 percentage points month over month and 2.5 percentage points from a year earlier to 80.7. At the component level, though, it was more of a mixed bag. The net percentage of Americans who said mortgage rates will drop over the next year fell by four percentage points to 68%, and the net share of Americans who reported that their household income is significantly higher than a year ago dipped five percentage points to 10%. Meanwhile, the net share of Americans who say it is a good time to buy a house rose by two percentage points to 32%, and the net percentage of Americans who are not concerned about losing their job increased four percentage points to 68%. The share of those who say that home prices will go up stayed put at 35%. Similarly, the net percentage of those who say it is a good time to sell was unchanged from the prior month at 13%, and the share of those who think it is a bad time to sell also remained the same as in November at 38%. Optimism on the part of consumers in the wake of the election is unsurprising, but could be fleeting, said Fannie Mae Chief Economist Doug Duncan. "A spike in economic optimism in the immediate aftermath of an election is typical," Duncan said. "Whether consumers will sustain this level of optimism into 2017 remains unclear."

 Bankruptcy Rate Rises in December . . . A Blip and Not a Blip - - Something happened in the U.S. bankruptcy courts that had not happened since October 2010. The daily filing rate increased on a year-over-year basis. There were 56,394 filings in December 2016 as compared to 53,844 in the previous December. Also, because the 2016 filings were spread over one less business day than in 2015, the rise represented a 9.7% increase in the daily filing rate. The lighter-red line in the graph to right the shows just how dramatic the spike was. Besides the obvious caveat that one month's filings do not a trend make, there are even more reasons to think the December 2016 filings are an anomalous blip. There was a spike in filings last November, apparently to beat the new bankruptcy forms took effect in December 2015. Again, the graph shows it. November 2016 was down 18.1% as compared to the prior year. If we lump November and December together, then the daily filing rate for those two months declined 5.4% in 2016 as compared to the same two months in 2015. A 5.4% decline is about what we saw for all of 2016. Still, the December figures are keeping with the general trend. The dark red trend line shows that the rate of decrease is slowing and coming back to zero. The trend line in the graph begins in September 2011, when we saw the greatest year-over-year decline of 17.6%.

160 million Americans can't afford to treat a broken arm - A lot of Americans are really struggling.  The precarious personal finance situation of Americans has made news for years. It is something we've written about a lot at Business Insider.  Elevate's Center for the New Middle Class wanted to look into the issue to find when an unexpected expense becomes a crisis for ordinary Americans. And the results were pretty depressing. Elevate carried out a study based on a 10-minute online questionnaire surveying 502 nonprime (credit score below 700) and 525 prime Americans (credit score of 700 or above).It turns out that nonprime Americans with credit scores below 700 are likely to be hit harder, and more often, by unexpected expenses than prime Americans. 160 million Americans come under the nonprime category, according to the study. "A bill becomes a crisis for nonprime Americans at $1,400. For Prime, it’s $2,900," the study said. "An unexpected expense becomes a significant disruption to prime Americans when it is 53% of their monthly income. Nonprime Americans can only swallow a 31% impact to their income." The study noted that many common expenses, such as covering the out-of-pocket on a broken arm, an apartment security deposit, or replacing a vehicle transmission, cost more than $1,400.    It’s hard for many to believe that unexpected car repairs can cause a major upset in a household’s finances," Jonathan Walker, executive director of Elevate’s Center for the New Middle Class, said. "Unfortunately, it happens all too often, simply because nonprime Americans don’t have the available resources to help absorb some of these financial shocks. This can cause a downward spiral on their daily finances as well as their credit history.”  The study's results add to previous evidence about the tightening personal finances of Americans. Two-thirds of Americans would struggle to cover a $1000 emergency expense. Half of Americans would find it hard to come up with even $400 to cover an unexpected expense, or pay over $100 a month for health insurance.

November 2016 Consumer Credit Headlines Say Year-Over-Year Growth Rate Accelerated: The headlines say consumer credit rate of annual growth increased from last month. Our analysis agrees. Not only does this data set suffer from backward revision (moderate to significant enough to change trends), but the use of compounding (projecting monthly change as annual change) by the Federal Reserve to determine consumer credit growth rates exaggerates the volatility in this data. This month the headlines showed accelerating consumer credit growth - and our analysis is that the rate of growth showed moderate growth.. the default rate of consumer loans is now marginally growing year-over-year, that the amount of consumer credit outstanding relative to consumer expenditures is at all time highs, Household Debt Payments As A Percent of Disposable Income is near all time lows. Last month's headline said: In October, consumer credit increased at a seasonally adjusted annual rate of 5-1/4 percent. Revolving credit increased at an annual rate of 3 percent, while nonrevolving credit increased at an annual rate of 6 percent. This month's headlines said: In November, consumer credit increased at a seasonally adjusted annual rate of 8 percent. Revolving credit increased at an annual rate of 13-1/2 percent, while nonrevolving credit increased at an annual rate of 6 percent. Overall takeaways from this month's data:

  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013 - although there was some acceleration this month.
  • Student loans growth rate (US Government owned) was up 0.3 % month-over-month and year-over-year growth is 10.6 % year-over-year.
  • Revolving credit (credit cards (and this series includes no student loans) and has been slightly accelerating since 2010.

Consumer Credit Soars, Driven By Near Record Credit Card-Funded Spending In November --After several months of tepid growth in the revolving consumer credit, i.e., credit card, space, the latest monthly report from the Fed revealed that Americans went on a credit card-funded shopping spree in November, when total revolving credit exploded higher by a massive $11 billion, the highest November increase on record, and the second highest of the post crash period. The credit card spending spike may explain why November, i.e., early holiday sales, were strong only to tumble in the second half of the holiday spending season as various retailers have already complained. The spike in revolving credit was more than matched by non-revolving credit, which as usual bounced by a solid $13.5 billion, bringing the total monthly increase in consumer credit to $24.5 billion, far above the revised October print of $16.2 billion and also well above the consensus estimate of $18.4 billion. As noted above, the biggest contributor of November credit was credit card debt, which surged by $11 billion, to a grand total of just under $1 trillion, or $992.4 billion.At the same time non-revolving credit, or car and student loans, rose to $2.758 trillion, a $13.5 billion jump in the month. While hardly a surprise, the Fed revised its student and car loan numbers, which as of Sept 30, stood at $1.4 trillion for student loans, and $1.1 trillion for auto loans, both at all time highs.  Finally, for those wondering who remains the biggest source of post-crisis consumer lending, the chart below should answer that question.

Preliminary January Consumer Sentiment at 98.1 -- The preliminary University of Michigan consumer sentiment index for January was at 98.1, down slightly from 98.2 in December. Consumer confidence remained unchanged at the cyclical peak levels recorded in December. The Current Conditions Index rose 0.6 points to reach its highest level since 2004, and the Expectations Index fell 0.6 points which was lower than only the 2015 peak during the past dozen years. The post-election surge in optimism was accompanied by an unprecedented degree of both positive and negative concerns about the incoming administration spontaneously mentioned when asked about economic news. The importance of government policies and partisanship has sharply risen over the past half century. From 1960 to 2000, the combined average of positive and negative references to government policies was just 6%; during the past six years, this proportion averaged 20%, and rose to new peaks in early January, with positive and negative references totaling 44%. This extraordinary level of partisanship has had a dramatic impact on economic expectations. In early January, the partisan divide on the Expectations Index was a stunning 42.7 points (108.9 among those who favorably mentioned government policies, and 66.2 among those who made unfavorable references). Needless to say, these extreme differences would imply either strong growth or a recession. Since neither is likely, one would anticipate that both extreme views will be tempered in the months ahead. (see graph)

Michigan Consumer Sentiment: January Mostly Unchanged - The University of Michigan Preliminary Consumer Sentiment for January came in at 98.1, down fractionally from the December Final reading. had forecast 98.5. Surveys of Consumers chief economist, Richard Curtin, makes the following comments: Consumer confidence remained unchanged at the cyclical peak levels recorded in December. The Current Conditions Index rose 0.6 points to reach its highest level since 2004, and the Expectations Index fell 0.6 points which was lower than only the 2015 peak during the past dozen years. The post-election surge in optimism was accompanied by an unprecedented degree of both positive and negative concerns about the incoming administration spontaneously mentioned when asked about economic news. The importance of government policies and partisanship has sharply risen over the past half century. From 1960 to 2000, the combined average of positive and negative references to government policies was just 6%; during the past six years, this proportion averaged 20%, and rose to new peaks in early January, with positive and negative references totaling 44%. This extraordinary level of partisanship has had a dramatic impact on economic expectations. In early January, the partisan divide on the Expectations Index was a stunning 42.7 points (108.9 among those who favorably mentioned government policies, and 66.2 among those who made unfavorable references). Needless to say, these extreme differences would imply either strong growth or a recession. Since neither is likely, one would anticipate that both extreme views will be tempered in the months ahead. Nonetheless, it should be noted that among the majority of consumers who referred to neither positive nor negative views on government, the Expectations Index was a strong 90.9, supporting a real consumption growth of 2.7% in 2017. [More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

BofA Finds Consumer Spending Tumbled In December, Warns Of Disappointing Retail Sales -- With this week's most important economic data point - this Friday's retail sales - fast approaching, economists are keen for clues if this key datapoint giving insight into the health of the US consumer will maintain the recent outsized spike in favorable and better than expected economic data, or if adversely, it may be a downward inflection point which could have significant implications on the dollar trade as RBC explained earlier. And according to BofA's internal debit and credit card data, always released just ahead of the retail sales report, it looks like it will be the latter. As Bank of America's chief US economist Michelle Meyer reports, the aggregated BAC credit and debit card data showed that retail sales ex-autos declined 1.0% mom seasonally adjusted in December. "This contrasts with other indicators of consumer strength including reports of a robust holiday shopping season, a rebound in consumer confidence and strong autos sales" according to Meyer. Actually, based on earnings reports of those companies who have recently closed their quarter,a weak December is precisely what one should expect, further corroborated by JPM's satellite imagery at early December showing empty parking lots (recall: "Satellite Imagery Reveals Sharp Retail Spending Slowdown After The Election") and a plunge in brick and mortar sales, which has been greater than the offsetting pick up in online sales. This is how the bank's adjusted retail spending data looks when charted.

Retail Sales: December Growth Improvement -  The Census Bureau's Advance Retail Sales Report for December released this morning showed growth improvement over the November increase. Headline sales came in at 0.6% month-over-month to one decimal, and November number was revised upward from 0.1% to 0.2%. Today's headline number was slightly below the optimistic consensus of 0.7%. Core sales (ex Autos) came in at 0.2% MoM, which was below the consensus of 0.5%, but the October Core was revised upward from 0.2% to 0.3%. Here is the introduction from today's report: Advance estimates of U.S. retail and food services sales for December 2016, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $469.1 billion, an increase of 0.6 percent (±0.5 percent) from the previous month, and 4.1 percent (±0.9 percent) above December 2015. Total sales for the 12 months of 2016 were up 3.3 percent (±0.6 percent) from 2015. Total sales for the October 2016 through December 2016 period were up 4.1 percent (±0.7 percent) from the same period a year ago. The October 2016 to November 2016 percent change was revised from up 0.1 percent (±0.5 percent)* to up 0.2 percent (±0.2 percent)*. Retail trade sales were up 0.8 percent (±0.5 percent) from November 2016, and up 4.3 percent (±0.7 percent) from last year. Nonstore retailers were up 13.2 percent (±1.8 percent) from December 2015, while Miscellaneous stores were up 7.1 percent (±4.6 percent) from last year. [view full report] The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

Retail Sales increased 0.6% in December -  On a monthly basis, retail sales increased 0.6 percent from November to December (seasonally adjusted), and sales were up 4.1 percent from December 2015. From the Census Bureau report: Advance estimates of U.S. retail and food services sales for December 2016, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $469.1 billion, an increase of 0.6 percent from the previous month, and 4.1 percent above December 2015. Total sales for the 12 months of 2016 were up 3.3 percent from 2015. ... The October 2016 to November 2016 percent change was revised from up 0.1 percent to up 0.2 percent.This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline were up 0.5% in December. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 4.0% on a YoY basis. The increase in December was below expectations, however sales for October and November were revised up. A solid report.

Retail Sales Improves In December 2016: Retail sales were up according to US Census headline data - but slightly below expectations. Our analysis paints a darker picture of retail sales. Things to consider when viewing this data:

  • it is not inflation adjusted - and inflation in this sector is now running around 0.8 %
  • the three month rolling averages of the unadjusted data improved, the year-over-year growth of retail sales was 3.9 % - and 4.1 % was shown in the US Census headlines.
  • there was no little growth in retail sales employment this month
  • our analysis says this month is not as good as last month, but the rolling averages improved. It is scary to consider that if one eliminates autos and gas - there was no growth in the adjusted data.

The relationship between year-over-year growth in inflation adjusted retail sales and retail employment has inverted - and this is normally a recessionary sign. Backward data revisions were mixed. Econintersect Analysis:

  • unadjusted sales rate of growth decelerated 1.0 % month-over-month, and up 4.4 % year-over-year.
  • unadjusted sales 3 month rolling year-over-year average growth accelerated 0.1 % month-over-month, 3.9 % year-over-year.
  • unadjusted sales (but inflation adjusted) up 3.7 % year-over-year
  • this is an advance report. Please see caveats below showing variations between the advance report and the "final".
  • in the seasonally adjusted data - there was weakness in store retailers and department stores.
  • seasonally adjusted sales up 0.6 % month-over-month, up 4.1 % year-over-year (last month was originally reported at 3.8 % year-over-year).

Retail Sales Disappoint As Post-Trump Animal Spirits Fade- Yesterday's confidence data showed a retracement in the 'Trump Bump' and now, just as BofA had predicted, US Retail Sales disappointed across the board in December. The Control Group rose just 0.2% MoM (missing expectations of a 0.4% rise) but it was Ex-Auto-and-Gas that missed the most (unchanged in December against expectations of a 0.4% surge) that was most worrisome as it appears Americans bought cars and not much else. Earlier this week Bank of America warned that December retail sales could come in weaker than expected, when it looked at its internal credit and debt card spending data and found a 1.0% drop. Moments ago the official data released from the Dept of Commerce confirmed that once again BofA was right, when it announced that in December, US retail spending rose 0.6%, below the expected 0.7%, however much of this was thanks to spending on cars and gas. If one excludes autos, the rise was only 0.2%, below the 0.5% expected, and if one also excludes gas, there was no increase in spending in December whatsoever. In fact this is the weakest year-over-year retail sales since Feb 2014...

Retail Sales Hiring The Lowest Since 2010: On the news that Macy’s is shuttering 68 stores and cutting 10,000 workers and Limited is closing all 250 locations impacting 4,000 workers, a new report released Tuesday further indicates the industry’s inexorable shift to online. Retail clocked the fewest holiday job gains since 2010, as the accelerating shift toward online shopping continued to take a toll on job opportunities in traditional brick-and-mortar stores.Employment in the sector grew by 672,700 workers during the three-month holiday hiring period of 2016, according to an analysis of government employment data by global outplacement consultancy Challenger, Gray & Christmas, Inc. That was down 9.0 percent from the 738,800 jobs added in 2015. This marked the third consecutive decline in holiday employment gains. The 2016 -holiday hiring total was the lowest since 647,600 jobs were added to retail payrolls during the closing months of 2010, when the economy was in the first year of recovery following the Great Recession. Said John A. Challenger, chief executive officer of Challenger, Gray & Christmas: The retail landscape is going through a sea change. The shift toward online shopping has being ramping up for years. It is obvious in the sales numbers and in the falling level of in-store traffic during the holidays. In this environment, retailers simply don’t need as many extra workers during the holidays. Indeed, US-based retailers have announced 125,182 job cuts in the last two years alone, according to Challenger tracking, many from major brands closing brick-and-mortar locations and eliminating in-store staff.

Best Buy National Repair Techs Routinely Search Customer Devices, Act as “Paid Informers” for FBI - Yves here. There is an additional layer to this ugly picture. I have whistleblowers as contacts, and one is particularly technology savvy. He has long been above-board in how he conducts his personal and business affairs. His big worry has been that it is not hard to plant information on devices. By Gaius Publius: Did you know that Best Buy’s central computer repair facility — their so-called “Geek Squad” — contains at least three employees who are also regular informers for the FBI? And that these employees routinely search through computers and other devices that Best Buy customers send in for repair? And when they find something they think the FBI would be interested in, they turn over the information for rewards of up to $500? That’s a sideline business you probably didn’t imagine existed — outside of the old Soviet Union or communist East Germany.I want to look briefly at two aspects of this — first, the story itself (it’s chilling) and second, its implications.Let’s look first at the story via the OC Weekly in Orange County, California. Note, as you read, the use of phrases like “FBI informant” and “paid FBI informant.” We’ll also look at other versions of this story. In all versions, Best Buy repair employees routinely search customers’ computers for information they can sell to the FBI, and get paid if the FBI wants the info.In the FBI-centered versions, the Best Buy employees act on their own and get paid as “honest citizens,” as it were, merely offering tips, even though this practice seems to be routine. For the FBI, the fact that the same employees frequently offer tips for which they get paid doesn’t make them “paid informers” in the sense that a regular street snitch regularly sells tips to cops.For the Best Buy customer in question, that’s a distinction without a difference. But you’ll see that distinction made in articles about this incident, depending on whose side the writer seems to favor.

US benchmark gasoline price climbs on surging exports to Mexico – Platts Global Oil Markets podcast - Mexico’s higher gasoline prices for consumers are having a ripple effect through North American gasoline markets as the US exports more product to its neighbor. Josh Brown, editor for US gasoline markets, explains why Mexico’s domestic production is hobbled despite growing demand and how US prices are being pressured upward.

 Has U.S. Gasoline Demand Peaked? - Several years of low gasoline prices have upended a decade-long shift towards more fuel efficient vehicles in the United States. For two years in a row, the U.S. auto industry broke new records for total sales, as an improving labor market and cheap gas induced more motorists to take to the roads. Car and trucks sales topped 17.5 million in 2016, the highest on record. At the same time, the industry is dealing with oversupply as automakers ramped up manufacturing capacity for sedans and lighter-vehicles in preceding years, which ran headlong into an era of rock bottom gasoline prices. Motorists have fallen back in love with gas guzzlers since 2014, taking advantage of the cheapest gasoline seen in years. So even as automakers are selling record levels of vehicles, they are having to offer steep discounts for sedans to unload inventory and are even temporarily shutting down production lines in order to focus more on SUVs and trucks. Ford recently announced that it would cancel a production line of sedans in Mexico. The makeup of the U.S. auto fleet is changing, with 60 percent of auto sales in 2016 coming in the form of light trucks, which is an increase from the 56 percent share that trucks captured in 2015. For a stretch of time back in 2012-2013, when oil traded above $90 per barrel, auto sales were roughly split between cars and trucks. As the result of a shift towards heavier SUVs and trucks, U.S. gasoline demand has climbed. Consumption is always seasonal, but the annual peaks began to decline after the financial crisis as a tepid economy combined with fuel efficiency efforts cut into demand. But the collapse of crude oil prices in 2014 reversed the trend, with consumption rising substantially over the past three years. That has led to the average fuel economy of the entire auto fleet to stagnate at 25 miles per gallon, where it has stayed since 2014. There is no guarantee that U.S. gasoline consumption will continue to expand, however, particularly now that oil prices are on the rise. According to GasBuddy, American motorists could end up spending an additional $52 billion on gasoline in 2017 compared to last year. GasBuddy estimates gasoline prices will average $2.49 per gallon this year, compared to the 2016 average of just $2.13 per gallon. “It may be years before some of the low prices we saw in 2016 come back,” Patrick DeHaan, Senior Petroleum Analyst at GasBuddy, wrote in a research note.

U.S. wholesale inventories post biggest rise in two years | Reuters: U.S. wholesale inventories in November rose slightly more than previously reported, posting their largest gain in two years and suggesting inventory investment would again support economic growth in the fourth quarter. The Commerce Department said on Tuesday wholesale inventories rose 1.0 percent after slipping 0.1 percent in October. That was the largest increase since November 2014. The department reported last month that wholesale inventories rose 0.9 percent in November. The component of wholesale inventories that goes into the calculation of gross domestic product - wholesale stocks excluding autos - increased 0.7 percent in November. Inventory investment contributed half a percentage point to the economy's 3.5 percent annualized growth rate in the third quarter. Inventories had weighed on GDP growth since the second quarter of 2015. A report last week showed stocks at manufacturers increased in November for a second straight month. Data on retail inventories due to be released on Friday could shed more light on the size of the boost to fourth-quarter GDP from inventory investment. The Atlanta Federal Reserve currently forecasts GDP rising at a 2.9 percent pace in the fourth quarter. In November, wholesale stocks of farm products surged 5.0 percent after a rise of 2.9 percent in October. Wholesale inventories of petroleum climbed 2.7 percent, while automobile stocks increased 3.2 percent. Machinery inventories fell 0.2 percent in November. Sales at wholesalers rose 0.4 percent in November after a gain of 1.1 percent in October. Sales were lifted by a 1.3 percent rise in sales of machinery as well as a 0.5 percent increase in sales of automobiles. At November's sales pace it would take wholesalers 1.32 months to clear shelves, up from 1.31 months in October.

November 2016 Wholesale Sales Improved Again: The headlines say wholesale sales were up month-over-month with inventory levels up slightly and remaining at levels associated with recessions. Our analysis shows some improvement of the 3 month averages, and the three month averages are in expansion. The headlines said this sector improved this month. The growth this month was widespread. Overally, I believe the rolling averages tell the real story - and they improved this month. There is an obvious growth trendline in wholesale - and the data set is now showing normal growth for times of economic expansion. Inventories remain at elevated levels - note that they declined from last year's level. To add to the confusion, year-over-year employment changes and sales growth do not match. Note that Econintersect analysis is based on the change from one year ago. Econintersect Analysis:

  • unadjusted sales rate of growth accelerated 7.8 % month-over-month.
  • unadjusted sales year-over-year growth is up 6.8 % year-over-year (it was -1.1 % last month)
  • unadjusted sales (but inflation adjusted) up 5.9 % year-over-year
  • the 3 month rolling average of unadjusted sales was unchanged month-over-month, and up 2.1 % year-over-year.
  • unadjusted inventories grew 1.6 % year-over-year (up 1.9 % month-over-month), inventory-to-sales ratio is 1.29 which historically is well above recessionary levels.
  • sales up 0.4 % month-over-month, up 3.4 % (last month was originally reported up 2.2 %) year-over-year
  • inventories up 0.1 % month-over-month, inventory-to-sales ratios were 1.34 one year ago - and are now 1.32.
  • Expectations for inventory growth from Bloomberg / Econoday were between 0.3 % to 0.9 % (consensus +0.9 %) vs. the actual at 0.4 %

Business inventories post biggest gain in nearly 1-1/2 years | Reuters: U.S. business inventories recorded their biggest increase in nearly 1-1/2 years in November, boosted by a strong rise among retailers, which suggested inventory investment would contribute to economic growth in the fourth quarter. The Commerce Department on Friday said business inventories increased 0.7 percent. That was the biggest increase since June 2015 and followed an upwardly revised 0.1 percent dip in October. Inventories were previously reported to have fallen 0.2 percent in October. Inventories are a key component of gross domestic product. Retail inventories increased 1.0 percent in November as reported in an advance report published last month. November's increase was the largest since September 2105. Retail inventories fell 0.4 percent in October. Retail inventories excluding autos, which go into the calculation of GDP, increased 0.5 percent as reported last month. That was the biggest rise since September 2015 and followed a 0.2 percent drop in October. Inventory investment contributed half a percentage point to the economy's 3.5 percent annualized growth rate in the third quarter. Inventories had weighed on GDP growth since the second quarter of 2015. The Atlanta Federal Reserve currently forecasts GDP rising at a 2.9 percent pace in the fourth quarter. In November, motor vehicle inventories rose 1.9 percent and clothing stocks increased 0.8 percent. Inventories of building materials and garden equipment advanced 1.2 percent. Business sales edged up 0.1 percent after rising 0.7 percent in October. At November's sales pace, it would take 1.38 months for businesses to clear shelves, up from 1.37 months in October.

November 2016 Headline Business Sales and Inventories Improve: Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales improved. Unadjusted Inventories jumped relative to the previous month and inventory-to-sales ratios remain at recessionary levels. This was a up month for business sales - but inventories remain at recession levels (and got worse). Our primary monitoring tool - the 3 month rolling averages for sales - are improving and in expansion. As the monthly data has significant variation, the 3 month averages are the way to view this series. Also consider the disconnect between the year-over-year growth of employment in business and business sales - however this month the inversion was broken but the rolling averages are still inverted. Econintersect Analysis:

  • unadjusted sales rate of growth accelerated 4.8 % month-over-month, and up 4.5 % year-over-year
  • unadjusted sales (but inflation adjusted) up 3.9 % year-over-year
  • unadjusted sales three month rolling average compared to the rolling average 1 year ago accelerated 0.3 % month-over-month, and is up 1.7 % year-over-year.
  • unadjusted business inventories growth rate accelerated 1.1 % month-over-month (up 1.5 % year-over-year with the three month rolling averages showing inventory growth now growing), and the inventory-to-sales ratio is 1.41 which is at recessionary levels (well above average for this month).
  • seasonally adjusted sales up 0.7 % month-over-month, up 2.3 % year-over-year.
  • seasonally adjusted inventories were up 0.7 % month-over-month (up 1.5 % year-over-year), inventory-to-sales ratios were up from 1.39 one year ago - and are now 1.38.
  • market expectations (from Bloomberg / Econoday) were for inventory growth of 0.1 % to 0.7 % (consensus +0.6 %) versus the actual of +0.7 %.

December Producer Price Index: Final Demand Increased 0.3% - Today's release of the December Producer Price Index (PPI) for Final Demand came in at 0.3% month-over-month seasonally adjusted, down from last month's 0.4%. It is at 1.6% year-over-year, unchanged from last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.2% MoM, down from 0.4% the previous month and is up 1.6% YoY. MoM consensus forecasts were for 0.3% headline and 0.1% core. Here is the summary of the news release on Final Demand: The Producer Price Index for final demand increased 0.3 percent in December, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.4 percent in November and were unchanged in October. (See table A.) On an unadjusted basis, the final demand index climbed 1.6 percent in 2016 after falling 1.1 percent in 2015. In December, nearly 80 percent of the advance in the final demand index is attributable to a 0.7-percent increase in prices for final demand goods. The index for final demand services inched up 0.1 percent. Prices for final demand less foods, energy, and trade services moved up 0.1 percent in December after rising 0.2 percent in November. In 2016, the index for final demand less foods, energy, and trade services climbed 1.7 percent following a 0.3-percent advance in 2015. More… The BLS shifted its focus to its new "Final Demand" series in 2014, a shift we support. However, the data for these series are only constructed back to November 2009 for Headline and April 2010 for Core. Since our focus is on longer-term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates. As this overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

Core PPI Comes Hotter Than Expected, Driven By Rising "Brokerage, Investment Advice" Prices --While headline PPI came in at 0.3% on a sequential basis, as expected, and rose 1.6% on the year, also in line with expectations, it was the core PPI that came in modestly hotter than expected, printing at 0.2%, above the expected 0.1%, and rose 1.6% Y/Y, above the 1.5% expected, and far above the -1.1% drop reported one year ago.The headline jump was driven by a spike in energy prices, as final demand energy rose 2.6% in December. Accounting for almost half of the December jump in final demand goods prices, the index for gasoline climbed 7.8% , while heating oil was up 9.6%. Away from the non-core energy and gasoline prices, the headline PPI rise was driven, surprisingly, mostly by "prices for securities brokerage, dealing, investment advice, and related services" which advanced 4.4%. In other words, brokers are capitalizing on the rush by retail investors to jump in the market and are hiking prices. Nonetheless, on an annual basis, the 1.6% increase in PPI was the highest since August 2014. Broken down between goods and service:

Import and Export Price Year-over-Year Inflation Returns in December 2016.: Import and export prices are now inflating year-over-year after years of deflation. As predicted, both export and import prices began inflating in December. What does this mean? Not a whole lot to consumers as non-fuel imports deflated this month. Export prices are generally indexed to market conditions - which would indicate inflation in global markets. Import Oil prices were up 7.3 % month-over-month, and export agricultural prices were down 0.3 %. with import prices up 0.4 % month-over-month, up 1.8 % year-over-year; and export prices up 0.3 % month-over-month, up 1.1 % year-over-year..There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships. Econintersect follows this series to adjust data for inflation.

Import Prices Rise At Fastest Rate In Almost 4 Years As Energy Costs Soar -- With survey after survey warning of stagflationary impulses - stagnant growth and higher input prices - today's US import prices will do nothing to assuage those fears as the year-over-year rise of 1.8% is the hottest since March 2012. This confirmed the end of the 27 month deflationary cycle. The main drive of the jump is the rise in energy costs as ex-fuel, input prices declined 0.1% YoY. This is the 25th month in a row of ex-fuel import price declines.

Rail Week Ending 07 January 2017: Bad Start to 2017: Week 1 of 2017 shows same week total rail traffic (from same week one year ago) declined 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 declined 22.2 %. This week's data again may have been caused by a mismatch 2017 and 2016 - even so, it is not clear to me why this week's data is so soft. The rolling averages declined. As coal production had a major improvement year-over-year, it is confusing why rail is down. We have to wait until next week to discover if the improving trend line is in play.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 441,417 carloads and intermodal units, down 11.4 percent compared with the same week last year. Total carloads for the week ending January 7 were 221,146 carloads, down 7.7 percent compared with the same week in 2016, while U.S. weekly intermodal volume was 220,271 containers and trailers, down 14.9 percent compared to 2016. Two of the 10 carload commodity groups posted an increase compared with the same week in 2016. They were metallic ores and metals, up 5.4 percent to 20,403 carloads; and grain, up 0.9 percent to 21,476 carloads. Commodity groups that posted decreases compared with the same week in 2016 included petroleum and petroleum products, down 32.1 percent to 8,903 carloads; farm products excl. grain, and food, down 18.4 percent to 13,802 carloads; and forest products, down 15.3 percent to 9,034 carloads. For the first week of 2017, U.S. railroads reported cumulative volume of 221,146 carloads, down 7.7 percent from the same point last year; and 220,271 intermodal units, down 14.9 percent from last year. Total combined U.S. traffic for the first week of 2017 was 441,417 carloads and intermodal units, a decrease of 11.4 percent compared to last year.

Fiat Chrysler announces $1 billion investment in U.S. manufacturing, 2,000 new jobs | Fox News: Fiat Chrysler said Sunday it would spend $1 billion on U.S. manufacturing, including modernizing plants in Michigan and Ohio, in a move that’s set to add 2,000 new jobs, Reuters reported. According to the company’s plan, the plant in Warren, Michigan will be made capable of producing a pickup truck currently built in Mexico. The Warren plant will make the new Jeep Wagoneer and Grand Wagoneer large SUVs. A plant in Toledo, Ohio also will get new equipment to make a new Jeep pickup. The move by Fiat Chrysler follows a similar recent announcement made by a competing auto brand. On Tuesday, Ford said it would cancel a $1.6 billion plant planned for Mexico and instead invest $700 million in a Michigan assembly plant. Though CEO Mark Fields said the decision would have gone ahead whether or not Donald Trump was elected president, Fields also said Trump's "pro-growth policies" gave the company's executives confidence. The president-elect has taken many auto manufacturers to task for Mexican production and encouraged building more vehicles in the U.S. He tweeted at General Motors after the Ford announcement on Tuesday, threatening a "big border tax" for producing cars in Mexico and then selling them in the U.S. GM pushed back on that characterization of its business model.

"It Finally Happened": Trump Thanks Fiat And Ford For Investing In The US, Adding New Jobs -- Having succeeded in turning around Ford's plans to invest $1.6 billion in Mexico last week, and converting it into a US-targeted investment into the US last week, after similar twitter-based confrontations with Toyota and GM also last week, moments ago Trump tweeted his thanks to Fiat which as reported last night, also announced plans to invest $1 billion in Ohio plants, adding some 2,000 jobs. "It's finally happening - Fiat Chrysler just announced plans to invest $1BILLION in Michigan and Ohio plants, adding 2000 jobs. This after Ford said last week that it will expand in Michigan and U.S. instead of building a BILLION dollar plant in Mexico. Thank you Ford & Fiat C!" Having used his Twitter "bully pulpit" successfully so far to change corporate capital allocation plans, it is unlikely that Trump will end his "shaming" of pulbic companies now, and will likely double down on his aggressive approach to push more investment in the US.

Fiat CEO Warns May Shut All Mexico Production If Trump Tariff "Too High" --  Fiat Chrysler's U.S. CEO, Sergio Marchionne, admitted earlier today that if Trump's import tariffs are "sufficiently large" he would be forced to shutter all of his manufacturing capacity in Mexico as it would be rendered "uneconomical."  Per the FT: Fiat Chrysler may close its Mexican car plants if Donald Trump imposes sufficiently stringent tariffs on vehicles coming into the US, chief executive Sergio Marchionne said on Monday. “It’s possible that if economic tariffs are imposed…and are sufficiently large, it will make production of anything in mexico uneconomical and we would have to withdraw,” he said in Detroit on Monday. “It’s quite possible.”As it turns out, purchasing 18mm cars per year, even if those purchases are fueled by a massive subprime auto lending bubble, affords the U.S. some leverage on where those vehicles are manufactured.  And, as Marchionne points out, the manufacturing capacity in Mexico was specifically designed and tooled to manufacture vehicles for the U.S. market which means that attempts to "re-purpose" the facilities for the export market would almost certainly be uneconomical.  Chrysler produces 503,000 vehicles in Mexico a year at two sites and is heavily dependent on exports to the US, with 86 per cent of its cars sold to US or Canada in 2015. Mexico’s car industry has blossomed under the North American Free Trade Agreement, with the industry making 3.4m cars a year and automakers from Ford and GM to Nissan and Volkswagen producing vehicles in the country. But the industry is heavily reliant on access to the US and Canadian markets, accounting for 82 per cent of the country’s 2.7m exports. “The reality is the Mexican auto industry has been tooled up to try and deal with the US market,” said Mr Marchionne at the Detroit Motor Show. “If the US market were not to be there, then the reasons for its existence are on the line.” Some car makers, such as Nissan and Volkswagen, use Mexico as a base to export to Europe or Latin America. But Mr Marchionne said it would be too expensive to repurpose the company’s existing Mexican site to export all over the world.

Toyota to invest $10 billion in U.S. over five years | Reuters: Toyota Motor Corp (7203.T) will invest $10 billion in the United States over the next five years, the same as in the previous five years, North America Chief Executive Jim Lentz said on Monday, to meet demand and upgrade plants to build more fuel-efficient models. The Japanese automaker has come under fire by President-elect Donald Trump for its plans, announced in 2015, to shift production of its Corolla to Mexico from Canada. Lentz said in an interview at the Detroit auto show the decision was not in response to Trump's remarks made in a recent tweet, but was part of Toyota's business strategy to invest in the United States, where it has 10 plants in eight states. Planning for the new Mexico plant began about two years before it was announced in 2015, said Lentz, describing such decisions as long-term ones. Lentz said he had not spoken with Trump. The $10 billion includes Toyota's new North American headquarters in Texas that is under construction and major improvements to its plants. Toyota plans to expand some of its U.S. plants over the next five years, said Lentz, declining to say if that effort would boost jobs. Toyota, which employs 40,000 in the United States, added more than 5,000 U.S. jobs over the last five years, he said.

GM Lied To The Public And To Trump About Where Chevrolet Cruze Sedans Sold In The USA Are Assembled --On Tuesday, president-elect Trump tweeted about General Motors, stating the GM was building its Chevrolet Cruze in Mexico, importing them to the US tax-free, and selling them at US car dealers:General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!— Donald J. Trump (@realDonaldTrump) January 3, 2017 GM quickly denied Trump’s tweet, and in a press release that same day, the company claimed that all Cruze sedans sold in the US are “built in GM’s assembly plant in Lordstown, Ohio”, and that GM builds the Cruze hatchback for global markets in Mexico, with only a small percentage being sold in the US……and the MSM and other liberal outlets were quick to pounce on GM’s statement, using it to slander the president-elect.  US News, ABC News, and many others, including the Wall Street Journal, all published articles containing the information in GM’s press release.    So, who did the fact-checking work that the MSM didn’t bother doing? Auto enthusiast and Twitter user E.W. Niedermeyer, that’s who.  Niedermeyer brought the GM and Trump saga up on Thursday, January 5th in a series of tweets that began innocently enough… If I've learned anything in my nearly 10 years of covering the car business it's that you always fact check anything GM says. Here is GM's 2017 Model Year VIN decoder. As you can see, Hecho En Mexico VINs start with 3G1 So all you have to do to prove that GM lied to the President Elect is to find Chevrolet Cruze Sedans for sale in the US with 3G1 VINs...…and finally, Niedermeyer provided evidence on where the autos sold in the US were built: Those are just @ Lone Star Chevy. There are 3 more at that location  But wait, the real gut punch is still coming. At Spitzer Chevrolet Lordstown:  Think about that for a second – GM  is selling Cruze sedans manufactured in Mexico, in the same Ohio town that builds Cruze sedans.  And at the same time, GM is brazen enough to say it doesn’t sell Cruze sedans built in Mexico in the US, saying all Cruze sedans in US dealerships are built in its Lordstown, Ohio plant.  And GM did so in the face of the president-elect of the United States accusing the company of building Cruze sedans in Mexico, shipping them to America tax-free, and selling them in your local dealerships.

Global carmakers navigate a tricky road to new Trump reality - Global carmakers at this week’s Detroit auto show are navigating carefully through a minefield, at pains not to criticise the US president-elect publicly while privately adjusting to a world where important investment decisions may have to be made or unmade overnight to stay out of Donald Trump’s Twitter crosshairs.  Bill Ford, great-grandson of Henry Ford and executive chairman of Ford Motor, which last week scrapped plans for a $1.6bn factory in Mexico to placate Mr Trump, praised the incoming president as a “good listener” who asks “good questions”. He said Mr Trump had called him several times on his mobile phone to press the company to cancel the Mexican factory, a decision Mr Trump lauded on Monday with a congratulatory tweet. “We are all adapting to this new reality; you have to accept reality and make the most of it,” said Joe Hinrichs, Ford’s North American head at a dinner with journalists on Monday night. Ford’s chief financial officer Bob Shanks added that it is important “not to overreact”. Over the past week, Mr Trump has stepped up his Twitter assault on global carmakers for making cars and investing in Mexico rather than in the US. The two Ford executives said they expect the new administration quickly to clarify its plans for the US automotive industry, including whether to impose stringent tariffs on imports of cars manufactured in Mexico, as Mr Trump threatened frequently during and since the election campaign. “They are going to move fast. I think there’s going to be a lot of clarity pretty quickly,” said Mr Shanks.  Sergio Marchionne, chief executive of rival Fiat Chrysler, took a harder line, warning his company may have to close factories in Mexico if the new US administration follows through on its tariff threat. He called on the new president to clarify his intentions in short order.

Taiwan Tech Giant May Open US LCD Plant In Response To Trump's "Make In America" Call -- While so far various international and domestic companies have announced, grudginly, they would expand production in the US, and hire US workers, after being called out by president-elect Trump on his  favorite "bully pulpit", Twitter, on Friday the push for insourcing took on an unsolicited twist, when Taiwan's Hon Hai Precision Industry, also known as iPhone maker FoxConn, and one of the largest employers in the world, and its Japanese subsidiary Sharp, have begun studying the possibility of building an LCD panel plant in the U.S., a Sharp executive said Friday cited by Nikkei.The Taiwanese electronics contract manufacturer, and its Japanese alliance partner SoftBank Group reportedly told Donald Trump they would jointly make significant investments creating new jobs in the U.S. when SoftBank Chairman Masayoshi Son met the President-elect in New York last month according to the Japanese paper.The joint investment plan was proposed by Son, the Sharp executive said, and was put 'on the table' in response to Trump's 'Make in America' call.While it was reported before that Foxconn may consider making iPhones in the US, that speculation was at a very preliminary stage, with nothing definitive confirmed. It also took place prior to the diplomatic fiasco following Trump's statement that the "one China" policy is negotiable. Whether this is "gratitude" by Foxconn exces to Trump for siding with the small island is unknown. Officially, with Trump urging American manufacturers to bring operations back to the U.S., Hon Hai is considering production in the U.S. due to its huge market for TVs and other home appliances.

The U.S. Needs More Manufactured Exports - I previously have noted that—if you exclude processing imports—China’s imports of manufactures are low relative to its GDP. I suspect the interlinked “China, Inc” connections between Party and State (described well by Mark Wu) have something to do with this. Manufactured imports, net of processing imports (processing imports are re-exported), peaked as a share of China’s GDP back in 2003. The other “trade” outlier among the world’s big economic blocks is the United States. U.S. imports of manufactures aren’t out of line with those of say the eurozone. Or for that matter with Japan, which imports a lot more manufactures now than it used too. The U.S. though does stand out for the low level of its manufactured exports. I am using an imperfect proxy for U.S. manufactures here—the sum of capital goods, autos, and consumer goods in the end use data. That leaves out manufactured goods in industrial supplies (notably chemicals, which sort of blur the line between manufactures and commodities given that competitive advantage is often determined by proximity to a low cost supply of ethane and the like). Adding in chemicals and plastics though would not significantly alter the picture (and would make the data harder to replicate). I confess that I prioritized using easy to reproduce (and easy to update) data that tells the basic story over analytical perfection.I also adjust the Chinese data by netting out processing imports from China’s exports in a way that I do not adjust the other countries data. Without that adjustment, China is on a different scale. The result of this pattern of exports and imports is that the U.S. runs a sizable trade deficit in manufactures, while the other big integrated economic blocks run surpluses in manufactures. Part of this is natural.  Countries that are not well supplied with natural resources have to export manufactures in order to import resources if their trade is to balance. Japan, Germany, and China fall into this category. All need to import oil. The U.S. does too, but now on a much smaller scale.A surplus in services can also finance a deficit in manufactures. And the U.S. has a decent sized surplus in services, thanks in part to Americans’ low propensity to travel abroad and thanks in part to the strength of U.S. exports of intellectual property heavy services (though many firms do their best to move potential services exports into the income line of the balance of paymentsand the process lower their tax bill.) So too can a surplus in income from foreign investment abroad. The earnings from past investment abroad can finance a high level of current imports. But much of the deficit reflects the fact that the U.S. also runs—unlike China, Japan, or the eurozone—a significant current account deficit.  Rough quantification suggests that the “jobs” impact between a deficit of 4 percent of GDP on manufactures and a say a surplus of 2 percent of GDP (like that of the eurozone) is fairly significant.

Alibaba's Ma meets Trump, promises to bring one million jobs to U.S. | Reuters: Alibaba Executive Chairman Jack Ma met U.S. President-elect Donald Trump on Monday and laid out the Chinese e-commerce giant's new plan to bring one million small U.S. businesses onto its platform to sell to Chinese consumers over the next five years, an Alibaba spokesman said. Alibaba Group Holding Ltd (BABA.N) expects the initiative to create one million U.S. jobs as each company adds a position, company spokesman Bob Christie said in a phone call. Alibaba has previously campaigned to bring more small U.S. businesses onto the company's sites, but this is the first time Ma has discussed specific targets. Trump and Ma emerged from their meeting at Trump Tower in New York together. The president-elect told reporters they had a "great meeting" and would do great things together. Ma called Trump "smart" and "open-minded." Ma said the two mainly discussed supporting small businesses, especially in the Midwest, such as farmers and small clothing makers, who could tap the Chinese market directly through Alibaba, whose Tmall online shopping platform offers virtual store fronts and payment portals to merchants. The company has in recent years been aggressively courting foreign brands to set up Tmall stores to sell to China's vast and growing middle class by offering to smoothen out Chinese sales, payment and shipping processes.

Alibaba job boom: Jack Ma chats with Trump about how to create 1 million US jobs over 5 years -- President-elect Donald Trump said he had a "great meeting" withAlibaba executive chairman Jack Ma on Monday, when they discussed 1 million new U.S. jobs. Ma said that Alibaba's expansion would focus on products like garments, wine and fruits, with a special focus on trade between the American midwest and southeast Asia."We're focused on small business," Ma told reporters. "We specifically talked about ... supporting 1 million small businesses, especially in the Midwest of America. Small businesses on the platform selling products — agriculture products and America services — to China and Asia, because we're pretty big in Asia."Where those jobs would come from is unclear. While an Alibaba spokesperson told CNBC before the meeting that the Chinese online retail giant company would create 1 million jobs over five years, Ma's comments focused on supporting small businesses. "Alibaba will create 1 million U.S. jobs by enabling 1 million American small businesses and farmers to sell American goods to China and Asian consumers on the Alibaba platform," the company said in a statement.   Like Etsy or eBay, Alibaba enables third-party sellers in China to take their own businesses to the web. The company only had 36,446 full-time employees, almost all in China, as of March 31, according to SEC filings. But with more than 10 million active sellers as of 2015, Alibaba estimates its China retail marketplaces "contributed to the creation of over 15 million job opportunities."

 NFIB: Small Business Survey: "Small Business Optimism Skyrocketed in December" – The latest issue of the NFIB Small Business Economic Trends came out this morning. The headline number for November came in at 105.8, up 7.4 from the previous month's 98.4, and its highest since December 2004. The index is at the 98th percentile in this series. Today's number came in well above the forecast of 98.4.Here is an excerpt from the opening summary of the news release.Small business optimism rocketed to its highest level since 2004, with a stratospheric 38-point jump in the number of owners who expect better business conditions, according to the monthly National Federation of Independent Business (NFIB) Index of Small Business Optimism, released today.“We haven’t seen numbers like this in a long time,” said NFIB President and CEO Juanita Duggan. “Small business is ready for a breakout, and that can only mean very good things for the U.S. economy.”The Index reached 105.8, an increase of 7.4 points. Leading the charge was “Expect Better Business Conditions,” which shot up from a net 12 percent in November to a net 50 percent last month. The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example, the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings following the Great Recession that ended in June 2009.

The Ratio of Part-Time Employed Remains High, But Improving --Let's take a close look at the latest employment report numbers on Full and Part-Time Employment. Buried near the bottom of Table A-9 of the government's Employment Situation Summary are the numbers for Full- and Part-Time Workers, with 35-or-more hours as the arbitrary divide between the two categories. The source is the monthly Current Population Survey (CPS) of households. The focus is on total hours worked regardless of whether the hours are from a single or multiple jobs.The Labor Department has been collecting this since 1968, a time when only 13.5% of US employees were part-timers. That number peaked at 20.1% in January 2010. The latest data point, over five years later, is only modestly lower at 18.3% last month. If the pre-recession percentage is a recovery target, significantly more full-time employment is needed.Here is a visualization of the trend in the 21st century, with the percentage of full-time employed on the left axis and the part-time employed on the right. We see a conspicuous crossover during the Great Recession.Since July of 2015, the two cohorts have oscillated in a narrow range around the crossover point. The two charts above are seasonally adjusted and include the entire workforce, which the CPS defines as age 16 and over. A problem inherent in using this broadest of cohorts is that it includes the population that adds substantial summertime volatility to the full-time/part-time ratio, namely, high school and college students. Also, the 55-plus cohort includes a subset of employees that opt for part-time employment during the decade following the historical peak earning years (ages 45-54) and as a transition toward retirement.

Weekly Initial Unemployment Claims increase to 247,000 -- The DOL reported: In the week ending January 7, the advance figure for seasonally adjusted initial claims was 247,000, an increase of 10,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 235,000 to 237,000. The 4-week moving average was 256,500, a decrease of 1,750 from the previous week's revised average. The previous week's average was revised up by 1,500 from 256,750 to 258,250.
There were no special factors impacting this week's initial claims. This marks 97 consecutive weeks of initial claims below 300,000, the longest streak since 1970.
emphasis added
The previous week was revised up.  The following graph shows the 4-week moving average of weekly claims since 1971.

The Labor Market Conditions Index Down in December -- Following a disappointing jobs report for December, the latest update of the Labor Market Conditions Index reflects the decline. The LMCI is a relatively recent indicator developed by Federal Reserve economists to assess changes in the labor market conditions. The latest LMCI update came in at -0.3. The previous month was revised upward to 2.1 (previously 1.5). The cumulative index (discussed below) peaked twelve months ago in December 2015. The indicator, designed to illustrate expansion and contraction of labor market conditions, was initially announced in May 2014, but the data series was constructed back to August 1976. Here is a linear view of the complete LMCI. We've highlighted recessions with callouts for its value the month recessions begin and for the latest index value.

Over 100,000 More Americans Are On Jobless Benefits Now Than Before Trump's Election - Continuing jobless claims are up over 100,000 since Donald Trump's election victory and stand at 4-month highs.  This is the biggest percentage rise in claims since May 2009, all happening as small business optimism, consumer confidence, and stocks soar to cyclical highs.

  Fed's Labor Market Conditions Index Plunges Most In 7 Years -- While mainstream media clung to The White House spin of record monthly streak of jobs gains after Friday's payrolls, The Fed's own Labor Market Conditions Index (LMCI) paints a very different picture of the health of the American job market. With a 0.3% drop in December, the LMCI is now down 5.8% year-over-year, the biggest plunge since Jan 2010. We are sure The Fed wishes it never created this index... As we noted previously, that's only the eighth time in nearly 40 years the index was down on a year-over-year basis, Deutsche Bank Chief U.S. Economist Joseph LaVorgna wrote in a note to clients today. Of the seven previous occasions, LaVorgna wrote, "four were soon followed by recession."(In the three other cases, two were false alarms, in 1986-87 and 1995-96, and in 1981 the recession began shortly before the annual change in the LMCI turned negative.)LaVorgna said the weakness in the LMCI indicates a rising possibility of recession."The upshot is that the economic outlook remains fragile despite the ostensible robustness of the labor market," he wrote. One look at the historical revisions (notably the last few months) and it's clear, however, every effort is being made to improve this data...

BLS: Job Openings "little changed" in November - From the BLS: Job Openings and Labor Turnover Summary The number of job openings was little changed at 5.5 million on the last business day of November, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were also little changed at 5.2 million and 5.0 million, respectively..... ... The number of quits was little changed in November at 3.1 million. The quits rate was 2.1 percent. Over the month, the number of quits was little changed for total private and for government. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS. This series started in December 2000. Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for November, the most recent employment report was for December. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings increased in November to 5.522 million from 5.451 million in October. Job openings are mostly moving sideways at a high level. The number of job openings (yellow) are up 6% year-over-year. Quits are up 7% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

November 2016 JOLTS Job Openings Rate Continues to Show Insignificant Year-over-Year Growth: -  The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings again were insignificantly changed from last month. It comes as no surprise that JOLTS is continuing to show little year-over-year job openings growth. Historically, this indicates weaker employment growth. Both employment and JOLTS job openings year-over-year growth have been slowing for the past year - and the short term trend is flat. This aligns with Econintersect's Employment Index and the Conference Boards Employment Index - but both indices are forecasting moderate employment gains similar to the last five months weaker employment growth.

  • the number of unadjusted PRIVATE jobs openings - which is the most predictive of future employment growth of the JOLTS elements - shows the year-over-year growth is near the lowest level since the Great Recession. The year-over-year growth of the unadjusted non-farm private jobs opening rate (percent of job openings compared to size of workforce) likewise shows little growth.
  • The graphs below looks at the year-over-year rate of growth for job opening levels and rate.

The Rate of Hiring and Job-Quitting Appears Stuck in a Rut - The rates at which people quit old jobs or are hired into new jobs have been stuck in a rut for nearly all of 2016. New Labor Department data for November showed that the number of job openings at the end of the month and the number of people leaving one job or starting a new job were all unchanged. Over the past year, the levels of quitting and hiring haven’t made any progress. Hiring plunged during the recession, but by the end of 2015 the rate had climbed to a post-recession high of 3.8%. For the past eight months, it has hovered below that rate. The rate at which people quit jobs also plunged during the recession (in tough economic times, people cling to the jobs they have and have less opportunity to jump to new positions). By the end of 2015 it climbed to 2.2%, but fell back to 2% in January and hasn’t made it back to the 2015 peak. Both measures have yet to recover to the rates that were recorded prior to the 2007-09 recession. Until 2015, they were making progress, but it looks like 2016 could be a year of little improvement in the economy’s churn rate. The report, known as the Job Openings and Labor Turnover Survey, or Jolts, isn’t the Labor Department’s primary report on the jobs market. That report, which was released last Friday, showed the economy added 156,000 jobs on net in December, while the unemployment rate was little changed at 4.7%. The Jolts report is a month behind, but the report is still closely followed by economists for the look it provides at the gross level of turnover in the labor market. The report shows that the number of job openings is near a 16-year-high, but that measure too has shown little improvement over the past year. The rate of job openings reached a postrecession high in June 2015.

Chart of the Day: How Badly have Real Wages Stagnated? – Ed Dolan - It is well known that wages in the United States have stagnated in recent decades, but how badly? We know that nominal wages, expressed in current dollars at the time they are paid, have risen dramatically. In 1965, production and nonsupervisory workers averaged just $2.60 an hour. Now they average nearly $22 an hour. But what really matters is real wages, that is, nominal wages adjusted to show the effect of inflation. Are real wages actually lower now than in the past? Have they increased, but just not very rapidly? As this chart shows, it depends on exactly how you do the inflation adjustment.  Both lines in the chart show the real hourly wages of production and nonsupervisory employees stated in constant 2016 dollars. The red line is adjusted using the consumer price index (CPI) from the Bureau of Labor Statistics. The government uses the CPI to adjust Social Security benefits and the value of the Treasury's inflation adjusted securities (TIPS). The blue line is adjusted using the personal consumption expenditure (PCE) index from the Bureau of Economic Analysis. The Federal Reserve uses the PCE index as the principal indicator of inflation when setting monetary policy. The difference is dramatic. According to the CPI, real wages have increased just 8 percent in half a century. According to the PCE index, they have increased 40 percent. Even that is not very impressive over such a long period, but 40 percent is a lot better than 8 percent. If you measure from 1972 instead of 1965, real wages have actually fallen by 4 percent, as measured by the CPI. Even by the PCE, they have increased by just 19 percent. Which is right? Frustratingly, we can't really say that either measure is right or wrong. The two indexes simply make different choices when it comes to the thorny technical issues that bedevil the measurement of inflation—how to adjust for changes in the basket of goods that consumers purchase, how to adjust for quality, and how to adjust for the substitution of cheaper goods for more expensive ones when relative prices change.

Why Wages Have Lagged Behind the Global Jobs Recovery - WSJ: In a world of sluggish economic growth, two conflicting trends puzzle policy makers: Why are companies hiring so aggressively and why haven’t wages until lately risen more rapidly? From Tokyo to London, jobless rates have kept falling even as labor market indicators suggest economies are nearing full employment. The U.S. unemployment rate edged up to 4.7% in December as more workers entered the labor force, but remains close to a nine-year low of 4.6%. In Japan, at 3.1%, it’s around its lowest level since the early 1990s. The U.K. jobless rate was 4.8% in the three months to October, close to a four-decade low, despite the country’s historic vote to leave the European Union last June. Even in the 19-nation eurozone, the unemployment rate has hit a seven-year low of 9.8%. It’s common for firms to hire large numbers of workers early in an economic recovery, to deal with backlogs of orders. That tends to slow productivity growth. But companies have been adding workers for much longer than expected, economists say, and productivity has remained subdued for an extended period as firms eschewed capital investments. “It’s very hard to rationalize why businesses are adding so many workers…throughout advanced economies at a time when growth [has been] near zero or even declining," said Adam Posen, president of the Peterson Institute for International Economics in Washington. “It’s very cheap to substitute capital for labor, in part because of what central banks are doing.” Low interest rates make it cheap to invest in labor-substituting equipment. Normally, economists expect wages to rise as the unemployment rate falls, and as inflation and productivity increase. But those relationships appear to have broken down: Wage growth in the U.S. and Japan since 2007 has been as much as 1 percentage point per year less than standard economic models would suggest, said Oxford Economics, a consultancy firm.

Monopsony Takes Center Stage – ProMarket -- In October, the Council of Economic Advisors released a report about monopsony in the labor market. That alone was rather astonishing—employer power and its consequences for labor market outcomes has been a distinctly minority concern in the economics profession for quite a while, notwithstanding mounting evidence of its importance coming from a number of subfields.  For that agenda to gain a hearing at the apex of economic policy-making is evidence of the shifting ground in matters of public economic debate. It is also reminiscent of the last time inequality was so high: then, as now, it sparked a sea change in the economics profession, including both the mainstreaming of labor exploitation as a subject of economic research and the founding of the American Economic Association. The key arguments in the CEA’s paper draw on the evidence of rising inequality in firm-specific wages I referred to in my last ProMarket post. A key determinant of earnings is which firm a worker can gain access to, and a strategy for consolidating earnings at the top of the income distribution is outsourcing labor to subordinate firms so the circle of workers who get paid by the most profitable ones narrows to high earners, who are thus earning more than they have in a century. Interfirm inequality and firm-specific wages are canonical evidence of an uncompetitive labor market. After all, if workers were able to move freely between firms, that should equalize the pay workers of similar experience and education obtain across firms within an industry or geography.  And yet, the further into the labor market you drill down, to workers in narrowly defined skill and experience groups, the more residual inequality is apparent—until you take into account the firms where they work.

Nation With Crumbling Bridges and Roads Excited to Build Giant Wall -  As America’s bridges, roads, and other infrastructure dangerously deteriorate from decades of neglect, there is a mounting sense of urgency that it is time to build a giant wall.Across the U.S., whose rail system is a rickety antique plagued by deadly accidents, Americans are increasingly recognizing that building a wall with Mexico, and possibly another one with Canada, should be the country’s top priority.Harland Dorrinson, the executive director of a Washington-based think tank called the Center for Responsible Immigration, believes that most Americans favor the building of border walls over extravagant pet projects like structurally sound freeway overpasses.“The estimated cost of a border wall with Mexico is five billion dollars,” he said. “We could easily blow the same amount of money on infrastructure repairs and have nothing to show for it but functioning highways.” Congress has dragged its feet on infrastructure spending in recent years, but Dorrinson senses growing support in Washington for building a giant border wall. “Even if for some reason we don’t get the Mexicans to pay for it, five billion is a steal,” he said.While some think that America’s declining infrastructure is a national-security threat, Dorrinson strongly disagrees. “If immigrants somehow get over the wall, the condition of our bridges and roads will keep them from getting very far,” he said.

Why Employers Are Rolling Back Raises - Just a few weeks ago, over four million Americans were poised to benefit from new overtime regulations at the start of the new year. The new rule—which would require time-and-a-half pay for those working more than 40 hours a week—was part of an executive order signed by President Obama in 2016. The order would have effectively doubled the salary threshold for mandatory overtime pay from $23,660 to $47,476—forcing employers to either pay many more workers overtime, or bump their salaries beyond the reach of the threshold. But with a new administration poised to take over, it looks like many of those workers won’t be getting higher pay after all. The implementation of the executive order was temporarily blocked by a federal judge in Texas back in November, and is now expected to be fully undone by Obama’s successor, President-elect Donald Trump. While it’s not certain that Trump will roll back the  measure—which would aid the many of the working-class voters that elected him—the president-elect’s nomination of fast-food executive Andy Puzder as his labor secretary suggests it’s a likely bet. As my colleague Alexia Campbell noted last month, Puzder has been a vocal critic of Obama’s overtime order saying that the measure “will simply add to the extensive regulatory maze the Obama Administration has imposed on employers, forcing many to offset increased labor expense by cutting costs elsewhere.” Some employers aren’t waiting for official word from the federal government and have, in several cases, canceled raises that were meant to push workers salaries above the overtime threshold. “The clawbacks seem mainly to have occurred at nonprofits and smaller for-profit businesses,” Politico’s Ted Hesson reported on Tuesday. According to Hesson, raises related to overtime have been rescinded at Massachusetts General Hospital, Iowa State University, the University of Iowa, Michigan State University, Rutgers University, the University of North Carolina Wilmington, Wayne State University in Michigan, and the University of Wisconsin, Milwaukee.

 Third World Employment Is Here - I knew the drill. I’d lived it for years. Don’t stop at intersections, including red lights and stop signs, if you don’t have to. Just keep going. Stopping makes you vulnerable to “smash and grab” and hijacking. Keep anything of value hidden away when you’re on the street. Keep your cellphone on vibrate so it doesn’t attract attention. Try to keep a wall or fence close behind or beside you so you can’t be surprised from behind. Scan your environment in 180-degree arcs in five-yard increments ahead of you. Dress like a local. Don’t make eye contact unless you must, and if you do, just nod without smiling. Above all, look like you belong there … or at least like you’ve been there before. It’s just everyday life in many parts of my second home, South Africa, where I’ve been for the past month. This is the way we may be living soon here in the U.S. … for essentially the same reasons. People with no stake in a socioeconomic system eventually prey on that system. It’s all they have. If the world considers you superfluous and you have no future in it, why not? Especially if the bigwigs in government and business do the same thing. Over 45% of South African adults have no formal job or do temporary piecework when they can. Millions of people depend on this slender thread for their daily survival. To keep the pot from boiling over, the government has been forced to expand an expensive system of welfare payments. The costs of not doing so — in terms of crime, policing and fleeing investors — would be even higher. Is this life coming to the U.S.? The signs sure point to it.

Oregon woman evicted from senior housing for $328 in late rent freezes to death in parking garage -  The 52-year-old woman who died of hypothermia on Saturday has been identified as Karen Lee Batts. Public records show she was evicted from an apartment complex for low-income seniors in October. At the time of her death, she appeared homeless.
Batts was found in the Smart Park parking garage at 730 Southwest 10th Avenue. The Portland Police had been called because she was taking off her clothes and appeared to be struggling in the cold weather. In some cases, people in the late stages of hypothermia undress because they feel extremely hot, due to nerve damage. By the time police arrived, Batts was dead. Police said Saturday she likely died of exposure. In the last five years, hypothermia caused or contributed to five deaths of homeless people, according to Multnomah County. Eighty-eight people died on the street in 2015 in Multnomah County overall, mostly from either drugs and alcohol or diseases. But the long cold snap of the past week has shown how dangerous freezing weather can be for people without shelter, especially people who aren't living or traveling in groups.

Black Lives Matter - Tyler Cowen - Several loyal MR readers requested I cover this topic.  My views are pretty simple, namely that I am a fan of the movement.  Police in this country kill, beat, arrest, fine, and confiscate the property of black people at unfair and disproportionate rates.  The movement directs people’s attention to this fact, and the now-common use of cell phone video and recordings have driven the point home. I don’t doubt that many policemen perceive they are at higher risk when dealing with young black males, and that is part of why they may act more brutally or be quicker to shoot or otherwise misbehave.  I would respond that statistical discrimination, even if it is rational, does not excuse what are often crimes against innocent people.  For instance, a man is far more likely to kill you than is a woman, but that fact does not excuse the shooting of an innocent man. I also don’t see that citing “Black Lives Matter” has to denigrate the value of the life of anyone else.  Rather, the use of the slogan reflects the fact that many white people have been unaware of the extra burdens that many innocent black people must carry due to their treatment at the hands of the police.  The slogan is a way of informing others of this reality. “Black Lives Matter” is a large movement, if that is the proper word for it, and you can find many objectionable statements, alliances, and political views within it.  I don’t mean to endorse those, but at its essence I see this as a libertarian idea to be admired and promoted.

How White Liberals Used Civil Rights to Create More Prisons -- Neither liberals nor conservatives are chomping at the bit to discuss the historical roots of the modern gun-rights movement. If asked to describe it, liberals will gesture vaguely at the ’80s and ’90s, blaming survivalists, school shootings, “cold, dead hands” and the National Rifle Association. Conservatives, on the other hand, will jump the historical mark by some distance, talking about the founding fathers, the Second Amendment and the right to an armed militia. Neither side wants to admit that the first modern anti-carry law was passed by California Governor Ronald Reagan in 1967. Nor would they want to mention that Reagan passed the law to disarm the twentieth century’s greatest gun-rights militia: the Black Panther Party. Political genealogies in America are more mixed than the 24/7 news cycle will allow.  In her first book, The First Civil Right: How Liberals Built Prison in America, historian Naomi Murakawa demonstrates how the American prison state emerged not out of race-baiting states’-rights advocates nor tough-on-crime drug warriors but rather from federal legislation written by liberals working to guarantee racial equality under the law. The prison industry, and its associated police forces, spy agencies and kangaroo courts, is perhaps the most horrific piece of a fundamentally racist and unequal American civil society. More people are under correctional supervision in the United States than were in the Gulag archipelago at the height of the Great Terror; there are more black men in prison, jail, or parole than were enslaved in 1850. How did this happen?

Why Are There So Many People in Jail in Scranton, PA? - Lackawanna County has one of the highest jail incarceration rates in Pennsylvania, higher than any county in the state besides Philadelphia, and higher than any county in New York, New Jersey, or anywhere in New England. In 1970, the rate of people locked up in the Lackawanna County jail was 46 for every 100,000 residents aged 15 to 64—slightly less than half the rate for the state of Pennsylvania as a whole. (All incarceration rates are presented per 100,000 residents aged 15 to 64.) In 2014, the rate of people locked up in the Lackawanna County jail was roughly 698 for every 100,000 residents, more than twice the national rate. If we include people who were sent to state prison from the county in these numbers, the combined jail and prison incarceration rate for Lackawanna County was 1,531 people per 100,000 residents in 2014. By way of comparison, the combined jail and prison incarceration for New York City—the largest city of the most incarcerated country on the planet—was 608 per 100,000 in 2014. Yet Scranton is by no means anomalous. Small cities and rural counties have been driving jail incarceration across the country, according to In Our Own Backyard, a recent Vera report. The number of people held in local jails on any day in the United States has increased four-fold since 1970. While the jail incarceration rate in large counties (with more than one million residents) has grown almost three-fold during this period, the jail incarceration rate in small counties (with fewer than 250,000 residents) increased almost seven-fold. The jail incarceration rate of Lackawanna County, a small county with a population of 213,000, increased by more than 15 times between 1970 and 2014, with racial disparities in incarceration that are both egregious and indicative of uneven incarceration rates in small counties across the country. Ninety-two percent of Lackawanna County’s population is white. The jail incarceration rate for these residents was 494 per 100,000 people in 2014. However, the rate of incarceration for black people, who made up 2.5 percent of the population in 2010, was 6,145 per 100,000 in 2014—or 6 of every 100. That’s six times the rate of incarceration for the state of Pennsylvania that year, which was 1,407 per 100,000. Latino people make up 5 percent of the population of Lackawanna County, and were incarcerated at a rate of 1,610 per 100,000 in the county, more than three times the rate for white people. 

Supreme Court Seems Wary of Hurdles for Refunds of Fines After Exonerations — The Supreme Court on Monday seemed deeply skeptical of a Colorado law that makes it hard for criminal defendants whose convictions are overturned to get refunds of the fines and restitution they had been ordered to pay. The justices were helped by the forthright presentation of the state’s solicitor general, Frederick R. Yarger, who did not shy away from the more extreme implications of his argument. Money taken from defendants after valid convictions belongs to the state, he said. A Colorado law requires people cleared by the courts to file separate civil suits and prove their innocence with clear and convincing evidence in order to obtain reimbursement. But Mr. Yarger said the state was under no obligation to do even that much. He said the state was not only free to impose onerous procedures, but could also enact a law making exonerated defendants forfeit the money entirely. Chief Justice John G. Roberts Jr. asked if the state could impose a $10,000 fine on everyone convicted of a crime and refuse to return the money if the convictions were later overturned. Mr. Yarger said yes. Just as there is no need to pay people for the time they spend in prison after their convictions are reversed, he said, there is no need to reimburse them for fines and fees. “The assumption is that the deprivation of both the liberty and the property at the time of conviction is lawful, and that the property passes into public funds,” he said.

Obama set for pardon frenzy as he leaves office (AFP) - A Rastafarian prophet, a former Taliban captive and thousands of minor drug traffickers have one thing in common: Their names have been submitted to President Barack Obama for clemency before he leaves office in two weeks. Some US presidents have used this regal power of leniency in a pointed way near the end of their term in office. On the last day of his term in 2001, Democratic president Bill Clinton granted pardon in a highly controversial move to late fugitive trader Marc Rich, whose ex-wife had been a major donor to Democrats. Sixteen years later, Obama is fielding pressure from all sides to grant unlikely pardons or commutations of sentences to people whose supporters say have been unjustly sentenced or sought out by the justice system. Among them is Bowe Bergdahl, a US Army sergeant held captive for five years by the Taliban before his release in a prisoner swap, who is due to be court-martialed for desertion. Leonard Peltier, a Native American activist convicted for the 1975 deaths of two FBI agents in what his supporters say was a setup, is also hoping to enjoy Obama's good graces. Then there's Edward Snowden, who made the shattering revelation in 2013 of a global communications and internet surveillance system set up by the United States. The 33-year-old, a refugee in Russia, is backed by numerous celebrities like actress Susan Sarandon and singer Peter Gabriel, as well as Amnesty International and the American Civil Liberties Union.

New bill could force states to allow visiting gun owners to pack heat without a permit  - One of the first gun bills introduced in the new Congress proposes to dramatically alter the way states regulate who can carry concealed firearms within their borders.  Under the legislation filed by Congressman Richard Hudson, a North Carolina Republican, gun owners — including those from states no longer mandating training or permits for persons wishing to tote hidden pistols — could be cleared to carry in any public spaces across the country that allow guns.  Currently, every state allows for concealed carry. But many forbid out-of-state residents from carrying concealed weapons within their borders, or only recognize permits from select states. And some cities, like New York, have strict rules about who may obtain a license to carry, with the result that very few people do.If Hudson’s bill passes, states that set high bars for concealed carry would be compelled to welcome gun-toting visitors from “any state that recognizes its residents’ right to concealed carry,” says a Hudson spokeswoman. That includes states with more relaxed requirements, or no requirements at all. New York authorities, for instance, may be forced to allow a tourist from Mississippi — one of the 10 states that now authorizes permitless carry — to be armed while walking down Broadway, with his Mississippi ID the only permission he needs.

Illinois Senate budget plan includes $5 billion in tax hikes, $7 billion in borrowing, Chicago Casinos -Illinois Senate members have a drafted a new budget plan that relies on multibillion dollar tax hikes, but little in structural spending reforms. The plan punishes taxpayers with more than $5 billion in additional income and other taxes, borrows $7 billion from the bond market and adds casinos in Chicago – none of which provide relief to struggling Illinoisans. The plan also leaves pensions unreformed, does little to workers’ compensation costs and burdens job creators with a higher minimum wage cost. There are limited, smaller reforms in the overall package, but nothing that slows the growth in government spending. It’s why the plan relies on massive tax hikes – even if those hikes accelerate out-migration of people and businesses. It’s a bad plan for Illinoisans. Below are the major parts of the budget plan:

  • 33 percent income tax hike: The proposal hikes personal income taxes up to 4.95 percent, up from the current 3.75 percent and corporate rates to 7 percent from 5.25 percent. This will cost Illinoisans at least $5 billion a year.
  • New sugary drinks tax: Illinoisans will also be hit with a new sugary drinks tax that would take another $200-$300 million from Illinoisans wallets annually.
  • More borrowing to cover unpaid bills: Illinois politicians propose to borrow $7 billion to pay down the state’s unpaid bills. But with no major accompanying spending reforms, unpaid bills will only continue to grow.
  • Pension “reform”: The reforms don’t end Illinois’ broken defined-benefit pension system and do little to fix the $130 billion pension crisis.
  • Property tax freeze: The plan freezes property taxes for two years. However, a property tax freeze alone will not decrease local taxpayers’ burdens. Without structural reforms in spending, local governments will continue to accrue more debt and bigger pension liabilities.
  • Adds term limits for legislative leaders: The plan fails to address term limits for all legislators.
  • Minimum wage increase: The plan calls for an increase to the minimum wage that will only result in fewer jobs for Illinois’ minorities and lower-income residents.
  • CPS pension pickup: The state will bail out Chicago by paying $215 million in 2017 and $221 million in 2018 to the Chicago Teacher’s Pension Fund. Every year after, the state will pay for the annual (normal) cost of Chicago teachers’ pensions.

'Enough is Enough' Message Sent to Lawmakers– Illinois' budget stalemate is more than two years old now and it's not sitting well with state residents. Illinois is projected to spend $13 billion more than it will collect in taxes this year, and Ryan Gruenenfelder, the manager of advocacy and outreach for AARP Illinois, says there's also more than $10 billion in unpaid bills from previous fiscal years. He says the impact of the money shortage is felt by college students, working families, older residents and social-service providers. In response, AARP has launched a campaign to put pressure on state lawmakers to get a budget approved."Enough is enough," he said. "Sit down and compromise and find a comprehensive balanced budget that helps make life better for residents of all ages of Illinois and is as equitable as can be for Illinois residents and businesses."The Tax Foundation says Illinois has the fifth-worst tax structure in the nation, and the second-highest property tax rate in the country.Gruenenfelder said the cost of living also is on the increase, and it's putting a big burden on people who are on a fixed income. "Illinoisans, every single day, are facing a future of having to pay for this massive amount of debt," he continued. "It's growing by around $500 million per month. If we don't get a handle on this thing, the future of the state of Illinois is in jeopardy."  Gruenenfelder said spurring lawmakers into action is going to have to come from state residents. He encouraged everyone to call or email their local representative and ask them what their specific plan is to pass a budget, and to tell them, 'Enough is enough.'

DOJ Report Rips Chicago Police for Poor Training, Excessive Force, and Racial Bias -- For years, Chicago police have violated the civil rights of the city’s residents through widespread bias against blacks and repeated use of excessive force, the Justice Department announced on Friday.The conclusions are part of a 164-page report, the result of a 13-month investigation that found a pattern of poorly trained police officers relying too much on the use of force, sometimes deadly, while facing few consequences for their actions. The investigation was launched in the aftermath of the police shooting of teenager Laquan McDonald, who was walking away from the police when he was killed.At the federal courthouse in Chicago, Mayor Rahm Emanuel and federal Attorney General Loretta Lynch said a plan was in the works to fix the problems in Chicago. Lynch, who reportedly hurried to finish the investigation before the end of the Obama administration, said the process of reforming the CPD would continue “regardless of who sits atop the Justice Department.” But Senator Jeff Sessions, Donald Trump’s pick to replace Lynch and a vocal opponent of consent decrees, might have something to say about that. The CPD has used forced nearly ten times more often against blacks than whites. But the problems, the report says, start long before the use of force. Training, both before and during an officer’s career, is lacking. One use-of-force training video the DOJ reviewed was made “decades ago” and is not in compliance with current laws or the department’s own policies. In interviewing recent graduates of the police academy in Chicago, the DOJ found only one in six “came close to properly articulating the legal standard for use of force.” Even when the CPD has taken steps to stem the tide of deadly force, it did so ineffectively. The department’s supply of Tasers, for example, was expanded last year to provide an option for nonlethal force. But officers failed to use them after they were trained too quickly and “without proper curriculum, staff, or equipment.” “This left many officers who completed the training uncomfortable with how to use Tasers effectively as a less-lethal force option — the very skill the training was supposed to teach,” the report says.

New York's public authorities have $13,487 debt for every state resident | Reuters: New York State's public authorities including the Dormitory Authority, the Empire State Development Corp and the Thruway Authority have $267 billion of total debt outstanding, or $13,487 for every resident, the state's chief fiscal officer said in a report on Thursday. The authorities are not subject to the same oversight, transparency and contracting rules as other government bodies. Yet New York is relying on them more often as a way to bypass a state requirement that some borrowing must be approved by voters, a report from New York State Comptroller Thomas DiNapoli said. "New York's public authorities play an increasingly influential role in government yet they operate outside the traditional checks and balances that apply to state agencies," DiNapoli said. "As a result, New York is shouldering a huge debt load issued by public entities operating in the shadows that voters never approved." Most such authorities do not have taxing power and repay their debt using revenue generated from projects they oversee, including tolls on roads. As of September 2016, New York had 1,192 public authorities, including 324 state-level authorities and subsidiaries, 860 local authorities and eight interstate or international authorities, DiNapoli's report said. More than a fifth of the total outstanding debt was "backdoor borrowing," when authorities issued debt that was actually for state purposes, according to the report.

As a deficit looms, here's a look at some of the plans in California's new budget: Gov. Jerry Brown’s newly unveiled state budget calls for spending $179.5 billion in the coming fiscal year, while offering ways to avoid what he believes would otherwise be California’s first deficit in more than three years. Here’s an overview of some of the most important proposals outlined by Brown in the budget he presented to the Legislature on Tuesday. School spending goes up, but not as much as expected: Brown’s budget pegs spending on K-12 schools and community colleges at $73.5 billion for the coming school year, about $2 billion more than this year. Per-pupil spending in elementary, middle and high schools would rise to $15,216. That’s $394 more per student than this year. Even so, the governor is seeking to slow the growth in spending — and help erase the state budget’s projected deficit — by cutting $1.7 billion out of what otherwise would have been earmarked for schools. Legislative Democrats are balking at the governor’s budget plan to cancel the 2013 law that earmarked money for UC and CSU students from families with incomes of up to $156,000 a year. Brown’s budget would only keep giving money to the 37,000 students who received awards for the current academic year. The savings, which won’t be realized until those students graduate, is pegged at $115 million a year. Negotiations at the state Capitol over the past two years have failed to produce a plan to produce needed new dollars for transportation. The governor’s budget offers a new plan to lawmakers, estimated to add $4.3 billion a year for the next decade to cover roadway repairs, and new efforts at expanding public transit. How does he propose to pay for it? The largest source of money would be a new $65 annual fee on all vehicles. The rest would come from a steadily growing excise tax on gas and diesel, money from the state’s auction of greenhouse gas pollution credits, and new efficiencies at Caltrans. Brown’s plan continues to assume more people enroll in Medi-Cal, the healthcare program that provides coverage for those with low incomes. Medi-Cal has been expanded in recent years with money provided by the federal Affordable Care Act, though the program’s fate is uncertain with new Republican leadership in Washington.

 Parents, save up: Cost of raising a child is more than $233K - WDAM-TV 7 (AP) - Expecting a baby? Congratulations! Better put plenty of money in your savings account. The Department of Agriculture says the estimated cost of raising a child from birth through age 17 is $233,610, or as much as almost $14,000 annually. That's the average for a middle-income couple with two children. It's a bit more expensive in urban parts of the country, and less so in rural areas. The estimate released Monday is based on 2015 numbers, so a baby born this year is likely to cost even more. It's a 3 percent increase from the prior year, a hike higher than inflation. Since 1960, USDA has compiled the annual report to inform - and probably terrify - budget-preparing parents. State governments and courts also use the information to write child support and foster care guidelines. The main costs include housing, food, transportation, health care, education, clothing and other miscellaneous expenses. Up to a third of the total cost is housing, accounting for 26 to 33 percent of the total expense of raising a child. USDA comes up with those numbers by calculating the average cost of an additional bedroom - an approach the department says is probably conservative, because it doesn't account for those families who pay more to live in communities that have better schools or other amenities for children.The cost of raising a child varies in different regions of the country. Overall, middle-income, married-couple families in the urban Northeast spent the most ($253,770), followed by those in the urban West ($235,140) and urban South ($221,730). Those in the urban Midwest spent less ($217,020), along with those in rural areas ($193,020).

$400M Property Tax Increase Could Save CPS Finances: Moody’s « CBS Chicago: — The credit rating agency Moody’s says a $400 million property tax increase is the most likely way for Chicago Public Schools to shore up its finances. “If CPS fiscal pressures continue, the district may pursue additional revenue by levying for debt service, which could raise Chicago taxpayers’ property taxes by more than $400 million annually,” according to two reports released Thursday by Moody’s. A property tax increase of that size, through, would weaken the city’s “political and practical ability” to increase taxes to fund pensions and other city services, Moody’s said. “CPS’ deteriorating credit profile reflects years of budget imbalance which have completely drained operating reserves, leaving the district with minimal protection against further budget pressures,” Naomi Richman, managing director of Moody’s, said in a statement. Last December, Gov. Bruce Rauner vetoed a bill that would have given the Chicago Public Schools $215 million it’s counting on to help pay for teacher pensions. “CPS continues to make substantial progress, eliminating a billion dollar budget deficit in the past 18 months through management efficiencies and new revenue,” CPS spokeswoman Emily Bittner said in an emailed statement Thursday night. “Despite Gov. Rauner’s veto of pension dollars for Chicago that every other school district receives, CPS will maintain a balanced budget this year, even as we continue to fight for Gov. Rauner to fix the nation’s most discriminatory school funding system.”

NC charter school enrollment has doubled in five years - While North Carolina’s traditional public schools lost students this school year, charter school enrollment has more than doubled since the state lifted a 100-school cap in 2011. State tallies show 168 charter schools had 91,815 students in the first month of this school year, compared with 45,215 in 100 schools five years earlier. In the past year, charter schools gained 9,630 students while district schools lost about 3,400, the average daily membership reports show. Seventy-five of the state’s 115 districts reported fewer students this year than last year. “Basically the growth in the state is being absorbed by charter schools and home schooling,” said Alexis Schauss, the state’s director of school business. Charter schools, which are independent public schools that report to nonprofit boards, still account for only 6 percent of North Carolina’s 1.5 million K-12 students. But their role in public education is growing even faster than their numbers, as state and federal officials show increasing enthusiasm for offering families alternatives to traditional public schools.

The Number of Librarians in Philly Continues to Dwindle - Public school librarians in the City of Brotherly Love are becoming increasingly scarce, a report published Monday in the Philadelphia Inquirer shows. Just eight full-time, certified librarians work in Philadelphia School District buildings, down from 11 in 2015—and a whopping 94 percent decrease since 1991, when 176 librarians staffed Philly’s public schools. The Inquirer’s Kristen A. Graham credits dwindling public school budgets for the layoffs (in 2013, for example, city officials voted to close 23 public schools, 10 percent of the city’s total number, as the city faced a budget deficit of $1.35 billion over five years). Though the layoffs aren’t that shocking—this is a city that “until very recently did not have full-time nurses and counselors in every school,” Graham reports—they are extremely damaging: Speaking to Graham, Debra Kachel, a professor at Antioch University Seattle and school library expert, estimated that the number of employed librarians in Philadelphia public schools ranks as “the worst nationally.” For a state with some of the lowest scores in standardized reading and math exams among large metropolitan areas— a 2011 Commonwealth Foundation report shows that fourth grade students in Philadelphia rank 16th out of the country’s largest 18 cities in reading scores—the decrease in librarians is acutely felt.

The Library Lockout at Our Elementary School – WSJ - My 6-year-old daughter, Scarlett, is a first-grader at A.N. Pritzker Elementary, one of 600 schools in the Chicago Public Schools system. Scarlett enjoys reading, but she has recently faced a serious problem getting the books she wants. The Chicago Teachers Union is preventing her and her classmates from using the school library. Due to a combination of budget cuts and enrollment numbers that were lower than expected, Pritzker’s librarian was laid off shortly after this school year began. Without a librarian, Pritzker students aren’t allowed to use the library. Dozens of parents have offered to volunteer in the library to keep it open. There was so much interest that the parent-teacher organization created a rotating schedule of regular volunteers to help out. But before parents could begin volunteering, a teachers union member filed a formal complaint with the school system, objecting to the parents’ plan. Several weeks later, a union representative appeared at a local school council meeting and informed parents that the union would not stand for parental volunteers in the library. Although the parents intended to do nothing more than help students check books in and out, the union claimed that the parents would be impermissibly filling a role reserved for teachers. The volunteer project was shut down following the meeting and the library is currently being used for dance classes.  On its website, the Chicago union expresses concern at the “extremely limited in-school and life experiences” available to many poor and minority students. The union says it is focused on closing the “opportunity gap.”  How does forcing the closure of an elementary school library square with the union’s stated mission of fighting for children? How does opposing parents who want to volunteer their time so that children can check out books constitute giving parents the voice they need?

Five key trends in U.S. student performance: Progress by blacks and Hispanics, the takeoff of Asians, the stall of non-English speakers, the persistence of socioeconomic gaps, and the damaging effect of highly segregated schools -- Economic Policy Institute - In 15 years of increasing average test scores, black-white and Hispanic-white student achievement gaps continue to close, and Asian students are pulling away from whites in both math and reading achievement. For the improving groups, these long-term trends may be a major educational success story. In stark contrast, Hispanic and Asian students who are English language learners (ELL) are falling further behind white students in mathematics and reading achievement. And gaps between higher- and lower-income students persist, with some changes that vary by subject and grade. Meanwhile, the proportion of low-income students in U.S. schools has increased rapidly, as has the share of minority students in the student population. The chances of ending up in a high-poverty or high-minority school are highly determined by a student’s race/ethnicity and social class. For example, black and Hispanic students—even if they are not poor—are much more likely than white or Asian students to be in high-poverty schools. These disparities represent a stubborn educational failure story. Attending a high-poverty school lowers math and reading achievement for students in all racial/ethnic groups and this negative effect has not diminished over time. And attending a school in which blacks and Hispanics make up more than 75 percent of the student body lowers achievement of black, Hispanic, and Asian students but does not affect white students (in some of the analyzed years it actually had a small positive influence on math test scores for whites). Sustaining our democratic values and improving our education system call for a host of more coordinated and widespread education, economic, and housing policies—including policies to raise curricular standards, tackle insufficient funding for schools with a large share of low-income students, promote access to education resources from early childhood to college, improve dual language programs, provide economic support for families, and create more integrated schools and neighborhoods.

Poet: I can’t answer questions on Texas standardized tests about my own poems - Badly worded or poorly conceived questions on standardized tests are not uncommon (remember the question about a “talking pineapple” on a New York test in 2012?). But here’s something new: The author of source material on two Texas standardized tests says she can’t actually answer the questions about her own work because they are so poorly conceived. She also says she can’t understand why at least one of her poems — which she calls her “most neurotic” — was included on a standardized test for students. The author is Sara Holbrook, who has written numerous books of poetry for children, teens and adults, as well as professional books for teachers. She also visits schools and speaks at educator conferences worldwide, with her partner Michael Salinger, providing teacher and classroom workshops on writing and oral presentation skills. Her first novel, “The Enemy: Detroit 1954” will be released March 7.  In this amusing but sobering post, Holbrook writes about the episode. This first appeared on the Huffington Post, and Holbrook gave me permission to republish. The tests on which Holbrook’s poems appeared are the STAAR, the State of Texas Assessments of Academic Readiness. The questions were released by the Texas Education Agency. Teachers use past test questions to prepare students for future exams.

Fed Chair Janet Yellen Channels Bernie Sanders in Speech to Teachers -  Pam Martens -- Last night the Federal Reserve convened a Town Hall meeting via webcast with K-12 teachers and college educators of economics and history. Federal Reserve Chair Janet Yellen delivered a speech and then took a series of questions from teachers. It was during the Q&A period that Yellen gave a sobering assessment of the long-term prospects for the U.S. At numerous points, Yellen echoed the income inequality themes that Senator Bernie Sanders raised repeatedly at his rallies around the country during the presidential primaries.When asked about the biggest obstacles to the U.S. economy over the short and long term, Yellen said she did not have serious concerns over the short term but was worried about the longer term. In addition to productivity concerns, Yellen stated: (See video clip below.) “We have seen over many decades now that the returns – the wages and income – of people with more education and higher skills have continued to increase systematically relative to those with less education. By some measures, men with a high school education or less are seeing not only stagnant incomes but the disappearance of jobs that afforded them reasonably secure lives and retirements. And these are problems that really lie outside the scope of what the Federal Reserve is able to address and I think they represent longer term structural trends in the global economy.”   In a similar vein, Yellen remarked: “I also worry a great deal about inequality and the fact that the largest share of gains from aggregate productivity growth have gone to workers at the top of the income distribution. And the gap we’re seeing, as I mentioned, between wages of those with a college education and high school or less have just continued to increase. I mean you can look at some measures that suggest that real wages of high school educated workers have essentially been stagnant for several decades and there’s some recent research that shows that a far smaller share of young people – if you think about the American Dream, that people expect their children to do better than they did, for generations to progress – a far smaller share of young people today are doing as well or better than their parents than was true for most of the post war period.”

Could Free College Really Be This Cheap? -- New York Gov. Andrew Cuomo made a big splash this week when he announced a fairly inexpensive plan to make college tuition-free for as many as 1 million New Yorkers. Unfortunately, the math doesn't appear to add up.  Cuomo's plan would force the state to fully cover college tuition bills beginning this autumn for any of the more than 400,000 New Yorkers who attend full-time a city or state university (including the two systems' two-year schools), so long as they come from a household that annually makes no more than $100,000 (rising to $125,000 by 2019). The fiscally centrist Cuomo says his ambitious plan would cost the state only an additional $163 million in annual financial aid to students, or less than a tenth of the total amount of state and federal grants that undergrads currently receive to pay their tuition bills.  Details are scant, and a spokesman for the governor declined to elaborate on the proposal before it is taken up by the state legislature. 1  If enacted, the Cuomo administration projects that some 200,000 students would attend city and state schools tuition-free by 2019, or half the number of currently enrolled full-time undergrads. Since tuition for residents at city and state schools is cheap (compared to the cost of public colleges in other states) it's possible that existing government grant programs would cover more than 90 percent of the cost of free tuition for the hundreds of thousands of eligible students.  But some experts doubt the governor's claims, raising the risk that it's either not as universal as he said or that lawmakers will dismiss it for being too costly. For starters, a significant number of full-time undergrads already attend city and state universities without having to pay tuition out of pocket, thanks to existing state and federal grants meant for low- and middle-income households. Around 65 percent of students are able to take classes tuition-free at schools in the City University of New York system, budget documents show (PDF). Last year, about 273,000 undergrads received federal Pell grants to attend New York's city and state universities, according to the most recent figures from the two school systems, and around 248,000 full-time undergrads received state tuition grants, according to the state's college financial aid agency (PDF).  Cuomo's plan kicks in funds only if Pell and existing state grants fail to fully cover tuition. 2  Those two sources of funds last year provided nearly $1.9 billion to students at New York's city and state universities, split about equally between the two systems, federal and state data show. The approximately $2.8 billion gap between existing state and federal grants and tuition collected is about what students currently pay out of pocket. 3 While Cuomo's plan would not need to cover that entire amount, his projected $163 million in additional financial aid doesn't come close to making up that difference. 4

Poison Ivy: Not so much palaces of learning as bastions of privilege and hypocrisy | The Economist - AMERICAN universities like to think of themselves as engines of social justice, thronging with “diversity”. But how much truth is there in this flattering self-image? Over the past few years Daniel Golden has written a series of coruscating stories in the Wall Street Journal about the admissions practices of America's elite universities, suggesting that they are not so much engines of social justice as bastions of privilege. Now he has produced a book—“The Price of Admission: How America's Ruling Class Buys Its Way into Elite Colleges—and Who Gets Left Outside the Gates”—that deserves to become a classic. Mr Golden shows that elite universities do everything in their power to admit the children of privilege. If they cannot get them in through the front door by relaxing their standards, then they smuggle them in through the back. No less than 60% of the places in elite universities are given to candidates who have some sort of extra “hook”, from rich or alumni parents to “sporting prowess”. The number of whites who benefit from this affirmative action is far greater than the number of blacks.The American establishment is extraordinarily good at getting its children into the best colleges. In the last presidential election both candidates—George Bush and John Kerry—were “C” students who would have had little chance of getting into Yale if they had not come from Yale families. Al Gore and Bill Frist both got their sons into their alma maters (Harvard and Princeton respectively), despite their average academic performances. Universities bend over backwards to admit “legacies” (ie, the children of alumni). Harvard admits 40% of legacy applicants compared with 11% of applicants overall. Amherst admits 50%. An average of 21-24% of students in each year at Notre Dame are the offspring of alumni. When it comes to the children of particularly rich donors, the bending-over-backwards reaches astonishing levels.

Ransomware Goes Big TimeWashington Post: The cyberattack struck Los Angeles Valley College late last month, disrupting email, voice mail and computer systems at the public community college in Southern California. Then, school officials found a ransom note. The missive advised the college that its electronic files had been encrypted and that the files could only be unlocked with a “private key.” The attackers would supply the key after receiving payment in the valuable digital currency known as bitcoin, which can be used anonymously without a centralized bank.“You have just 7 days to send us the BitCoin after 7 days we will remove your private keys and it’s impossible to recover your files,” the attackers warned, according to a copy of the note obtained by The Washington Post. Leaders of the Los Angeles Community College District decided to pay the ransom. The college paid $28,000 and the files were restored. ArsTechnica: According to the FBI, ransomware payouts in the United States jumped from $25 million in all of 2015 to over $209 million in just the first quarter of 2016. Clearly, this is just the beginning.

Hundreds of Colleges Saddling Students With Unaffordable Debt, Feds Say - About one in four career-training programs at U.S. colleges is at risk of losing federal funding, the lifeblood for most schools, the Department of Education said on Monday. In a news statement, the department disclosed for the first time the number of recent graduates saddled with potentially unmanageable debt. The figures are part of the package of rules known as the gainful employment regulations, which attempt to measure whether graduates of career-training programs end up earning enough to afford their student debt. The Obama administration defined affordability as annual loan payments of no more than 20 percent of discretionary income, or 8 percent of total earnings. The Education Department evaluated typical student debt and earnings information for some 1.2 million recent graduates across 8,637 such programs. About 95 percent of 2,042 at-risk vocational programs are at for-profit colleges, the department said. They range from law schools and master's degree programs to undergraduate certificates. Steve Gunderson, who leads Career Education Colleges & Universities, the for-profit college trade group, blasted the department as politically motivated and seeking to destroy colleges. More than 800 career-training programs across 296 schools produced graduates who recently left school with loan payments exceeding either 30 percent of their annual discretionary income or 12 percent of earnings, government data show. The schools range from the defunct ITT Technical Institute to Harvard University. (A graduate certificate in drama from the Ivy League school leaves the typical student with debt that's 44 percent of discretionary earnings). Unless they challenge the data, schools must warn prospective students that they’re at risk of losing access to federal student loans within a few years. The regulations are meant to police a sector that is heavily reliant on taxpayers for its revenue in the form of federal student loans and grants. The Obama administration wants schools whose students graduate with unaffordable debt to either lower prices or eliminate poorly performing vocational programs.

Public pensions out of control in Texas’ biggest cities --While clamoring for more “local control” on fiscal matters, big-city politicians in Texas have, at the behest of their public-employee unions, resisted efforts to restore local accountability on pensions. And problems are piling up. Austin, Dallas, Houston and San Antonio carry a whopping $22.6 billion in unfunded pension liability, according to Moody’s, the financial analysis firm.“Rapid growth in unfunded pension liabilities over the past 10 years has transformed local governments’ balance sheet burdens to historically high levels,” the Moody’s report stated.Dallas — second only to Chicago in its liability ratio — has unfunded obligations totaling $7.6 billion. That’s more than five times the city’s annual operating revenues.Houston, which came in fourth on the Moody’s list, faces a $10 billion shortfall, more than four times operating revenues.  Austin’s unfunded pensions are 2 ½ times operating revenue and San Antonio’s are nearly double. The problem should concern every taxpayer in the Lone Star State, says James Quintero, director of the Center for Local Governance at the nonpartisan Texas Public Policy Foundation. “There are other ticking time bombs out there getting ready to explode,” he forecast. “It’s not just Dallas’ pension plan that’s taken on excessive risk to chase high yields in a low-yield environment.”

Illinois governor pans state legislature's Chicago pension fix | Reuters: Illinois Governor Bruce Rauner signaled a likely veto on Monday of newly passed legislation to stave off possible insolvency for two of Chicago's pension funds. Credit ratings for the nation's third-largest city have been plummeting largely due to an unfunded pension liability that stood at $33.8 billion at the end of fiscal 2015 for Chicago's four retirement systems. By a 41-0 vote, the Illinois Senate approved the proposed rescue, which cleared the House overwhelming in December. The plan would authorize new city funding for Chicago’s municipal and laborers retirement systems. The systems are projected to run out of money in the coming decade and were depending on legislative sign-off of the city’s enactment of a water and sewer usage tax and telephone surcharge designed to help get them 90 percent funded in 40 years. City officials have acknowledged that more money will be needed starting in 2023 when payments will reach actuarially required levels. “The bill essentially authorizes another property tax hike on the people of Chicago and sets a funding cliff five years out without any assurances that the city can meet its obligations,” Rauner spokeswoman Catherine Kelly said in a statement. “The governor cannot support this bill without real pension reform that protects taxpayers.” Rauner’s response drew belittlement from Chicago Mayor Rahm Emanuel’s administration. “Bruce Rauner is Governor Gridlock, and he is showing why nothing gets done in Springfield,” said Emanuel spokesman Adam Collins, who argued the governor should focus on passing a budget and fixing Illinois' pension woes.

NJ Seeks Help from Bankers to Bring Down Public-Worker Pension Costs - Spokesman says Treasury hopes for ‘new and innovative ideas’ for what is now the worst-funded system in the U.S.  New Jersey is already one of the nation’s most indebted states, and its public-employee pension system, according to one recent estimate, is now the worst-funded state-retirement plan in the country. But the state is also facing even more fiscal trouble thanks in part to nearly $3 billion in pension bonds that were issued two decades ago. Annual debt payments tied to a bond issue that was called the “Pension Security Plan” in 1997 are continuing to ramp up and will reach $500 million in the next few years. The state’s annual pension contribution is also set to increase by nearly $600 million when Gov. Chris Christie introduces a new state budget next month. In the face of that burden and other rising costs tied to retiree benefits, the state Department of Treasury last month issued a formal Request for Proposals from investment-banking institutions looking for their recommendations for “reducing the budgetary burden on the State.” The request from Christie’s administration forcefully emphasized that New Jersey is not interested in issuing any new pension-obligation bonds like those floated 20 years ago by then-Gov. Christie Whitman. Instead, it appears to be a sort of brainstorming exercise to see what, if any, new ideas the financial community can come up with to help the state deal with its rising retiree-benefit costs.

Hawaii public worker pension shortfall grows to $12 billion — The shortfall in Hawaii's public employees' pension fund has grown to more than $12 billion, meaning taxpayers could have to pay an additional $385 million a year to make up for the budget gap.The Honolulu Star-Advertiser reports ( that a study release this week by an independent actuary shows the Employees' Retirement System pension fund deficit was up about $4 million from last year.ERS Executive Director Thom Williams said the pension plan needs the $385 million additional contribution from taxpayers each year to stay afloat. But getting that additional revenue would mean taxpayers would be putting a total of $1.1 billion toward the plan each year."Even though these contributions are high, they are intended to avoid great expense down the road," Williams said. "So the sooner we begin to address the unfunded liability in a proactive way, the less it will ultimately cost to amortize it."Senate Ways and Means Committee Chairwoman Jill Tokuda (D-Kailua-Kaneohe) said the new figures were "truly overwhelming.""It can rain money out of the sky, it still cannot account for these kinds of payments," she said.  Dallas-based actuary Gabriel Roeder Smith & Co. said without the taxpayer payment increases, it would take the fund until 2082 to become whole.

Social Security Taxes Set To Soar For Top Earners In 2017 --Many Americans looking forward to Trump's promise of tax cuts from his administration are going to get a rude awakening when they get their first paychecks of 2017.  While Trump has vowed to cut marginal income tax rates for individuals and corporations, the social security tax levied on the nation's top earners is set to soar in 2017 for top earners. For the 2015 and 2016 tax years, only the first $118,500 of earnings was subject to the 6.2% social security payroll tax.  That said, that "taxable minimum" is set to soar to $127,200 for the 2017 tax year, a 7.3% increase that will cost America's top earners an additional $539 this year.As Bloomberg points out, the steep increase in 2017 is the result of the federal government making up for lost time as the "taxable minimum" is not allowed to increase in tax years during which benefit recipients don't get a cost-of-living increase.A 7.3 percent hike is way above inflation: The main U.S. consumer price index was up 1.7 percent in the 12 months ended in November (the latest data available), and it rose just 0.7 percent in all of 2015. So what’s going on here? Well, theSocial Security taxable minimum is adjusted annually based on an index of U.S. wages, not consumer prices. The National Average Wage Index was up 3.5 percent in 2015, five times faster than inflation. But the real reason for this sudden, steep hike is simply that the government is making up for lost time. The 2017 hike is essentially two years of wage gains packed into one. The wage index also rose 3.6 percent in 2014, but the Social Security Administration couldn’t raise the taxable minimum last year because rules prevent an increase from happening in a year when Social Security recipients don’t get a cost-of-living increase.

Most Americans are one medical emergency away from financial disaster - Wanda Battle, a registered nurse for four decades, was recently hit with a $100,000 medical bill. She has visited her local emergency room on more than one occasion due to severe migraines and mini-strokes. Battle managed to reduce her latest hospital bill to $32,000 based on her relatively low income, but still faces $650 monthly payments for a previous $22,000 medical bill. “There were times I couldn’t work,” says Battle, 61. Although her case is particularly unfortunate — she was not one of the estimated 20 million people to sign up to Obamacare — she is not alone in facing the prospect of a disastrous financial situation after an unexpected bill. A majority of Americans (59%) don’t have enough available cash to pay for even a $1,000 emergency room bill or even a $500 car repair, according to data released Thursday by the personal finance site Indeed, some studies have suggested that medical bills are the No. 1 cause of personal bankruptcies and, early Thursday, the Republican-controlled Senate narrowly passed a budget resolution to repeal the Affordable Care Act.)  “It’s not a matter of if, but when an unexpected expense will pop up,” says Jill Cornfield, a retirement analyst on Half of those surveyed said they actually knew someone who faced a surprise expense of $500 or more in the last year. The good news: The number of those who say they could not afford to meet that unexpected expenses is down from 62% two years ago. When faced with an unexpected expense, 41% who said they would dip into their savings, one-fifth would finance the expense on a credit card, another one-fifth would reduce spending on other things like groceries and entertainment, and 11% said they would borrow from family or friends.  While savings predictably increase with income and education, almost half of the highest-income households — those earning $75,000 per year — and college graduates don’t have enough to pay for these unexpected expenses. However, 47% of those aged 18 to 29 said they would use their savings to cover such a burden, up from 33% in 2014.

Obama says Sanders' supporters helped undermine Obamacare | Reuters: President Barack Obama said on Friday that criticism from the left wing of his own Democratic Party helped feed into the unpopularity of Obamacare, his signature healthcare reform law. Obama has been spending part of his last two weeks in office urging supporters to speak out against plans by Republicans - who will soon control both the White House and Congress - to dismantle the 2010 Affordable Care Act. At a town hall event with Vox Media, Obama acknowledged the politics have been stacked against his reforms, mainly blaming Republicans who he said refused to help make legislative fixes to Obamacare, which provides subsidies for private insurance to lower-income Americans who do not have healthcare plans at work. But Obama also said Liberals like former Democratic presidential candidate Senator Bernie Sanders had contributed to the program's unpopularity. During Sanders' campaign for the presidential nomination, he proposed replacing Obamacare with a government-run single-payer health insurance system based on Medicare, the government plan for elderly and disabled Americans. "In the 'dissatisfied' column are a whole bunch of Bernie Sanders supporters who wanted a single-payer plan," Obama said in the interview. "The problem is not that they think Obamacare is a failure. The problem is that they don't think it went far enough and that it left too many people still uncovered," Obama said.

Repealing the ACA without a Replacement — The Risks to American Health Care - Barack H. Obama, J.D. - Health care policy often shifts when the country’s leadership changes. That was true when I took office, and it will likely be true with President-elect Donald Trump. I am proud that my administration’s work, through the Affordable Care Act (ACA) and other policies, helped millions more Americans know the security of health care in a system that is more effective and efficient. At the same time, there is more work to do to ensure that all Americans have access to high-quality, affordable health care. What the past 8 years have taught us is that health care reform requires an evidence-based, careful approach, driven by what is best for the American people. That is why Republicans’ plan to repeal the ACA with no plan to replace and improve it is so reckless. Rather than jeopardize financial security and access to care for tens of millions of Americans, policymakers should develop a plan to build on what works before they unravel what is in place.

Health Care's Bipartisan Problem: The Sick Are Expensive and Someone Has to Pay - Congress has begun the work of replacing the Affordable Care Act, and that means lawmakers will soon face the thorny dilemma that confronts every effort to overhaul health insurance: Sick people are expensive to cover, and someone has to pay. The 2010 health law, also known as Obamacare, forced insurers to sell coverage to anyone, at the same price, regardless of their risk of incurring big claims. That provision was popular. Not so were rules requiring nearly everyone to have insurance, and higher premiums for healthy people to subsidize the costs of the sick.If policyholders don’t pick up the tab, who will? Letting insurers refuse to sell to individuals with what the industry calls a “pre-existing condition”—in essence, forcing some of the sick to pay for themselves—is something both parties appear to have ruled out. Insurers could charge those patients more or taxpayers could pick up the extra costs, two ideas that are politically fraught.The problem hits people who don’t have access to coverage through an employer or government program such as Medicare. For Congress, addressing the cost of covering sick people who buy their own plans “is the absolute key challenge they have to deal with,” says health-care economist Gerard Anderson, who says he generally supports the health act. Whether it is the government or healthy insurance-buyers that pay that tab, “somebody has to subsidize their cost for them to afford health insurance.” A small number of high-cost patients have long generated a large proportion of health spending. The 10% of people with the highest costs accounted for about two-thirds of health spending, according to the Kaiser Family Foundation, a health-care research nonprofit, when it quantified the phenomenon in 2011.

Massive scientific report on marijuana confirms medical benefits - In a new 400-page analysis that blows through the current state of scientific knowledge on the health risks and benefits of marijuana, one of the strongest conclusions is that it can effectively treat chronic pain in some patients. The sweeping report, released Thursday by the National Academies of Science, Engineering, and Medicine, covered more than 10,000 scientific studies and came to nearly 100 other conclusions. Those mostly highlight unanswered questions and insufficient research related to health effects of marijuana, as well as several risks. However, the firm verification that marijuana does have legitimate medical uses—supported by high-quality scientific studies—is a significant takeaway in light of the Drug Enforcement Administration’s decision in August to maintain marijuana’s listing as a Schedule I drug. That is, a drug that has no medical use. The new report also strongly concludes that the Schedule I listing creates significant administrative barriers for researchers wishing to conduct health research on marijuana and its components—an issue Ars has previously reported on.  “It is often difficult for researchers to gain access to the quantity, quality, and type of cannabis product necessary to address specific research questions on the health effects of cannabis use,” concluded the authors, a panel of experts led by Marie McCormick, a pediatrician and public health researcher at Harvard.In a public presentation of their findings, the report’s authors repeatedly refused to comment on the DEA’s scheduling of marijuana, noting that the issue was outside the scope of their scientific review.The  massive report falls at a hazy time for enforcement of that scheduling. Despite the federal prohibition, dozens of states have enacted or passed laws allowing for medical and recreational use of marijuana. The Obama Administration was lenient in its enforcement of the federal law, largely leaving states alone. However, it’s unclear how President-elect Donald Trump’s Administration will handle the situation.

A Spike in Rates of Pregnancy-related Deaths in Texas Spurs Soul-searching -- Last week, researchers studying maternal mortality in the U.S. reported an ominous trend: The rate of pregnancy-related deaths in Texas seemed to have doubled since 2010, making the Lone Star State one of the most dangerous places in the developed world to have a baby. Reproductive health advocates were quick to blame the legislature for slashing funding in 2011–12 to family-planning clinics that serve low-income women, calling the numbers a “tragedy” and “a national embarrassment.”  Now a 15-member state task force has issued its own maternal mortality report, offering a new view of what might be going on. The bottom line: Maternal deaths have indeed been increasing in Texas, members said, and African-American women are bearing the brunt of the crisis. For 2011 and 2012, black mothers accounted for 11.4 percent of Texas births but 28.8 percent of pregnancy-related deaths. “The disparity in the rates for African-American women is incredibly important and not widely recognized,” said Lisa Hollier, a professor of obstetrics and gynecology at Baylor College of Medicine in Houston who heads the Maternal Mortality and Morbidity Task Force.  But the overall maternal mortality rate and actual number of maternal deaths remain uncertain, as does the underlying reason for the sudden jump in 2011–12. Among the challenges encountered by task force members as they try to find answers: Recent changes aimed at keeping better track of maternal deaths — such as check boxes on death certificates noting that a woman was recently pregnant— have led to confusion and more inaccuracies.

“Many Areas of Appalachia and Mississippi Delta Have Lower Life Expectancy Than Bangladesh” --Yves Smith -  At a major industry conference, the annual Allied Social Sciences Associations meeting, a blue-chip panel of four Nobel Prize winners, Angus Deaton, Joe Stiglitz, Roger Myerson and Edmund Phelps, was in surprising agreement that capitalism had become unmoored and in its current form was exacerbating inequality. These may seem like pedestrian observations, but the severity of the critique, as reported in the Pro-Market blog, was striking.  Deaton was blistering by the normally judicious standards of the academy. Recall that he and his wife Anne Case performed the landmark study, published at the end of 2015, that showed that the death rate had increased among less educated middle aged whites, due largely to addiction and suicides. Thus the plight of economic losers is more vivid to Deaton than his peers, and he sees the disastrous human cost as a direct result of rent-seeeking and untrammeled monopolies. Key extracts:“A lot of the inequality in the U.S. comes from rent seeking. It comes from firms and industry seeking special protection or special favors from the government…To the very considerable extent that inequality is generated by rent seeking, we could sharply reduce inequality itself if rent seeking were to be somehow reduced.”While some forms of inequality could be linked to progress and innovation, said Deaton, inequality in the U.S. does not stem from creative destruction. “A lot of the inequality in the U.S. is not like this. It comes from rent seeking. It comes from firms and industry seeking special protection or special favors from the government,” he said. Deaton highlighted a particularly salient example of rent seeking: the American health care system which, he said, “seems optimally designed for rent seeking and very poorly designed to improve people’s health.”  Stiglitz argued that taxes could help reduce inequality, in concert with other policies to curb rent extraction: Deaton begged to differ: “I don’t think that rent seeking, which is incredibly profitable, is very sensitive to taxes at all. I don’t think taxes are a good way of stopping rent seeking. People should deal with rent seeking by stopping rent seeking, not by taxing the rich,” he said. Deaton is clearly outraged by how opiate manufacturers (meaning Purdue Pharma) have profited by killing poor whites: “There are around 200 thousand people who have died from the opioid epidemic, were victims of iatrogenic medicine and disease caused by the medical profession, or from drugs that should not have been prescribed for chronic pain but were pushed by pharmaceutical companies, whose owners have become enormously rich from these opioids,” said Deaton, who later advocated for a single-payer health care system in the U.S., saying: “I am a great believer in the market, but I think we need a single-payer health care system. I just don’t see any other sensible way to address it in this country.”

Trump Asks Anti-Vaccine Activist Robert Kennedy Jr. to Lead Panel on Vaccine Safety - Donald Trump, who promoted the debunked conspiracy theory that vaccines cause autism during his presidential campaign, asked a fellow skeptic of the scientific consensus on the issue, Robert Kennedy Jr., to chair a commission on “vaccine safety and scientific integrity” during a meeting at Trump Tower on Tuesday. Kennedy, who recently accused the Centers for Disease Control of orchestrating a “cover up of the vaccine-autism connection,” and scolds the media for “undue reverence for the CDC” told reporters after the meeting that “President-elect Trump was very thoughtful on the issue,” and that he had agreed to lead the commission. Robert Kennedy Jr. says he accepted Trump request to chair commission on "vaccine safety and scientific integrity" “President-elect Trump has some doubts about the current vaccine policies and he has questions about it,” Kennedy said. “He says his opinion doesn’t matter, but the science does matter and we ought to be reading the science and we ought to be debating the science.” “Everybody ought to be able to be assured that the vaccines that we have — he’s very pro-vaccine, as am I — but that they’re as safe as they possibly can be,” Kennedy added. Kennedy’s activism on the issue is well-known. He launched a new advocacy group, the World Mercury Project, in November with a fundraising pitch in which he likened vaccinating children to “assault and battery — it’s child abuse, in some cases, it’s even worse.”

Monsanto's Roundup Linked to Fatty Liver Disease - Glyphosate —the controversial active ingredient in Monsanto's top-selling weedkiller Roundup and other herbicides—can cause non-alcoholic fatty liver disease in rats at very low, real-world doses, according to a peer-reviewed study published in Nature.   The groundbreaking research is the first to show a "causative link between an environmentally relevant level of Roundup consumption over the long-term and a serious disease," stated lead author Dr. Michael Antoniou of King's College London, who described the findings as "very worrying." Non-alcoholic fatty liver disease is the accumulation of extra fat in liver cells not caused by alcohol. It's a serious and common condition that affects up to 90 million people in the U.S. For the study, the researchers used cutting-edge molecular profiling methods to examine the livers of female rats who were fed an extremely low dose of Roundup over a two-year period. The rats were administered an ultra-low dose of only 4 nanograms per kilogram of body weight per day, which is 75,000 times below EU and 437,500 below U.S. permitted levels—basically thousands of times below the amount allowed by regulators around the world. As King's research associate Dr. Robin Mesnage explained to the Daily Mail , "the concentration of glyphosate that was added to the drinking water of the rats corresponds to a concentration found in tap water for human consumption." "It is also lower than the contamination of some foodstuffs," Mesnage added.  The team found evidence that consumption of low doses of glyphosate over time can cause cell damage, serious fatty liver disease and areas of dead tissue or necrosis in the livers, as the Daily Mail reported from the study.

Factory farming blamed for massive bird flu outbreak: experts - Korea Herald - Two months into the outbreak of a highly pathogenic H5N6 strain of bird flu in the country, experts said that poor breeding conditions at poultry farms such as industrial-scale farming of egg-laying hens may have accelerated the spread of avian influenza virus. A record number of 30.4 million birds have been culled throughout the nation so far as of Wednesday, with egg-haying hens accounting for over 73 percent. While the government has yet to offer clear reason for the worsening situation, casting the blame on migratory birds, experts pointed out that the battery cage-facilities at poultry farms and stockbreeding farmhouses have scaled up the damage. These cages, rows and columns of identical cages connected together like cells, can house millions of birds. Hens spend their entire lives in a sheet of A4 paper-sized cage with dust, ammonia gas and stink.Experts and animal rights activists have been demanding the authorities come up with regulatory improvements in Korea’s overall poultry farming systems and upgrade quarantine measures.  Professor Kim Jae-hong of Seoul National University’s College of Veterinary Medicine said that “it would be strange if the virus does not spread in such a filthy environment. Damages (from the recent AI outbreak) could have been minimized if there was an upgrade in farming systems that provides a healthy environment for poultry breeding, thinking animal health and welfare.”

It's Official: First Bumble Bee Species Listed as Endangered in 'Race Against Extinction' - The U.S. Fish and Wildlife Service (USFWS) has declared the rusty patched bumble bee an endangered species under the U.S. Endangered Species Act (ESA). This is the first-ever bumble bee in the U.S., and the first wild bee of any kind in the contiguous 48 states, to receive ESA protection. This landmark decision was made in "a race against extinction" of the Bombus affinis which is "balancing precariously on the brink of extinction," the agency said in its announcement Tuesday. The bee, known for its distinctive reddish mark on its abdomen, was once common and abundant across 28 states from Connecticut to South Dakota, the District of Columbia and two Canadian provinces, but has plummeted by 87 percent since the late 1990s. Only small, scattered populations remain in 13 states and one province. "The rusty patched bumble bee is among a group of pollinators—including the monarch butterfly —experiencing serious declines across the country," USFWS Midwest Regional Director Tom Melius said. "Why is this important? Pollinators are small but mighty parts of the natural mechanism that sustains us and our world. Without them, our forests, parks, meadows and shrublands, and the abundant, vibrant life they support, cannot survive, and our crops require laborious, costly pollination by hand." The rusty patched bumble bee is already listed as "endangered" under Canada's Species at Risk Act and as "critically endangered" on the International Union for Conservation of Nature's Red List . The insect is an important pollinator of prairie wildflowers, as well as food crops such as cranberries, blueberries, apples, alfalfa and more.

'It's Outrageous': EPA Acknowledges Proven Dangers of Bee-Killing Pesticides But Refuses to Restrict Them - The U.S. Environmental Protection Agency (EPA) acknowledged for the first time on Thursday that three of the nation's most-used neonicotinoid pesticides pose significant risks to commercial honey bees. But in a second decision , which represents a deep bow to the pesticide industry, the agency refused to restrict the use of any leading bee-killing pesticides despite broad evidence of their well-established role in alarming declines of pollinators.  The EPA analysis indicates that honey bees can be harmed by the widely-used pesticides clothianidin, thiamethoxam and dinetofuran. The agency also released an updated assessment for a fourth leading neonicotinoid—imidacloprid—showing that in addition to harms to pollinators identified last year, the pesticide can also harm aquatic insects.  Yet on the same day the EPA revealed the dangers these pesticides pose to pollinators, it reversed course and backed away from a proposed rule to place limited restrictions on use of the bee-killing neonicotinoid pesticides when commercial honey bees are present in a field. Instead, the agency announced voluntary guidelines that impose no mandatory use restrictions.  "It's outrageous that on the same day the EPA acknowledged these dangerous pesticides are killing bees it also reversed course on mandating restrictions on their use," said Lori Ann Burd, director of the Center for Biological Diversity's Environmental Health program. "This is like a doctor diagnosing your illness but then deciding to withhold the medicine you need to cure it."

Growing mega-cities will displace vast tracts of farmland by 2030, study says - Our future crops will face threats not only from climate change, but also from the massive expansion of cities, a new study warns. By 2030, it’s estimated that urban areas will triple in size, expanding into cropland and undermining the productivity of agricultural systems that are already stressed by rising populations and climate change. Roughly 60% of the world’s cropland lies on the outskirts of cities—and that’s particularly worrying, the report authors say, because this peripheral habitat is, on average, also twice as productive as land elsewhere on the globe. “We would expect peri-urban land to be more fertile than average land, as mankind tends to settle where crops can be produced,” says Felix Creutzig from the Mercator Research Institute on Global Commons and Climate Change in Berlin, and principal author on the paper. “However, we were ignorant about the magnitude of this effect.” The agricultural losses they calculated in the study, published in Proceedings of the National Academy of Sciences, translates to a 3 to 4% dip in global agricultural production.  This may not appear to be a huge figure at first glance, but on the regional scale the picture changes. Across countries and different crops, the effects of this loss vary and become more intense. In Africa and Asia especially—which together bear 80% of the projected loss due to rising urbanisation in these regions—urban expansion will consign farmers to an even tougher agricultural reality. To arrive at the estimates, the researchers combined datasets on cropland location, productivity, and projected urban expansion by 2030. By superimposing these layers of information on one other, they could highlight the locations where cropland and urban spread are expected to intersect in the future. These projections reveal hotspots of loss in countries like Egypt, Nigeria, the countries that flank Lake Victoria in East Africa, and in Eastern China. (China alone is expected to experience one-quarter of the global cropland loss.)  A major worry surrounding the disappearance of this productive land is the impact it will have on staple crops such as maize, rice, soya beans, and wheat, which are cornerstones of global food security. Many of these crops occur in areas that will be consumed by urban spread in years to come.

Scientists turn mild-mannered mice into killers -- Step aside killer zombies: scientists have delved deep into ancient brain circuits to reveal neurons that can instantly turn mild-mannered mice into ferocious predators — before switching the rodents back to their normal placid selves.The researchers at Yale University used “optogenetic” technology, which switches specific neurons on and off in genetically engineered animals with laser light, to tap into brain mechanisms that control predatory hunting.  “We’d turn the laser on and they’d jump on an object, hold it with their paws and intensively bite it as if they were trying to capture and kill it,” said Ivan de Araujo, lead investigator.  The mice attacked not only live prey such as crickets, which they immediately devoured, but also inanimate objects such as mobile plastic toys that they would normally avoid. The study, published in the journal Cell, was part of a broader programme to research the evolutionary biology and neural mechanisms underlying feeding behaviour in animals. Investigation of various brain regions showed that the central nucleus of the amygdala was closely associated with the urge to hunt and with controlling the jaw and neck muscles required to subdue and kill prey. By manipulating brain cells in this region through optogenetics, the Yale team found one distinct set of neurons controlled pursuit and another controlled the kill. If the hunting neurons were switched on and the biting set inactivated, the mice pursued prey but could not deliver the killer bite to finish it off. “We now have a grip on their anatomical identities, so we hope we can manipulate them even more precisely in the future,” said Dr de Araujo.

Wastewater treatment upgrades result in major reduction of intersex fish: Upgrades to a wastewater treatment plant along Ontario's Grand River led to a 70 per cent drop in fish that have both male and female characteristics within one year and a full recovery of the fish population within three years, according to researchers at the University of Waterloo.The 10-year study, published in Environmental Science and Technology found that the microorganisms used to remove ammonia in the wastewater treatment process also reduced the levels of endocrine disrupters in the water, which caused the intersex occurrences in fish to dramatically decline. "Having long-term data of the fish population, before and after the wastewater treatment upgrades makes this a truly unique study," said Mark Servos, Canada Research Chair in Water Quality Protection in Waterloo's Department of Biology. "The changes to Kitchener's wastewater treatment system have had a much larger positive impact then we had anticipated." In 2007, Servos started tracking the number of intersex male rainbow darter fish in the Grand River. Intersex fish are a result of exposure to natural and synthetic hormones in the water, which cause male fish to grow eggs in their testes. At one point Servos noted the rate of intersex changes in the Grand River was one of the highest in the world. In 2012, the Region of Waterloo upgraded the Kitchener Wastewater Treatment Plant and changed the aeration tank to reduce toxic ammonia. Within one year the proportion of intersex males dropped from 100 per cent in some areas to 29 per cent. By the end of three years, the numbers dropped below the upstream levels of less than 10 per cent. "Rainbow darters are the Grand River's canary in the coal mine," said Servos, also a member of the Water Institute at Waterloo. "They're extremely sensitive to the concentration of estrogens and other hormone disrupters in the water. Still, we didn't expect them to recover so quickly."

China Announces That It Will Cover Nearly A Quarter Of The Country In Forest By 2020 - China has announced, via a United Nations report, that it will be covering nearly a quarter of the country with forests by 2020.  The plan is to turn China into an “ecological civilization” and function as a model for future building projects. “The outdated view that man can conquer nature and ignore the bearing capacity of resources and the environment should be completely abandoned,” said Zhu Guangyao, executive vice president of the Chinese Ecological Civilization Research and Promotion Association. “Conscientious efforts should be made to live in harmony with nature, allowing for a new approach to modernization characterized by such co-existence.” The report also indicated that by 2020 the country plans on cutting water consumption by 23 percent, energy consumption by 15 percent and carbon emissions per unit of GDP by 18 percent. There is also action to restore 35 percent of the natural shorelines, increase prairie vegetation coverage by 56 percent and reclaim more than half of reclaimable desert in the country.

The wild, extinct supercow returning to Europe - The earliest cows were mighty beasts that stood almost as tall as elephants, with lean, powerful frames and fearsome horns that would make a hunter think twice. For thousands of years the aurochs were the largest land mammals in Europe, until the rise of human civilization decimated their numbers, and the last of the species died in Poland in 1627 -- one of the first recorded cases of extinction. Conservationists now believe the loss of the keystone herbivore was tragic for biodiversity in Europe, arguing that the aurochs' huge appetite for grazing provided a natural "gardening service" that maintained landscapes and created the conditions for other species to thrive. The theory is now being put to the test, as a "near 100% substitute" of the beast is returned to the forests. Ecologist Ronald Goderie launched the Tauros programme in 2008, seeking to address failing ecosystems. The most powerful herbivore in European history seemed to offer a solution. "We thought we needed a grazer that is fully self-sufficient in case of big predators...and could do the job of grazing big wild areas," says Goderie. "We reasoned that this animal would have to resemble an auroch." Rather than attempt the type of gene editing or high-tech de-extinction approaches being employed for species from woolly mammoths to passenger pigeons, Goderie chose a method known as back-breeding to create a substitute bovine he named "Tauros." Auroch genes remain present in various breeds of cattle around the continent, and the team identified descendants in Spain, Portugal, Italy and the Balkans. Geneticists advised breeding certain species together to produce offspring closer to the qualities of an auroch, and then breed the offspring.

Behind New Zealand’s wild plan to purge all pests - New Zealand wants to rid itself of all its invasive pests on a tight deadline. That’s where Russell and his colleagues come in. They are about to start a major research project to develop some of the necessary technologies, such as new baits, species-specific poisons and genetic tweaks that interfere with animal fertility. To succeed, the project will require public and political support — and money. In a 2015 paper2, the team estimated the entire cost at around NZ$9 billion (US$6 billion), arguing that the savings to pest-control programmes, and the reduction in environmental damage and crop loss, would more than cover the outlay. Their argument has been convincing. “Our government just grabbed that paper, and the surrounding evidence and public goodwill, and announced this policy,” Russell says. “It’s been pretty hectic here ever since.” New Zealand is a poster child for the havoc wrought by invasive species. For millennia it was an island of small lizards and flightless birds, such as the iconic kiwi. Since land mammals, including humans, first arrived some 750 years ago, the number of species of native vertebrate fauna have nearly halved — at least 51 species of bird have disappeared in that time. Losses sped up dramatically after Europeans arrived in the late eighteenth century. The mammalian pests are a drain on New Zealand’s economy. The government spends around NZ$70 million each year on pest-control programmes for animals, and invasive predators cost the country an estimated NZ$3.3 billion a year in lost productivity3. Most of the losses come from agriculture, but government officials also worry about the hit to the country’s reputation as a destination for unspoilt natural beauty. “Last year, tourism overtook agriculture as our biggest revenue earner,” says Maggie Barry, the minister of conservation. “Our environment is what attracts people here.” Although the environmental and economic arguments had been around for some time, many people credit physicist Paul Callaghan with getting the public to back eradication plans. Callaghan was an eminent scientist and a household name in New Zealand — a sort of Kiwi David Attenborough — writing popular books and presenting television shows about science and innovation. In a public address in 2012, he encouraged New Zealanders to save the nation’s native fauna by eradicating its invasive pests. “It’s crazy and ambitious but I think it might be worth a shot,” he said. The address would be his last; he died of cancer a few months later.

London exceeded its annual air pollution limit in just 5 days -- London’s filthy air has smashed legal limits on annual levels of traffic fumes just 120 hours into the New Year.  A monitor on Brixton Road has already recorded more than 20 hourly readings when concentrations of toxic nitrogen dioxide exceeded 200 micrograms per cubic metre since Big Ben sounded in 2017.  Under European law residents, pedestrians and cyclists should not be exposed to such high levels of N02 - a gas emmitted by diesel engines - more than 18 times in an entire year.  The breach comes even earlier than last year when the limit was broken on January 8 on Putney High Street.  Brixton resident Alan Andrews, a lawyer for the campaign group ClientEarth, said the breach was “another shameful reminder of the severity of London’s air pollution.” He added: “It is absolutely essential that the Mayor now delivers on his promises and that the national government back him to the hilt. “He has promised to introduce a bigger ultra-low emission zone in 2019 and to deploy the cleanest buses on the most polluted roads.  “While these are vital steps in the right direction, we can’t wait another three years for action. We need immediate action to cut pollution in the short-term and protect Londoners’ health during these pollution spikes.”  The breach comes the day after new research linked traffic pollution with higher levels of dementia.  Concentrations  of N02 were particularly high yesterday when a “blanket” layer of still cold air trapped vehicle fumes and stopped them being dispersed. 

The filth they breathe in China - Winter has returned to northern China. And so has the country’s trademark, deadly smog.The central government recently declared its first-ever national red alert for air quality, with pollution levels hovering over 12 times the level recommended by the World Health Organization. Indeed, China’s unprecedented growth has come at a horrific social cost that is just beginning to get serious attention. The political leadership of China, like Japan and South Korea before it, put economic growth far above environmental protection or health concerns, and the country now faces a catastrophically polluted countryside. Nearly all aspects of China’s environment are affected, and the true economic and health effects are only now becoming apparent.Pollution in China is at an unsustainable level. The cost in lives and the cost of cleaning up China’s ruined rivers, lakes, skies, and soil are staggering. Just as significant will be the economic cost of changing the way business is done in China to prevent further environmental destruction. The lack of industrial regulation, the burning of dirty coal, and the rapid growth in private ownership of cars have combined to create one of the world’s worst air pollution problems. On one of my first trips to Beijing, as our plane touched down in the early afternoon, the sky looked as though it was dusk, a phenomenon universally noted by visitors. The rarity of sunny and blue sky is avidly remarked on by everyone from shopkeepers to government officials — the latter, of course, off the record. By some estimates, only 1 percent of China’s urban dwellers breathe safe air. During the winter of 2012–13, levels of the most dangerous type of particulate matter in Beijing’s air were over 20 times the amount recommended by the World Health Organization. Midday in Beijing looked like late evening, and residents were urged to stay inside.

As the smog lifts, China's ports grapple with huge traffic jam of ships | Reuters: A huge traffic jam of hundreds of ships carrying coal and iron ore into China has built up outside key ports like Tianjin and Caofeidian, just as winter demand hits its peak ahead of the Chinese New Year holiday later this month. Major northern Chinese ports have suspended loading of ships several times since December 20 due to poor visibility largely caused by smog that has enveloped large parts of northern China at various times in recent weeks. This has left hundreds of ships sitting in China's Bohai Bay waiting to offload into key Chinese industrial hubs like Tianjin, which is close to Beijing. An officer onboard the 119,503 deadweight tonne (DWT) Nord Vela, which anchored off Caofeidian on January 5, said when contacted by phone that the delays were the worst he had seen. "Most of the time we can berth in one or two days. But we've been waiting four days already," he said, opting not to give his name. Other ships are similarly affected. The captain of the 93,258 DWT LM Selene said it has been waiting for seven days to berth at Tangshan, while crew on the 114,091 DWT Anangel Dawn said it had waited idly for five days near the Caofeidian anchorage before docking at Huanghua. Shipping data from Thomson Reuters Eikon shows that more than 100 dry-bulk carriers, mostly carrying coal and iron ore for China's power stations and steel mills, have been waiting to deliver into the ports of Tianjin and its nearby terminals at Caofeidian and Huanghua.

Colorado’s governor won’t issue clean-air executive order  — Citing backlash from Republicans, Colorado’s Democratic governor said Tuesday he has abandoned the idea of issuing an executive order to seek a one-third cut in greenhouse gas emissions from power plants. But Gov. John Hickenlooper insisted he hadn’t given up on the proposal’s goals — or his own commitment to maintaining Colorado’s status as a national leader in fighting air pollution. “I think the response — the pushback — from the executive order was so intense that the potential benefits were outweighed by the collateral damage,” Hickenlooper told reporters on the eve of the 2017 state legislative session. “That being said, I continue to hold it up as a vision” for reducing emissions, he said. The draft order revealed by The Associated Press in August would have directed state agencies to work on ways to cut carbon dioxide emissions from power generators by 35 percent by 2030, compared with 2012 levels. It said warming temperatures and violent weather related to global warming threaten Colorado’s economy, including agriculture, skiing and summer recreation. The proposal directed agencies to work with utilities to keep energy affordable to consumers. It did not disclose how the state would try to enforce the goals. A U.S. Environmental Protection Agency Clean Power Plan set similar targets for Colorado and separate targets for other states. The Supreme Court suspended that plan pending the outcome of lawsuits challenging the EPA rules. GOP lawmakers argued that federal courts had to settle those lawsuits before Hickenlooper could push ahead with any state plan.

Scientists Map Vast Peat Swamps, a Storehouse of Carbon, in Central Africa - Scientists have mapped what they say is the largest peatland in the tropics, an area larger than New York State in the Congo Basin in Central Africa. The peat, which consists of slowly decomposing vegetation in swamp forests, has been accumulating for more than 10,000 years. As in all peatlands, the vegetation is a natural storehouse of carbon taken from the atmosphere — in this case, about 30 billion metric tons of carbon, or roughly equivalent to the carbon in two decades of fossil fuel emissions in the United States. “It’s astonishing to me that in 2017 we can be making these kinds of discoveries,” said Simon Lewis, a professor at the University of Leeds in England and an author of a study on the peatlands being published on Wednesday in the journal Nature. Dr. Lewis and his colleagues first discovered the peatlands several years ago, working on a hunch that in the wetlands known as the Cuvette Centrale, which straddle the border of the Republic of Congo and the Democratic Republic of Congo, they would find peat in layers under the swamps. The vegetation, which is waterlogged year-round, lacks oxygen and other nutrients that would lead to its quick decomposition. The current study used satellite imaging and analysis to determine the extent of the peat, which is about 55,000 square miles. Field work across the wetlands — which Dr. Lewis said were the most difficult expeditions he had undertaken in 15 years of research in Africa — revealed the depth of the peat, up to 20 feet, allowing a calculation of the amount of stored carbon.

Carbon deposit in Congo swamp equal to 20 years of U.S. gas emissions: study | Reuters: Scientists say a recently discovered area of peatland straddling the two Congos contains 30 billion tonnes of carbon dioxide, equivalent to 20 years of U.S. greenhouse gas emissions, and must be protected to prevent major environmental damage. The British and Congolese teams, who made the discovery in 2014, say it is the largest known tropical peatland - home to rare gorillas and forest elephants - and in Wednesday's edition of Nature they say development there would release the gas. Carbon dioxide is linked to climate change and peatlands, formed from the accumulation of dead plant material, act as "carbon sinks." Peat does not decompose in a water-logged state but when it dries, the organisms that break down plant material revive and the carbon seeps back into the atmosphere. "Peatlands are only a resource in the fight against climate change when left intact, and so maintaining large stores of carbon in undisturbed peatlands should be a priority," Leeds University ecologist and one of the study's authors, Simon Lewis, said. The heavily forested and swampy terrain has kept development to a minimum - there is virtually no mining activity - but scientists say similar peatlands in rugged parts of Indonesia have been threatened by agriculture. "It's very remote but what we've seen in south-east Asia is that these once-remote areas have been dried out and converted to oil palm plantations and rice plantations and other forms of industrial agriculture causing a huge release of carbon dioxide into the atmosphere," Lewis told Reuters.

Exclusive: OECD opens investigation into WWF in world first - Survival International - In an unprecedented move, a member of the Organization for Economic Co-operation and Development (OECD) has agreed to investigate a complaint that the World Wide Fund for Nature (WWF) has funded human rights abuses in Cameroon, beginning a process which until now has only been used for multinational businesses.  Survival submitted the complaint in February 2016, citing numerous examples of violent abuse and harassment against Baka “Pygmies” in Cameroon by WWF-funded anti-poaching squads. Survival also alleges that WWF failed to seek communities’ free, prior and informed consent for conservation projects on their ancestral land.This is the first time a non-profit organization has been scrutinized in this way. The acceptance of the complaint indicates that the OECD will hold WWF to the same human rights standards as profit-making corporations.WWF funds anti-poaching squads in Cameroon and elsewhere in the Congo Basin. Baka and other rainforest tribes have reported systematic abuse at the hands of these squads, including arrest and beatings, torture and even death, for well over 20 years.Survival first urged WWF to change its approach in the region in 1991, but since then the situation has worsened.Baka have repeatedly testified to Survival about the activities of these anti-poaching squads in the region. One Baka man told Survival in 2016: “[The anti-poaching squad] beat the children as well as an elderly woman with machetes. My daughter is still unwell. They made her crouch down and they beat her everywhere – on her back, on her bottom everywhere, with a machete.” In two open letters Baka made impassioned pleas to conservationists to be allowed to stay on their land. “Conservation projects need to have mercy on how we can use the forest … because our lives depend on it.” Getting a conservative on the court early in his term would help Trump ease concerns among Republicans and others on the right who are skeptical of his conservative bona fides. Putting conservatives in control of the Supreme Court -- and nullifying the swing-vote power of Justice Anthony Kennedy, a conservative who sometimes votes with liberals -- has been high on the right's wish list.

U.S. posts second-warmest year on record, breadth of warmth ‘unparalleled’ - Every single state and every single city in the Lower 48 states was warmer than normal in 2016. For the nation, the year ranked second-warmest in records that date back to 1895. The nation’s average temperature was 54.9 degrees, nearly 3 degrees above the long-term average, NOAA reported. Only 2012 was warmer in historical records, NOAA said, by less than half a degree. The U.S. has had 20 straight warmer-than-normal years and is warming at the rate of 0.15 degrees per decade. All of the Lower 48 states registered one of their top-seven warmest years. “The breadth of the 2016 warmth is unparalleled in the nation’s climate history,” NOAA said. “No other year had as many states breaking or close to breaking their warmest annual-average temperature.” Thirty-four cities recorded their warmest year, from the Gulf Coast to the shores of the Arctic Ocean, and include: Asheville, New Orleans, Houston, Atlanta, Nashville, New York (La Guardia), Harrisburg, El Paso, Juneau and Barrow (Alaska). Alaska posted its warmest year on record for the third time in as many years. Its temperature was nearly 6 degrees above average and is rising at the feverish pace 0.3 degrees per decade. Set against the backdrop of record- and near-record warmth, the nation witnessed extreme rainstorm after extreme rainstorm. Based on an analysis from reinsurer Munich Re, USA Today reported last week that the U.S. experienced 19 floods in 2016, more than any other year on record. Several extreme rainfall events were described as 1-in-1,000-year occurrences, including torrents that swamped northern Louisiana in March, Greenbrier County, W.Va., in June, Ellicott City, Md., in July, southern Louisiana in August and eastern North Carolina in October (from Hurricane Matthew).

San Francisco Receives More Rain in First Eight Days of January Than All of 2013 - Extreme weather , from drought to heavy downpour, lambasted much of California over the last couple of weeks. An atmospheric river brimming with moisture, known as the "Pineapple Express," brought tropical Hawaiian water to California with some of the worst flooding since 2005 . The river can carry up to 15 times the equivalent volume of the Mississippi River. According to NASA , "Between 30 and 50 percent of the annual precipitation in the western U.S. comes from just a few atmospheric river events." More than 350 billion gallons of water poured into Northern California reservoirs last week. Reservoirs from Mount Shasta to Lake Tahoe filled faster than any time since 1922. Lake Shasta is the state's largest reservoir, a crucial water source enabling agriculture in the otherwise dry San Joaquin Valley. Lake Shasta is now 82 percent full . Fifteen feet of snow fell on Mammoth Mountain in the eastern Sierras from Jan. 6 to 11. Kirkwood Ski Resort added 11 feet of snow in five days. Since Oct. 1, precipitation in the Sierra Nevada has been on pace with 1982-83, northern and central Sierra, and 1968-69, southern Sierra, as the wettest winters on record in modern times. With the extreme rainfall came deadly mudslides, torrential flooding and hurricane-force winds. Thousands of people were forced to evacuate their homes. At least four fatalities are linked to rain, snow, mudslides and flooding.  Squaw Valley Ski Resort in Olympic Valley recorded a record-breaking 173-mph wind gust at its 8,700-foot peak. That's equivalent to a Category 5 hurricane, which rips buildings off their foundations. Though rainfall from December to late February is the normal pattern, San Francisco received more rain in the first eight days of January than it did during all of 2013.

‘This is a big deal’: Storms could spell end to historic drought - San Francisco Chronicle: The storms barreling into California aren’t only flooding towns, ripping trees from the earth and igniting roadway chaos.They’ve had the extraordinary effect of filling reservoirs that haven’t breached their brims in years and, for much of the north state, intensifying a rainy season that is finally, mercifully, driving an end to the historic drought.“In the very northern part of California, yes, the drought is over,” said Marty Ralph, director of the Center for Western Weather and Water Extremes at UC San Diego’s Scripps Institution of Oceanography. “In the south, not so much.” This weekend, so much water fell from the sky that at one point nearly 63 million gallons of water per minute poured into the Folsom Reservoir near Sacramento, leaving dam operators at the long-dry basin opening the floodgates in an exercise that has occurred just a few times in the past five years.The story was similar across the state. California’s 154 major reservoirs on Tuesday held what they typically do after January, normally the wettest month.At Don Pedro Reservoir outside Yosemite, which San Francisco shares with irrigation districts in Modesto and Turlock and serves as the largest storage site for the city and its southern suburbs, the Bay Area holdings reached capacity.“This is a big deal,” said Charles Sheehan, a spokesman for the San Francisco Public Utilities Commission, noting that the agency now has at least five years’ worth of supplies for its 2.6 million customers. “We were very nervous. It was three or four dry years in a row, and our water bank was getting lower and lower.”The greatly improved reserves are the result of an atmospheric river — essentially massive channels of storm clouds that provide up to 50 percent of the state’s water — that struck California in the New Year after a wet fall.

20 inches of rain, 12 feet of snow finally end 5-year drought in N. California: The recent onslaught of rain and snow finally brought much-needed relief to northern California, ending a punishing five-year drought, federal officials said Thursday. "Bye bye drought ... Don't let the door hit you on the way out," tweeted the National Weather Service's office in Reno, Nev., which monitors parts of the region. Overall, less than 60% of California remains in drought for the first time since early 2013, according to the weekly U.S. Drought Monitor. A year ago, drought covered 97% of the state. Stations up and down the Sierra mountain chain reported twice the amount of normal rain and snow for this time of year after snowstorms doubled the vital snowpack there that provides the state with much of its year-round water supply. "It's been a nice little miracle month after five bad years," said meteorologist David Miskus of the National Oceanic and Atmospheric Administration, who wrote this week's drought report. More than a foot of precipitation fell in the Sierra in the past week alone, leaving most major reservoirs at or above average levels, Miskus said. Strawberry Valley, Calif., received 20.7 inches of precipitation, and the Heavenly Ski Area near Lake Tahoe picked up a whopping 12 feet of snow. The excessive snowfall even led to closures of some ski resorts because of blizzard conditions and road closures. However, much of southern California remains dry, though most not at the most severe level of drought. Only 2% of the state is in that category of "exceptional" drought: an area that stretches from Los Angeles to Santa Barbara. Across southern California, reservoirs and underground water supplies remain below normal, the Drought Monitor said.

Study documents tree species' decline due to climate warming  (AP) -- A type of tree that thrives in soggy soil from Alaska to Northern California and is valued for its commercial and cultural uses could become a noticeable casualty of climate warming over the next 50 years, an independent study has concluded. Yellow cedar, named for its distinctive yellow wood, already is under consideration for federal listing as a threatened or endangered species. The study published in the journal Global Change Biology found death due to root freeze on 7 percent of the tree&apos;s range, including areas where it&apos;s most prolific. It cited snow-cover loss that led to colder soil. Additional mortality is likely as the climate warms, researchers said. "Lack of snow is only going to become more and more prevalent," said lead author Brian Buma, a University of Alaska Southeast assistant professor of forest ecosystem ecology. By 2070, winter temperatures in about 50 percent of the areas now suitable for yellow cedar are expected to rise and transition from snow to more rain, according to the study. Yellow cedar began to decline in about 1880, according to the U.S. Forest Service, and its vulnerability is viewed as one of the best-documented examples of climate change&apos;s effect on a forest tree. The trees are in the cypress family and are not true cedars, which are part of the pine family. They have grown to 200 feet and can live more than 1,200 years.

70% of coral in Japan's largest coral reef have died - Japan has reported an alarming rate of death in its largest coral reef.  The environment ministry says that 70 percent of the coral at Sekiseishoko, off Okinawa, is dead. 91.4 percent of the coral in the largest reef in the Northern Hemisphere has also been bleached due to warm temperatures — meaning they're vulnerable and very likely to die, as well. The Japan Times cited a ministry official saying that accelerated coral bleaching was taking place in 35 points at the reef, located between Ishigaki and Iriomote islands in Okinawa.The report at Sekiseishoko comes after the ministry found in November last year, that most of the reef was bleached due to high water temperature that lasted till early September.Ministry officials also told NHK News that water temperatures have been decreasing since autumn, but it is still unclear whether it will recover.Coral bleaching occurs when coral loses the algae that lives within it, due to increased water temperatures and pollution. The algae gives coral its colour, and supplies nutrients; without it, the coral loses a major supply of food, and its skeleton is exposed, exacerbating the bleaching further. Bleached corals can recover if they are not exposed to extra stress, and some reefs are more resilient than others.  The die-off is another alarming sign of global warming, after temperatures in the North Pole reached melting point on Christmas, and an iceberg the size of Delaware shelved off Antarctica. This report comes just months after the mass bleaching crisis in the Great Barrier Reef, which saw over 67 percent of corals in one area dead.

How warming seas are forcing fish to seek new waters - Thirty years ago, squid was a rarity in the North Sea. Today, boats bring back thousands of tonnes a year – though cod and haddock still dominate catches. Nor is this warm-water addition to northern fish menus a unique feature. Red mullet, sardines and sea bass have also appeared with increasing frequency in North Sea fishermen’s nets in recent years. All of them are associated with warmer waters and their appearance is seen by many scientists as a sign that climate change is beginning to have a serious impact on our planet’s oceans.  For Scottish lovers of fresh squid, this is good news. However, in many other parts of the world, rising sea temperatures – triggered by climate change – are providing fishing industries and governments with major headaches. Fish are moving hundreds of miles from their old grounds, sometimes out of zones that had been set up to protect them. In other cases, fish are simply disappearing from nets.Part of the problem has its roots in past overfishing. But now climate change is exacerbating the issue. Last week, scientists revealed that a vast chunk of ice was set to break away from the Antarctic Larsen C ice shelf, while Arctic sea ice extent is now at its lowest level for this time of year since records began.  And if sea temperatures continue to rise, even greater disruption will be caused to fishing stocks. Fishermen will lose their livelihoods and communities will be deprived of their only source of food.

 Ocean data upgrade confirms pace of recent warming - Every day, thousands of measurements of the Earth’s temperature are taken across the world by weather stations, ships, satellites, floating buoys and weather balloons. Scientists combine these different data sources to provide a complete picture of global surface temperature. This is no mean feat. There are four main global datasets and they each go about it in slightly different ways.A new study, published in Science Advances, uses the latest sea surface temperature (SST) data to see which global dataset best captures the warming in recent decades. The closest match, the authors find, is the one that shows the fastest temperature rise. Since the instrumental temperature record began in the mid-19th century, technological advances have gradually made collecting global temperature data more sophisticated. Stitching together data from different instruments adds a complicating factor for scientists attempting to construct long-term global temperature records, says the new study’s lead author Zeke Hausfather, a climate scientist and energy systems analyst at Berkeley Earth. He tells Carbon Brief: “The challenge with this is that it creates uncertainties and judgement calls about how best to account for – and correct – changes in instruments.” For example, when ships first started recording SSTs, crews would lower a bucket over the side and measure the temperature of the water they pulled up. But since the 1940s, most ships automate collecting temperature data from the water they take in to cool their engines – known as “engine room intakes (ERI)”  In recent decades, technology has moved on again. As you can see in the chart below, the number of measurements taken by ships (dark blue shading) has declined while those from buoys floating on the ocean surface (yellow and blue) have increased dramatically.

No 'Pause' in Global Warming: Oceans Heating Up and Sea Levels Rising at Alarming Pace: (Real News Network interview and transcript)  In the summer of 2015, scientists from the National Oceanic and Atmospheric Administration published a scientific paper correcting previous data on ocean temperatures since 1998, suggesting that sea temperatures were almost double the temperatures of previous NOAA findings. Now, the updated research caused an uproar from climate change deniers, who had actively publicized the previous finding as a global warming pause, or climate change hiatus. The House Committee on Science, Space, and Technology, lead by Texas Republican Lamar Smith, filed a subpoena for the NOAA scientist's emails, accusing them of altering data for political ends. Now a new independently produced study confirms that the planet and the sea surfaces is indeed warming, consistent with the controversial NOAA study, and that a pause in global warming did not occur. And with us to discuss the new study, which is titled, "Assessing Recent Warming Using Instrumentally Homogenous Sea Surface Temperature Records." That's a little bit of a mouthful. We're joined by one of the study's authors, Zeke Hausfather, who is a climate scientist, and energy systems analyst, with Energy & Resources Group at the University of California, at Berkeley. He's also a research scientist with Berkeley Earth, which is an independent, non-profit. And his research focuses on instrumental temperature records, model observation comparisons, and climate impacts of energy systems. And Zeke is joining us today from San Francisco. Zeke, thanks so much for being here.

The underestimated danger of a breakdown of the Gulf Stream System - A new study in Science Advances by Wei Liu and colleagues at the Scripps Institution of Oceanography in San Diego and the University of Wisconsin-Madison has important implications for the future stability of the overturning circulation in the Atlantic Ocean. They applied a correction to the freshwater fluxes in the Atlantic, in order to better reproduce the salt concentration of ocean waters there. This correction changes the overall salt budget for the Atlantic, also changing the stability of the model’s ocean circulation in future climate change. The Atlantic ocean circulation is relatively stable in the uncorrected model, only declining by about 20% in response to a CO2 doubling, but in the corrected model version it breaks down completely in the centuries following a CO2 doubling, with dramatic consequences for the climate of the Northern Hemisphere.The potential instability of the Atlantic Meridional Overturning Circulation or AMOC – commonly known as the Gulf Stream System – has been a subject of research since the 1980s, when Wallace Broecker warned in an essay in Nature of Unpleasant Surprises in the Greenhouse. The reason for this was growing evidence of abrupt climate changes in the history of the Earth due to instability of Atlantic currents. Most models show a significant slowdown in the Gulf Stream System by 20% to 50% in typical global warming scenarios up to the year 2100, but do not exceed the tipping point that would lead to its collapse. However, there is a large spread between different models – which is not surprising since the stability of the Atlantic flow depends on a subtle balance in the salinity and thus also in the freshwater budget, which is only inaccurately known. The new study attempts to correct this model deficit by modifying the freshwater exchange at the sea surface in a model by using a so-called flux correction (which also involves the heat exchange, but this should be secondary). As a result, the salinity distribution in the ocean of the model for today’s climate is in better agreement with that of the real ocean. Without correction, the AMOC once again proves to be very stable against the massive disturbance. With the correction, in contrast, the flow breaks down in the course of about 300 years. It has lost a third of its strength after 100 years.

Collapse of Atlantic Ocean Current Could Trigger Icy Apocalypse, Researchers Warn | The Huffington Post: Yale University scientist Wei Liu has calculated that the Atlantic Meridional Overturning Circulation could collapse within 300 years. The graphic illustrates predicted responses on surface temperature and precipitation. Climate change could become so extreme that it might trigger the cataclysmic collapse of a vital Atlantic Ocean current and plunge parts of the Northern Hemisphere into a frigid new reality, a study warns.The Atlantic Meridional Overturning Circulation (AMOC) transports warm water from the tropics to the North Atlantic and helps regulate climate and weather patterns all over the world. As it releases the warmth into the air, the cooling water sinks and flows back to the tropics to repeat the process. But researchers fear that as the air in the north warms significantly due to climate change, the AMOC won’t be able to transfer its warmth to the atmosphere and the great circulatory engine of the ocean could stagnate and shut down. “It is a major player in the climate system, important for Europe and North America. So it’s a big deal,” Tom Delworth, a scientist at the National Oceanic and Atmospheric Administration, told The Verge.The doomsday scenario is chillingly like the plot of the sci-fi movie “The Day After Tomorrow,” in which the collapse of an ocean current turns North America and Europe into frigid wastelands in a matter of weeks.

 Low sea ice extent continues in both poles - Sea ice in the Arctic and the Antarctic set record low extents every day in December, continuing the pattern that began in November. Warm atmospheric conditions persisted over the Arctic Ocean, notably in the far northern Atlantic and the northern Bering Sea. Air temperatures near the Antarctic sea ice edge were near average. For the year 2016, sea ice extent in both polar regions was at levels well below what is typical of the past several decades. Arctic sea ice extent for December 2016 averaged 12.10 million square kilometers (4.67 million square miles), the second lowest December extent in the satellite record. This is 20,000 square kilometers (7,700 square miles) above December 2010, the lowest December extent, and 1.03 million square kilometers (397,700 square miles) below the December 1981 to 2010 long-term average. The rate of ice growth for December was 90,000 square kilometers (34,700 square miles) per day. This is faster than the long-term average of 64,100 square kilometers (24,700 square miles) per day. As a result, extent for December was not as far below average as was the case in November. Ice growth for December occurred primarily within the Chukchi Sea, Kara Sea, and Hudson Bay—areas that experienced a late seasonal freeze-up. Compared to the record low for the month set in 2010, sea ice for December 2016 was less extensive in the Kara, Barents, and East Greenland Seas, and more extensive in Baffin and Hudson Bays.  Air temperatures at the 925 hPa level (approximately 2,500 feet above sea level) were more than 3 degrees Celsius (5 degrees Fahrenheit) above the 1981 to 2010 average over the central Arctic Ocean and northern Barents Sea, and as much as 5 degrees Celsius (9 degrees Fahrenheit) above average over the Chukchi Sea. Repeated warm air intrusions occurred over the Chukchi and Barents Seas, continuing the pattern seen in November.

The unprecedented drop in global sea ice, in one terrifying gif.  This could be what a global warming tipping point looks like - Joe Romm -- Arctic sea ice area and volume have collapsed in recent decades. And the North Pole has been freakishly warm this winter, as carbon pollution has made what would have been once-in-1,000-years heatwaves increasingly commonplace.  But what’s so remarkable about this year is that the ongoing drop in Arcticsea ice has been matched by an unexpectedly sharp drop in Antarctic sea ice. A new animation from Kevin Pluck shows just how unprecedented this is:    Climate models have always predicted that human-caused warming would be at least twice as fast for the Arctic as for the planet as a whole thanks to Arctic amplification — a vicious cycle that includes higher temperatures melting highly reflective white ice and snow, which is replaced by the dark blue sea or dark land, both of which absorb more solar energy and lead to more melting. Systems with amplifying feedbacks tend to have tipping points beyond which change is irreversible. In the case of the great polar ice sheets that will drive catastrophic sea level rise and ultimately inundate every major coastal city, we appear to be dangerously close to such tipping points. Alarmingly, what happens in the Arctic does not stay in the Arctic. The accelerated loss of Arctic sea ice drives more extreme weather in North America, while speeding up both Greenland ice sheet melt (which causes faster sea level rise) and the defrosting of carbon-rich permafrost (which releases CO2 and methane that each cause faster warming).

Vast iceberg poised to crack off Antarctica - scientists | Reuters: A vast iceberg, expected to be one of the biggest ever recorded with an area almost the size of the U.S. state of Delaware or the Caribbean island state of Trinidad and Tobago, is poised to break off Antarctica. A rift, slowly developing across the Larsen C ice shelf on the Antarctic Peninsula in recent years, expanded abruptly last month, growing by about 18 km (11 miles). It is now more than 80 km long with just 20 km left before it snaps, scientists said. "The Larsen C Ice shelf in Antarctica is primed to shed an area of more than 5,000 square km (1,930 square miles) following further substantial rift growth," scientists at Project Midas at the University of Swansea in Wales said in a statement. The iceberg "will fundamentally change the landscape of the Antarctic Peninsula" and could herald a wider break-up of the Larsen C ice shelf, the statement said. Ice shelves are areas of ice floating on the sea, several hundred metres thick, at the end of glaciers. Scientists fear the loss of ice shelves around the frozen continent will allow glaciers inland to slide faster towards the sea as temperatures rise because of global warming, raising world sea levels. Several ice shelves have cracked up around northern parts of Antarctica in recent years, including the Larsen B that disintegrated in 2002. Andrew Fleming, remote sensing manager at the British Antarctic Survey who also tracks the Larsen C, said the ice was being thawed both by warmer air above and by warmer waters below.In some cases, big icebergs simply float around Antarctica for years, causing little threat to shipping lanes as they melt. More rarely, icebergs drift as far north as South America.

A 1,000-foot-thick ice block about the size of Delaware is snapping off of Antarctica - A slab of ice nearly twice the size of Rhode Island is cracking off of an Antarctic glacier, and one scientist says rapid growth in the giant rift between it and the southern continent means its break-off is inevitable in a few months' time.  The giant ice block is part of the Larsen C ice shelf, which is the leading edge of one of the world's largest glacier systems.  It's called an ice shelf because it's floating on the ocean. It's normal for ice shelves to calve big icebergs, since snow accumulation gradually pushes old glacier ice out to sea.  But this piece of floating ice off of Antarctica's prominent peninsula is colossal — more than 1,100 feet (335 meters) thick and roughly 2,000 square miles (5,180 square kilometers) in area — and it's destabilizing quickly, likely accelerated by rapid human-caused global warming. Satellite images suggest the crack began opening up around 2010 and lengthened more than 18 miles (29 kilometers) by 2015. By March 2016, it had grown nearly 14 miles longer. In November, a team of scientists in NASA's Operation IceBridge survey flew over the rift to confirm it's at least 70 miles long, 300 feet wide, and one-third of a mile deep.  Now another group of researchers — this time at Swansea University in the UK — say the entire block of ice is hanging on by 12 miles of unfractured ice.

Antarctica is set to lose an enormous piece of ice. The question is what happens next - Last week, British scientists announced a disturbing finding — a crack in the Larsen C ice shelf in the Antarctic Peninsula had dramatically accelerated its spread, increasing 11 miles in length in the space of a month. This means the floating ice shelf, which is nearly as big as Scotland and the fourth largest of its kind in Antarctica, is poised to break off a piece nearly 2,000 square miles in size, or over 10 percent of its total area. An ice island the size of a small U.S. state would then be afloat in the Southern Ocean.  That’s dramatic enough, but there is uncertainty in the science world about what would happen next. On the one hand, the researchers with Project MIDAS, who announced the growth of the rift, have published research suggesting that, in their words, it “presents a considerable risk to the stability of the Larsen C Ice Shelf.” If they’re right, it’s hard to understate how big a deal it is — Antarctica has lost ice shelves before, but not one so enormous. Not only would a loss of Larsen C change the map of the Earth itself; the shelf holds back glaciers capable of contributing about 4 inches of global sea level rise over time. The rift is now largely following the second, and worse scenario from their research, said glaciologist Daniela Jansen of the Alfred Wegner Institute in Germany — if it is correct. “This calving will be a test for our calving front stability criterion,” she said by email. However, other analyses have suggested that most of the ice that would be lost is so-called “passive ice” that does not play a key role in holding the glaciers behind the shelf in place. And some scientists have expressed skepticism about whether what’s happening at Larsen C is “cause for alarm.” Time, ultimately, will show who is right. But in the meantime we can sketch, a little, the kinds of things that scientists are thinking about as they watch all of this unfold.

Human-Driven Global Warming Is Biggest Threat to Polar Bears, Report Says - Federal wildlife officials on Monday called climate change the biggest threat to the survival of the polar bear and warned that without decisive action to combat global warming, the bears would almost certainly disappear from much of the Arctic. “It cannot be overstated that the single most important action for the recovery of polar bears is to significantly reduce the present levels of global greenhouse gas emissions,” the officials wrote in a report released by the Fish and Wildlife Service. “The sooner global warming and sea-ice loss are stopped, the better the long-term prognosis for the species,” they added. The report, called a conservation management plan, is required under the Endangered Species Act and outlines what must be done for a species to recover and avoid extinction. The polar bear was listed as threatened under the act in 2008. But the report’s message, coming less than two weeks before President-elect Donald J. Trump takes office, may face a skeptical audience in a new administration that has expressed doubt about the science of climate change and disputed the dangers it poses.

Exxon Ordered to Fork Over 40 Years of Climate Research -- ExxonMobil was dealt a major blow on Wednesday after a Massachusetts judge ordered the company to hand in more than 40 years of climate research.  On Wednesday, Suffolk Superior Court Judge Heidi E. Brieger denied the oil giant a protective order that would have blocked Massachusetts Attorney General Maura Healey's subpoenas for Exxon's internal research on climate change.  "This affirms our authority to investigate fraud," Healey tweeted after the decision. "ExxonMobil must come clean about what it knew about climate change."  Exxon spokesman Alan Jeffers told Reuters the company was "reviewing the decision to determine next steps."  In June, the company filed a lawsuit at a federal court in Texas to block Healey's investigation. However, a Texas judge later ruled that the court had no jurisdiction over an investigation in Massachusetts.

As Donald Trump Denies Climate Change, These Kids Die of It — She is just a frightened mom, worrying if her son will survive, and certainly not fretting about American politics — for she has never heard of either President Obama or Donald Trump. What about America itself? Ranomasy, who lives in an isolated village on this island of Madagascar off southern Africa, shakes her head. It doesn’t ring any bells. Yet we Americans may be inadvertently killing her infant son. Climate change, disproportionately caused by carbon emissions from America, seems to be behind a severe drought that has led crops to wilt across seven countries in southern Africa. The result is acute malnutrition for 1.3 million children in the region, the United Nations says. Trump has repeatedly mocked climate change, once even calling it a hoax fabricated by China. But climate change here is as tangible as its victims. Trump should come and feel these children’s ribs and watch them struggle for life. It’s true that the links between our carbon emissions and any particular drought are convoluted, but over all, climate change is as palpable as a wizened, glassy-eyed child dying of starvation. Like Ranomasy’s 18-month-old son, Tsapasoa. Southern Africa’s drought and food crisis have gone largely unnoticed around the world. The situation has been particularly severe in Madagascar, a lovely island nation known for deserted sandy beaches and playful long-tailed primates called lemurs. But the southern part of the island doesn’t look anything like the animated movie “Madagascar”: Families are slowly starving because rains and crops have failed for the last few years. They are reduced to eating cactus and even rocks or ashes. The United Nations estimates that nearly one million people in Madagascar alone need emergency food assistance.

Trump, rising populism threaten to slow climate action, analyst says | Reuters: - Rising global populism and pressure to reduce U.S. environmental regulation are among the issues to watch in 2017 as efforts to address climate change push ahead, a sustainability expert said Wednesday. Action to address global warming should be non-partisan to make the kind of ambitious progress needed, Andrew Steer, president of the Washington-based World Resources Institute, told reporters. But U.S. President-elect Donald Trump has suggested he will scrap policies to address climate change in his first year in office, Steer said, noting that even "the Environmental Protection Agency could be pulled off the table and abolished." Steer predicted U.S. environmental groups will increasingly take the government to court to safeguard climate policies. If Trump tries to reverse U.S. backing for the Paris Agreement to combat climate change, the United States, which has been "an astonishing leader" in pushing the deal, could find itself among a tiny pool of other reluctant nations including Syria, Nicaragua and Uzbekistan, he said. Internationally, there has been "greater enthusiasm around the deal than expected" – a sign of what he called the "professionalization of the fight against climate change" with more countries seeing at home that economic growth doesn't need to produce higher emissions. "Since the beginning of the century GDP has increased in 30 countries while their CO2 emissions have declined – and the club is growing," he said.

 Donald Trump makes top Republican fear environmental future - BBC News: A leading US Republican says she fears for the future of her seven grandchildren with Donald Trump in the White House. Christine Todd Whitman, head of the US Environmental Protection Agency (EPA) under George W Bush, accused Mr Trump of ignoring compelling science. And she warned that his threat to scrap climate protection policies puts the world's future at risk. Trump supporters say rules on climate and energy are stifling business. But Ms Todd Whitman says the US must find ways of promoting business without unduly harming the planet. Details of Mr Trump's climate policy are not yet clear, but his team have talked about boosting coal, opening new oil pipelines, and allowing mining on public wilderness or drilling in the Arctic. On the political side, they have suggested quitting the global climate deal, scrapping President Obama's clean power plan, and dismantling the US energy department along with the EPA itself. Ms Todd Whitman was interviewed on Trump's likely policies for a documentary - Climate Change: the Trump Card - which airs on BBC Radio 4 at 20:00 on Tuesday.  She said: "I find it very worrisome that there seems to be a disdain for the science on protecting the environment. "I worry terribly for the future of my family and families round the world because Mother Nature has never observed geopolitical boundaries and what one country does really does affect another country.  "To walk away from something where you have 97% of scientists saying this is occurring and people have an impact on it … it's gotten to the point where we've got to try to slow it down if we're going to survive it."

Donald Trump urged to ditch his climate change denial by 630 major firms who warn it ‘puts American prosperity at risk’ - More than 630 companies and investors have called on Donald Trump and the Republican-dominated Congress to continue the move to a low-carbon economy, warning that failing to do so would “put American prosperity at risk”.The US President-elect has talked about scrapping the United States’ international commitments to tackle global warming, such as the Paris Agreement, dismissed climate change as a hoax, and appointed a string of climate science deniers to senior positions in his administration. His election has been described as a “very big challenge” to the world’s efforts to address the problem by UK Climate Change Minister Nick Hurd.  In a joint statement, leading companies, such as Johnson & Johnson, General Mills, Kellogg’s, General Mills, Hewlett Packard Enterprise and Unilever, appealed to Mr Trump to reconsider his apparent views. “We want the US economy to be energy efficient and powered by low-carbon energy,” they said. “Cost-effective and innovative solutions can help us achieve these objectives. Failure to build a low-carbon economy puts American prosperity at risk.

How will Ryan Zinke manage federal lands as head of the Interior Department? - Among Trump’s controversial cabinet picks, U.S. Representative Ryan Zinke (R-MT) appears to have some amount of bipartisan accord. Nominated for Department of Interior Secretary, Zinke hails from a state with 37% of its lands under some kind of public management. But he wasn’t the first pick. Initially, news reports, Utility Dive included, pegged U.S. Representative Cathy McMorris Rodgers (R-WA) to head the DOI, but that later proved not to be the case. Her track record was decidedly more conservative, especially with her support to auction off public lands. Conversely, Zinke’s biggest bipartisan appeal lies in his open support of keeping federal lands in the hands of government agencies as several of his House colleagues push for state control. Environmentalists and climate activists are more skeptical of his stance over climate change mitigation and his pro-fossil fuel interests. But his Republican allies and a well-known conservation group speak highly of his track record dealing with public lands. “We have followed him since he was elected to Congress and found him to be for industry and development but also for conservation,” Whit Fosburgh, who heads the Theodore Roosevelt Conservation Partnership, told Utility Dive.Environmentalists in Zinke’s home state of Montana are more dubious. “He started as a moderate Republican but turned sharply right and has voted against the environment and for pipeline and coal development projects ever since,” Anne Hedges, deputy director of the Montana Environmental Information Center (MEIC) told Utility Dive. “This is not the person we want in charge of our public lands.”

 Climate change is a 'plausible' theory, Sessions says -  As attorney general, Sen. Jeff Sessions could find his department battling polluters or lawsuits over the extent of manmade climate change. Pressed by Sen. Sheldon Whitehouse (D-R.I.), Sessions said he would approach the issue with an open mind. "I don't deny we have global warming," the conservative Republican said. "In fact, the theory always struck me as plausible. And it is the question of how much is happening and what the reaction would be to it." Whitehouse noted that the U.S. military and the U.S. government's scientific establishment support the notion that human activity, particularly the burning of fossil fuels, is warming the planet. Many Republicans in Congress and President-elect Donald Trump have cast doubt on the theory, with Trump once calling it a "hoax."

 Sen. Sessions failed to disclose that he is making money off oil leases Much of the discussion around President-elect Donald Trump’s nominee for attorney general has focused on whether Sen. Jeff Sessions (R-AL) is racist. But another question worth raising is: Will he protect Americans from environmental degradation? Early evidence suggests he won’t. As a senator, Sessions has longstanding ties to the fossil fuel industry. And, as it turns out, he is even an oilman himself, a fact that he did not disclose in federally mandated financial reports. Earlier this week, the Washington Post discovered that Sessions had failed to disclose oil lease income from land he owns in the Choctaw National Wildlife Refuge. The land has been leased to an oil company, the paper reported. “We reported the income on my [tax] return as coming from the property I own and the property the oil well is on,” Sessions told fellow senators during his confirmation hearing Tuesday. “I did not note in [the financial disclosures] report that it was specifically oil income.”“I am troubled by any omissions,” Sen. Richard Blumenthal (D-CT), told the paper. “But this is particularly troubling because this ownership interest involves oil and gas holdings connected to a federal wildlife refuge.” The article says the land generates about $4,700 per year, which might seem like a nice boost for millions of Americans, but it is a tiny amount compared to the money Sessions gets from other people’s oil holdings.

Tillerson Called Out for 'Lying About Climate' During Confirmation Hearing - At his senate confirmation hearing on Wednesday, U.S. Secretary of State nominee Rex Tillerson dodged questions about ExxonMobil's long history of denying climate science, lending credence to claims his tenure would be a disaster for the planet .  When pressed by Sen. Tim Kaine (D-Va.) about the major charges unearthed by the ongoing ExxonKnew investigation—namely, that the oil company hid evidence going back to the 1970s of how the burning of fossil fuels impacts the climate , and funded misinformation campaigns to spread skepticism about growing scientific consensus—former Exxon CEO Tillerson "essentially pled the fifth," said Oil Change International executive director Stephen Kretzmann. "Since I'm no longer with ExxonMobil, I'm in no position to speak on their behalf," said Tillerson, who recently separated from the company after 42 years. "The question would have to be put to them." Kaine asked as a follow-up question: "Do you lack knowledge to answer my questions or are you refusing to answer my question?"  Tillerson responded: "A little of both."

Tillerson doesn’t deny climate change – but dodges questions about Exxon’s role in sowing doubt -- Secretary of state nominee Rex Tillerson on Wednesday said he believes “the risk of climate change does exist, and the consequences could be serious enough that action should be taken.” But while the Obama administration and other world leaders have aggressively pursued efforts to slash carbon dioxide emissions and stave off global warming, the former ExxonMobil chief executive expressed little such urgency when testifying before the Senate Foreign Relations Committee on Capitol Hill Wednesday. Asked by Sen. Bob Corker (R-Tenn.) about his personal position on climate change, Tillerson said he formed his views “over about 20 years as an engineer and a scientist, understanding the evolution of the science.” Ultimately, he said, he concluded that increasing greenhouse-gas concentrations in the atmosphere are having an effect on the earth’s climate. But he added, “Our ability to predict that effect is very limited,” and precisely what actions nations should take “seems to be the largest area of debate existing in the public discourse.” Tillerson’s statements on climate change were in line with views he has expressed in the past: In short, that climate change is real and could pose problems for humans, but the degree of threat remains unclear. Tillerson sees climate change primarily through the eyes of an engineer, as something that must be solved largely through innovation and ingenuity.

Perry and Pruitt: Texas, Oklahoma may call the climate tune under Trump -- Republicans from Texas and Oklahoma – where oil and gas rule politics – may be about to apply their state governments’ approaches to climate change to the whole country. The shifts they bring might be rapid and radical if former Texas Gov. Rick Perry, nominated by Donald Trump to be energy secretary, and Oklahoma Attorney General Scott Pruitt, nominated to be Environmental Protection Agency administrator, do in Washington as they did in Austin and Oklahoma City.  Texas and Oklahoma have both insisted, in court arguments and in public statements, that the federal government is trampling the law and the Constitution by regulating emissions of climate-warming carbon dioxide. Pruitt teamed with his Texas counterparts and other states in a pending lawsuit to block proposed CO2 limits on coal-burning power plants. More important than specific policy fights are the underlying views on climate science that they represent. Scrapping President Barack Obama’s Clean Power Plan would be a short-term political victory, but abandoning or censoring climate monitoring and research – in which the United States carries much of the world’s workload – could have deeper implications. We’ve seen something like this before. Like Perry, Ronald Reagan’s first energy secretary, former South Carolina Gov. James B. Edwards, promised to eliminate rules and perhaps his own department. And like Perry, he had no energy-science background. Edwards never shook the know-nothing label. “Dentist Edwards to Quit Energy,” the Washington Post reported when he resigned after 16 months. Reagan’s first EPA administrator, Colorado’s Anne Gorsuch Burford, was, like Pruitt, a Western Republican lawyer and ferocious opponent of the agency she would head. Her 22 chaotic months saw her slash the budget by 22 percent and abandon basic enforcement. She quit when the Reagan White House cut her adrift during a toxic-waste cleanup scandal.

McConnell outlines environmental wish-list for Trump action  (AP) -- The top Republican in the Senate outlined a series of actions he hopes President-elect Donald Trump will take to overturn environmental regulations imposed by President Barack Obama, including a rule to protect streams from coal-mining debris. Majority Leader Mitch McConnell, R-Ky., urged Trump in a letter to scrap a rule to protect small streams and wetlands from development and other regulations that the GOP considers overly burdensome. He also asked Trump to drop a legal defense of the Clean Power Plan, Obama's signature effort to limit carbon pollution from coal-fired power plants. The plan, the linchpin of Obama's strategy to fight climate change, is on hold awaiting a court ruling. In a Jan. 4 letter to the president-elect, McConnell said Trump "inspired the American people with your vision of less regulation, free and fair competition and enhanced job opportunities." McConnell said he personally appreciated Trump's public commitment to "provide relief for coal communities" such as Kentucky, the state that is the third-largest producer of coal in the U.S. McConnell's letter decried what he and other Republicans describe as Obama's "war on coal," a series of regulations that the GOP says has made coal more expensive to mine, transport and use for energy production. U.S. coal production has declined sharply in recent years amid stiff competition from cheap, easy-to-produce natural gas. But McConnell said those who attribute coal's decline simply to low gas prices "are not seeing the full picture," which he said includes costly federal regulations that place an unfair burden on coal. McConnell called the stream-protection rule "a direct assault on coal mining operations" that "must be stopped." He pledged to use the rarely invoked Congressional Review Act to overturn the stream rule and asked for Trump's support in that effort.

The Destructive Power of Preemption: How Congress Can Use It to Bar State Action on Climate -  If some of the deepest concerns of climate-focused bureaucrats from San Francisco to Massachusetts and New York come true, the Trump administration will preemptively prevent them from acting to slow global warming. With Trump and Republicans in Congress widely expected to unite to undermine federal environmental protections, progressive states and cities are making plans to fight global warming within their borders without being helped or required to do so by the U.S. government. “Preemption is probably the progressive cities’ worst nightmare,” said Deborah Raphael, director of San Francisco’s environment department, which has helped city lawmakers craft rules mandating everything from greener buildings to composting and recycling by residents. “It’s also the state of California’s worst nightmare.” The term “preemption” doesn’t describe a single legislative or regulatory tool. The word describes a concept, in which the federal government or a state imposes restrictions on the rules and programs that governments operating beneath it are allowed to implement. Conservative lawmakers in North Carolina used a preemption law last year to outlaw transgender protections in Charlotte. In Michigan, cities and counties were barred from banning plastic bags. Colorado prevents local governments from banning fracking. With Republicans about to control both houses of Congress and the White House, environmental experts are warning of battles ahead over potential federal preemptions. “There really is virtually no aspect of federal regulation of the natural environment or health that’s not at risk of preemption now,” said Mark Pertschuk, a lawyer and activist with the nonprofit Grassroots Change, which tracks state preemptions of local rules affecting gun safety, paid sick days, factory farming and other issues. “Federal laws almost always trump state and local laws.”

 TRANSITION: Trump a 'big fan of solar' — RFK Jr. -- Tuesday, January 10, 2017 -- Solar power has a friend in President-elect Donald Trump, according to Robert F. Kennedy Jr. The prominent environmentalist and scion of the Democratic political dynasty met with Trump today in Manhattan, where they discussed energy policy and scientific integrity.

 Green technologies need to proliferate 10 times faster to prevent 2°C rises -- The Paris Agreement, a climate accord signed by nearly 200 countries which came into effect in November, aims to limit global warming to below 2°C above pre-industrial levels, with an ambition of limiting temperature rises even further to 1.5°C.  But the United Nations later said in a report that current greenhouse emissions will exceed that which is needed to keep global warming in check by 2030 unless the pace at which emissions are curbed is not increased. “Based on our calculations, we won’t meet the climate warming goals set by the Paris Agreement unless we speed up the spread of clean technology by a full order of magnitude, or about ten times faster than in the past,” said Gabriele Manoli, who led the Duke University study. “Radical new strategies to implement technological advances on a global scale and at unprecedented rates are needed if current emissions goals are to be achieved.” Manoli and his colleagues were able to estimate the likely pace of future emissions increases and also determine the speed at which climate-friendly technological innovation and implementation must occur to hold warming below the Paris Agreement’s target. “It’s no longer enough to have emissions-reducing technologies,” he said. “We must scale them up and spread them globally at unprecedented speeds.”

Decoupling of Emissions and GDP: Now you see it, now you don’t - There are conflicting claims about whether emissions growth and GDP growth have decoupled. My presentation today shows that some of this debate is due to a failure to distinguish cycles from trends: there is an Environmental Okun’s Law (a cyclical relationship between emissions and GDP) which often obscures the Environmental Kuznets Curve (the trend relationship between emissions and GDP). My ongoing work casts relationships between emissions and economic growth in much simpler terms than is typically done in the climate change literature. My co-authors and I use the trend and cycle decomposition that is familiar to most economists, particularly macroeconomists. We then show that the cyclical relationship between emissions and real GDP—akin to an Okun’s Law, in the terminology of macroeconomists—obscures the trend relationship—the Kuznets Curve that is the focus of many papers in the climate change literature. Once the cyclical relationship is stripped away, the trends do show some evidence of decoupling in the richer nations, particularly in Europe. We then apply the framework to take into account the effects of international trade. That is, we distinguish between production-based and consumption-based emissions. This makes a big difference to the results. Specifically, the evidence for decoupling among the top emitting countries gets much weaker, including for many countries in Europe.

All the state energy legislation from 2016, in one place - With Donald Trump in the White House and the GOP controlling Congress, all hope for movement forward on climate change and clean energy lies in the states.   Such movement will be more difficult in the absence of federal support. National mandates and incentives serve as a “floor” to state efforts, establishing a common baseline and overall direction. Programs like the Clean Power Plan ensure (or, uh, would have ensured) that every state is taking at least some action.  But the CPP is doomed, as are most federal efforts initiated by President Barack Obama. The floor is going to sink much lower. Still, even without federal support, there is much that states can do on their own. A great deal of authority over energy lies at the state level — states have jurisdiction over their electricity systems, natural gas infrastructure, clean energy procurement, and much more.   Long story short, it’s time to start paying attention to state energy policy. One problem: There are a lot of states — 50, last time I counted! That’s a lot of legislatures, lots of governors and public utility commissions, lots of moving parts. It can be difficult to keep track. Happily, help has arrived, in the form of the Advanced Energy Legislation Tracker, a project of the Center for the New Energy Economy (CNEE) and Advanced Energy Economy (AEE). It’s a searchable database of energy legislation introduced or passed every year since 2012. You can filter by state; by whether the bill was introduced, passed by one or both houses, or passed into law; or by any of 10 subject categories, from economic development to energy efficiency. Endless nerd fun! So how did state energy legislation fare in 2016?  Across the country, 344 energy bills were enacted. Here’s where:

Can Hawaii go 100% Renewable? - Hawaii’s Renewables Portfolio Standard commits it to obtaining 100% of its energy from renewables by 2045, and Hawaii proposes to do this by wholesale replacement of fossil fuel generation with solar. This approach is theoretically possible, but only if there is enough energy storage (approximately 10GWh) to match day-night solar fluctuations of over 3GW to a substantially flat ~800MW load curve and if grid stability can be mantained with dominant solar generation. The Renewables Portfolio Standard also covers only electricity generation, which presently supplies only about a third of Hawaii’s energy needs, so even if it’s met Hawaii will still fall well short of its 100% renewable energy target. Data for Hawaii are limited but adequate for a preliminary review. The main source of backup data for the 100% renewables claim is The Hawaiian Electric Companies 2016 Power Supply Improvement Plan . This is a four-book document that defies analysis because of its length (book four alone contains over 800 pages) and the Executive Summary provides little in the way of hard data.  There are no publically-available grid data available for Hawaii, or at least none that I could find. Hawaii is a chain of islands unconnected by submarine cables. Electricity is supplied by three utilities, of which HECO, which serves Honolulu, is by far the largest.

  • Hawaian Electric Company (HECO): Island of Oahu, installed capacity 2,197MW
  • Maui Electric Company (MECO): Island of Maui and surrounding islands, installed capacity 424MW
  • Hawai’i Electric Light Company (HELCO): Island of Hawaii, installed capacity 397MW

Kaui generates only a small amount of electricity and is not considered in this review.

Wyoming Bill Would All But Outlaw Clean Energy by Preventing Utilities From Using It - While many U.S. states have mandates and incentives to get more of their electricity from renewable energy, Republican legislators in Wyoming are proposing to cut the state off from its most abundant, clean resource—wind—and ensuring its continued dependence on coal. A new measure submitted to the Wyoming legislature this week would forbid utilities from providing any electricity to the state that comes from large-scale wind or solar energy projects by 2019. It's an unprecedented attack on clean energy in Wyoming, and possibly the nation. And it comes at a time when such resources are becoming cheaper and increasingly in demand as the world seeks to transition to clean energy to prevent the worst impacts of climate change. The bill's nine sponsors, two state senators and seven representatives, largely come from Wyoming's top coal-producing counties and includesome deniers of man-made climate change. They filed the bill on Tuesday, the first day of the state's 2017 legislative session. Activists and energy experts are alarmed by the measure, which would levy steep fines on utilities that continue providing (or provide new) "non-eligible" clean energy for the state's electricity. But they are skeptical it will get enough support to become law."I haven't seen anything like this before," Shannon Anderson, director of the local organizing group Powder River Basin Resource Council, told InsideClimate News. "This is essentially a reverse renewable energy standard." Anderson, who has tracked the Wyoming legislature's work for a decade, added: "I think there will be a lot of concerns about its workability and whether this is something the state needs to do... it seems to be 'talking-point' legislation at this point."

Department of Energy finally releases new guidelines to protect scientists from political pressure - The Verge - The US Department of Energy has released new rules to protect government scientists from political agendas, and not a moment too early given the troubling relationship President-elect Donald Trump has already developed with scientists.  Outgoing energy secretary Ernest Moniz announced the rules on Wednesday while speaking at the National Press Club in Washington, DC. The policy could have widespread effects, as the Energy Department is a major funder of scientific research—notably, funding most of the work on nuclear weapons. Because the policy is not an official regulation, it wouldn’t be very difficult to reverse when the Trump administration comes in. But it still has symbolic power, since the immediate reversal of a scientific integrity policy would not paint the new administration in a positive light. The new policy stipulates that Energy Department officials “should not and will not ask scientists to tailor their work to particular conclusions.” Energy Department scientists, (and scientists working on a contract basis) can state their personal opinions as long as they don’t claim to be speaking for the department itself, and scientists “must get the opportunity to review Department statements about their work.” It also requires the energy secretary — soon to be former Texas governor Rick Perry, who once said he wanted to shut down the department entirely — to appoint an ombudsman for scientific integrity.  It’s important that these new policies have been released before Trump’s inauguration. In the months since the November election, Trump has shown that his administration, like the Bush administration, is unlikely to take science seriously. Trump questioned global warming while on the campaign trail and asked the Energy Department for the names of its climate change workers. Trump later backed down, after they refused to comply with the request. Still, there are loopholes that could let him wage war on scientific expertise, and scientists have been scrambling to save government climate data before he is sworn in.

Obama in Science: Clean energy will happen whether you like it or not - In Science’s Policy Forum column, President Barack Obama has penned an article arguing that the world is quickly replacing fossil fuel-based energy with clean energy. That momentum, he asserts, will not be stopped by “near-term” policy changes from Donald Trump’s incoming administration. The current president writes that, although climate change is undeniable, the incoming administration might do nothing about it. That would be a political mistake, but it might not effect on the economics of clean energy, Obama argues. “Mounting economic and scientific evidence leave me confident that trends toward a clean-energy economy that have emerged during my presidency will continue,” he wrote, adding that “the trend toward clean energy is irreversible.”   The president cites recent studies from national and international agencies showing that energy emissions are decoupling from economic growth, a trend that “should put to rest the argument that combatting climate change requires accepting lower growth or a lower standard of living.” And the potential damage to the economy is vast: a 4°C increase in global temperature could “lead to lost US federal revenue of roughly $340 billion to $690 billion annually.”Despite Trump’s baseless denial of climate science, local governments and businesses will be the ones dealing with climate change in the coming years. Obama predicts that these organizations will continue making the investments necessary to protect people and investments from the effects of climate change. He cites Google, Walmart, and GM as companies that have promised to move large portions, or all, of their energy consumption to renewable power. The president notes that momentum is also found on the labor side of the energy equation. Approximately “2.2 million Americans are currently employed in the design, installation, and manufacture of energy-efficiency products and services,” he writes, as opposed to “roughly 1.1 million Americans who are employed in the production of fossil fuels and their use for electric power generation.” The president adds that fossil fuel industries receive nearly $5 billion in federal subsidies a year, “a market distortion that should be corrected on its own or in the context of corporate tax reform.”

Life in a post-flying Australia, and why it might actually be ok -- In Australia, the amount of aviation fuel consumed per head of population has more than doubled since the 1980s. We now use, on average, 2.2 barrels (or 347 litres) of jet fuel per person per year.  This historically unprecedented aeromobility has enormous environmental costs. Aviation is contributing to around 4.9% of current global warming and this is forecast to at least triple by 2050. Domestic aviation in Australia produces around 8.6 million tonnes of greenhouse gases each year. Offsetting schemes, technology solutions and other attempts to lower the carbon emissions of aviation have failed dismally. The only solution to these intractable environmental impacts is the dramatic reduction, or complete elimination, of air travel. It might be hard to imagine life without the plane, but the idea is not as crazy as it sounds. Here are nine common objections to grounding planes, and our counterpoints:

Volkswagen To Pay $4.3 Billion To Settle Diesel Scandal, Will Plead Guilty To Criminal Charges --Confirming recent leaks, Volkswagen - whose former head of US regulatory compliance was arrested on Saturday - said it was in "advanced discussions"  with US authorities to resolve charges related to its diesel emissions scandal, and has negotiated a “concrete draft of a settlement” that would see it pay $4.3 billion in criminal and civil penalties, and would require the German carmaker to enter a guilty plea to various criminal charges, strengthen compliance systems and install an independent monitor for three years.The agreement, which has yet to be finalized, would lead to an expense that exceeds current provisions, the German automaker said. It also includes a guilty plea to some criminal charges, the Wolfsburg, Germany-based automaker said:In case of a settlement agreement, the payment obligations are expected to lead to a financial expense that exceeds the current provisions. The concrete impact regarding the annual result 2016 cannot be defined at present due to its dependency on various further factors.According to Bloomberg, VW’s management and supervisory boards are scheduled to review the settlement today or Wednesday and may raise provisions related to the scandal, which currently total €18.2 billion ($19.2 billion). A final agreement also needs to be approved by U.S. courts. The U.S. Justice Department declined to comment on Volkswagen’s statement.VW, which admitted in September 2015 to installing software in its diesel cars to cheat emissions tests, is eager to resolve potential criminal charges before federal prosecutors overseeing the settlement talks leave with the Obama administration later this month the FT added. Porsche, which owns 30.8% of Volkswagen, said its financial performance will be hurt by the settlement:

VW Emissions-Cheating Deal Could Put Employees In Hot Seat: (AP) — The imminent criminal plea deal between Volkswagen and U.S. prosecutors in an emissions-cheating scandal could be bad news for one group of people: VW employees who had a role in the deceit or subsequent cover-up. VW on Tuesday disclosed that it is in advanced talks to settle the criminal case by pleading guilty to unspecified charges and paying $4.3 billion in criminal and civil fines, a sum far larger than any recent case involving the auto industry.It’s likely that VW will agree to cooperate in the probe, turning over documents and other information, said David M. Uhlmann, a former chief of the Justice Department’s Environmental Crimes Section who is now a University of Michigan law professor. “Companies often face the dilemma of whether to protect their employees or cooperate with government investigations, but almost always end up deciding in the company’s best interest to share what information they have,” Uhlmann said.Although VW’s communications with lawyers may be exempt, emails between employees and company executives should help prosecutors reach as far up VW’s organizational chart as the scandal went, he said. Prosecutors now have three witnesses giving them information and have arrested Oliver Schmidt, VW’s former head of U.S. environmental compliance who dealt with the EPA and California Air Resources Board after the scandal was uncovered.The cooperation of witnesses and the company should help investigators determine if the scandal went beyond VW’s engineers, Uhlmann said. But extraditing any executives from Germany would be a problem.

DOJ indicts 6 Volkswagen executives, automaker will pay $4.3 billion in plea deal | Ars Technica: The US Justice Department announced on Wednesday that Volkswagen would pay $4.3 billion in civil and criminal fines and plead guilty to three criminal charges pertaining to the automaker’s diesel emissions scandal. The DOJ also announced an indictment of six high-level VW Group executives, who are charged with lying to regulators and destroying documents. Working with US Customs and Border Patrol, the DOJ brought against VW Group charges of defrauding the US government, committing wire fraud, and violating the Clean Air Act. As part of the settlement, VW Group has agreed to submit to three years of criminal probation, which will require the German automaker to "retain an independent monitor to oversee its ethics and compliance program." It has also agreed to cooperate with the DOJ's ongoing investigations into individual executives that may have been involved with the scandal. For the past 17 months, the automaker has maintained that none of its executives were involved with the diesel scandal, in which illegal software was discovered on Volkswagens, Audis, and Porsches to alter the cars' emissions controls depending on whether the cars sensed they were under real-world driving conditions or lab conditions. Instead, VW Group claimed, "rogue engineers" were responsible for the placement of the emissions cheating software on the cars. After the software was discovered, VW Group admitted that its cars did have mechanisms to reduce the effectiveness of the emissions controls on its so-called "Clean Diesel" cars. Earlier this year, the Justice Department and a class-action group of consumers pursued civil penalties from VW Group, leading to historic settlements of many billions of dollars earlier this year.

Volkswagen Tells Its Managers Not To Travel To The US -- In the last days of the Obama administration, the outgoing president has taken on a surprising urgency in closing "open" cases of alleged fraud, if mostly involving foreign carmakers. Case in point, this week's $4.3 billion settlement with Volkswagen to put the diesel emmisions scandal to rest, and yesterday's unexpected accusation by the EPA that Fiat was likely engaging in a similar scheme to defraud the US government of its true emissions. The crackdown has led to various curious outcomes, the most surprising of which is that Volkswagen has warned its senior managers not to travel to the United States after six current and former managers were indicted for their role in the German carmaker's diesel test-cheating scheme, according to Reuters. The company agreed to pay $4.3 billion in civil and criminal fines in a settlement with the DoJ on Wednesday, the largest ever U.S. penalty levied on an automaker. However, Attorney General Loretta Lynch said the DoJ would continue to pursue "the individuals responsible for orchestrating this damaging conspiracy". As reported on Monday, one of the six charged, Oliver Schmidt, was arrested by the FBI at Miami International Airport on Saturday as he was about to fly home from holiday in Cuba. Schmidt, who is caught up in the "Dieselgate" investigation by the U.S. Department of Justice (DoJ), was ordered to be charged and held without bail on Thursday pending trial.

Fiat Chrysler Shares Crash After EPA Accuses Automaker Of Using Software To Cheat Diesel Emissions Laws -- It appears they were all doing it. Fiat Chrysler shares are collapsing following EPA accusations that the automaker used cheating software to beat diesel emissions tests, and this violated pollution laws. The U.S. Environmental Protection Authority will accuse Fiat Chrysler of using software that allowed excess diesel emissions in about 100k U.S. vehicles, Reuters reports in tweet, citing people familiar. BREAKING: EPA to accuse Fiat Chrysler of using software that allowed excess diesel emissions in about 100,000 U.S. vehicles – sources (ReutersUS) January 12, 2017  The stock is down over 10%...The supply chain is also being hit... As AP reports,Two people briefed on the matter say that the U.S. government is accusing Fiat Chrysler of violating the Clean Air Act on some of its diesel engines.The Environmental Protection Agency has scheduled a news conference for Thursday morning to release details of the matter. The people briefed on the matter didn't want to be identified because the formal announcement hasn't been made.The move comes one day after federal prosecutors announced that Volkswagen would plead guilty to criminal charges and pay a record $4.3 billion penalty for cheating on emissions tests. The Environmental Protection Agency has scheduled a call with reporters at 11 a.m. in Washington to “take questions on a recent development regarding a major automaker.” Representatives for Fiat Chrysler didn’t immediately respond to requests for comment.

"Disappointed" Fiat-Chrysler Responds To EPA Accusations --Just days after Fiat-Chrysler's (FCA) commitment to Trump, the Obama administration's EPA has, as we previously noted, accused the carmaker of cheating on di4esel emissions tests (a la Volkswagen). FCA just responded, denying the charges.  Fiat Chrsyler press release: FCA US is disappointed that the EPA has chosen to issue a notice of violation with respect to the emissions control technology employed in the company's 2014-16 model year light duty 3.0-liter diesel engines. FCA US intends to work with the incoming administration to present its case and resolve this matter fairly and equitably and to assure the EPA and FCA US customers that the company's diesel-powered vehicles meet all applicable regulatory requirements. FCA US diesel engines are equipped with state-of-the-art emission control systems hardware, including selective catalytic reduction (SCR).  Every auto manufacturer must employ various strategies to control tailpipe emissions in order to balance EPA's regulatory requirements for low nitrogen oxide (NOx) emissions and requirements for engine durability and performance, safety and fuel efficiency. FCA US believes that its emission control systems meet the applicable requirements. FCA US has spent months providing voluminous information in response to requests from EPA and other governmental authorities and has sought to explain its emissions control technology to EPA representatives.  FCA US has proposed a number of actions to address EPA's concerns, including developing extensive software changes to our emissions control strategies that could be implemented in these vehicles immediately to further improve emissions performance. FCA US looks forward to the opportunity to meet with the EPA's enforcement division and representatives of the new administration to demonstrate that FCA US's emissions control strategies are properly justified and thus are not "defeat devices" under applicable regulations and to resolve this matter expeditiously. Shares are halted down 16% for now...

“Heating Empty Buildings”: Billion Pound British Biomas Subsidy Scandal - The Times reports that a badly designed British biomass subsidy has led to a gold rush of people cashing in, by heating empty buildings.Taxpayers face £1bn bill over green energy subsidy scandal A botched green energy scheme that has ignited a political crisis is on course to cost taxpayers more than £1 billion. The Treasury faces the bill after a massive overspend on subsidies encouraging farmers and businesses in Northern Ireland to run eco-friendly power schemes. The Renewable Heat Incentive (RHI) was supposed to cost £25 million in its first five years but the bill is likely to reach £1.15 billion over 20 years. The Treasury can claw back £490 million from the block grant to Northern Ireland, leaving £660 million to be financed by taxpayers in England, Scotland and Wales. The scandal threatens the future of Northern Ireland’s first minister Arlene Foster, leader of the Democratic Unionist Party (DUP). She was the minister responsible when the scheme was set up in 2012. It was intended to boost renewable energy, but critics say Mrs Foster and her officials did not cap costs. Businesses that signed up could receive £160 from the government for every £100 they spent on fuels, such as wood pellets, burnt in biomass boilers. As people spotted the gains to be made, there was a surge in applications and costs spiralled. Flaws in the scheme were exposed by a whistleblower who said businesses were buying biomass boilers solely to collect the subsidy. The whistleblower alleged that one farmer expected to make £1 million over 20 years for using a biomass boiler to heat an empty shed, while heating a number of empty factories would net their owner £1.5 million.

Private capital rotating into mining and metals ---After four-plus years of declines, 2016 was a comeback year for natural resources and the oil and mining industries – with only a couple of exceptions, energy, metal and mineral prices rallied last year. According to a new report by private capital tracker Preqin, the improving conditions of last year did not filter through to all sectors.Overall fundraising for natural resources investment actually declined declined by a fifth in 2016 to the lowest since 2012. Coming off a record 2015, 70 funds raised a total of $58bn for investment in natural resources in 2016 (a figure that could go higher as more information becomes available says Preqin).In 2015 mining and metals made up a paltry 0.6% of funds raisedBut mining and metals enjoyed a much better year. In 2015 mining and metals made up a paltry 0.6% of funds raised with just two funds closing on $400 million in 2015. Last year five funds managed to raise $2.1 billion. That's still small beer compared to the money going into oil and gas however. Of the top 10 largest natural resources funds that reached a final close in 2016, all 10 are focused on energy-related assets, and all but one focus on projects in the US.

Coal to Lead U.S. in Energy Production in 2017 - Even for all the gloom and doom surrounding the coal industry lately, coal will still account for more U.S energy production in 2017 than any other resource according to the U.S Energy Information Administration. Coals comeback marks a rebound from 2016 where, for the first time, U.S electricity from natural gas exceeded output from coal-fired power plants. But with higher natural gas prices on the horizon, coal should once again take the top energy producing spot in 2017. According to the U.S Energy Information Administration’s new short-term forecast, coal will account for one-third of the country’s electricity generation. However, coals lead in energy production looks to be short lived. Natural gas is expected to be the country’s top electricity generator once again in 2018. Along with coal, nuclear power is expected to decline by 2018 as well. The share of nuclear energy generation is expected to fall to around 19% with several nuclear power reactors set to be retired in 2018. The rise of renewable energy sources will also continue, as expected, into 2018. By then, 16% of energy produced in the U.S will come from hydropower, solar, wind, and other renewables. Of course the wildcard in forecasting energy production is the incoming Trump Administration. Obama’s Clean Power Plan was established to curb greenhouse gas emissions and set strict environmental regulations. Although the Clean Power Plan is awaiting a U.S. Appeals ruling after a legal challenge from Arizona and 23 other states, the energy economy is already headed towards meeting the Clean Power Plan goals. Levels of carbon dioxide are already down 21 percent below 2005 levels.

Weekly US coal production higher in first week of 2017: EIA - Weekly US coal production totaled an estimated 13.78 million st in the holiday-shortened week ended January 7, up 11.1% from the previous week and up 19.6% from the year-ago week, US Energy Information Administration data showed Thursday. Despite the stronger comparisons, production was off 19.6% from the five-year average for the first week of the year, as weak demand continues to make an impact on coal producers. Coal production in 2016 dipped to 738.7 million st, the lowest total since 1978, as cheap natural gas and warm weather led to increased producer rationalization. The EIA estimates coal production in 2017 will total 790 million st. For the recently-concluded week, coal production in Wyoming and Montana, which is mostly made up of production from the Powder River Basin, totaled an estimated 5.7 million st, up 2.2% from the prior week and up 5.7% compared with the year-ago week. In Central Appalachia, weekly coal production totaled an estimated 1.4 million st, up 18.1% from the prior week and down 16.3% from last year. Weekly coal production in Northern Appalachia totaled an estimated 2.1 million st, up 19.2% from the prior week and up 37.8% compared with last year. In the Illinois Basin, weekly coal production totaled an estimated 1.9 million st, up 17.9% from the prior week and up 26.1% from last year.

Obama Plan to Shake Up Coal Leases Could Restrict Trump - The outgoing Obama administration issued a blueprint for overhauling the way coal on federal land is sold, making it tougher for President-elect Donald Trump to resume sales under decades-old procedures. The report released Wednesday lays out a menu of potential options for policy makers to consider, including tacking a carbon fee onto coal leases to account for climate change, requiring payments into a fund that could help out-of-work miners and devastated communities -- and even halting sales altogether.This initial report is part of a reevaluation of the coal program announced by Interior Secretary Sally Jewell a year ago. It doesn’t prevent Trump from making good on his vow to overturn the Interior Department’s moratorium on new coal sales after being sworn in Jan. 20. Trump can even disregard this report’s recommendations and stop the environmental review that was slated to take three years.But the document bulks up a record of evidence that changes are needed -- information that would make it harder for future coal lease sales to withstand legal challenge. About 40 percent of U.S. coal now comes from federal land, much of it from the Powder River Basin in Wyoming and Montana. Demand for the fossil fuel and new federal coal leases has fallen as environmental regulations and competition from cheap natural gas encourage utilities to abandon coal-fired power. But because coal-fired power is the most potent source of carbon dioxide emissions, environmentalists argue government sales of the fossil fuel should account for the damage from those greenhouse gases.   Environmentalists already used litigation to press for a coal leasing overhaul, including a 2014 lawsuit by Friends of the Earth and the Western Organization of Resource Councils. The groups appealed after a federal court dismissed their lawsuit in 2015, and that litigation was still ongoing when Jewell imposed the leasing halt.

US Republicans pass bill to block last minute Obama regulations on coal --House Republicans in the US passed legislation Wednesday to block or undo regulations and executive orders recently issued by President Barack Obama. Congress has now the power to kill in one fell swoop dozens of such laws, dubbed “midnight rules” — those rolled out in the last 60 legislative days of an outgoing administration. The approval of the bill comes as Republican leaders have made public their intention to revoke Obama’s rules to reduce methane emissions and lower the environmental impact of coal mining on nearby streams. House Majority Leader Kevin McCarthy, R-Calif., told AP he expected the two environmental rules to go as soon as possible, as he believes they curb the nation’s energy production. In the past, lawmakers have successfully used the special law that lets them invalidate a regulation only once. That legislation, known as the Congressional Review Act, requires a simple majority of both chambers to approve a joint resolution of disapproval followed by the President’s signature. In practical terms, it means that any federal regulation passed since May last year could be voided by the Republican-led Congress once President-elect Donald Trump moves into the White House.

Coalition backs $100bn growth plan for Australian coal industry -- The federal government is backing a $100 billion investment target to expand the Australian coal industry as it blasts the “hypocrisy” of environmentalists who want to halt new mines, escalating a fight over attempts to mandate more solar and wind power. Aiming to open up vast new deposits for export, the government is mobilising against warnings about the “end of coal” as it considers a $1bn loan for the Adani mine in central Queensland on the condition the cash will help further projects. Resources Minister Matt Canavan told The Australian it would be hypocritical to stop coal production or exports on the grounds that developing nations should not use fossil fuels to drive their economic growth. “For the foreseeable future, coal will remain one of the core parts of the energy supply mix to provide people with electricity. We can’t deny people the same benefits that we accrue from permanent and reliable electricity — that would be immoral,” Senator Canavan said. Senator Canavan said Australians who used fossil fuels to fly around the world or used coal power to light their homes were in no position to deny the same power to Indian consumers who wanted cheap power. “In the broader global context, it’s also mean-spirited because this is life and death for people in other parts of the world,” he said.

China to cut 800m tons of coal capacity annually by 2020 - Business - - China aims to optimize the structure of its coal production by reducing outdated capacity and increasing the use of cleaner products. The world's largest coal producer and consumer will cut outdated coal capacity by 800 million metric tons per year by 2020, while increasing use of cleaner coal by 500 million tons, according to the coal industry 2016-2020 development plan issued by the country's top economic planner. Total coal output will stand at about 3.9 billion tons in 2020, compared with 3.75 billion tons in 2015, while China will consume 4.1 billion tons of coal, up from 3.96 billion tons in 2015. There will be about 3,000 coal enterprises in 2020, mostly large companies, running about 6,000 collieries nationwide, with large-capacity coal mines the majority. The plan also outlines targets to improve coal production safety and efficiency, as well as reducing impact on the environment.

Coal power is on the decline in Germany, yet emissions have increased - Germany’s transition to green energy was marked by both progress and setbacks in 2016.   On the one hand, the power system became more climate friendly for the third year running: gas power plants gained back market share from coal-fired plants; the phase-out of nuclear power continued as planned; renewable energy systems delivered more electricity than ever before; electricity use fell; and support for the energy transition among Germans grew from its already high level. On the other hand, by the end of 2016 it became clear that Germany’s total greenhouse gas emissions had risen once again; that in 2017 domestic electricity prices would exceed the 30-cent per kilowatt hour mark for the first time; and that the transition’s progress has been too slow to reach the 2020 climate and efficiency targets without major additional efforts. These are the key findings of the Agora Energiewende 2016 annual assessment released today. The assessment found that renewables accounted for almost one out of every three kilowatt hours of electricity consumed in Germany – 32.3 per cent, to be exact – raising the share of green energy in the German power mix 0.8 percentage points. But despite the strong increase in capacity from wind turbines (five gigawatts) and PV installations (1 gigawatt), only four additional terawatt hours of green energy were produced relative to the previous year due to the below-average amount of wind and sun in 2016. Gas-fired power plants elevated production considerably, generating around 25 per cent more electricity than in the previous year. At 12.1 per cent of the German energy mix, electricity from gas-fired plants was almost as high as that from nuclear power plants (13.1 per cent), which produced half as much electricity as in 2000.

New York is betting on renewables to replace a major nuclear power plant -- New York governor Andrew Cuomo announced plans this week to close the Indian Point nuclear power plant, which supplies electricity to New York City and surrounding areas. The plant’s two working reactors — which account for roughly 10 percent of the state’s power generation — are slated to go offline in 2020 and 2021, more than a decade ahead of schedule. Some environmentalists celebrated the closure. Others lamented the loss of a carbon-free source of energy, despite nuclear power’s potential hazards to humans and wildlife. Nuclear power plants represent a range of risks, from hazardous radioactive waste to a full-scale meltdown. They also supply the bulk of America’s zero-carbon electricity. In laying out its carbon-cutting goals, the Environmental Protection Agency assumed that existing nuclear power plants would continue to hum and buzz for decades to come. But cheap natural gas is digging into the profits of America’s aging nuclear power plants, pressuring them to close ahead of schedule. In a statement, Cuomo said the plant’s closure won’t drive up emissions “at the regional level.” Given New York’s ambitious climate policies, he might be right. This week, Cuomo called for states belonging to the Northeast carbon trading program to further limit carbon pollution. He also announced that New York would cut carbon emissions by an additional 30 percent by 2030. As part of its energy plan, New York will require 50 percent of its power to come from renewables by 2030. To help integrate renewables, New York is remaking its power grid, incentivizing utilities to advance distributed energy — rooftop solar panels, community solar arrays and microgrids. It’s also building power lines to supply New York City with wind and hydroelectric power generated upstate. Cuomo promised that new hydropower and improved transmission would largely fill the gap left by Indian Point. He’s said the shift will come “at a negligible cost to ratepayers.” You may be wondering why New York isn’t maximizing zero-carbon power, building out wind, solar, and hydropower while maintaining its nuclear reactors. More zero-carbon power means less natural gas. Less natural gas means less climate change.

Nuclear Power In Washington State Continues To Break Records -- Despite two unexpected outages, the nuclear power plant near Richland, WA generated a record 9.6 billion kWhrs of electricity in 2016, edging out its previous record of 9.5 billion kWhs in 2014. The Columbia Generating Station has been generating electricity constantly for thirty-two years, but seems to have really found its groove over the last six. The power plant’s electricity output has been steadily increasing over this period because of continuous management and safety improvements, well-timed maintenance, technology replacements and power uprates, done when production is halted to replace fuel. But the most important reason for the reliability is that nuclear takes so little fuel and just keeps going and going. Unlike fossil fuel plants that have to be fueled continuously, refueling of nuclear plants only happens every two years because nuclear produces so much power using so little fuel. The Columbia Generating Station produces uses 5% of 20 tons of fuel each year to generate 9.6 billion kWhs of electricity. Compare this to a coal plant which uses almost a million tons of fuel to produce the same amount of electricity, not to mention the 2 million tons of CO2 it produces that enters the atmosphere. “Columbia’s low-cost power is absolutely critical if we’re to achieve this state’s and the region’s clean energy goals,” said Mark Reddemann, Energy Northwest CEO.

Worldwide nuclear capacity continues to grow in 2016 -- Global nuclear generating capacity increased slightly in 2016 to 391.6 GWe net, up from 382.2 GWe at the end of 2015, according to data from the World Nuclear Association. Construction of three large reactor projects also started during 2016, while three units were permanently shut down. Ten new nuclear power reactors with a combined generating capacity of 9479 MWe came online in 2016. Five of these – Ningde 4, Hongyanhe 4, Changjiang 2, Fangchenggang 2 and Fuqing 3 – were in China. Unit 3 of South Korea’s Shin Kori plant was also connected to the grid, as were India’s Kudankulam 2, Pakistan’s Chashma 3, Russia’s Novovoronezh 6 and the USA’s Watts Bar 2. In 2015, 9497 MWe of new nuclear generating capacity was connected to the grid, while 4763 MWe was added in 2014. At the end of 2016, there were 447 reactors operable around the world totalling 391.4 GWe net, and 60 under construction (64.5 GWe gross). This compares with 439 reactors in operation at the end of 2015, with a total 382.6 GWe.

China Starts Building SMR-Based Floating Nuclear Plant -- China has officially begun construction of its first offshore nuclear power plant, a demonstration project that will employ the domestically developed ACPR50S small modular reactor (SMR). China General Nuclear Power Corp. (CGN) on November 4 told reporters at a press conference that the project is a “top priority” that will further the country’s “strong marine power strategy.” Among its myriad uses will be powering oilfield exploration in the Bohai Sea and deep-water oil and gas development in the South China Sea. “An offshore small modular reactor adopting a decentralized energy system could be a good solution for providing a steady supply of energy on islands, in coastal or far offshore areas,” CGN said. CGN did not address it, but the project has reportedly prompted some alarm amongst countries that border the South China Sea, which spans 1.4 million square miles. A third of the world’s shipping passes through its waters. China, Taiwan, the Philippines, Vietnam, Brunei, and Malaysia all claim sovereignty over some land features in the sea, and concerns about security and resources have driven much tension among stakeholder countries.

Armed Guards at Sweden’s Nuclear Power Stations Next Month -- A spokesman for one of Sweden’s three nuclear power plants says they will have armed guards outside the facilities starting next month in a decision made by the country’s nuclear watchdog. Anders Osterberg of the Oskarshamn power station says “the elevated level” was based on a general security assessment, not a specific threat. Osterberg said Thursday in an email to The Associated Press that the Swedish Radiation Safety Authority decided last year that guards should carry firearms as of Feb. 1. Sweden has a total of 10 reactors in Oskarshamn, Ringhals and Forsmark, providing about half of the country’s electricity production. Sitting some 200 kilometers (124 miles) south of Stockholm on the Baltic Sea coast, Oskarshamn has three reactors.

French watchdog deepens probes into Areva nuclear parts -- Investigators are widening probes into potentially faulty nuclear reactor components made at a factory operated by Areva, the struggling French manufacturer, after the problems contributed to multiple shutdowns of power plants last year. Julien Collet, deputy director of the ASN, France’s nuclear regulator, said he wanted to “go much further” with investigations into Areva’s components, including one probe into the falsification of documents that certified the quality of certain parts. Separately, the ASN is expected to issue a report this year about issues with components made by Areva for a new nuclear power plant at Flamanville in France. The report’s findings could have an impact on the proposed Hinkley Point C nuclear plant in the UK, which is due to use the same technology as Flamanville.

Giant Solar Farm to Rise From Chernobyl's Nuclear Ashes - It was the worst nuclear accident in history, directly causing the deaths of 50 people, with at least an additional 4,000 fatalities believed to be caused by exposure to radiation .  The 1986 explosion at the Chernobyl power plant in Ukraine also resulted in vast areas of land being contaminated by nuclear fallout , with a 30-kilometer exclusion zone , which encompassed the town of Pripyat , being declared in the area round the facility.  Now two companies from China plan to build a one-gigawatt solar power plant on 2,500 hectares of land in the exclusion zone to the south of the Chernobyl plant.   Ukrainian officials say the companies estimate they will spend up to $1 billion on the project over the next two years .   A subsidiary of Golden Concord Holdings (GLC) , one of China's biggest renewable energy concerns, will supply and install solar panels at the site, while a subsidiary of the state-owned China National Machinery Corporation will build and run the plant.  "It is cheap land and abundant sunlight constitutes a solid foundation for the project," said Ostap Semerak, Ukraine's minister of environment and natural resources.  "In addition, the remaining electric transmission facilities are ready for reuse."  In a press release , GLC state work on the solar plant will probably start this year and talk of the advantages of building the facility.  Radiation that escaped as a result of the explosion at Chernobyl reached as far away as the mountains and hills of Wales in the UK , and a substantial portion of the radioactive dust released fell on farmlands in Belarus , north of Ukraine.  Till now the exclusion zone, including the town of Pripyat, has been out of bounds for most people, with only limited farming activity permitted on lands that are still regarded as contaminated.  Many former residents of the area are allowed back only once or twice a year for visits —to their old homes or to tend their relatives' graves. However, a growing number of tourists have been visiting the Chernobyl area recently .  As yet, neither the Ukrainians nor the Chinese have disclosed the safety measures that will be adopted during the construction of the solar plant.

Constitutionally questionable slap at Medina and Portage counties, other anti-fracking localities, signed into Ohio law - -- The legislature just made it harder for anyone to use local ballot issues to fight fracking, thanks to a bill rammed through the legislature, House Bill 463, which Gov. John Kasich signed WednesdayHB 463 takes aim at attempts to propose county charters, or city or village ballot issues, that would ban fracking or any other local initiative that would run counter to statewide law (example: ballot issues to soften marijuana penalties). HB 463 gives county Boards of Elections and the Ohio secretary of state power to decide if a municipal initiative or proposed county charter fails to follow proper procedures for reaching the ballot - or (this is key) tries to claim local control over powers the state reserves for itself. (A 2004 law gives the state sole authority over oil and gas production.)In 2016, the Ohio Supreme Court again backed refusals by elections boards in Portage, Athens and Meigs counties to place similar proposed charters on the ballot. (Meigs County is in southeast Ohio along the Ohio River.) But what the Supreme Court didn't specifically decide was this: whether any officeholder or any government agency could keep a proposed county charter off the ballot because the proposed charter tried to assume power over things the state has reserved for itself (e.g., fracking). That's where HB 463 comes in. It gives county Boards of Elections power to yank an initiative if it would give a city or village more municipal home rule power than Ohio's constitution authorizes. And HB 463 says a county charter can be kept off the ballot if it tries to assume power the state doesn't give counties.A range of lobbies, with the Statehouse oil-and-gas crowd at or near the head of the parade, backed the anti-voter-initiative amendment. Ohio's Bill of Rights says "all political power is inherent in the people" - not, as the General Assembly seems to think, in the Statehouse's lobbies.

State law adds another obstacle to local charter efforts - A bill signed into law last week apparently will make it more difficult for local activists to get charter amendments on the local ballot in Ohio, when those amendments are deemed in conflict with state law. That would spell bad news for efforts in Athens County and other Ohio counties to pass county charters that regulate or ban oil and gas production activities, as well as efforts by Ohio communities to decriminalize marijuana. In both cases, the local charter would be at variance with a state law that Ohio courts and lawmakers say constitutionally trumps the local law. The provision in question was inserted by the state Senate into a grab-bag House Bill (463) that also included provisions involving autism services, property foreclosures and recall of municipal officials. The House passed the bill on Dec. 14 after getting it back from the state Senate, and Gov. John Kasich signed it on Jan. 4. These types of bills – containing many unrelated provisions – are common at the end of legislative sessions when lawmakers are trying to wrap up the two-year term. Dick McGinn, who leads the Athens County Bill of Rights Committee (ACBORC), said Friday that the group is leaning toward preparing another charter amendment for the Athens County ballot as a way to directly challenge H.B. 463. “The irony is that possibly the only way that the Bill of Rights Committee can defeat this new law is to give our local Board (of Elections) the opportunity to use it against us, and if they do, we will appeal to the Court of Common Pleas,” McGinn said.

Eastern Ohio Sets Record For Shale Production - Last year, the EPA stated that, despite an average of 9,100 gallons worth of chemicals used for each fracking job, the process does not create “widespread, systemic impacts on drinking water resources.” On Tuesday, however, EPA officials said they “identified cases of impacts on drinking water at each stage in the hydraulic fracturing water cycle.” “It is beyond absurd for the administration to reverse course on its way out the door,” said Erik Milito, who serves as upstream director for the Washington, D.C.-based American Petroleum Institute. “The agency has walked away from nearly a thousand sources of information from published papers, technical reports and peer-reviewed scientific reports demonstrating that industry practices, industry trends and regulatory programs protect water resources at every step of the hydraulic fracturing process.” As the fracking debate continues, Ohio drillers are smashing shale production records. From July 1 through Sept. 30, records provided by the state Department of Natural Resources show companies drew 360 billion cubic feet of natural gas during the period, which is up from the prior three-month record of 334 billion cubic feet set from April 1 to June 30.Formally known as hydraulic fracturing, fracking is the process by which drillers extract natural gas, oil and liquids from Marcellus and Utica shale. Officials estimate it takes anywhere from 1 million to 10 million gallons of water to frack a single well, along with about 4 million pounds of sand, in addition to a chemical cocktail. Milito and other industry leaders believe fracking helps consumers save an average of $1,337 per household every year, helps curb carbon dioxide emissions because of natural gas replacing coal for electricity generation and supports millions of jobs.

Ohio's Fractured Lands - Effects of fracking could be far-reaching - The Post - In Ohio, underground layers of the rock shale hold reserves of natural gas, which can be extracted through wells drilled into the ground, according to the Ohio Department of Natural Resources. Wells often use “horizontal drilling,” where the well is initially drilled downward and then across a layer of shale.  “With horizontal drilling, it allows pretty pinpoint accuracy,” Natalie Kruse, associate professor of environmental studies at OU’s Voinovich School, said. “(Companies) can direct that well into whatever rock formation they’re trying to hit.” Fracking is a technique used to force the natural gas out of the shale, and it became a more common practice in the mid-2000s, Kruse said.   About 1 million oil and gas wells in the U.S. have used hydraulic fracturing since the process first began in the late ’40s, according a report from the Environmental Protection Agency. Fracking accounted for more than 50 percent of U.S. oil production and nearly 70 percent of gas production in 2015.  In recent years, wells have become more efficient by extending farther across shale layers to extract more natural gas from a single well, Jason Trembly, an associate professor of engineering at OU said. Just as coal has affected people in Southeast Ohio in past decades, natural gas extraction presents similar challenges, Buckley said. “Both mining coal and also in the gas industry, those tend to be pretty migratory industries.” Buckley said. “So if a new mine (or well) opens up somewhere, that really doesn’t employ many locals.” Residents like Mettler, however, are more concerned about the impacts of fracking — whether through air or water pollution — on people’s health. “It is a health issue,” Mettler said. “For me, it doesn’t have anything to do about the industry itself, it’s because it’s not safe.” “There are a lot of potential costs that don’t get factored into our use of fossil fuels: environmental costs, public health costs, things like that,” Buckley said. “That’s probably one of the things that tend to bring people together (in Southeast Ohio), when it’s extracted right under your nose, and the negative consequences can affect everybody.”

REX, Zone 3 (Ohio To Missouri) Has Been Completed; At/Near Full Capacity -- January 13, 2017 - Today, EIA posts its update of Rockies Express Pipeline (REX) Zone 3: REX Zone 3 capacity expansion enters full service, increasing Northeast takeaway capacity.  On January 5, Tallgrass Energy and Rockies Express Pipeline LLC (REX) announced the completion of the Zone Three Capacity Enhancement Project, providing an additional 800 million cubic feet per day (MMcf/d) of east-to-west capacity out of Ohio and into Midwestern markets. The recently completed capacity expansion project has increased REX's Zone 3 east-to-west capacity to 2.6 billion cubic feet per day (Bcf/d) by adding three additional compressor stations and upgrading two others. The project received approval from FERC in March of 2015; it is estimated to have cost $532 million. Capacity on the east-to-west expansion is currently fully subscribed under long-term contracts. In its first full week of service, east-to-west flows have been close to full capacity, averaging 2.6 Bcf/d at the Chandlersville compressor station in central Ohio (PointLogic Energy). Zone 3 has 20 different pipeline interconnects and delivery points, which has expanded markets for Appalachian natural gas. This includes interconnects with several major interstate pipelines, the largest of which are with Natural Gas Pipeline of America (NGPL) and ANR Pipeline. These interconnects also see the greatest throughput, both averaging 764 MMcf/d over the last two months (PointLogic Energy). NGPL extends from the Permian basin and Texas Gulf Coast into the Chicago market; its REX interconnect at Moultrie, Illinois, has a capacity of 1.55 Bcf, which was recently expanded as part of its Chicago Market Expansion Project. ANR has a 1.25 Bcf/d interconnect with REX at Shelbyville, Indiana, that provides access to upper Midwest markets, including Detroit and the Dawn hub in eastern Canada.  In addition to providing access to Midwestern markets, both pipelines will also connect Appalachian natural gas to the Gulf Coast, which is evolving into a demand center as liquefied natural gas export and petrochemical facilities come online.

Mariner East II pipeline makes waves in PA -- It looks as though North Dakota isn’t the only state affected by pipeline struggles. Similar to arguments against the Dakota Access in Iowa, the eminent domain issue continues to frustrate landowners. A Dec. 29 article by Matt Miller in reported that the Pennsylvania Supreme Court refused to hear an appeal by Cumberland County property owners fighting against Sunoco Logistics, owner of the Mariner East II natural gas transmission pipeline.  Three couples, R. Scott and Pamela Martin, Douglas and Lyndsey Fitzgerald, and Harvey and Anna Nickey, have lost against the pipeline giant in defending their land. The lower Commonwealth Court refused to hear the couples’ complaints after Judge Edward E. Guido ruled in favor of Sunoco against the property owners fighting against the use of eminent domain for the pipeline project.The Commonwealth Court ruled that Sunoco is a “public utility corporation” that has the power to seize private land for its multi-state pipeline,” according Pennlive.In Huntingdon County, Ellen Gerhart, was left with a jumbled mess of trees after Sunoco hired a logging company to remove trees on her property to make way for the pipeline. She, too, appealed a lower court’s decision to take a portion of her land through eminent domain. She and her daughter, Elise, are also fighting criminal charges of disorderly conduct stemming from protests against the pipeline.But the fight against the pipeline isn’t just about eminent domain. StateImpact Pennsylvania reported on Jan. 6 that some communities in Philadelphia’s western suburbs have concerns, saying the pipeline could endanger public safety.StateImpact reported that documents filed against Sunoco Logistics in eight townships or boroughs say residents would be “vulnerable to releases of toxic and flammable gases if there was a leak or explosion. The documents also note Sunoco’s poor safety record, with 263 spills of hazardous liquids since 2006. Sunoco company spokesperson Jeff Shields said many layers of safety are in place to prevent a major incident, including additional safety standards in populated places.” He also noted that the pipeline will have federal regulation and emergency response plans in addition to education to first responders who might deal with any safety issue.The $2.5 billion Mariner East II pipeline would run from western Ohio to the Marcus Hook refinery south of Philadelphia. It will carry propane, butane and ethane, not natural gas.

NYMEX February gas popped 16.2 cents to $3.386/MMBtu - NYMEX February natural gas futures contract settled 16.2 cents higher to $3.386/MMBtu Thursday, on a larger-than-expected storage withdrawal. US natural gas in storage fell 151 Bcf to 3.160 Tcf in the week ended January 6, the US Energy Information Administration said Thursday. The withdrawal was significantly larger than an S&P Global Platts survey of analysts who expected a 137-Bcf pull. In the corresponding week in 2015, the EIA reported a 152-Bcf draw, while the five-year average is a withdrawal of 168 Bcf, according to EIA data. Total inventories now are 52 Bcf less than the five-year average of 750 Bcf in the East, 14 Bcf more than the five-year average of 851 Bcf in the Midwest, 24 Bcf higher than the five-year average of 173 Bcf in the Mountain region, 36 Bcf less than the five-year average of 299 Bcf in the Pacific, and 46 Bcf more than the five-year average of 1.091 Tcf in the South Central region. According to the National Weather Service, the eight- to 14-day outlook calls for above-average temperatures from the Eastern Seaboard to the Rocky Mountains. Meanwhile, the Southwest and the Pacific Northwest are expected to to experience below-normal temperatures. Lower-48 natural gas demand reached 135 Bcf on January 6, 2017, according to Bentek Energy, which is only 3 Bcf less than the highest consumption day during the polar vortex three years ago. And yet this winter heating season has been nearly 15% warmer than normal for the country as a whole since October 2016. The February gas contract traded in a range of $3.294-$3.450/MMBtu.

 US EIA ups expected Q1 Henry Hub spot gas price forecast 29 cents to $3.65/MMBtu -  The US Energy Information Administration on Tuesday raised its forecast for first-quarter 2017 Henry Hub natural gas spot prices to $3.65/MMBtu, 29 cents above its December estimate. The agency, in its January Short-Term Energy Outlook, projected Henry Hub gas prices would average $3.55/MMBtu across all of calendar-year 2017, up from an average of $2.51/MMBtu in 2016. Those forecasts are up 28 cents and 2 cents, respectively, from estimates EIA issued in December. EIA lowered its US gas consumption estimate for Q1 by 0.68 Bcf/d to 91.05 Bcf/d. However, "US natural gas exports are expected to continue growing over the next two years as several liquefied natural gas export terminals come online," EIA Administrator Adam Sieminski said Tuesday.

 US will be a net exporter of natural gas in 2017 - The U.S. is set to become a net exporter of natural gas in 2017 as dependence on foreign oil imports falls, according to the federal government’s latest energy projections. The Energy Information Administration, the independent analysis arm of the Energy Department, made the assessment Thursday in its Annual Energy Outlook for 2017. The outlook said all test-case scenarios point to the nation becoming a net energy exporter of natural gas, while its oil imports fall. Becoming a net exporter of natural gas means the U.S. will be able to meet demand on the global market while still producing enough to meet demand domestically. “Exports are highest, and grow throughout the projection period,” the outlook said. It said favorable geology and technology are combining to help the nation’s oil and gas companies produce at lower prices. The glut has hurt oil and gas producers that use hydraulic fracturing, or fracking, in the United States to break shale rock deep underground to release fossil fuels. Fracking has made the U.S. a top oil and natural gas producer. U.S. production is expected to decline sometime in the 2030s, reversing projected growth in net energy exports.

Natural Gas Industry Preps To Meet Demand - By 2040, global energy demand should increase by about 25 percent — which is roughly equivalent to the total energy used today in North America and Latin America — according to natural gas industry leaders. However, officials with Exxon Mobil and the American Petroleum Institute do not believe this means there will be more air pollution from electricity generation, as they highlight the fact that carbon dioxide emissions are declining at the same time the industry is producing more natural gas. “As economies expand around the world, energy demand will increase as more people seek higher standards of living,” William Colton, vice president of corporate strategic planning for Exxon, said. “Humanity’s dual challenge is to meet growing energy demand while managing the risk of climate change.” According to Exxon’s “2017 Outlook for Energy” report, the global population is expected to grow by nearly 2 billion by 2040, while emerging economies in nations such as China, India and Indonesia will continue to grow. The report states 55 percent of energy demand will be tied directly to electricity generation in support of an increasingly digital society. Average electricity use per household will increase about 30 percent by 2040, according to the study. However, the share of the world’s electricity generated by coal is expected to fall to about 30 percent by 2040, which would be down from approximately 40 percent in 2015.The number of motor vehicles on the road is projected to increase by 80 percent to 1.8 billion by 2040, which will also drive energy demand.   Electricity producers such as American Electric Power and FirstEnergy Corp. have gradually been shifting their main generation fuel from coal to natural gas, which results in lower carbon dioxide emissions. Gerard expects this to continue, despite promises from President-elect Donald Trump to use more coal.

New pipelines teeing up supply for more trains at Sabine Pass LNG -  Northeast producers are about to get a new path to target LNG export demand at Cheniere Energy’s Sabine Pass LNG terminal. Cheniere in late December received federal approval to commission its new Sabine Pass lateral—the 2.1-Bcf/d East Meter Pipeline. Also in late December, Williams indicated in a regulatory filing that it anticipates a February 1, 2017 in-service date for its 1.2-Bcf/d Gulf Trace Expansion Project, which will reverse southern portions of the Transcontinental Gas Pipe Line to send Northeast supply south to the export facility via the East Meter pipe. Today we provide an update on current and upcoming pipelines supplying exports from Sabine Pass. In the 11 months or so since it loaded and shipped its first export cargo in February 2016, Cheniere’s Sabine Pass liquefaction and export facility in Cameron Parish, LA, has made a noticeable dent on the natural gas market, helping the market to reduce a massive year-on-year surplus in storage over the injection season and also enabling the U.S. to become a net exporter of natural gas for the first time last fall (see Feels Like the First Time Part 2 and We’ve Only Just Begun). To date, the terminal has loaded and shipped off 61 cargoes, and the pace has accelerated in recent months. Twenty-seven cargoes (44% of the total) have  been exported since November 1, 2016, five of those in the first six days of 2017 alone, according to Genscape’s North American LNG Supply & Demand report.

An aging pipeline has driven this Native American tribe into an unprecedented move -- A Wisconsin Native American tribe wants a 64-year-old oil pipeline removed from its reservation due to concerns that it poses a grave environmental threat. The Bad River Band of Lake Superior Chippewa’s tribal council approved a resolution on Wednesday, Jan. 4, to refuse new easements along 12 miles of Enbridge’s Line 5 pipeline, which carries oil and natural gas liquids 645 miles from Canada to eastern Michigan. In a very rare move, the resolution also calls for the decommissioning and removal of the pipeline from all Bad River lands and watershed along the shores of Lake Superior in far northern Wisconsin. “We really don’t know how everything is going to play out,” said Dylan Jennings, a Bad River council member. “We can’t speak for Enbridge and what they are thinking or what they intend to do. This is kind of an unprecedented thing from our understanding. We know of communities that attempt to stop pipelines, but don’t know of any booting out or uprooting them.” Jennings said that while they stand with the protesters around Standing Rock Indian Reservation fighting to stop the Dakota Access pipeline in North Dakota, their decision has been a long time coming and was not spurred by the recent attention to the issue. “This is a really important time for our society and our communities to stand up and to be that voice of reason.”Jennings called the decision “long overdue,” saying that the tribe has been “silent observers” as the world news has show what kind of devastation can happen from an oil spill. He noted that the nearby Kalamazoo oil spill in 2010 happened on a similar sized pipeline, but that pipeline was only 43 years old when it ruptured.

US shale oil producers expected to spend more in West Texas in 2017 – Platts snapshot video - NYMEX crude futures are in the low $50s/b, smack in the middle of the 'Goldilocks zone' for US shale oil producers, particularly in the West Texas Permian Basin. Jeff Mower explains why US oil producers are getting a bit more optimistic about production prospects over the next few years, bolstered by lowered breakevens and higher returns.

Pipeline protesters face tough road ahead --  Tipis and tents still stand against a frigid North Dakota winter in the Oceti Sakowin camp along the banks of the Cannonball River. The occupants in what is the largest Dakota Access protest camp have withstood blizzards and extreme temperatures, but a force of nature is coming that the camp won’t be able to withstand. Substantial spring floods in the Cannonball River area appear likely, with the Bismarck-Mandan area already receiving 55.3 inches of snow. That is the most accumulation on record for that area through Jan. 10, according to National Weather Service data. The above-average precipitation is likely to continue. A La Nina weather pattern still has the Great Plains in its grasp, which tends to result in winters that are colder and wetter than average. Weather forecasters have predicted the trend will continue for at least the next month — if not longer. The amount of precipitation, however, is just one of the many factors that will play into how big localized flooding gets in the vicinity of the protest camps. Garland Erbele is an engineer with the North Dakota State Water Commission, and is among state officials with eyes on the situation. “Snowfall amounts for the remainder of this winter, the timing of the spring melt, future rainfall events, and potential ice jams will all influence flows in Cantapeta Creek, the Cannonball River and the Missouri River/Lake Oahe,” he said. State and federal officials, tribal officials and camp leaders are all aware that the potential risk of substantial flooding is growing, and that this presents significant safety risks to people and property in the location.In 2013, the entire area on which Oceti Sakowin now sits was inundated by a sea of icy cold water and gigantic ice rocks — some of them the size of 4 and 5-foot boulders. Standing Rock Sioux’s tribal chairman David Archambault talked about the dangers ahead during a Jan. 5 meeting between the tribal council and representatives of the protest camps. The council called the meeting to urge camp leaders to share more information with them about plans to vacate the camps so the area can be cleaned up. Another flood like the one in 2013 would not only put the camp’s estimated 500 to 800 occupants in harm’s way, Archambault said during the meeting, but debris from the camps — which include abandoned vehicles and buried human wastes — could result in contamination of the very river protesters have said they came to protect. “We had a flood in 2013 where the whole area was inundated,” Archambault told the assembly of camp leaders and members. “So we know that is a real risk today, because of the amount of snow we are experiencing. So what we want to do is make sure that none of that waste gets into the Missouri River.”

 North Dakota Governor: DAPL Likely to Get Easement Once Trump Is President -- Even though the U.S. Army Corp and the Obama Administration denied a key easement needed to complete the Dakota Access Pipeline (DAPL) last month, the struggle against the controversial pipeline is far from over. North Dakota's new Republican Gov. Doug Burgum has reaffirmed his favor of the project, telling Reuters that he is confident that the pipeline will be approved by Donald Trump when he comes into the White House. "I expect the world's going to change dramatically on that day relative to finding resolution on this issue," Burgum said. "I would expect that (Energy Transfer Partners, DAPL's parent company) will get its easement and it will go through." The president-elect formally announced his support for the completion of the DAPL last month. His transition team noted that his support for the pipeline "had nothing to do with his personal investments and everything to do with promoting policies that benefit all Americans." Burgum has requested that the demonstrators clean up the protest camps near the Standing Rock Sioux Reservation before spring floods from rain and melting snow create a "potential ecological disaster."  According to Reuters, more than 300 vehicles, along with dozens of temporary dwellings and other detritus, have been abandoned at the encampment, with at least one campsite sitting on a flood plain. "The amount of cleanup that needs to take place is enormous," Burgum said. "We've got a potential ecological disaster if this land floods and all the debris flows downstream into tribal lands."  About 700 to 1,000 pipeline protesters remain at the Oceti Sakowin camp even though Tribal Chairman Dave Archambault II's has requested them to leave due to the harsh winter conditions. The chairman said the pipeline fight will continue in court.

Trump taps well of protest with calls for more drilling in national parks | Reuters: President-elect Donald Trump aims to open up federal lands to more energy development, tapping into a long-running and contentious debate over how best to manage America’s remaining wilderness. The U.S. government holds title to about 500 million acres of land across the country, including national parks and forests, wildlife refuges and tribal territories stretching from the Arctic to the Gulf of Mexico. They overlay billions of barrels of oil and vast quantities of natural gas, coal, and uranium. With Trump poised to take office on Jan. 20, energy companies and their lobbyists are eyeing a new gusher of federal drilling and mining leases after a period of stagnation under the administration of Barack Obama. Oil output on federal land made up about a fifth of the national total in 2015 - down from more than a third in 2010 - while the number of onshore drilling leases fell about 15 percent, according to federal data. "This opportunity is unique, maybe once in a lifetime," said Jack Gerard, president of the Washington D.C.-based American Petroleum Institute lobby group, referring to prospects for increased access to federal leases. The hoped-for land run by energy companies, however, could get bogged down by lawsuits and lobbying from environmental groups and some local residents. "It would only take one serious mistake - one well to go bad - for our town’s water supply to be damaged," said Josh Ewing, the leader of a southern Utah conservation group.

Big Oil Cheers as Trump Plans to Open National Parks for Drilling - The president-elect plans to open up federal lands for more energy development and, according to Reuters , energy companies and industry lobbyists are already expecting a flurry of new federal drilling and mining leases with the incoming administration. "This opportunity is unique, maybe once in a lifetime," Jack Gerard, president of the Washington DC-based American Petroleum Institute lobby group, told the news service in regards to increased access to federal leases.  Vast quantities of oil, natural gas, coal and uranium are tucked away in government-owned national parks and forests, wildlife refuges and tribal territories from the Arctic to the Gulf of Mexico. As Reuters noted, under the Obama administration, oil output on federal land made up about a fifth of the national total in 2015, down from more than a third in 2010. Onshore drilling leases also fell about 15 percent. However, Trump campaigned on a promise to "unleash America's $50 trillion in untapped shale, oil, and natural gas reserves, plus hundreds of years in clean coal reserves." He has accused Obama of "denying millions of Americans access to the energy wealth sitting under our feet" by restricting leasing and banning new coal extraction.  The U.S. government owns roughly 640 million acres of land, and the U.S. Department of the Interior (DOI) manages most of it. In December, Trump nominated U.S. Rep. Ryan Zinke of Montana, a climate change skeptic and coal mining advocate as head of the department.  As it happens, The Wilderness Society calculated that 90 percent of the lands held by the Bureau of Land Management, a bureau of the DOI, is already open to oil and gas development. Most of these lands are in the West and Alaska.

 Is this the year the Arctic National Wildlife Refuge will be targeted for oil drilling? - Less than a month after the Obama administration announced that it was banning offshore oil and gas production in most of the Arctic, there are new signs that a place many conservationists regard as the crown jewel of the Arctic — the coastal plain of the Arctic National Wildlife Refuge — could one day be open for drilling. After decades of unsuccessful attempts to gain access to oil beneath the pristine coastal lowlands, Alaska’s Republican congressional delegation this week began yet another effort to open a region experts say may hold one of the nation’s largest reserves of oil and natural gas. This time, however, there may be reason to expect a bill to actually pass and be signed into law. “On a practical level, this might be the best opportunity we’ve had in a couple of decades to do what many people in Alaska thought should have happened years ago,” Andy Mack, commissioner of the Alaska Department of Natural Resources, said in an interview Friday. “Politically, in Washington, D.C., we have all the right folks in place.” One of those folks, of course, is President-elect Donald Trump, who has promised to roll back regulations and expand oil and gas production on public lands. Another is U.S. Sen. Lisa Murkowski, who is now chairwoman of the powerful Senate Committee on Energy and Natural Resources. On Thursday, Murkowski and Alaska’s junior senator, Daniel Sullivan, introduced Senate Bill 49, the Alaska Oil and Gas Production Act, which Murkowski’s office said “would allow limited oil and natural gas development” in areas of the coastal plain that are not federally declared wilderness. Her office emphasized that the bill calls for a very small oil and gas footprint in a vast region, and said the legislation would only allow development on 2,000 “surface acres” within the 1.5-million-acre coastal plain, an area known as the “1002 area.” The plan would rely heavily on horizontal drilling from a limited number of platforms.

Sessions Led Deregulation of Fracking... And Then Profited From It –- Last month, Steve Horn at DeSmog published a fascinating story revealing that Sessions introduced the first bill to try to exempt fracking companies from regulation under the Safe Drinking Water Act. We looked a bit more at what Sessions was up to, and found that that same year — in 1999 —his wife held big investments in the oil and gas company leading the fracking charge in Alabama. DeSmog reported that during Sessions’ first term as senator, he was the sole co-sponsor of the original Halliburton Loophole bill, introduced in March 1999 by fellow climate science denier Senator James Inhofe.The bill, which was folded into the Energy Policy Act of 2005, would ultimately exempt underground injections of fracking fluids from regulation under the Safe Drinking Water Act. DeSmog uncovered that this was done with strong backing from the Interstate Oil & Gas Compact Commission, and it stemmed from controversy surrounding the practice in Sessions’ home state.From the late 1980s through the 1990s, coal beds in Alabama were being fracked for natural gas. After residents complained of impacts to their drinking water, they petitioned the EPA to enforce its regulations of fracking injections under the Safe Drinking Water Act. Under the Clinton Administration, the EPA refused to reconsider approval of what Alabama underground injections regulators were doing on fracking: looking the other way. (For more on this history, read Steve Horn’s piece on DeSmog and this 2002 U.S. Supreme Court decision.)  Building off of the DeSmog story, we’ve discovered that when Senator Jeff Sessions introduced the original Halliburton Loophole, he and his wife had sizable stakes in Energen, the Alabama-based oil and gas company that pioneered fracking in the state. In 1995, as Sessions was running for his senate seat, his wife held between $1,001-$15,000 in Energen stock. They reported the same for 1996. In 1997 and 1998, the same range in value was posted as jointly owned. But in 1999 — the year Inhofe and Sessions introduced the bill to exempt Energen’s and other fracking operations from regulation under the Safe Drinking Water Act — the senator reported that his wife had separately acquired through inheritance an additional stake in Energen, valued at $15,000-$50,000.

Putin's Other American Propaganda Effort: Anti-Fracking News -- Energy politics makes strange bedfellows, none stranger than Robin Hood and Russian President Vladimir Putin.  RT, a media organization that the U.S. intelligence community calls "the Kremlin's principal international propaganda outlet," published an article on Jan. 2 under the unlikely headline: “Robin Hood’s Sherwood Forest hideout under threat from frackers.” The article, which carries no byline and cites the work of environmental activists, laments plans of a unit of Ineos Group, a Switzerland-based chemical company, to conduct seismic testing for natural gas near Major Oak, the millennium-old tree that served in legend as headquarters to Robin Hood and his merry fellows. (Ineos Shale and Friends of the Earth have been involved in a public dispute over the environmental group's depiction of fracking, with the U.K.'s Advertising Standards Board weighing in.) This wasn't the only foray by RT, formerly known as Russia Today, into anti-fracking coverage. The media organization has regularly published articles and aired segments that appear to oppose fracking, the fossil-fuel extraction technique that has made the U.S. an energy superpower again. One "exclusive" interview about the extraction technique features the opening question: "There are a lot of studies that say fracking is dangerous, so why do you think some countries and companies think it’s worth the risk?"  RT's practice is so marked that U.S. intelligence officials used it last week as an example of how Russia promotes its national interests abroad. The Office of the Director of National Intelligence (ODNI) states in the public version of its report on Russian interference in the U.S. presidential election (PDF):

U.S. Oil And Gas Jobs See First Gains In 2 Years - Rising rig counts and an uptick in drilling activity is leading to a rebound in employment in the oil and gas industry, according to recent data.Payrolls in the oil and gas sector in the United States rose for the month of November, recent U.S. government data shows, the first monthly gain in over two years. Employment in oil and gas extraction and support services rose by 3,300 for the month, rising to 384,300. That comes after the industry lost over 150,000 jobs during the two-and-a-half-year downturn.While one month’s worth of statistics does not make a trend, the data suggests that the worst is over. The market is passed the low point and even as companies continue to repair balance sheets, oil trading above $50 per barrel is sparking a rebound in drilling activity and hiring. The rig count is already up by more than 200 oil rigs since the middle of last year, posting six consecutive months of gains. U.S. shale output is also rising, up about 300,000 bpd from a last summer, according to preliminary data.The big question is whether or not spending on drilling will rise substantially this year or simply level off at these low levels. Estimates from market watchers vary. Cowen & Co., a financial services company, surveyed 25 E&Ps and found an average increase in capex by 33 percent this year compared to last. Barclay’s expects a more modest 7 percent growth in capex across a more comprehensive measure of 215 global oil and gas companies. The industry could more aggressively ratchet up spending if oil prices rise. Raymond James says spending could double if oil rises to $65 per barrel in the first quarter. These bullish estimates are a departure from the rather downbeat assessments prior to the OPEC deal in November. The IEA had repeatedly warned last year that the global oil industry risked a third consecutive year of a contraction in spending in 2017, a development that no longer looks likely.  Nevertheless, all is not well for oil drillers. The rebound in spending, drilling and hiring could reverse one of the oft-cited “achievements” of the two-year downturn. Across the industry, companies big and small achieved major cost reductions in order to adapt to a lower price environment. Some of that came from real reductions in the cost of operations and more efficient drilling techniques.

Short-Term Energy Outlooks anticipates gains in oil, natural gas -- On Tuesday, the Energy Information Administration (EIA) released its Short-Term Energy Outlook, which includes its first forecasts for 2018. A more detailed look at the EIA’s crude oil forecast was released Thursday, January 12. The report slightly reduced its forecast for dry natural gas production in 2017 to 43.78 billion cubic feet per day. In 2016, drilling activity slowed due to low natural gas prices. 2016 showed the first yearly production decline since 2005, according to a Reuters analysis. While EIA projected lower production and consumption for 2017 that its initial predictions, the 2018 forecast shows significant increases. The forecast for natural gas demand in 2018 “would rise to an all-time high of 76.86 bcfd,” says Reuters. The U.S. also became a net exporter of gas in November 2016 with the increase of LNG exports to Mexico, likely to occur once again in October 2017. Annually, the U.S. is not expected to become a net exporter of gas until 2018, which has not happened since 1957. Crude oil is forecast to increase as well, with a modest increase in prices over the next two years. Of course, production is related directly to price, as the past two years have shown, as inventories increased alongside production. The OPEC agreement to cut production makes way for a price increase, but EIA names the agreement as one of the uncertainties that could affect price going forward. Forecast increases in global production should provide downward pressure on prices and mitigate the potential for significant crude oil price increases through 2018. Despite the recent OPEC agreement, EIA expects global petroleum and other liquid inventory builds to continue, but at a slowing rate, in 2017 and 2018. Crude oil production is forecast to increase to 9.3 million b/d by 2018, reflecting increases in offshore Gulf of Mexico production. EIA also cites a rise in tight oil production that are a result of increases in drilling activity, rig efficiency, and well-level productivity. This is consistent with other similar forecasts regarding oil production across the shale plays that cite efficiency and increased technological advances that have boosted production while cutting costs.

Oil Production Vital Statistics December 2016 - Global total liquids production hit yet another record high of 98.24 Mbpd in November led by OPEC and Russia! Libya’s drive to restore production is a significant factor with production up 280,000 bpd from recent lows. The US oil rig count has risen for 32 consecutive weeks and US oil production has stopped falling. Production from the North Sea and Asia are in decline as the past low price and drive to restore profitability works through the system. The oil price has significantly broken above the $51 / bbl resistance and Brent is currently at $57. With OPEC + Russia due to decrease production from January first and to maintain lower plateau levels, combined with the relentless rise in demand, the oil price should rally from here, but not by much. The ceiling is set by the cost of new supply that currently resides with the N American LTO frackers. US production has halted its decline which is perhaps a sign of what is coming. The following totals compare November 2016 with November 2015:

  • World Total Liquids +780,000 bpd
  • OPEC +950,000
  • Russia + FSU +440,000
  • Europe -170,000 bpd
  • Asia -640,000
  • North America -640,000

The net figures from the above are +1.39 Mbpd and -1.45 Mbpd leaving a net -0.06 Mbpd increase compared with the + 0.78 Mbpd global total liquids figure. Year on Year, OPEC and Russia are the big winners. North America, Asia and Europe the big losers.

US EIA STEO highlights: Decline in US oil production may be over -- The decline in US oil production appears to be over, the US Energy Information Administration said Tuesday. US oil output, which climbed from 6.14 million b/d in January 2012 to a recent peak of 9.5 million b/d in December 2014, may have bottomed out at 8.69 million b/d in July 2016 and now appears to be on a new upswing, the EIA said in its Short-Term Energy Outlook. The agency forecast US production, which averaged 8.89 million b/d in 2016, to climb back above the 9 million b/d threshold in April 2017 and reach as high as 9.44 million b/d by December 2018."The general decline in US crude oil production that began almost two years ago is likely over, as higher average oil prices and improvements in drilling efficiency are giving a boost to output," EIA Administrator Adam Sieminski said in a statement. US production late last year climbed from 8.81 million b/d in October to 8.86 million b/d in November and to 8.9 million b/d in December, marking the first output increase over three consecutive months since early 2015, Sieminski said.Production is expected to average 9 million b/d in 2017 and 9.30 million b/d in 2018, both up from the 2016 average of 8.89 million b/d, but below the 9.42 million b/d hit in 2015 -- the highest level in decades. EIA has been steadily increasing its supply estimate for 2017, as the decline in US supply in response to relatively low prices has not been as significant as initially assumed. In April, for example, EIA had forecast that 2017 production would fall to average of 8.04 million b/d, nearly 1 million b/d below what it is currently forecasting.

US to sell 8 million barrels of sweet crude from three SPR sites - The US government plans to sell up to 8 million barrels of light, sweet crude from three of the Strategic Petroleum Reserve's four sites later in January, with first deliveries planned for as early as February, a Department of Energy official said Friday. DOE plans to sell 3 million barrels from its Bryan Mound SPR site and 3 million barrels from its Big Hill site, both in Texas, and 2 million barrels from its West Hackberry site in Louisiana, according to the official, who spoke on the condition of anonymity. The crude will be sold at multiple delivery points throughout the SPR system. "Companies could make offers for oil coming out of one site only, for all three sites, for pipeline deliveries only for marine vessels or combinations of both," the official said.The agency plans to issue a notice of sale by mid-January, according to the official, beginning the process for what is expected to be the first of 18 expected SPR sales through fiscal 2026 that would put nearly 200 million barrels of government-owned crude up for auction. The US SPR, the largest government stockpile of crude in the world, currently holds 695.1 million barrels of crude, including 266.1 million barrels of sweet crude. The estimated 8 million barrels to be sold this month are part of an appropriation by Congress to sell up to $375.4 million of SPR crude to partially fund an effort to modernize the SPR and add marine terminal capacity. Once the notice of sale is issued, companies will have eight days to submit bids. In order to bid, companies need to be registered in the SPR's Crude Oil Sales Offer Program and must submit an offer guarantee of $10 million or 5% of maximum potential contract amount, whichever is less.

Oil, Gas Investment to Grow in 2017 for First Time since Price Crash - The oil and gas investment cycle will show the first signs of growth in 2017 since the oil price crash in 2014 and new projects in the upstream industry will double compared to 2016, according to a new report from Wood Mackenzie. "2017 will demonstrate how efficient the oil and gas industry has become, showing projects in better shape all round,” Malcolm Dickson, a principal analyst for Upstream Oil and Gas for Wood Mackenzie, said. According to Wood Mackenzie's global upstream outlook for 2017, exploration and production spend is set to rise by 3 percent to $450 billion. “This is still 40 percent below the heady days of 2014 … but for all the pain of the downturn a leaner industry is starting to emerge,” Wood Mackenzie said in a company statement. The number of final investment decisions (FID) will rise to more than 20 in 2017, compared with nine in 2016, Wood Mackenzie reported. “This is still well short of the 2010-2014 average of 40 a year, but these are generally smaller, more efficient projects, and capex per barrel of oil equivalent averages just $7 per barrel, down from $17 per barrel for the 2014 projects,” a Wood Mackenzie spokesperson said. The impending growth is also good for jobs in the sector, Dickson told Rigzone. "Rising oil and gas investment is generally good news for jobs, in terms of safe-guarding existing roles and creating new ones. For oil companies, these will be associated with new projects, and on the supply chain side, for the delivery of required kit,” Dickson said. In its new report, Wood Mackenzie predicts that deepwater projects will spring back to life in 2017, but warns that more cost cutting is needed in the long run.

Big Oil Hits Sweet Spot as Projects Reap Rewards of Recovery (Bloomberg) -- Big Oil is poised to reap rewards this year as investments made before the crude-price slump pay off just as the recovery starts. Seven of the world’s largest energy companies will together boost oil and natural gas output by 398,000 barrels a day, the most since since 2010, according to data from Oslo-based consultant Rystad Energy AS. In 2018, output will rise even faster.The oil majors aren’t increasing their drilling budgets. Instead they’re benefiting from money invested before the rout. Lower costs combined with higher output would allow companies including Exxon Mobil Corp. and Royal Dutch Shell Plc to maximize their gains from improved oil prices. Should crude remain above $50 a barrel, 2017 could be a break-out year, eliminating the need to borrow to pay dividends, according to analysts at Sanford C. Bernstein.“They could hit a sweet spot this year,” said Mark Tabrett, a London-based analyst at Bernstein. “Heavy investments of previous years are paying off with more production, costs have been cut and the companies are in a position to take advantage of that when oil prices rise.”After reaching an intraday low of $27.10 a barrel on Jan. 20, Brent oil prices more than doubled to a high of $57.89 on Dec. 12. Futures traded Wednesday at $53.97 a barrel, up 0.6 percent, as of 11:46 a.m. London time. The global benchmark rose 52 percent last year, its biggest yearly gain since 2009. Shares in the majors, meanwhile, rose across the board, led by Shell, whose B shares gained 53 percent in London, the best annual increase since at least 1990.Brent averaged about $45 a barrel in 2016, and is expected to rise above $55 this year, according to the median of 45 analyst estimates compiled by Bloomberg. Yet the majors, still smarting from more than two years of depressed prices, have expressed a reluctance to increase spending. “For us this will be about not starting to run too fast,” Statoil Chief Executive Officer Eldar Saetre said at a conference in Oslo last week. “There won’t be a lot of new activity initiated when it comes to larger projects in 2017.”

Energy companies are about ready to loosen the purse strings -  The lean years are unlikely to be over for energy companies amid rising crude-oil inventories and global uncertainty, but the industry is expected to start spending again after years of belt-cinching. OPEC and other major players have agreed to cut production starting this month, but the market continues to be plagued by concerns that some oil-producing countries will not comply with the terms. Crude futures are off about 2% so far this year but gained 45% in 2016 after two years of double-digit losses that peaked with a 46% slide for 2014.To face the precipitous price declines, companies have cut their expenses, laid off employees, and sold so-called “non-core” assets. Spending ticked higher by the end of last year, and Wall Street expects that trend to continue. With OPEC putting a floor on prices, exploration and production companies “have greater confidence to drill and complete, although the early stages of the recovery will be uneven,” analysts at Barclays said in a recent note. North American E&P companies are seen as the biggest spenders this year, with Barclays projecting a spending increase of 27% for the year. Overall, spending is seen up 7% globally, Barclays said, citing the results of a yearly survey it conducted with more than 200 companies worldwide. Spending dropped 26% in 2015 and 23% last year.

Oil Discoveries To Rebound From Rock Bottom - The tough couple of years that oil companies had to go through with the oil price crash has forced many of them to slash exploration investment. Significantly reduced capital expenditure resulted last year in the lowest amount of conventional oil finds since 1952, with the number of wells drilled in 2016 coming in at just one-third of wells drilled in 2014. As bleak as the 2016 figures are, analysts reckon that last year was the bottom of the investment cycle, and companies are cautiously looking up to increasing exploration and production investments. The E&P sector is emerging ‘leaner and meaner’ from a doom-and-gloom two years after cutting costs, increasing efficiency, and optimizing the most promising and efficient projects. Last year was probably the low point for conventional oil discoveries, with just 3.7 billion barrels found, according to analysts at energy consultancy Wood Mackenzie. This was 14 percent less than the conventional oil finds in 2015 and the lowest level in 65 years. Even if WoodMac’s updated figures are not as gloomy as earlier forecasts from August of last year, the numbers remain extremely low, with only 431 wells drilled last year. “We may come to see 2016 as a turning point for conventional exploration,” WoodMac said in its global exploration review of 2016. Still, one bright note last year was that although far fewer wells were drilled, discovery costs were below the 2014 costs for a second year running, according to WoodMac’s review. Last year was surely not the year of exploration investment and drilling booms. But Wood Mackenzie now sees 2017 “as the dawn of a cautious recovery for the E&P sector, with investment edging upward”.

Energy's Drunken-Sailor Legacy Hangs Over Debt Rescue Plans - Debt-laden energy companies that still don’t have a financial escape plan in place are running out of time and willing lenders even after oil doubled from its February lows.Crude prices topping $50 a barrel helped to ease pressure on distressed energy companies, allowing at least 27 issuers to sell $16 billion of junk-rated bonds in last year’s final quarter, according to data compiled by Bloomberg. That still leaves about $44.5 billion maturing by the end of 2020, according to Fitch Ratings. A "mountain" of more than $18 billion in credit-line commitments comes due in 2019, said Spencer Cutter at Bloomberg Intelligence.Those still vying for new capital such as Vanguard Natural Resources LLC and Pacific Drilling SA need prices above $55 to $60 to win over lenders, according to credit analysts. What’s more, banks face tougher limits from U.S. regulators on energy loans, spurred by memories of previous booms and busts. Creditors remain mindful that drillers "get very happy about their cash flow” during good times, Evercore ISI analyst James West said. “And when financial markets become wide open, they spend like drunken sailors."Borrowers are trying to avoid the fate of more than 230 exploration, drilling, production, servicing, transportation and storage companies that have gone bankrupt since the start of 2015, affecting about $96.2 billion of debt, according to data tracked by the Haynes and Boone law firm. Despite last year’s rally, oil prices are still down from more than $107 a barrel in mid-2014, making debt loads based on those near-record levels unaffordable. Lenders may want to see sustained prices of at least $55 a barrel before agreeing to extensions, Cutter said.

Exxon’s 2040 Outlook: Fossil Fuels Aren’t Going Anywhere The global energy mix will not look that much different for oil and gas in 2040, according to Exxon Mobil’s recently released 2017 Outlook for Energy: A View to 2040. Both the middle class and world GDP is expected to double in the next 15 years, accelerating demand for air conditioned homes, cars, and appliances such as refrigerators, washing machines, and smart phones. Non-OECD nations, particularly China and India, will experience the most economic growth, driven by urbanization. Oil is expected to remain the world’s primary energy source, driven by demand for transportation fuel and feedstock for the chemical industry. Plastics and other advanced materials provide advantages to manufacturers and consumers including energy efficiency gains. Natural gas is projected to grow the most of any energy type, accounting for a quarter of all demand by 2040. Increasing electrification will drive the growth in global energy demand over the next 25 years, 55 percent of energy demand growth coming from power generation to support increasingly digital and plugged-in lifestyles and electricity will grow the most of any sector. Natural gas demand will increase significantly, with the fuel gaining share across all sectors due to its abundance and flexibility. Different sectors will use different types of energy based on their economic supply options and suitability to different purposes. A wide variety of energy types will support electricity generation, with gas, nuclear, and renewables all increasing their share in the mix to offset the decline of coal.

'Significant' oil supply-demand gap possible in three to four years: IEA's Birol - Oil price volatility is here to stay, notwithstanding recent producer pledges of output cuts aimed at calming the international market, the executive director of the International Energy Agency said Friday. "We are entering an era of more oil price volatility," Fatih Birol said in a keynote address to delegates at the Atlantic Council Global Energy Forum Forum in Abu Dhabi. "We believe that this year, if there are no major oil projects starting, ... in three to four years' time we may see a significant supply-demand gap, with major consequences," he elaborated. "This will not be filled by shale oil. This is why we may now be entering an era of greater oil volatility." Birol stressed that the two consecutive years of declining global investment in oil development in 2015-2016 had no parallel in the history of the oil industry. Globally during the two years following the sharp decrease in international oil prices of second-half 2014, no major oil projects were started and there were zero large oil discoveries. "There were no discoveries because there is no money for exploration. You find something if you look for it," he said. Global tightness in oil supply could be felt within two to three years, Birol predicted, echoing similar comments at the energy form Thursday by Saudi energy minister Khalid al-Falih. "In 2017 we have to see major new investment to calm the market, otherwise, in two to three years, that supply-demand gap will be with us," he said.

British Columbia First Nations groups file suit to stop LNG project - The proposed Pacific Northwest LNG project, which a consortium led by Malaysia's Petronas plans to build on an island off the northwest coast of British Columbia, ran into another roadblock this week, with the filing of a lawsuit by First Nations groups who argue they were not properly consulted. A group of hereditary chiefs with the Gitxsan First Nation, representing several sub-groups of indigenous people who live in the interior of the province, are seeking to overturn the federal government's approval of the project.The suit calls for the Canadian government to review an environmental approval granted to the project in September. Attempts to reach a Pacific Northwest spokesman for comment on the suit were unsuccessful. John Ridsdale, chief of Tsayu clan of Wet'suwet'en, whose group was not a party to the litigation, nevertheless said he supports the legal challenge on behalf of all First Nations peoples in the region. He said the LNG terminal, which the developers want to build on Lelu Island at the mouth of the Skeena River, could threaten a salmon spawning habitat in the river estuary. The suit brings to four the number of legal actions filed by Native American groups to try to halt the proposed $8.32 billion (C$11 billion) LNG export project. Yvonne Lattie, Gitxsan hereditary chief of the Wilp Gwininitw group, and Charlie Wright Gitxsan, hereditary chief of Wiip Luutkudziwuus, announced the request for judicial review in Vancouver Tuesday.

Natural gas production pumped up in 2016: Figures - Natural gas production in B.C., and exports to the U.S., increased seven per cent over the first nine months of 2016 despite dismal numbers for drilling new wells, statistics from the Ministry of Natural Gas Development show. That short-term rise runs counter to longer-term projections from the U.S. Energy Information Agency that estimate U.S. imports of Canadian natural gas will fall dramatically over the coming decades with increases in American domestic production. B.C. natural gas producers produced a net 35.6 billion cubic metres of gas between January and the end of September of last year and exported 11.8 billion cubic metres to the U.S., which reverses a decline in U.S. exports experienced in 2015. The production figures are a brighter spot for B.C.'s energy sector than new drilling activity. Gas producers drilled just 341 new wells in 2016, according to figures from the B.C. Oil and Gas Commission, a 23-year low. Over the longer term, however, the U.S. EIA predicted "U.S. imports of natural gas from Canada, primarily from the West where most of Canada's natural gas is produced, (will) continue to decline," according to the agency's annual energy outlook for 2017. B.C. produces about one-third of Canada's natural gas. U.S. natural gas production is also on the rise, according to the report, driven by a continuing drilling boom as producers use hydraulic fracturing to tap shale gas reserves in eastern states such as Pennsylvania, which has fuelled American gas exports to Eastern Canada. And for the moment, that increase in production is helping fuel U.S. exports of liquefied natural gas, the report said. The first U.S. export plant at Sabine Pass in Louisiana sent its first shipments to market starting in 2016.In the meantime, B.C. producers with drilling rights in the so-called Montney shale-gas formation that surrounds Fort St. John and Dawson Creek in the province's northeast are bumping up drilling activity which is proving attractive for the other hydrocarbons its shale deposits contain.

Natural gas prices in 2016 were the lowest in nearly 20 years | Hellenic Shipping News Worldwide: Natural gas spot prices in 2016 averaged $2.49 per million British thermal units (MMBtu) at the national benchmark Henry Hub, the lowest annual average price since 1999. The monthly average price fell below $2.00/MMBtu from February through May, but later increased, ending the year at an average of $3.58/MMBtu in December. Warmer-than-normal temperatures for most of the year and changing natural gas demand were the main drivers of natural gas prices in 2016.Natural gas prices in U.S. regional markets were volatile in 2016. In the first quarter of the year, much warmer-than-normal winter temperatures and large amounts of natural gas in storage caused prices to decrease. Prices began to gradually increase in late spring, with increased natural gas demand from multiple sectors and decreasing natural gas production, before sharply increasing at the end of the year with the onset of cold temperatures in mid-December. In the Northeast, where natural gas pipeline capacity is often constrained, cold weather can cause monthly average prices at hubs such as Algonquin Citygate (near Boston) and Transco Zone 6 NY (New York) to spike. Although this happened in 2016, new pipeline capacity and increased natural gas production in the Appalachian Basin, along with warmer-than-usual winter weather, contributed to price spikes that were considerably lower than in previous years. Because of warm weather, natural gas consumption in the residential and commercial sectors in 2016 declined 7% and 4%, respectively, from the previous year. Warmer winter temperatures also limited natural gas storage withdrawals. As a result, natural gas storage inventories were at or near record levels throughout most of the year and reached a record 4,047 billion cubic feet (Bcf) for the week ending November 11. Despite the overall decrease in residential and commercial demand in 2016, late-year increases in these sectors and increased demand from other sources contributed to increasing natural gas prices later in the year.

EIA Natural Gas Inventories Fall 151 Bcf, Prices Continue Recovery: The weekly Energy Information Administration (EIA) natural gas storage data recorded a decline of 151 Billion Cubic feet (Bcf) for the week ending January 6th following a 49 Bcf draw the previous week. This was the eighth successive draw and marginally above consensus forecasts of a 150 Bcf decline. Overall stocks are now 10.3% below the year-ago figure and a slight 0.1% below the five-year average. The sharp drawdown in weekly stocks will help boost confidence in the market, although there were sharp reductions in stocks during 2016 and the annual comparisons are liable to be less favourable over the next few weeks. Natural gas prices have been subjected to further high volatility this week with sharp fluctuations driven mainly by shifts in weather forecasts. After sliding to one-month lows on Monday, with lows near $3.70 per mBtu, prices had declined by more than 20% from the highs seen in late 2016, which technically put natural gas into a bear market. There was, however, a rebound the following day with evidence of strong buying support, as weather forecasts switched once again and the positive tone has been sustained with a recovery to $3.37 ahead of the inventories data. Prices rose sharply to $3.44 after the storage data and maintained a firm tone just above $3.40 as the substantial draw helped underpin sentiment.

Natural Gas Price Pops on Larger-Than-Expected Inventory Drop -  The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 151 billion cubic feet for the week ending January 6. Analysts were expecting a storage decline of around 144 billion cubic feet. The five-year average for the week is a withdrawal of around 167 billion cubic feet, and last year's storage decline for the week totaled 168 billion cubic feet. Natural gas inventories fell by just 49 billion cubic feet in the week ending December 30.Natural gas futures for February delivery traded up by about 3.8% in advance of the EIA's report, at around $3.35 per million BTUs, and traded around $3.45 immediately after the data release. Natural gas closed at $3.22 per million BTUs on Wednesday, after falling from a high of $3.36 last Friday. The 52-week range for natural gas is $2.49 to $3.90. One year ago the price for a million BTUs was around $2.81. Natural gas prices remained low over the past week as warmer weather moved through the middle of the country toward the east coast. Cold weather over the northern tier boosted consumption above the consensus estimate, but still below the five-year average and last year's consumption. Continued warmer weather east of the Mississippi should keep prices in check again during the next week. Stockpiles have now dropped to 10.3% below their levels of a year ago, and just 0.1% below the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 3.160 trillion cubic feet, around 4 billion cubic feet below the five-year average of 3.164 trillion cubic feet and 363 billion cubic feet below last year's total for the same period. Working gas in storage totaled 3.523 trillion cubic feet for the same period a year ago.

US Gulf Coast refiners look to Algeria to feed FCCs: trade - Sluggish trade in Houston vacuum gasoil barges this week turned attention of market players to substitute feedstock from Algeria, market sources said Thursday. Low-sulfur straight-run fuel oil at maximum 0.30% sulfur can be substituted for VGO in the gasoline-making fluid catalytic cracker at a refinery. The 335,000 b/d refinery complex at Skikda, Algeria, has been a major source of the low-sulfur feedstock for US use. Much US-produced straight run fuel oil reflects higher sulfur levels up to 3.00%, with that product used as coker feed. A small fraction of US-produced straight run fuel oil tests beneath 0.3% sulfur, market sources have said. "The Skikda is basically the poor man's VGO," a US feedstocks source said. "That should make further moves up in VGO less likely." The differential for straight run fuel oil at 0.30% sulfur ("low-sulfur straight run") rose 25 cents Thursday to cash February WTI plus $5.5/b. Low-sulfur VGO fell 25 cents to $8.25/b. Market players offered different ideas Thursday on the fuel oil-VGO breakdown this month at the maw of Gulf Coast FCCs. Brokers said the balance was tipping to fuel oil, and a trader at one US refiner said the balance was in favor of VGO. Another market source had the split as level among the feedstocks. But nearly all market sources agreed that US VGO trade has slowed. Only a handful of barge trades have been heard since last Friday.

A major shift in marine fuel rules - Shipping companies now know that within three years all vessels involved in international trade will be required to use fuel with a sulfur content of 0.5% or less—an aggressive standard, considering that in most of the world today, ships are currently allowed to use heavy fuel oil (HFO) bunker fuel with up to 3.5% sulfur. This is a big deal. Ships now consume about half of the world’s residual-based heavy fuel oil, but starting in January 2020 they can’t—at least in HFO’s current form. How will the global fuels market react to a change that would theoretically eliminate roughly half the demand for residual fuels? How will ship owners comply with the rule? What are their options? Today we discuss the much-lower cap on sulfur in bunker fuels approved by the International Marine Organization, and what it means for shippers and refineries.

What's Next for Mexico's Energy Sector?  - Mexico’s recent deepwater bidding round marked a major milestone for the country in its transformation of its energy sector. However, more work is needed to prepare Mexico and its state energy firm, Petroleos Mexicanos (PEMEX), for competition in the global oil market. The success of Mexico’s Round 1.4 deepwater bidding compared with other Round 1 bids shows that major international oil companies were waiting for the right properties and fields to be bid out, Juan Francisco Torres Landa R., partner with the Mexico City office of law firm Hogan Lovells, told Rigzone. The award of fields to key global industry players in the deepwater round, and PEMEX’s farm-out agreement with BHP Billiton, would not have been possible a few years ago. Both PEMEX and Mexican government officials deemed the deepwater auction process and results as a major success. However, government officials from 2013 to 2015 expressed a “naïve optimism” regarding the production and reserve replacement and short and mid-term impact of upstream reform. It wasn’t until last year that officials realized that the upstream auctions will have little effect on production and fiscal revenues during this decade, Adrian Lajous, a fellow with Columbia University’s SIPA Center on Global Energy Policy, stated in a Jan. 9 research paper on Mexico’s deepwater auctions. “The compounding impact of low oil prices and falling oil production on public finance and particularly on the financial position of PEMEX has forced the oil industry to limit debt and drastically cut expenditures,” Lajous said. “The mid-term consequences of these constraints should not be underestimated.” Despite president-elect Donald Trump’s controversial comments on building a wall along the U.S.-Mexico border and tough talk on immigration, Mexico still wants the United States investing in its energy sector, Antonio Garza, U.S. ambassador to Mexico during the George W. Bush Administration and now Counsel in the Mexico City office of the White & Case LLP, told Rigzone. “There is far too much strategic expertise and know-how not to want them involved. I think the response of Mexican leadership, the Mexican private sector and the Mexican people would [be that] the U.S. energy sector is best-in-class – of course, they’re welcome. Of course, we want them to participate.”’

Mexican Drug Cartels Looting State-Owned Gas Pipelines For Black Market Sales --A couple of weeks ago we highlighted the protests that had engulfed Mexico after the finance ministry announced plans to raise gasoline prices by 20.1% starting January 1st.  Amid the chaos, the country's powerful Jalisco New Generation cartel threatened to to burn down gas stations as retribution for taking advantage of "the majority of the people who don't make even a minimum wage."But before readers blow this off as just another protest by an angry population which fails to grasp the "global deflationary collapse" while focusing on "fringe, outlier events"  - at least in the words of central bankers -  things suddenly got serious when none other than the country's powerful Jalisco New Generation cartel has entered the fray, threatening to burn gas stations in response to the price hikes, according to Jalisco authorities cited by TeleSur."They are speculating in order to obtain million dollar profits from the majority of the people who don't make even a minimum wage, we have already realized that the (shortage) of fuel is because dealers don't want to sell fuel unless they can do so at a profit, all of our people are now ready to start the mission," the Mexican drug cartel stated in a WhatsApp message circulating in Jalisco. "The CJNG, in support of the working class, commits itself to making burn all the gasoline stations that to December 30 of the current year, at 10:00 p.m." — before the price increases go into effect — "have not normalized the sale of fuel at the fair price," the message said, according to the Mexican news outlet Aristegui Noticias.

Friends of the Earth to withdraw fraudulent anti-fracking leaflet - Friends of the Earth (FoE) has agreed to withdraw an anti-fracking leaflet that made misleading claims about the environmental and social costs of extracting shale gas. The charity has agreed not to repeat unsubstantiated claims that fracking involves the use of cancer-causing chemicals or causes house prices to plummet, the Advertising Standards Authority (ASA) said. The leaflet also showed a picture of Grasmere in the Lake District emblazoned with the words “Don’t let fracking destroy all of this”. But it was pointed out by Michael Roberts, a retired geologist who complained to the ASA, that Grasmere is a volcanic landscape and contains no coal, oil or gas. Roberts and another individual complained to the ASA along with Cuadrilla, the energy firm that has been given governmental permission to frack in Lancashire. Francis Egan, chief executive of Cuadrilla, said: “FoE’s repeated falsehoods have been exposed as nothing more than scaremongering designed to frighten the public into giving it money. It is the unacceptable face of the charity sector.”  FoE was keen to point out that it had reached an agreement with the ASA rather than losing a settlement. It has vowed to continue campaigning against fracking and maintain that it is detrimental to the environment.

Bone-Chilling Winter From Berlin to Davos Causes Energy Scramble - From the rivers criss-crossing eastern Europe to the Mediterranean ports of Greece and France, everyone is hunting for energy supplies. Blizzards, gale force winds, arctic temperatures and river ice thicker than a house has left the stewards of the European energy business frenzied. Prices of natural gas, primarily a heating fuel, has soared to the highest in more than two years. Blackouts across Eastern Europe caused electricity rates to spike to record levels. It’s chaotic, but yet familiar. While energy grid operators, producers and traders prepare for winter’s chill every year, they tend to rely on meteorological forecasts that sometimes turn out to be dead wrong. So when a winter that’s expected to be mild develops into an extended deep freeze, a mad dash to meet demand ensues. “Those who became sure that such a cold spell was unlikely given the overall trend in global warming are like those who get drowned in a stream that averages three inches deep,” “The Black Swan is your constant companion.” For Europe’s natural gas traders, this winter was supposed to be boring, with a glut damping any potential for wild price swings. Norway and Russia exported at record levels, while the increasingly global liquefied natural gas trade gave utilities a cushion. By September, prices from gas to power were still near six-year lows. But gas ended the year with its biggest bull run in a decade as Centrica Plc delayed the return of the U.K.’s biggest gas store by more than two months after the start of the heating season. Long-term reserves in the region’s biggest gas market are now only about half of normal. In Turkey, the state-owned gas grid operator asked private power plants to reduce gas demand by 90 percent as Istanbul got covered in snow. France issued its strongest warning that the southeast part of the country had an urgent need for extra gas. Bulgaria, Romania and Serbia last week deployed emergency services to evacuate remote villages where people were stranded without electricity or heat.

Australia raises 2016-17 LNG exports forecast to 52.4 mil mt, 2017-18 to hit 67.3 mil mt - The Australian government has bumped up its forecast for LNG exports for fiscal 2016-2017 (July-June) to 52.4 million mt, and given an estimate for 2017-2018 of 67.3 million mt, the Department of Industry, Innovation and Science said Monday in its Resources and Energy Quarterly. In its previous quarterly report, the department had the forecast for fiscal 2016-2017 at 51.50 million mt. A rise to 67.3 million mt in fiscal 2017-2018 would be an 82.4% spike from the 36.9 million mt shipped in fiscal 2015-2016. "The four LNG projects currently under construction are expected to commence production by mid-2018, bringing Australia's LNG export capacity to around 87 million [mt]," the report said. "However, some uncertainty surrounds the timing of Shell's Prelude project in the Browse Basin, where start up could be complicated by the cyclone season -- which runs from November to April," the report added. Increased exports to Japan, South Korea and China are expected to drive the rise in Australia's export volumes. "Australian producers are expected to capture an increasing share of these countries' imports with the commencement of a number of long-term contracts over the outlook period [over 2017-2018]," the department said.

New LNG projects to boost Australia's condensate production in 2017-18 - The Australian government expects its crude and condensate output to increase to 380,000 b/d in fiscal 2017-2018 (July to June), up 21% year on year, on additional condensate production from the country's new LNG projects. Australian LNG production is set to double from 43 million mt in 2016 to more than 80 million mt in 2019, which would be even more than Qatar's estimated annual production of 77 million mt, making it the largest producer of LNG, according to Platts Analytics. Three more LNG projects -- Wheatstone, Ichthys and Prelude -- are due to startup in 2017, following the commissioning of the Chevron-led Gorgon LNG project last year. Condensate production at Ichthys is expected to peak at 100,000 b/d, while Prelude and Gorgon are expected to peak at 36,000 b/d and 20,000 b/d, respectively, according to the Department of Industry, Innovation and Science's Resources and Energy Quarterly report released earlier this week. Rising production and oil prices, following OPEC's agreement to cut output, are expected to increase the value of Australia's oil and condensate exports to $8.7 billion in fiscal 2017-2018, up $1.2 billion year on year. In the short term, the outlook seems less positive, with production in the year ending June 2017 expected to be 314,000 b/d, slightly lower than the 317,000 b/d produced a year earlier. Third-quarter data showed that Australia produced 291,000 b/d of crude and condensate, down 17% year on year. Reduced production and low prices led to a 23% decline in the value of Australia's crude and condensate exports year on year to $1.3 billion in Q3. Expenditure on oil and gas exploration fell 39% year on year in Q3 2016 to $355 million.

Japan's average LNG spot price for cargoes contracted in Dec rises 14% on month to $8/MMBtu - Japan's LNG buyers paid $8/MMBtu for spot cargoes contracted in December, surging 14.3% from November, data released by the Ministry of Economy, Trade and Industry showed Friday. The ministry does not disclose delivery months of cargoes contracted. Platts JKM averaged $8.935/MMBtu in December, which reflects spot deals concluded for January and February deliveries to Japan and South Korea. The JKM jumped during December as demand increased following an outage at Australian Gorgon LNG facility's Train 1. On December 1, the Platts JKM for cargoes for delivery in January was assessed at $7.7/MMBtu, while on December 30, the Platts JKM for cargoes for delivery in February was assessed at $9.75/MMBtu. Japan's METI on Friday also published the average price of cargoes delivered into Japan in December, which stood at $6.8/MMBtu, up from $5.9/MMBtu in November. The Platts JKM for November cargoes averaged at $7.030/MMBtu with the assessment covering the period from October 17 to November 15.

Energean Expects To Spend Up To $1.5B On Israeli Offshore Gas Project (Reuters) - Greek company Energean Oil & Gas plans to build its own production system in the eastern Mediterranean at a cost of up to $1.5 billion to tap two Israeli offshore gas fields, the group's chief executive said on Wednesday. Greece's only oil producer is also looking to bring a financial partner into the project to develop the Tanin and Karish fields which are situated in deep waters around 100 kilometres (62 miles) off Israel's coast and have combined gas reserves estimated at 2.4 trillion cubic feet. Energean bought Karish and Tanin last August for $148 million from U.S.-Israeli partners Delek Group and Noble Energy, who are developing two much larger fields nearby and were required by Israel to sell off other discoveries in an effort to open up the sector to competition. Rather than piggyback off that group's infrastructure, an idea previously floated by some experts, Energean plans to lease its own floating production, storage and offloading (FPSO) vessel and build a separate pipeline to Israel. "We are going to be a totally independent system," CEO Mathios Rigas told Reuters, adding that a combination of local and international banks will help finance the $1.3-$1.5 billion needed. Before making a final investment decision, which is expected in December, the Israeli government must first approve the development plan and Energean needs to secure sales contracts for 3 billion cubic metres of gas per year, Rigas said. Israel has determined that gas from Tanin and Karish must be sold domestically.

 ExxonMobil Strikes More Oil Offshore Guyana - Exxon Mobil Corp. reported Thursday it had further established offshore Guyana as a significant exploration province with a new oil discovery and successful appraisal drilling at its Liza field. The Payara-1 discovery encountered over 95 feet (29 meter) of high-quality, oil-bearing sandstone reservoirs. Payara-1 was drilled in a new reservoir and marks the second oil discovery ExxonMobil has made at the 6.6 million acre (26,800 square kilometer) Stabroek Block, the company said in a Jan. 12 press statement. Located about 10 miles northwest of ExxonMobil’s 2015 Liza discovery, Payara-1 was drilled to 18,080 feet (5,512 meters) in 6,660 feet (2,030 meters) of water, ExxonMobil said in a Jan. 12 press statement. ExxonMobil started drilling Payara-1 on Nov. 12, reaching initial total depth Dec. 2. The company is drilling two additional sidetracks at Payara to quickly evaluate the discovery; a well test is underway to further evaluate the well results, ExxonMobil said. Appraisal drilling at Liza-3 also identified an additional, high quality, deeper reservoir directly below the Liza field, which is estimated to contain 100 to 150 million oil equivalent barrels. ExxonMobil said it was evaluating the additional resource for development in conjunction with the Liza discovery. The Liza field is estimated to yield the equivalent of 800 million to 1.4 billion barrels of crude.

Rosneft inks deal to supply crude to Glencore, QIA-backed trader - Rosneft said Tuesday it had signed a five-year deal to supply up to 55 million mt -- around 403 million barrels -- of oil to QHG Trading, a joint venture between Glencore and the Qatar Investment Authority. The deal comes shortly after Glencore and QIA jointly acquired a stake in Rosneft itself, with the purchase completed last week. The supply deal, which was signed Monday, envisages shipments for export of between 22.5 million mt and 55 million mt of oil, Rosneft said in a document posted on its website. Annual volumes included in the deal are between 4.5 million mt and 11 million mt. The deal is valid for five years starting January 1. "The financial size of the deal has not been set, as it depends on the market price for oil in the long term, the price of each shipment will be determined using a formula based on market prices for crude oil at the time of delivery," the document said. A Rosneft spokesman declined any further comment. Glencore did not provide immediate comment. The deal adds to existing cooperation between the three parties, after Glencore and QIA agreed in December to purchase a 19.5% stake in Rosneft from the Russian government for Eur10.2 billion ($10.8 billion). Last Tuesday Glencore said the transaction had closed. When the deal was announced in December, Glencore indicated it would have a significant impact on the volumes of Russian crude it trades. It said the deal included a five-year offtake agreement with Rosneft, representing a sizable additional 220,000 b/d for Glencore's marketing business.

China's CNPC Forecasts Record Oil Demand, Warns On Product Glut (Reuters) - China's crude oil demand will grow by 3.4 percent this year to a record of almost 12 million barrels per day (bpd), the country's top state-owned oil producer forecast on Thursday, as refiners in the world's second-biggest oil user ramp up output. The robust outlook for crude combined with surging vehicle sales in the world's largest auto market boosted oil futures even as the report cautioned that demand growth for products like gasoline and diesel will slow and the domestic fuel glut will remain a significant problem. Total crude oil consumption will hit 594 million tonnes, or 11.88 million bpd, state-owned China National Petroleum Corporation (CNPC) forecast in an annual report released by its research institute. Total refinery throughput will rise by 3.3 percent to 557 million tonnes, or 11.2 million bpd, with refiners adding 702,000 bpd of net capacity. That will increase to 11.8 million by 2020, it said. The rising refinery demand will lift crude imports by 5.3 percent to 396 million tonnes, or 7.95 million bpd. By 2020, it forecast imports will hit 8.2 million bpd. But, the rising refinery runs will maintain the domestic supply glut that has forced refiners to export into a saturated Asian market in recent years. The domestic refining glut will be at least 2.2 million bpd by 2020, but could surpass 3 million bpd if the market worsens, it forecast. CNPC predicted that net exports of diesel will surge by 55 percent this year to 22.4 million tonnes, or about 450,000 bpd. In addition, slowing growth in the world's second-largest economy and the shift to renewable energy will hamper the consumption growth for oil products, the report said. "Energy giants will die like dinosaurs if they don't diversify into other energy products and into clean energy," said Liu Zhaoquan, vice president at the CNPC institute, at a briefing.

Outlook 2017: India's oil demand growth rate to eclipse China's yet again - The dramatic rise in India's oil demand shows no signs of faltering, leading analysts to say that the country will remain a driver of Asian growth in 2017. Consumption is expected to rise 7-8% this year, outpacing China's demand growth for the third consecutive year. The cash crunch following New Delhi's move in early November to demonetize more than 80% of its currency is expected to temporarily dampen the country's appetite for oil products in the first quarter, or maybe a little longer. But gains in oil demand that the country is set to achieve from the "Make in India" initiative -- which aims to raise the share of manufacturing in GDP over the next few years -- will more than offset the negative effects of demonetization, analysts said. The government's clean fuel drive, sharp anticipated growth in transport demand and air travel, and the country's insatiable growth for petrochemicals will act as a boon for gasoline, jet fuel, LPG and naphtha, helping oil products to post close to double-digit growth in 2017 -- similar to that seen last year -- if not higher. "For the third year in a row, India's oil demand growth will outpace China's demand growth," Platts Analytics said in a note, adding that it was expected to grow at about 7% to 4.13 million b/d in 2017, compared with 3% in Chinese oil demand to 11.5 million b/d. India's demand for oil products in November rose 12% year on year to 16.6 million mt, or 4.35 million b/d, data from the Petroleum Planning and Analysis Cell showed.

Nigeria: Militant group Niger Delta Avengers warns government of more deadly attacks in 2017: The Niger Delta Avengers, a local militant group known for attacking oil pipelines in the delta region, on Friday (6 January) announced the launch of a more fierce war and bloodshed against the Nigerian government in 2017. The group alleged that the government has turned a deaf ear to their demands and was not ready for dialogue. It also blamed the government of not reciprocating its ceasefire efforts of 2016.The government, led by President Muhammadu Buhari, and the militant group have been engaged in talks for more than six months over the latter's concerns about oil revenues and poverty levels of the people of Niger Delta. However, the group claimed that the government was "politicising and blackmailing the process to forestall any genuine dialogue and negotiations"."Since, the declaration of cessation of hostilities in the region by all fighters and affiliates, it has been evidently clear that the Nigerian state is not ready for any form of dialogue and negotiation with our people to addressing the issues sustaining the unending sufferings and deprivation of the people of the Niger Delta."As we get prepared for the challenges ahead 2017, We make bold to tell the people of our Niger Delta, sane minds in Nigeria and the comity of nations that the remaining 11 months and couples of weeks in 2017 will be filled with surprises and a reconfiguration of the struggle for the liberation of our motherland.

Iran Picks 29 Foreign Companies To Bid In Oil, Gas Tenders --The National Iranian Oil Company has issued a list of 29 companies that have qualified for bidding in oil and gas tenders, of whom only one is a U.S. player, Schlumberger. The biggest European producers, including Shell, Eni, Total, and OMV have all qualified but BP has pulled out from the race because of worry that relations between Iran and the U.S. will get heated once Donald Trump takes office later this month, according to the Financial Times. Among those that qualified were China’s Sinopec, CNPC, CNOOC, and CNPW, as well as the state-owned oil companies of Indonesia and Malaysia – Pertamina and Petronas – plus Japan’s INPEX Corporation, Itochu, Mitsui, and Mitsubishi, and Japan Petroleum Corporation. Russian Gazprom and Lukoil were also among those qualified for the tenders, as were Danish Maersk, Indian ONGC, and Polish PGNiG.The domination of Chinese and Japanese companies on the list is understandable, as is the reluctance of U.S. energy companies to participate in Iranian oil and gas tenders. During his colorful election campaign, Donald Trump slammed the deal reached by Western powers and Iran on its nuclear program, which led to the lifting of most sanctions against it. The President-elect has also threatened to revoke the deal as soon as he takes office.  Iran, meanwhile, is eager to get its oil and gas industry back on its feet and has already struck deals with Lukoil, Total, CNPC and Sinopec, and Petronas for the development of oil and gas fields. Total is working on the huge offshore South Pars field; Petronas is drilling for oil at South Azadegan and Sheshmeh Hosh; and CNPC and Sinopec are developing Yadavaran and North Azadegan. Tehran’s leanings east and north could be seen as a safeguard against new sanctions coming from the West, in case Trump gets his way, which is by no means a certainty, especially in light of a recent appeal from top U.S. scientists to the President-elect to keep the deal as it is, arguing it is a deterrent to any further attempts by Tehran to develop nuclear weapons.

Libya’s oil revival gathers pace to highlight risks on OPEC deal - Libya, the holder of Africa’s biggest crude reserves, is ramping up output from its biggest oil field again after two years of internal conflict, the latest reminder of just how vulnerable OPEC’s quest to clear a global crude glut might be. The Sharara deposit in the Libya’s south west will ship almost 1.9 MMbbl this month from its Zawiya port near Tripoli, according to a loading program obtained by Bloomberg. That compares with a pumping rate from the field of almost 9 MMbbl a month as recently as late 2014, before internal conflict halted flows. So far Libya’s revival has done little to undermine a plan by the Organization of Petroleum Exporting Countries to prop up prices by restricting oil supply. The group said Nov. 30 it would curb almost 1.2 MMbopd but that several nations—Libya among them—didn’t have to commit due to exceptional circumstances. Nigeria was also allowed to boost output because of a militant campaign that damaged its flows, while Iran was also allowed to increase supplies from what it was pumping late last year in its recovery from sanctions. Libya reopened Sharara field last month and the nation’s total pumping rate stood at 650,000 bopd. As well as restarting fields, it has also resumed cargo loadings from key ports. If maintained, the amount Libya is pumping would be about 125,000 bopd higher than the North African country was producing in October, the starting point for when most other OPEC nations are supposed to limit their collective supply. Mustafa Sanalla, the chairman of Libya’s National Oil Corp., said Dec. 21 that output would reach 900,000 bpd early this year. By hitting that target, Libya would replace about one third of the supplies being cut by other OPEC nations.

 Kuwait Slashes Oil Production To 2.707M BPD On OPEC Accord - Kuwaiti officials say the OPEC-member country has reduced oil production this month to around 2.707 million barrels per day, in line with the targeted amount under the OPEC output cut agreement reached on 30 November. So far, Saudi Arabia, Kuwait, Iraq and Venezuela are honoring the commitment to cut output, while Iran uses the time to shore up lost market share, and Libya and Nigeria struggle to ramp up production to avoid destabilization. Kuwait agreed in November to cut output by 131,000 barrels per day, starting on 1 January. This figure is down from its October baseline production of 2.838 million barrels per day, and down from December’s 2.9 million bpd in production, news agencies cited industry sources as saying. On 21 and 22 January, a committee responsible for monitoring whether the agreed upon cuts are being made will meet in Vienna to hash out a way to monitor compliance with the deal. On Sunday, OPEC Secretary General Mohammad Barkindo is set to visit Kuwait for preliminary discussions with the Kuwait Oil Minister regarding mechanisms for monitoring compliance. Meanwhile, Kuwait is benefitting from a slight recovery in oil prices since the November OPEC deal. For the second quarter in a row, Kuwait’s trade surplus has widened on oil price recovery, though its US$4.58-billion surplus is still far below the levels it had seen prior to the oil price crash of mid-2014.

Iraq Cuts Oil Production By 160,000 Bpd Under OPEC Deal | Rigzone- Iraq has cut oil production by 160,000 barrels per day (bpd) since the beginning of January in line with an OPEC decision to lower output, the oil ministry said in a statement on Tuesday. Oil Minister Jabar Ali al-Luaibi said he hoped that by the end of the month production would be cut by 210,000 bpd, in line with the OPEC-agreed cap for Iraq, according to the statement. Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), said on Monday exports from its southern oil ports had reached a record 3.51 million bpd, but it was nonetheless lowering nationwide production. OPEC agreed in November to cut output by 1.2 million bpd from January 2017 to support prices. A separate ministry statement on Tuesday said Luaibi had invited Angolan oil company Sonangol to begin working at the Qayyara and Najma oil fields in northern Iraq by the end of February. The ministry was "working to enable oil companies in Iraq to operate by removing obstacles" in areas recaptured in recent months from insurgents. Sonangol had pulled out of an agreement to increase output at the Qayyara fields in 2014, citing the mounting security risk. Iraqi oil workers have capped a number of burning wells set alight by Islamic State militants as they retreated from Qayyara towards Mosul, where U.S.-backed Iraqi forces are pressing an offensive against the group. Qayyara and Najma used to produce up to 30,000 bpd of heavy crude before they fell under control of the ultra-hardline jihadists. Reliant on oil sales for most of its income, Iraq had resisted production cuts, saying it needed revenue to fund a war against Islamic State militants who seized a third of the country's territory in 2014. But it has accepted a lower production reference level as part of the OPEC deal that estimated its output at 4.561 million bpd.

Despite OPEC Cuts, Iraq To Boost February Oil Exports To Record High - One month ago, we were surprised to report that while oil traders and analysts were expecting OPEC member nations to, at least initially, pretend to comply and affirm their adherence to the production cuts as per the the Vienna meeting (before eventually cheating on their quotas), a very aggressive Iraq was not only not cutting output, but according to Iraq’s national oil company, the State Organization for Marketing of Oil (SOMO), had disclosed plans as of December 8, nine days after agreeing to cut production, to increase deliveries of its Basra oil grades by about 7% to 3.53 million barrels a day compared with October levels. The unexpected news was first reported by the WSJ which obtained a detailed oil-shipment program: such oil shipments represent about 85% of Iraq’s exports. To be sure, Iraq did come up with a convenient scapegoat when just days later it blamed the autonomous Kurdish region of exporting more than its allocated share of oil. As a reminder, as part of the deal, Iraq, OPEC's second largest producer, agreed to reduce output by 210,000 bpd to 4.351 million bpd. However, it immediately accused Kurdistan, over whose oil production Iraq's level of control is limited at best, of producing well more than its quota. "The region is exporting more than its share, more than the 17 percent stated in the budget,” Iraq oil minister Haider al-Abadi said at the time.Fast forward to this morning, when Reuters, looking at the same loading schedules, reportedthat Iraq plans to raise crude exports from its southern port of Basra to an all-time high in February, keeping exports high even as OPEC production cuts take effect this month.Just like last month, the country's State Oil Marketing Company (SOMO) announced plans to export 3.641 million barrels per day (bpd) of crude in February, according to trade sources and preliminary loading schedules obtained by Thomson Reuters on Tuesday, beating a record of 3.51 million bpd set in December. The February volume includes 2.748 million bpd of Basra Light and 893,000 bpd of Basra Heavy, the documents showed.Reuters adds that for January, SOMO had planned to export 2.627 million bpd of Basra Light and 903,000 bpd of Basra Heavy. Basra crude accounts for the bulk of oil exports from Iraq. Surprisingly, despite the jump in exports, Iraq's oil ministry said on Tuesday it has cut oil production by 160,000 bpd since the beginning of January in line with the OPEC decision.

Oil futures decline on record Iraqi exports, rising US rig count - Oil futures fell Monday as record-high exports from Iraq's southern crude terminals and rising US drilling activity sowed doubts over the effectiveness of OPEC's agreed supply cuts. NYMEX February crude settled $2.03 lower at $51.96/b. ICE March Brent settled down $2.16 at $54.94/b. Iraqi crude exports from southern ports averaged a record 3.51 million b/d in December, according to the country's oil ministry. Despite the rise in exports, Iraq remains committed to complying with its pledged output cut under the OPEC supply deal reached November 30, Iraqi oil minister Jabbar al-Luaibi said Monday. Iraq vowed to lower its output by 210,000 b/d from its October level, which OPEC pegged at 4.651 million b/d. OPEC's members agreed to lower their collective output by roughly 1.2 million b/d to 32.5 million b/d. Non-OPEC producers, including Russia, agreed to nearly 600,000 b/d of additional cuts. Iraq plans on satisfying its production cut obligations by implementing scheduled field maintenance, according to senior Iraqi oil officials. The UAE and Saudi Arabia have also been trying to move forward field maintenance to comply with pledged cuts that went into effect January 1, sources said. "For prices to push higher, we need verification that OPEC and Russia have cut production and decide to keep it there for more than a week or two,"

How Tillerson Could Jeopardize Geopolitics In Iraq -- Former oil executive Rex Tillerson’s history of politically damaging oil dealings in the Middle East could jeopardize the future of a united Iraq as he assumes the position of U.S. Secretary of State with the inauguration of President-elect Donald Trump on January 20th, pending a Senate confirmation vote. Under Tillerson’s management in 2011, Exxon Mobil approved oil contracts with Erbil, the capital of the Kurdish Regional Government (KRG), which spans almost 80,000 kilometers in northern Iraq, provided disputed territories are included in the calculations. These lands hold an estimated 45 billion barrels of recoverable oil. This strategic business move, which helped insulate the American oil major from the financial effects of the collapse of $25 billion in development contracts for West Qurna it had signed with the Iraqi government in 2009, affirmed the independent vision the KRG had been pushing in its domestic and international political agenda. “Part of the process of building our region has to do, of course, with dealing with oil, signing contracts, negotiations with various countries,” Fuad Hussein, chief of staff to Kurdistan’s president, told Reuters in 2014. The Exxon deal represented “a big victory for [the Iraqi Kurds]” because it affirmed the group’s economic ascension, apart from Baghdad’s volatility since the U.S.-led toppling of Saddam Hussain’s authoritarian regime in 2003. However, the new agreements with Erbil undermined the U.S.’ official position of supporting a unified Iraq and irked neighboring Turkey, which, to this day, vehemently opposes Kurdish militant factions pushing for political self-determination for those who belong to the minority group.

 Oil Prices Fall As Markets Question OPEC Cuts - Oil prices declined sharply at the start of this week on fears of rising U.S. shale production and a reversal of speculative bets by hedge funds and other money managers, a sign that optimism in crude prices might be reaching its limits. WTI and Brent fell more than 2 percent on Monday and declined by another 1 percent during midday trading on Tuesday. Natural gas prices have also fallen sharply over the past week (although gas gained a bit on Tuesday) as warmer weather is set to arrive in much of the United States. With capex set to rise in 2017 for the first time in three years, payrolls in the oil industry will also expand. An estimated 440,131 jobs were eliminated around the world during the downturn, with more than three quarters coming from the oilfield services sector, including drilling contractors, equipment suppliers and service providers. After bottoming out in July, oil jobs started to rise in the U.S., and hiring will pick up momentum this year, according to industry consultant Graves & Co.  In 2016, the global oil industry discovered 3.7 billion barrels of new oil, the lowest figure dating back to the 1950s, according to Wood Mackenzie. However, there is a good chance that last year’s total will be the low point, with discoveries set to rise this year as spending on exploration increases. Enbridge is trying to market a new stream of oil to U.S. customers, but is having trouble finding willing buyers. Canada’s oil industry is suffering from a dearth of pipeline capacity, forcing Canadian oil to sell at a steep discount to WTI. Much of Canada’s oil is of the heavier variety, but Enbridge is trying to market a new stream dubbed Canadian Heavy Sweet (CHS), a mixture of heavy and light oil. The idea is to send more oil along an existing but under-utilized pipeline that runs to Wisconsin, USA, which has been used to ship light oil. The new CHS blend would allow more heavy oil to be exported, but U.S. refiners are thus far wary of the unknown oil blend.

Oil prices running out of reasons to rally -- Oil prices faltered at the start of the second week of the year, as fears set in about a rapid rebound in U.S. shale production. For the better part of two months, optimism surrounding the OPEC deal has buoyed oil prices, but bullish sentiment from speculators are showing early signs of abating, raising the possibility that the oil rally is running out of steam. WTI and Brent sank more than 2.5 percent in intraday trading on Monday, after a report at the end of last week showed another solid build in the U.S. rig count, the tenth consecutive week that the oil industry added rigs back into the field. Aside from a single week in October, the U.S. oil industry has deployed more rigs in every week dating back to June, a remarkable run that has resulted in more than 200 fresh rigs drilling for oil. The gains in the rig count come even as oil prices have held steady in the mid- to low-$50s per barrel. At the start of 2017, there are two major dynamics at play occurring at the same time, each pushing in opposite directions on the market. The OPEC deal is slated to take oil off the market, while U.S. drilling is expected to add new supply. The pace and magnitude of each trend will ultimately drive oil prices one way or the other. On the positive side of the ledger, there are early signs that OPEC members are meeting their commitments. Saudi Arabia said last week that it is lowering its production in January by 486,000 barrels per day, a volume that it promised to cut as part of the November deal. That will take output down to 10.058 million barrels per day, a level that Riyadh was only required to meet as an average over the January to June time period. Cutting to that level ahead of time is a sign of good faith from Saudi Arabia, and increases the chances that OPEC will stay true to its promises. On top of that, Kuwait’s envoy to OPEC said that Qatar, Kuwait and Oman were also complying with the cuts. In an interview with Bloomberg, Kuwait’s Nawal Al-Fezaia said that those countries already told customers that cuts were imminent.

US To Sell 8 Million Barrels Of Oil From The Strategic Petroleum Reserve - Two weeks ago we previewed that 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. 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. Some 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.

Oil Slumps As Nigeria Production Jumps, Kuwait Hints At OPEC Deal "Non-Compliance", SPR Sale - Having already traded heavy much of the Monday despite pressure on the dollar index which is trading near session lows, oil took out session lows moments ago on what appear to be three most recent catalysts. First, Kuwait's oil minister shook some of the market's conviction that the Vienna OPEC oil production cut is being adhered to, when we said that the announced cuts so far make up just 60-70% of the total decrease pledged by OPEC and other major producers. Trying to put a positive spin on the news, Kuwait's Essam Al-Marzouk told reporters in joint conference with OPEC Secretary General Mohammad Barkindo in Kuwait City, that he is confident the remaining countries will comply with promises to cut oil production, even though as he admitted "not all producers have to cut output from Jan. 1" and that one should look at the cut as a phase in process to "average over 6 months." We can only assume he was referring (mostly) to Russia, which repeatedly warned it will need months to catch up to its promised quota. It would be troubling if other OPEC nations are having "problems" complying with the cuts. Recall that Iraq has already accused its semi-autonomous Kurdish region of oil production that was roughly double what it was afforded per the Vienna quota.  Complicating matters for the oil bulls, was a a second report according to which Nigeria's oil production in December rose to 1.9mmbpd, up roughly 100kbpd from the November output of 1.8mmbpd, which in turn was a nearly 30 increase from October. In a video posted on his Facebook account, Nigeria Oil Minister Emmanuel Kachikwu his country plans to sell oil blocks in 2017, adding “we are going to be conducting oil blocks allocation and marginal field awards to try and raise money for the government” in hopes of phasing out term contracts for crude this year.   Finally, topping off the trifecta of negative crude news was the previously reported announcement from the DOE that the US will soon sell 8 million barrels from the Strategic Petroleum Reserve over the next few weeks. As a result, oil which was down all day, just hit session lows.

Russia Cuts Oil Output By 100,000 Bpd In Early Jan (Reuters) - Russia cut its oil production in early January by around 100,000 barrels per day (bpd) from the previous month after an agreement with OPEC to cap global crude output, two sources from the energy sector told Reuters on Monday. Russia's oil and gas condensate output averaged 11.1 million barrels per day (bpd) in the period from Jan. 1 to Jan. 8, according to the two sources. This was down from 11.21 million bpd in December and October's level of 11.247 million bpd, a starting point for output reduction agreed with the Organization of the Petroleum Exporting Countries. The sources declined to give the reason for the fall or name the companies that reduced their production. The cuts came amid a cold spell in Russia and in its oil production heartland of Western Siberia in particular, where temperatures reached as low as minus 60 Celsius (minus 76 Fahrenheit). Russian Energy Minister Alexander Novak had said the targeted level of Russian output was 10.947 million bpd after the production cut deal. He also said that Russia plans to reduce oil output by 200,000 bpd in the first quarter and reach the cuts of 300,000 bpd thereafter, as agreed with OPEC last month. Some other countries, including Saudi Arabia, the world's top oil exporter and biggest OPEC producer, have also reduced their output. Saudi Arabia cut oil output in January by at least 486,000 bpd to 10.058 million bpd, fully implementing OPEC's agreement to reduce output, according to a Gulf source familiar with Saudi oil policy. Many analysts still expect Russian oil production to grow in 2017 overall and reach a record high due to new fields coming on line.

Markets Brace As API Estimates First Crude Inventory Build In Eight Weeks - The American Petroleum Institute (API) reported a 1.5-million-barrel build in its latest data release on Tuesday afternoon. The build to crude inventory sent oil prices downward, even though a build, although more modest, was expected. Analysts had forecast a 1.2 million-barrel build. This is the first increase to crude inventory in eight weeks. What the market was hoping for was another draw week, which would have been eight straight weeks of declines to crude inventory. Oil prices were already trading down more than 2% on Tuesday before the data release on a strong dollar, rising US production, and reservations that OPEC would follow through with its promised cuts—although Saudi Arabia and a handful of other OPEC members do appear to be putting on the brakes. Iraq, however, is upping February exports from its Basra port to all-time highs, worrying markets. Last week, the API reported a large draw on crude inventories, down 7.4 million barrels from the week prior, marking the fifth draw in seven weeks, and the largest draw since September 2016. Crude inventory at the Cushing, Oklahoma facility saw a draw of 187,000 barrels, after last week’s 482,000-barrel build. Shocking the markets further was a gasoline build of 1.7 million barrels, which although not a huge figure by itself, is tough to swallow combined with last week’s massive 4.25-milllion-barrel build, which was largest build in gasoline stocks in a year. Distillates also climbed by 5.5 million barrels, after last week’s 5.24-million-barrel build.U.S. light crude oil settled down $1.14, or 2.2 percent, at $50.82. That was its weakest daily closing level since Dec. 7. Brent crude was last down $1.26 a barrel, or 2.3 percent, to $53.68.

Oil Holds Losses After Inventory Data Shows More Builds --Having tumbled to a $50 handle during the day session, WTI Crude whipsawed to unchanged after API reported 1.53mm crude build (in line with expectations), a Cushing draw, and builds again (after last week's massive builds) for gasoline and distillates. API":

  • Crude +1.53mm (+1.5mm exp)
  • Cushing -187k
  • Gasoline +1.69mm
  • Distillates +5.48mm

After a big crude draw and massive product inventory builds last week, it appears things have calmed down a little...

US crude settles at $50.82, striking one-month low on strong dollar, OPEC cut doubts - Oil prices fell about 2 percent on Tuesday, extending the previous session's sharp sell-off, as the U.S. dollar strengthened and doubts over implementation of a global deal to cut output loomed. Members of the Organization of the Petroleum Exporting Countries (OPEC), such as Saudi Arabia, appear to be reducing production under a global deal to rein in oversupply but it is unclear whether other big producers like Iraq will follow suit. Iraq, OPEC's second-largest producer, said it would raise crude exports from its main Basra port to an all-time high in February. The country's southern oil exports in the first nine days of January held steady near a record high, despite the agreed start of OPEC cuts on Jan. 1, according to a source and loading data. "The petroleum markets are consolidating at the lower levels reached in Monday trade after doubts emerged over the degree of compliance with OPEC production cuts as Iraqi exports remain high, as well as the more general pace of market rebalancing," Tim Evans, energy futures specialist at Citigroup said in a note. "Fresh reports that non-OPEC producers Russia and Kazakhstan have reduced output have produced little price reaction, with the failure to rally on bullish news suggesting that the market is overbought and vulnerable to a further downward correction."

 Too early to decide on extending OPEC's production cut deal: UAE minister - As OPEC producers begin cutting back their output, UAE energy minister Suhail al-Mazrouei said Wednesday producers were committed to making the necessary cuts, but it was premature to discuss whether the arrangement would be extended beyond the initial six months outlined in November. Speaking at an energy event in Abu Dhabi, Mazrouei said producers from the Gulf Cooperation Council -- which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE -- have all started talking with their customers about reduced volumes. "They already know what to expect," Mazrouei said, adding that this gave him confidence that the cuts were being implemented, and there was no need to be skeptical about this. This was not a "show me" scenario, he said, while also calling on the producers to be "vocal" about their cuts to bring total OPEC output down by 1.2 million b/d. Saudi Arabia pledged to take on the biggest burden of production cuts, slashing output by 486,000 b/d, but there has so far been little indication from the kingdom of current output levels. Kuwait announced earlier this month it had closed down as many as 90 oil wells to bring its production down by 131,000 b/d, while non-OPEC producer Oman has also begun cutting production by 45,000 b/d since January 1. The UAE's contribution is to cut production by 139,000 b/d, from just over 3 million b/d.

 Crude Dumps'n'Pumps Despite Massive Inventory Builds, Biggest Jump In Production In 20 Months -- After last week's massive product builds (and crude draw), API suggested additional builds ahead of DOE data which confirmed even bigger than expected builds in Crude, Gasoline, and Distillates. WTI gapped lower on the print then accelerated lower as US crude production rose by the most since May 2015. Then the algos decided it was time to rip oil prices higher... DOE:

  • Crude +4.097mm (+1.5mm exp)
  • Cushing -579k (+100k exp)
  • Gasoline +5.023mm (+2.75mm exp)
  • Distillates +8.356mm

Biggest crude build since November and another week of massive builds in gasoline and distillates...The 13.4 million barrel increase in total U.S. crude and refined products stocks last week is the biggest weekly gain since April 2015. Crude prices have slipped this week on, among other things, concerns of rising US crude production which exploded higher in the last week...The biggest surge since May 2015

U.S. crude, fuel stockpiles soar amid record high refining: EIA | Reuters: U.S. inventories of crude and refined oil rose sharply and more than expected last week, with stocks of distillates hitting six-year highs, as crude imports and refining hit record highs, government data showed on Wednesday. Crude inventories rose 4.1 million barrels in the week to Jan. 6, the U.S. Energy Information Administration said, higher than analyst expectations for a 1.2 million-barrel build. "We have had a triumvirate of bearish builds from today's report. Counter-seasonal strength in refinery runs have boosted product inventories, while stronger imports have bolstered crude stocks," said Matt Smith, director of commodity research at energy data provider ClipperData in Louisville, Kentucky. The market's reaction was initially bearish, with a sharp fall across the energy complex, but the selloff was quickly reversed, in part because a record amount of crude was refined. Refinery crude runs rose 418,000 barrels per day to 17.1 million bpd, the highest level since EIA records begin in 1982. Refinery utilization rates rose 1.6 percentage points to 93.6 percent of nationwide capacity, with rates in the Gulf Coast region reaching 96.4 percent, the highest seasonal levels since the EIA began collecting the data in 2010. However, crude production also rose notably, particularly in the lower 48 states. Overall production was 8.95 million bpd last week, most since April of last year. That could undermine the Organization of the Petroleum Exporting Countries' deal to reduce a global glut. Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. West Texas Intermediate (WTI) crude futures fell by 579,000 barrels, EIA said.WTI was up 2.6 percent, or $1.31, to $52.13 a barrel by 11:28 a.m. (1628 GMT). U.S. fuel prices also rose, with heating oil futures up 2.4 percent and gasoline over 3 percent higher.

 Oil Erases Saudi Jawbone Gains Amid China Glut Concerns -- Oil prices rallied the last couple of days on the heels of Saudi jawboning about just how much they cut production, after concerns on US shale production surging. However, prices are falling back as despite near-record imports of crude reported overnight in China, it appears that historical demand has 'glutted' refiners (who exported record product in 2016) leaving a slew of oil tankers stranded off the Chinese coast. As Reuters reports, China's crude oil imports jumped to a record high in December as refiners stepped up purchases ahead of a possible OPEC deal to cut supply and bolster prices, and as more independent refiners won import permits. Exports of refined fuel also surged to a new high as the country's giant state refiners shipped more product offshore in the face of a growing domestic surplus, adding to pressure on Asian refining margins. Crude imports hit 36.38 million tonnes in December, data from the Chinese General Administration of Customs showed, or 8.57 million barrels per day (bpd).This was up 9 percent from November and well above the previous record of 8.04 million bpd set last September.Inbound shipments to China rose to a record average of 7.63 million barrels a day in 2016, boosted by the teapots, Bloomberg notes that government data shows. The purchases were one of the factors that helped crude prices recover from their worst crash in a generation. But then, authorities began clamping down on anyone skirting rules.

Oil price rise falters as doubts emerge over Opec cuts: The oil market’s tentative recovery has hit a setback as niggling concerns over Opec’s plans to cut supply punctured growing market optimism. The market enjoyed its strongest rally in six weeks on Thursday, taking the price of Brent crude to almost $56.50 a barrel, but as market jitters re-emerged the price tumbled back over $1 to $55.30. Earlier in the week the market was emboldened by fresh data suggesting deeper than expected oil supply cuts from Saudi Arabia, one of the world's biggest oil producers, and spurred on by a weaker dollar following president elect Donald Trump’s first press conference. The Saudis are reported to have exceeded the level of cuts agreed in the landmark supply deal and are producing less than 10 million barrels of oil a day, which suggests a cut of 625,000 barrels rather than the agreed 500,000 barrel slowdown. An investment note from brokerage Cenkos said: “This would suggest that Saudi is willing to wear the pain of short-term cuts over and above agreed quotas in order to absorb Libyan increases and thus preserve longer-term prices.” Libya has been exempted from the Organisation of Petroleum Exporting Countries' supply cuts as the battered North African nation tries to get its industry back on its feet.But traders still harbour concerns over whether the deal struck late last year between Opec and the world’s largest producers outside of the cartel will stick. Saxo Bank’s Ole Hansen said the short-lived price rally had been followed by a sell-off as traders tried to make sense of a range of supply news. “Key Opec members have cut production as promised but against this we have doubts about Iraq as well as rising production from Libya and an upgrade to US production,” he explained.

OilPrice Intelligence Report: Skepticism About OPEC Compliance Drags Oil Down -- Oil prices are set to close out the week slightly down. Speculators have taken a breather on bullish bets, which is taking the momentum out of the rally. Meanwhile, U.S. oil data is also putting downward pressure on crude (see below).  OPEC admits compliance with cuts won’t be 100%. "Compliance won't be 100 percent, it never is," an OPEC source told Reuters. The source went on to add that a compliance rate of 50 to 60 percent would be good enough to do the job, and as high as 80 percent would be a very positive result. The comments come after Saudi Arabia and Kuwait announced this week that they have cut more than they had promised to, reductions that will help make up for some non-compliance elsewhere. Saudi output is down below 10 million barrels per day and Saudi officials said it could fall further in February.   OPEC is doing its best to tighten the market but the U.S. is not cooperating. Crude stockpiles in the U.S. rose last week by 4.1 million barrels, leaving inventories stubbornly high. Gasoline stocks also saw a strong jump. And there are early signs of an uptick in production. EIA weekly data showed an increase in output by about 176,000 bpd last week, a shocking increase in production. It should be noted that weekly data is not as accurate as the monthly data that EIA publishes on a lag. However, the data suggests that production could be on the rise in the U.S., offsetting some of the cuts from OPEC.   A dearth of pipeline capacity in the U.S. northeast is leading to a shortage of supply, which is allowing the Haynesville Shale to receive more drilling activity, according to S&P Global Platts. That is because the pipeline bottleneck is forcing gas from the prolific Marcellus Shale to trade at a discount to gas in the U.S. South. As such, drillers are moving rigs to the Haynesville to take advantage. A major pipeline that could connect Alberta oil sands to the international market received an approval from British Columbia, one of its last major hurdles before construction can begin. Kinder Morgan’s Trans Mountain Pipeline Expansion will nearly triple the existing line’s capacity from 300,000 to 890,000 bpd when completed. The twin line was viewed as a less controversial pipeline since it will be built alongside the existing pipeline that runs from Alberta to the Pacific Coast.

 Baker Hughes data show U.S. oil-rig count down for first time in 11 weeks - Data from Baker Hughes Friday revealed that the number of active U.S. rigs drilling for oil fell by 7 to 522 rigs this week. The decline follows ten consecutive weeks of increases. The total active U.S. rig count, which includes oil and natural-gas rigs, also fell 6 to 659, according to Baker Hughes. February West Texas Intermediate crude was trading down 46 cents, or 0.9%, for the session at $52.55 a barrel on the New York Mercantile Exchange, unchanged from the levels it traded at before the data.

U.S. Oil Rig Count Falls For The First Time In 12 Weeks | The number of active oil and gas rigs in the United States dipped on Friday by 6 for a total of 659 active rigs, according to oilfield services provider Baker Hughes, which is 9 rigs above the rig count last year. The number of oil rigs decreased 7 from 529 to 522, while the number of active gas rigs increased from 135 to 136 for a single-rig gain. This week marks the first week in the last 12 that the number of oil rigs has decreased, and 10 straight weeks of gas rig increases. Drillers in the United States have been slowly but steadily increasing the number of active drilling rigs in line with higher oil prices, particularly since the OPEC agreement on November 30 that saw OPEC agree to cut back production to 32.5 million bpd. This upward trend in the number of active rigs is expected to continue overall, barring any glitches in OPEC’s promise to make good on the production cut deal solidified in November. The number of active oil rigs is still well below 2014 figures, when the number of oil rigs operating in the United States sat comfortably above 1,500.A snapshot of the number of active oil and gas rigs by basin a year ago versus today shows a shift in activity, most notably away from Eagle Ford to the coveted Permian, which holds an estimated mean of 20 billion barrels of oil, 16 trillion cubic feet of associated natural gas, and 1.6 billion barrels of natural gas liquids. These figures signify the single largest continuous pool of oil that the U.S. Geological Survey has every surveyed.  WTI was trading down 0.85 percent at $52.56 half an hour before the data release, with Brent at $55.66, down 0.62 percent. Immediately after the rig count release, WTI was sitting at US$52.60, and Brent at US$55.68.

Rig count slides after 10 weeks of increases -- After ten weeks of gains, the U.S. rig count from Baker Hughes shows a decrease of six since last week, dropping from 665 to 659. However, the total is still up 9 from last year at this time when the count was 650. Colorado, North Dakota, Ohio, and Pennsylvania each lost one rig. Oklahoma and Texas were each down two while Wyoming added two new rigs. Louisiana also gained one. The Permian Basin still holds strong as the greatest area of oil and gas exploration, maintaining 268 rigs in the basin.Canada and the Gulf of Mexico both increased, with one offshore rig added in the Gulf and 110 new rigs exploring for oil and Gas up north. John Kemp, Reuters market analyst, notes that oil price forecasts for the next few years have increased, however, as risks fall. Kemp based his analysis on a questionnaire emailed to approximately 5,000 energy market professionals, with 1,000 responses. Expectations about price are slightly above the Energy Information Administration Short-Term Energy Outlook, released earlier this week. Kemp’s survey showed energy market professionals expect 2018 Brent prices to average between $60-$65 per barrel and reach $70 by 2020. Kemp also notes that 24 percent of those who were surveyed are directly involved in oil and gas production. The other respondents come from banking and finance, hedge funds, research, professional services and physical trading.Currently, the price of WTI crude oil sits at $53.53 at 12:52 pm CST, down 0.48. Brent crude is also down slightly at $55.61. Jillian Ambrose of the Telegraph suggests that oil’s slight drop is due to “niggling concerns over OPEC’s plans to cut supply punctured growing market optimism.” This is despite Saudi Arabia exceeding production cuts, producing less than 10 million barrels of oil a day in order to absorb increases by Libya who is exempted from the OPEC deal. The price of oil, including the forecast, affect the rig count. As confidence in the oil market returns, the rig count is expected to increase as well, although few believe the count will reach 2014 highs anytime soon.

OPEC output at 32.85 mil b/d in Dec, first fall in 7 months: Platts Survey -- OPEC oil output slumped 280,000 b/d in December, due to hefty falls in Nigeria and Saudi Arabia, a month before the group's pledge to rein in production, an S&P Global Platts survey of OPEC and oil industry officials and analysts showed Tuesday. OPEC's 13 members saw their collective December output fall to 32.85 million b/d from 33.13 million b/d in November. Including Indonesia, which suspended its membership at the organization's last meeting, total December output was 33.57 million b/d, also down 280,000 b/d. The producer group has agreed to cut 1.2 million b/d from its October output level for six months starting from January 1, and freeze production at around 32.5 million b/d, with the total including Indonesia. As part of global efforts to curb the crude supply glut, 11 non-OPEC countries led by Russia have also agreed to cut output by 558,000 b/d in the first half of 2017, with Russia shouldering the majority of that burden, with a 300,000 b/d reduction. The December slide comes after OPEC reached a new production record in November and is the first fall in seven months as Saudi Arabia provides an encouraging sign that it is set to lead the cuts by example. However, the main protagonist responsible for the fall in total output was Nigeria, which is exempt from the cut agreement, as it recovers from renewed militancy in the oil rich Niger Delta, while Iraq, OPEC's second-biggest producer, saw its exports rise sharply. Nigerian production fell to 1.44 million b/d from 1.68 million b/d in November, as planned maintenance halved loadings of its key export grade Agbami.

Saudi Energy Minister Says Output Below 10 MMBpd, Cut Will Deepen (Reuters) - Saudi Arabia has cut its oil production to slightly below 10 million barrels per day and plans a deeper cut in February under an agreement among global producers to reduce output, Saudi Energy Minister Khalid al-Falih said on Thursday. "The market first of all is extremely healthy - we had to cut deeply to get below 10," Falih told reporters at an industry conference. "And of course it is low demand season in Saudi Arabia so the combination of deep cuts and low demand in Saudi Arabia have kept our production in the month of January below 10. It is below 10 today and it will be below 10 by the end of the month." Saudi output was about 10.45 million bpd in December, according to a Reuters survey of shipping data and information from industry sources. Falih added, "We have also cut our nominations for our customers worldwide significantly for February. Saudi Aramco has just announced to their customers what they should expect in February and it is going to be even a deeper cut than in January. So we are committed." Asked if the agreement would need to be extended beyond six months, Falih said producers would watch the oil market and only intervene if necessary. OPEC and non-OPEC producers are very serious in complying with the agreement, he told reporters at an industry conference.

Oil market to become tight in next 2-3 years: Saudi energy minister - The world could run short of oil by 2020 due to the recent sharp global downturn in upstream investment, Saudi Energy Minister Khalid al-Falih said Thursday. "From what I can see, within two to three years there will be tightness because many projects have been deferred and delayed," Falih told delegates at the Atlantic Council Global Energy Forum in Abu Dhabi. Increasing the likelihood of a medium-term swing towards tight oil supply was the "not insignificant" natural decline in output from large, mature fields in the Middle East and elsewhere, he added. For the coming year, Falih said there were too many variables at play for him to predict market trends. However, he said he broadly expected global oil demand to continue growing while production from mature basins declined. "Uncertainty about the future has impacted investment levels and jobs in the industry, which is of particular concern to me. The good news is that we are moving towards a rebalanced market, too slowly for my liking. But the even better news is that the pace of re-balancing will be accelerated by the recent agreements," he said, referring to OPEC's late November agreement to cut output by 1.2 million b/d in the first half of 2017 and the group's subsequent deal with 11 oil producers from outside OPEC under which the non-OPEC countries agreed to cut by roughly a further aggregate 600,000 b/d. Falih said near-term uncertainty over oil supply -- including the extent of an ongoing rebound in US shale oil production -- was the reason for the limited duration of the OPEC deal. "The agreement is for six months for the specific reason that we don't know what will happen by mid-year; and then we will consider renewing it," he said.

Saudi Arabia’s Dream of Domination Goes Up in Flames: As recently as two years ago, Saudi Arabia’s half century-long effort to establish itself as the main power among Arab and Islamic states looked as if it was succeeding. A US State Department paper sent by former Secretary of State, Hillary Clinton, in 2014 and published by Wikileaks spoke of the Saudis and Qataris as rivals competing “to dominate the Sunni world”.A year later in December 2015, the German foreign intelligence service BND was so worried about the growing influence of Saudi Arabia that it took the extraordinary step of producing a memo, saying that “the previous cautious diplomatic stance of older leading members of the royal family is being replaced by an impulsive policy of intervention”.An embarrassed German government forced the BND to recant, but over the last year its fears about the destabilising impact of more aggressive Saudi policies were more than fulfilled. What it did not foresee was the speed with which Saudi Arabia would see its high ambitions defeated or frustrated on almost every front. But in the last year Saudi Arabia has seen its allies in Syrian civil war lose their last big urban centre in east Aleppo. Here, at least, Saudi intervention was indirect but in Yemen direct engagement of the vastly expensive Saudi military machine has failed to produce a victory. Instead of Iranian influence being curtailed by a more energetic Saudi policy, the exact opposite has happened. In the last OPEC meeting, the Saudis agreed to cut crude production while Iran raised output, something Riyadh had said it would always reject.In the US, the final guarantor of the continued rule of the House of Saud, President Obama allowed himself to be quoted as complaining about the convention in Washington of treating Saudi Arabia as a friend and ally. At a popular level, there is growing hostility to Saudi Arabia reflected in the near unanimous vote in Congress to allow families of 9/11 victims to sue the Saudi government as bearing responsibility for the attack.

Diving deeper: Gulf debt issuance to surge in 2017 - Debt issuance from the GCC is expected to surge in 2017 with sovereign issuers leading while conventional bonds outstripping sukuk both in terms of amounts raised and number of issues, according to market analysts. The decline in oil prices over the past two years has pushed GCC countries to raise capital to fund the expected budget deficits in the near term as the surpluses accumulated over the past decade or more could support future deficits for only a limited period of time.  “On the positive side, most of the regional oil exporters have adequate credit quality enabling them to comfortably raise debt in the international market. This is particularly the case with the GCC countries with almost all of the economies continuing to boast investment grade ratings despite several downgrades by rating agencies over the past 18 months,” said Faisal Hasan, Head — Investment Research at Kamco.The key drivers to bond issuances in the GCC during 2016, which more than doubled to $66.5 billion (Dh244.5 billion), was primarily the sovereign bond issuances by Saudi Arabia, UAE and Qatar. Bond issuances in 2016 almost doubled from the previous year in the Middle East and North Africa (Mena) primarily on the back of new sovereign issues by GCC countries that were aimed at plugging the budget deficit. Saudi Arabia’s first international bond issuance valued at $17.5 billion in October last year was the biggest recorded emerging market bond, far outpacing the previous record of Qatar’s $9 billion sovereign bonds issued in May 2016.

Saudi Arabia said to be mulling cancellation of $20bn projects - - Saudi Arabia is reportedly working with PricewaterhouseCoopers on plans to cancel about $20 billion of projects as the Gulf kingdom battle with lower revenues amid lower oil prices. Bloomberg reported on Monday that Ministry of Economy and Planning has appointed PwC to review $69 billion of government contracts with a view to cutting about a third of them, citing two people familiar with the matter. It said that projects under review include contracts awarded by the ministries of housing, transport, health and education. Bloomberg reported that PwC declined to comment, while a spokesman for the Ministry of Economy didn’t immediately respond to requests for comment. Last month, Saudi Arabia said it had successfully cut into its huge state budget deficit this year and will increase government spending in 2017 to boost flagging economic growth. The deficit shrank to 297 billion riyals ($79 billion) in 2016. That was well below a record 367 billion gap in 2015, and below the government's projection in its original 2016 budget plan of a deficit of 326 billion riyals.

Syria truce under strain; Assad ready to discuss 'everything' at talks | Reuters: A Syrian truce brokered by Russia and Turkey was under growing strain on Monday as rebels vowed to respond to government violations and President Bashar al-Assad said the army would retake an important rebel-held area near Damascus. Assad, in comments to French media, also said his government was ready to negotiate on "everything" at peace talks his Russian allies hope to convene in Kazakhstan, including his own position within the framework of the Syrian constitution. But he indicated any new constitution must be put to a referendum and it was up to Syrians to elect their president. His opponents have insisted throughout nearly six years of war that he must leave power under any future peace deal. But since Russia joined the war on his side in late 2015, his government's position on the battlefield has strengthened dramatically, giving him greater leverage now than at any time since the war's earliest days. The ceasefire which came into effect on Dec. 30 aims to pave the way for the new peace talks which Russia hopes to convene with Turkish and Iranian support. But no date has been set for the talks and the warring sides have accused each other of truce violations. The Moscow-led effort to revive diplomacy, without the participation of the United States, has emerged with Assad buoyed by the defeat of rebels in Aleppo, and as ties thaw between Russia and Turkey, long one of the rebels' main backers.

U.S. military aid is fueling big ambitions for Syria’s leftist Kurdish militia -- In a former high school classroom in this northeastern Syrian town, about 250 Arab recruits for the U.S.-backed war against the Islamic State were being prepped by Kurdish instructors to receive military training from American troops. Most of the recruits were from villages surrounding the Islamic State’s self- proclaimed capital of Raqqa, and the expectation is that they will be deployed to the battle for the predominantly Arab city, which is now the main target of the U.S. military effort in Syria.But first, said the instructors, the recruits must learn and embrace the ideology of Abdullah Ocalan, a Kurdish leader jailed in Turkey whose group is branded a terrorist organization by both Washington and Ankara. The scene in the classroom captured some of the complexity of the U.S.-backed fight against the Islamic State in Syria, where a Kurdish movement that subscribes to an ideology at odds with stated U.S. policy has become America’s closest ally against the extremists. The People’s Protection Units, or YPG, is the military wing of a political movement that has been governing northeastern Syria for the past 4 1 / 2 years, seeking to apply the Marxist-inspired visions of Ocalan to the majority Kurdish areas vacated by the Syrian government during the war. Over the past two years, the YPG has forged an increasingly close relationship with the United States, steadily capturing land from the Islamic State with the help of U.S. airstrikes, military assistance and hundreds of U.S. military advisers.

Russia says it starts Syrian drawdown with aircraft carrier — Russia announced on Friday that it is withdrawing its aircraft carrier and some other Russian warships from the waters off Syria as the first step in a drawdown of its forces in the war-torn, Middle Eastern country.  According to Russian General Staff chief Gen. Valery Gerasimov, the Admiral Kuznetsov carrier and accompanying ships are to be the first to leave.The declaration comes a week after Russia and Turkey brokered a cease-fire in Syria, following a decisive Moscow-backed victory for the government of Syrian President Bashar Assad over rebels in the city of Aleppo.It's also the second time Moscow has announced scaling back its military presence in Syria since Russia threw its military weight behind the Syrian government in September 2015. Russia's support, with airstrikes and military advisers — along with the boosting of its arsenal and a naval base on the Syrian coast — changed the course of the civil war, now in its sixth year, in favor of Assad.

Israeli Jets Bomb Damascus Military Airport; Syria Vows It Will Respond To "Flagrant Attack" -- Just as the Syrian proxy war showed some hopeful signs of finally dying down, the Syrian army command said on Friday that Israeli jets have bombed the Mezzeh military airport west of Damascus, accusing Tel Aviv of supporting terrorism, and warned Tel Aviv of repercussions of what it called a "flagrant" attack. Syrian state TV quoted the army as saying several rockets were fired from an area near Lake Tiberias in northern Israel just after midnight which landed in the compound of the airport, a major facility for elite Republican Guards and special forces. The airport was rocked by multiple explosions, some of which were captured by social media.Video shows large flames after military airport near Damascus bombed at least 8 times by suspected Israeli jets tonight. "Syrian army command and armed forces warn Israel of the repercussions of the flagrant attack and stresses its continued fight against (this) terrorism and amputate the arms of the perpetrators," the army command said in a statement.#BREAKING Israeli jets attacked Syria army base in Damascus as part of its 'support of terrorists groups: Sana news agency— Guy Elster (@guyelster) January 12, 2017The statement did not disclose if there were any casualties, but said the rockets caused a fire. Earlier, state television said several major explosions hit Mezzeh military airport compound near Damascus and ambulances were rushed to the area, without giving details.

Obama "Gifts" Iran With Massive Uranium Shipment From Russia Sufficient "For More Than 10 Nuclear Bombs" --In what amounts to an 11th hour "gift" by the outgoing Obama administration to Tehran's leadership to keep the country, which on Sunday was involved in yet another shooting incident with a US destroyer, content and compliant with Obama's landmark "Nuclear deal", the AP reported that Iran is to receive a huge shipment of natural uranium from Russia to compensate it for exporting tons of reactor coolant. The move was approved by the outgoing U.S. administration and other governments "seeking to keep Tehran committed to a landmark nuclear pact." AP cites two senior diplomats who said that the transfer which was recently agreed by the U.S. and five other world powers that negotiated the nuclear deal with Iran, foresees delivery of 116 metric tons (nearly 130 tons) of natural uranium. U.N. Security Council approval is needed but a formality, considering five of those powers are permanent Security Council members, they said. The swap is in compensation for the approximately 40 metric tons (44 tons) of heavy water exported by Iran to Russia since the nuclear agreement went into effect. Another 30 metric tons have gone to the U.S. and Oman.While Uranium can be enriched to levels ranging from reactor fuel or medical and research purposes to the core of an atomic bomb, Iran has claimed it has no interest in such weapons and its activities are being closely monitored under the nuclear pact to make sure they remain peaceful. As we reported at the time, Tehran previously received a similar amount of natural uranium in 2015 as part of negotiations leading up to the nuclear deal, in a swap for enriched uranium it sent to Russia. But the new shipment will be the first such consignment since the deal came into force a year ago.

China Foreign-Exchange Reserves Continue Drop - WSJ —China’s foreign-exchange reserves fell to the lowest level in nearly six years last month, testing the central bank’s resolve to control the yuan’s descent to a pace it dictates.The People’s Bank of China said Saturday that the world’s largest stockpile of foreign currency fell by $41.08 billion in December to $3.011 trillion, the lowest level since March 2011. The  mdecline was smaller than the previous month’s drop of $69.06 billion and was largely in line with analysts’ expectations.Albeit more limited, the drop underscored the central bank’s willingness to dip into reserves to buy up yuan, and use capital controls and other tools to try to prop up the currency and restrain businesses and individuals rushing to send money offshore.China’s foreign-exchange regulator, an arm of the central bank, said efforts to stabilize the yuan are the main reason for the drop in the reserves. Other factors, it said, include the strengthening of the dollar against other currencies such as the euro, which dent the value of nondollar-denominated assets in the reserves in dollar terms. The central bank is walking a tightrope trying to gradually deflate a currency that is widely seen as overvalued after years of steady appreciation. But just as betting on the yuan’s rise seemed a sure bet for many years, the current strategy is reinforcing a belief among businesses and individuals that the yuan will keep falling, causing them to cash out and putting further downward pressure on the currency. To prevent the yuan from falling too fast, the central bank has burned through about $1 trillion of the reserves in the past 17 months.

Trump Is Set To Label China A "Currency Manipulator": What Happens Then? -- While China has been banging the nationalist drums in its government-owned tabloids, warning daily of the adverse consequences to the US from either a trade war, or from Trump's violating the "One China" policy, a more tangible concern for deteriorating relations between China and the US is that Trump could, and most likely will, brand China a currency manipulator shortly after taking over the the Oval Office. Even Bank of America, which two months ago issued a report arguing that it is too early to base concerns of US trade barriers against China on campaign rhetoric, notes "that recent tweeter feeds from Mr. Trump suggests he disapproves the yuan depreciation, implying a higher probability of naming China as a currency manipulator country after his inauguration in January 2017." BofA believes that such an action could take place as soon as the spring of 2017, or around the time the the US Treasury Department meet in April to determine which country on the monitoring list will be named.

Chinese Forex Reserves Continue Declining -  Menzie Chinn  -- Hard to argue the PBoC is manipulating the yuan to keep it weak, especially as capital controls are being tightened. But who listens to facts any more?From FT: Reserves fell by $41bn, to $3.01tn, less than the expected $51bn drop according to a Reuters poll of analysts. In November reserves fell $70bn. The lower than expected drop nonetheless showed that pressure on the renminbi continues, as many Chinese seek to get money out of the country. Like previous months’, December’s fall in reserves was mainly accounted for by the central bank selling foreign currency to slow the renminbi’s decline, according to a statement by the State Administration of Foreign Exchange, which said that the central bank’s effort to stabilise the currency was the key reason for the fall in reserves in 2016 from $3.3tn to just above $3tn.Starting in November the Chinese government began to impose new capital controls, including strict limits on large business deals abroad, in an effort to close off an avenue widely used to get money out of China.  While the yuan continues to decline against the USD, it’s important to keep in mind the overall strengthening of the dollar in recent months. Consequently, the yuan in real effective terms (the macroeconomically relevant measure) has stabilized.

China’s Exorbitant Detriment, Mirror Image of America’s Exorbitant Privilege, Is Costing It Dearly - The so-called Exorbitant Privilege of the United States, the power to conjure the world’s primary reserve currency, is reflected in the unique combination of being deeply in debt to the rest of the world (that is, having a massive negative net international investment position, or NIIP) while earning far more income abroad than it pays out in interest (that is, having massive positive annual net investment income, or NII).  The U.S. NIIP averaged negative $7.5 trillion over FY15/16, while its NII was positive $167 billion, as shown in the top left of the graphic above.  Basically, foreigners are willing to accept a trivial return to hold dollar-denominated assets.  Far less well known is the mirror-image of the Exorbitant Privilege, or what we might call the Exorbitant Detriment.  It is, not surprisingly, borne by China.  It is, to some extent, the price the country bears as the world’s largest holder of dollar-denominated central bank reserves.  Reserves account for half of China’s foreign assets, of which around 40 percent are invested in low-yielding U.S. Treasury securities.  But it also reflects the fact that China is lending to the rest of the world at paltry rates.  Chinese government institutions lend to Chinese, as well as foreign, firms operating abroad far more cheaply than alternative lenders. This reflects the Chinese government’s efforts both to subsidize its companies and to strengthen economic ties with resource-rich countries in, for example, Africa and Latin America.  China’s Exorbitant Detriment is reflected in an NIIP of $1.6 trillion and NII of negative $80 billion in FY15/16.  Can China continue supporting its Exorbitant Detriment indefinitely?  Not if it wants to prioritize a halt to reserve sales, which have been necessitated by capital outflows.  Negative investment income reduces the current account surplus, and therefore the amount of capital that can leave the country before the central bank has to match outflows with reserve sales. If China’s investment income balance had been zero over FY15/16 it would, all else being equal, have been able to absorb an additional $80 billion of capital outflows before having to sell reserves.  This is equivalent to 17 percent of the actual decline in reserves over this period.

China banks extend record 12.65 trillion yuan in loans in 2016 as debt worries mount | Reuters: China's banks extended a record 12.56 trillion yuan ($1.82 trillion) of loans in 2016 as the government encouraged more credit-fueled stimulus to meet its economic growth target, despite worries about the risks of an explosive jump in debt. China's top leaders pledged last month to stem the growth of asset bubbles in 2017 and place greater importance on preventing financial risk, even as some global financial experts warned the nation's debt load is nearing crisis levels. In December alone, Chinese banks extended 1.04 trillion yuan in net new yuan loans, far more than economists had expected, central bank data showed on Thursday. Analysts polled by Reuters had expected new lending would fall to 700 billion yuan from November’s 794.6 billion yuan. New bank loans last year surpassed the levels of China's massive credit-led stimulus during the global financial crisis in 2009, according to Reuters calculations based on central bank data. The 2016 total was some 8 percent above the previous all-time high of 11.72 trillion yuan set just the year before. Despite China's ever-more frantic pace of credit creation, however, some analysts say Beijing is getting less and less bang for its buck, with every yuan of stimulus proving less efficient in generating the same amount of economic growth, while adding to the risk of rising defaults and non-performing loans.

98% of Bitcoin trading volume over the past six months was in Chinese Renminbi -- In case you were wondering why Bitcoin experienced a crazy spike recently: China's economy is a hyperinflated bubble, poised to burst and the Chinese central bank is depreciating the Renminbi -- so China's wealthy are getting their cash out of the country as fast as they can, using any means necessary: suing themselves, spending huge whacks of cash while on vacation, and converting it to Bitcoin (this is especially urgent now that the Canadian real-estate money laundry is shutting down) -- this is just the latest salvo in the Chinese capital flight story.

Two Trade Variables To Watch in 2017 -- I suspect that few variables will tell us more about the course of the global economy, and perhaps global policy, than the evolution of Chinese and U.S. exports. Sometimes the most important indicators are simple and straightforward. China’s exports matter for a simple reason: they could provide the basis for a true change in the narrative around China’s currency. I tend to think controls can play a role in stabilizing expectations. The trade account doesn’t signal an underlying overvaluation of the yuan. China’s goods surplus is quite substantial. And China’s exports, as the chart below shows, have outperformed U.S. exports both during the period of dollar weakness (05 to 13) and in the recent period of dollar strength (chart uses a volume index, Chinese data starts in 05).  With an ongoing trade surplus, the right exchange rate is ultimately a function of the scale of outflows—and those are in part determined by expectations about what others are likely to do. If everyone wants out and can get out, it is rational to try to get out first. That is why the controls could work, especially as the nominal return on safe assets in China (still) exceeds the nominal return on safe global assets.  At the same time, there are likely to be limits to how tight the controls can be. It should be relatively easy for China, if it wants too, to keep its state banks from running up their foreign assets. And to keep state-run financial institutions from buying U.S. corporate bonds for their portfolio. It is far harder to control the activities of China’s export sector. Chinese exporters will be far more likely to sell their dollars and euros for yuan if the exporters believe that there is real two-way risk on the currency. And one thing that could convince the exporters that they risk losing out if they hold their export proceeds abroad is a run of decent trade data. China’s November exports were pretty strong—China releases its own export volume data with a month lag, and the latest data shows that exports were up 8% in November.   One obvious obvious risk to the U.S. economy in 2017 is that the drag from a stronger dollar (and higher interest rates) kicks in before the expected tax cut stimulus arrives (the other risk is that the stimulus isn’t very stimulative, given that it is likely to be tilted toward high-end tax cuts) Another obvious risk is that the collateral damage from a cycle of trade restrictions and retaliation is bigger than the market now seems to expect. Trump has emphasized policies that would lower U.S. imports (and raise the price of imports in the absence of any exchange rate moves). But cutting imports won’t reduce the trade deficit—or spur the economy—if exports fall by more.

China posts worst export fall since 2009 as fears of U.S. trade war loom | Reuters: China's massive export engine sputtered for the second year in a row in 2016, with shipments falling in the face of persistently weak global demand and officials voicing fears of a trade war with the United States that is clouding the outlook for 2017. In one week, China's leaders will see if President-elect Donald Trump makes good on a campaign pledge to brand Beijing a currency manipulator on his first day in office, and starts to follow up on a threat to slap high tariffs on Chinese goods. Even if the Trump administration takes no concrete action immediately, analysts say the specter of deteriorating U.S.-China trade and political ties is likely to weigh on the confidence of exporters and investors worldwide. The world's largest trading nation posted gloomy data on Friday, with 2016 exports falling 7.7 percent and imports down 5.5 percent. The export drop was the second annual decline in a row and the worst since the depths of the global crisis in 2009. It will be tough for foreign trade to improve this year, especially if the inauguration of Trump and other major political changes limit the growth of China's exports due to greater protectionist measures, the country's customs agency said on Friday. "The trend of anti-globalization is becoming increasingly evident, and China is the biggest victim of this trend," customs spokesman Huang Songping told reporters. "We will pay close attention to foreign trade policy after Trump is inaugurated president,”

China Threatens To "Take Revenge" If Trump Violates "One-China" Policy As Taiwan President Lands In US --Around the time Taiwan's president Tsai Ing-wen, who last month infamously spoke to Trump putting the long-standing "One China" policy in jeopardy, made a controversial stopover in Houston, China's state-run tabloid Global Times warned U.S. President-elect Donald Trump that China would "take revenge" if he reneged on the one-China policy.  The Taiwan president met senior U.S. Republican lawmakers during her stopover in Houston on Sunday en route to Central America, where she will visit Honduras, Nicaragua, Guatemala and El Salvador. Tsai will stop in San Francisco on Jan. 13, her way back to Taiwan. While Ing-wen did not meet with the president-elect or members of his transition team, that will hardly mollify China which had previously asked the United States not to allow Tsai to enter or have formal government meetings under the one China policy. Beijing considers self-governing Taiwan a renegade province ineligible for state-to-state relations. The subject is a sensitive one for China. Reuters reported that Tsai's office said on Monday she also spoke by telephone with U.S. senator John McCain, head of the powerful Senate Committee on Armed Services. Tsai also met Texas Senator Ted Cruz. Meanwhile, an angry China lashed out again at the US saying that "sticking to (the one China) principle is not a capricious request by China upon U.S. presidents, but an obligation of U.S. presidents to maintain China-U.S. relations and respect the existing order of the Asia-Pacific," said the Global Times editorial on Sunday. The influential tabloid is published by the ruling Communist Party's official People's Daily. "If Trump reneges on the one-China policy after taking office, the Chinese people will demand the government to take revenge. There is no room for bargaining," said the Global Times.

China's Xi Open To Meet Trump's Team In Davos, Warns Populism "Can Lead To War" --On the surface, relations between China's president Xi and Donald Trump have had a rocky start even before the president-elect's inauguration, with speculation about a trade war, tariffs, the collapse of the "One China" policy, the confiscation of a US naval drone, fly-bys over disputed islands, and non-stop jingoist bluster dominating the airwaves and local press. However, that may be merely bluster as the two leaders gradually warm up to each other, ironically, at a very cold place: Switzerland's World Economic Form held, as every other year, in Davos. It is here that a senior Chinese official said Beijing is open to a meeting with US president-elect Donald Trump’s team. “China has good contacts with the present US government, and also has a smooth communication channel with Trump’s team,” deputy foreign minister Li Baodong said on Wednesday. Li was responding to a query on the possibility of a meeting between President Xi Jinping and Trump’s team members when they attend the World Economic Forum in Davos from January 17 to 20, according to SCMP. This year's forum is expected to be dominated by discussion of a surge in public hostility toward globalization and the rise of U.S. President-elect Donald Trump, whose tough talk on trade, including promises of tariffs against China and Mexico, helped win him the White House. Earlier, we laid out the top risks envisioned by the WEF in 2017, and which will be topic of much discussion by those present. They are summarized in the chart below.

China Daily: Tillerson's "Disastrous" Actions Would Set The Course For A "Devastating Confrontation" -- We were surprised by how contained China was this morning after yesterday's confirmation hearing of Rex Tillerson, in which the former Exxon CEO said that a failure to respond to China had allowed it to “keep pushing the envelope” in the South China Sea and added that “we’re going to have to send China a clear signal that first the island-building stops and second your access to those islands is also not going to be allowed” and that putting military assets on those islands was "akin to Russia’s taking Crimea” from Ukraine." Traditionally such a direct threat would be i) perceived as very undiplomatic and ii) prompt an immediate, and angry rebuke from Beijing, with China immediately shifting to the offensive.   But not today: during his press conference earlier today, Foreign Ministry spokesman Lu Kang could barely muster the will to sound defensive, saying China has been acting within the limits of its sovereignty. “Like the U.S., China has the right within its own territory to carry out normal activities,” he said at a regular briefing in Beijing.  As it turns out, China may not have had time to digest what Tillerson said. However, they caught up today, and first China Daily, then its nationalist tabloid, the Global Times took turns to first mock, then attack Tillerson. Here is the gist of the China Daily op-ed published earlier today: according to the Chinese daily mouthpiece, not only were Tillerson's views "divergent from, even contrary to, those of Trump on some critical issues. He openly conceded he is yet to have a serious, in-depth discussion with Trump on foreign policy imperatives. These boil down to one simple point – his remarks at the Wednesday hearing, sensational as they were, turned out to be of little reference value except for judging his personal orientations."Yet while China realizes that Tillerson's bluster was intended for a specific audience, that does not make it any happier: The backlash that has ensued is understandable. It is certainly no small matter for a man intended to be the US diplomat in chief to display such undisguised animosity toward China.  Tillerson labeled China's reclamation projects in the South China Sea as "an illegal taking of disputed areas without regard for international norms," in obvious disregard of the essential truth that all those activities took place well within the country's persistent, historical territorial claims.

Chinese bomber flies around contested Spratlys in show of force: U.S. official | Reuters: A Chinese H-6 strategic bomber flew around the Spratly Islands over the weekend in a new show of force in the contested South China Sea, a U.S. official said on Tuesday. It was the second such flight by a Chinese bomber in the South China Sea this year. The first was on Jan. 1, said the official, who spoke on condition of anonymity. The flight could be seen as a show of “strategic force” by the Chinese, the official said. It comes after U.S. President-elect Donald Trump has signaled a tougher approach to China when he takes office on Jan. 20, with tweets criticizing Beijing for its trade practices and accusing it of failing to help rein in nuclear-armed North Korea. Commander Gary Ross, a Pentagon spokesman, said he had no specific comment on China’s recent bomber activities, but added: "we continue to observe a range of ongoing Chinese military activity in the region‎.” In December, China flew an H-6 bomber along the “nine-dash line” it uses to map its claim to nearly all of the South China Sea, a strategic global trade route. That flight also went around Taiwan, which China views as a renegade province. In August, China conducted “combat patrols” near contested islands in the South China Sea. Trump has enraged Beijing by breaking with decades of U.S. policy and speaking to the Taiwanese president by telephone.

Beijing Not Amused After Tillerson Says US Will Block Chinese Access To South China Sea Islands -  While Rex Tillerson's confirmation hearing as Trump's Secretary of State was for the most part uneventful, several hours into his back and forth with the Senate Foreign Relations Committee, Tillerson compared China’s actions to those of Russia in Crimea, saying a failure to respond had allowed it to “keep pushing the envelope” in the South China Sea. “We’re going to have to send China a clear signal that first the island-building stops and second your access to those islands is also not going to be allowed” and that putting military assets on those islands was "akin to Russia’s taking Crimea” from Ukraine.With that statement, America's likely next secretary of state "has set a course for a potentially serious confrontation with Beijing" according to Reuters, which added that his comments are "expected to enrage Beijing." Tillerson, the former Exxon chairman and CEO, did not elaborate on what might be done to deny China access to the islands it has built up from South China Sea reefs, equipped with military-length airstrips and fortified with weapons. Trump's transition team did not immediately respond to a request for specifics on how China might be blocked from the artificial islands.Tillerson said he considered China’s South China Sea activity "extremely worrisome" and that it would be a threat to the "entire global economy" if Beijing were able to dictate access to the waterway. “This is the sort of off-the-cuff remark akin to a tweet that pours fuel on the fire and maybe makes things worse,” Malcolm Davis, a senior analyst at the Australian Strategic Policy Institute in Canberra told Bloomberg. “Short of going to war with China, there is nothing the Americans can do.”

Taiwan Scrambles Jets, Navy After Chinese Aircraft Carrier Group Enters Taiwan Strait-  While much of America was preparing to listen to Obama speak one final time, the Chinese had far less lofty ambitions, and on Wednesday morning Beijing sent a group of Chinese warships led by China's sole aircraft carrier north through the Taiwan Strait, resulting in Taiwan scrambling jets and navy ships in the latest sign of heightened tensions between China and the self-ruled Taiwan. According to Reuters, The Soviet-built Liaoning aircraft carrier, returning from exercises in the South China Sea, was not trespassing in Taiwan's territorial waters but entered its air defense identification zone (ADIZ) in the southwest, Taiwan's defense ministry said. As a result Taiwan scrambled jets and navy ships to "surveil and control" the passage of the Chinese ships through the narrow body of water separating Taiwan and China. "We have full grasp of its movements," Taiwan defense ministry spokesman Chen Chung-chi said. The defense ministry spokesman added that the Taiwanese military aircraft and ships have been deployed to follow the carrier group, which is sailing up the west side of the median line of the strait.

North Korea, U.S. trade warnings over potential ICBM test | The Japan Times: – With Donald Trump getting ready to take office as president, North Korea is talking about launching a newly perfected intercontinental ballistic missile. Officials in Washington are saying that if Pyongyang launches anything that threatens the territory of the U.S. or its allies, it will be shot down. North Korea has not explicitly said it will conduct an ICBM test in the immediate future, and it is safe to assume U.S. policy has always been to shoot down any missiles that threaten its territory. But the recent barb trading could suggest Pyongyang and Washington are feeling each other out ahead of President-elect Trump’s Jan. 20 inauguration. A successful ICBM launch would be a major step forward for the North and a serious concern to the U.S. and its allies. Kim Jong Un announced in his New Year’s address that the country had reached the “final stages” of ICBM development. Trump responded with a tweet two days later, saying the possibility of the North developing a nuclear weapon capable of reaching the U.S. “won’t happen!” Upping the ante, the reclusive state’s KCNA news agency quoted a North Korean Foreign Ministry spokesman as saying Sunday that Pyongyang reserves the right to conduct a test whenever it sees fit. “The ICBM will be launched anytime and anywhere determined by the supreme headquarters of the DPRK,” the unnamed spokesman was quoted as saying. DPRK stands for the North’s official name, the Democratic People’s Republic of Korea.

S. Korea heading toward economic storm with no remedy in sight: expert: -- South Korea may be heading toward the worst economic turbulence in its history that will require much more than increased fiscal spending as currently planned by the Seoul government, the head of a South Korean think tank said. Kwon Tae-shin, chief of the Korea Economic Research Institute (KERI), said the country may soon face what he called a "perfect storm" where all three pillars of growth, including investment, will shrink. "The crisis currently facing the country is a perfect storm where consumption, investment and exports are collapsing at the same time, which means government stimulus through fiscal spending will have little or no effect," the chief researcher said in a breakfast meeting in Chicago, hosted by the Korea-America Economic Association. In 2016, South Korea's overall exports shrank 5.9 percent on-year to US$495.5 billion, marking the second consecutive year of drop. Local consumer spending has also remained weak throughout the year amid a steady increase in household debt. The central bank earlier said the country's household debt reached a record high of 1,295.8 trillion won ($1,076 billion) as of end-September, up 11.2 percent from a year earlier.

Can Korea say no to US?: It appears to be unthinkable for South Korea to give up its decades-old alliance with the United States and choose China in its place. However, a combination of events gives a sense of reality to this unlikely scenario. Recently, a group of opposition lawmakers visited China on a fact-finding mission over Beijing’s opposition to Seoul’s decision to deploy a U.S.-made missile interceptor here. The delegation was given a thorough drubbing by the media for fueling the national division on the Terminal High-Altitude Area Defense (THAAD) system deployment. Residents in Sangju, North Gyeongsang Province, where it will be installed, are up in arms for being sitting ducks in the event of a North Korean missile attack. The opposition parties are united against it because they believe the deployment puts the nation right in the middle of an emerging big-power rivalry pitting China against the U.S. Those opposing the deployment try carefully not to make a big case out of their THAAD stance for fear of a conservative backlash. Despite China’s retaliatory acts against Korea, Washington has not even rendered support for Seoul. Donald Trump, the incoming U.S. president, has sent out no tweets. His national security advisor Michael Flynn only backed the deployment and gave lip service to the two countries’ alliance. Inevitably, Seoul feels hung out to dry over this controversial deployment that is becoming a test of wills between two superpowers. China is pulling out all the stops.Chinese Foreign Minister Wang Yi went out of the protocol to play host to Korean lawmakers, alternating between coercion and conciliation. Now, it is highly questionable that Korea will allow a second THAAD system into its country, having faced such strong opposition from China and meek U.S. support shown so far. If the next president holds the key, the prospects are not rosy.

The Cost of India’s Man-Made Currency Crisis - Editorial Board, NYT - Two months after the Indian government abruptly decided to swap the most widely used currency notes for new bills, the economy is suffering. The manufacturing sector is contracting; real estate and car sales are down; and farm workers, shopkeepers and other Indians report that a shortage of cash has made life increasingly difficult. Prime Minister Narendra Modi announced on Nov. 8 that the 500 and 1,000 rupee notes (roughly $7.50 and $15) that made up about 86 percent of all currency in circulation could no longer be used in most transactions and would be replaced by new 500 and 2,000 rupee notes. People could deposit old notes in banks until Dec. 30 and withdraw a limited number of new notes every week. This was meant to help identify people who were hoarding cash — or “black money,” as it is known in India — to avoid paying taxes or to engage in corruption. Mr. Modi’s government later said that it was also eager for Indians to move to electronic transactions. But the swap was atrociously planned and executed. Indians had to line up for hours outside banks to deposit and withdraw cash. New notes have been in short supply because the government did not print enough of them in advance. The cash crunch has been worst in small towns and rural areas. The amount of cash in circulation fell by nearly half, from 17.7 trillion rupees ($260 billion) on Nov. 4 to 9.2 trillion ($135 billion) on Dec. 23, according to the Reserve Bank of India. No economy can lose that much currency in a few weeks without creating major hardship — certainly not one like that of India, where cash is used for about 98 percent of consumer transactions by volume. And while a growing number of people have debit cards and cellphones that can be used to transfer money, most merchants are not set up to accept such electronic payments. Meanwhile, there is little evidence that the currency swap has succeeded in combating corruption or that it will forestall future bad behavior once more cash becomes available. The government had said that people bringing more than 250,000 rupees ($3,660) of the old notes to banks would have to show that they had paid taxes owed on the money. Because of those rules, officials had expected that a lot of black money would never make it back to banks. Yet local news outlets are reporting that Indians have successfully deposited the vast majority of old notes. That suggests that either there wasn’t as much black money out there as the government claimed or that tax cheats found a way to deposit their hoards of cash without attracting the government’s attention, perhaps with the help of money launderers. Many Indians have said that they are willing to tolerate some pain in the fight against corruption. But their patience won’t last if the cash crunch continues and the swap does little to reduce corruption and tax evasion, as many economists predict.

 Pakistan fires 'first submarine-launched nuclear-capable missile' | Reuters: Pakistan fired its first submarine-launched cruise missile on Monday, the military said, a show of force for a country that sees its missile development as a deterrent against arch-foe India. The launch of the nuclear-capable Babur-3 missile, which has a range of 450 km (280 miles) and was fired from an undisclosed location in the Indian Ocean, is likely to heighten long-running tension between India and Pakistan. The nuclear-armed neighbors have fought three wars since independence from Britain in 1947. Both nations have been developing missiles of varying ranges since they conducted nuclear tests in May 1998. "Pakistan eyes this hallmark development as a step toward reinforcing the policy of credible minimum deterrence," the military's media wing said in a statement. A spokesman at the Indian defense ministry was not immediately available to comment on the Pakistani missile test. India successfully test-fired a nuclear-capable, submarine-launched missile in 2008 and tested a submarine-launched cruise missile in 2013. The Pakistani military said the Babur-3 missile was "capable of delivering various types of payloads and will provide Pakistan with a Credible Second Strike Capability, augmenting deterrence". An army spokesman later confirmed the language meant the missile was equipped to carry nuclear warheads.

 United States to Lift Sudan Sanctions - After nearly 20 years of hostile relations, the American government plans to reverse its position on Sudan and lift trade sanctions, Obama administration officials said late Thursday. Sudan is one of the poorest, most isolated and most violent countries in Africa, and for years the United States has imposed punitive measures against it in a largely unsuccessful attempt to get the Sudanese government to stop killing its own people. On Friday, the Obama administration will announce a new Sudan strategy. For the first time since the 1990s, the nation will be able to trade extensively with the United States, allowing it to buy goods like tractors and spare parts and attract much-needed investment in its collapsing economy. In return, Sudan will improve access for aid groups, stop supporting rebels in neighboring South Sudan, cease the bombing of insurgent territory and cooperate with American intelligence agents. American officials said Sudan had already shown important progress on a number of these fronts. But to make sure the progress continues, the executive order that President Obama plans to sign on Friday, days before leaving office, will have a six-month review period. If Sudan fails to live up to its commitments, the embargo can be reinstated.

Devaluation Looms for Nigeria Even as Forwards Ease on Oil - The Nigerian naira’s recovery in the forwards market may be deceptive. The currency is destined to weaken, however long policy makers hold out. Six-month contracts declined to their lowest level since September last week as crude oil, Nigeria’s top export, advanced about 20 percent after OPEC agreed a production cut in November. A drop in forwards would typically be a sign of growing confidence in a nation’s economy and currency, but not this time. Even as oil prices advance, Standard Chartered Plc and London-based Duet Asset Management say the nation needs to devalue the naira and loosen capital controls. With dollars becoming scarcer and the economy on the brink of its first full-year recession since 1991, Nigerian businesses are being forced into the black market. There, each dollar costs 493 naira, almost 60 percent more than the official rate. “Oil’s rise isn’t enough to eliminate the need for a change,” Ayodele Salami, who oversees around $450 million of African stocks as chief investment officer at Duet, said by telephone. Nigeria won’t attract inflows until it weakens its currency, he said. While the naira has plummeted almost 40 percent since central bank Governor Godwin Emefiele in June ended a 15-month peg to the dollar, traders say it’s still being managed by the government. President Muhammadu Buhari, who has likened devaluation to “murder” in the past, said in a speech on Dec. 30 that he was still against floating the currency, Lagos-based Cable Newspaper reported.

Venezuela 2016 imports down more than half to $18 billion: president | Reuters: Recession-hit Venezuela's imports plunged by more than half to nearly $18 billion in 2016, President Nicolas Maduro said on Monday, as the country prioritized foreign debt payments despite chronic product shortages. Maduro, in a meeting with businessmen, said the private sector accounted for $11 billion of imports, while the cash-strapped public sector brought in $6.8 billion of products. "You accounted for 60 percent of imports for the first time in 100 years," Maduro told the businessmen, blaming the oil price fall since mid-2014 for shrinking state coffers. Imports have fallen during three years of recession in the member of the Organization of the Petroleum Exporting Countries from a record high of $66 billion in 2012 to $36.9 billion in 2015, according to Central Bank figures. Despite plunging oil revenues, Venezuela managed to pay $17 billion in foreign debt and build 360,000 new homes in a state housing project last year, Maduro said. But Venezuela's 30 million people have been suffering long shopping lines, while basic foodstuffs, medicines and other products have been running short. Price controls and nationalization have hurt domestic production. Maduro said, "2016 was the hardest, longest and most difficult year we have known."

Mexico Spent $4 Billion To Defend The Peso Last Week...And This Is What They Got - Mexico's central bank spent over $4 billion last week in an effort to support the collapsing peso during U.S., Mexico and Asian tradin, according to El Economista. Gabriel Gerzstein, a strategist at BNP Paribas, estimated that opening an episode of dollar sales to "anchor the value of the national currency" could cost about $ 40 billion from the international reserve. The handling of discretionary dollar auctions, in the context of volatility generated by US protectionist policy, would have to motivate the Exchange Commission to"be much more aggressive and discretionary than in 2015," he explained. In August, Banxico used a daily auction mechanism that ended up draining $ 27 billion from the reserve in six months.So far that $4 billion has not stemmed the tide of selling with the peso down 3%...

Mexico's peso hits record low on Trump talk of wall, auto tax | Reuters: The Mexican peso MXN= weakened to a historic low of 22.04 per dollar and the country's stock index fell on Wednesday, after U.S. President-elect Donald Trump warned U.S. auto companies would face a high tax for products made south of the border. Speaking at a news conference in New York, Trump also reiterated that the United States would start building a southern border wall after he took office next week. He said Mexico would reimburse the cost either through a tax or a payment. The Mexican currency regained some ground after passing the psychological 22 peso barrier to trade at 21.77 per dollar at 13:09 a.m. eastern (1709 GMT). The IPC stock index .MXX fell 0.73 pct to 45,550. The peso was the worst-performing major currency last year, weakening 20 percent against the dollar as Trump closed in on the U.S. presidency. The depreciation has sped up in 2017 after Trump told major automakers last week to expect high taxes on vehicles made in Mexico that are sold in the United States. On Wednesday, Trump congratulated Ford (F.N) and Fiat Chrysler for announcing plant expansions in the United States. He said General Motors, another major investor in Mexico, should follow suit, reiterating the threat of new taxes on Mexican-made autos. He said he would not wait for negotiations with Mexico to be completed before starting to build a wall along the two countries' border.

Trump still says he'll make Mexico pay for his border wall, but can he really? - It's by now a predictable pattern. Every few days, President-elect Donald Trump repeats his threat to build a massive border wall — and force Mexico to pay for it. And each time, Mexican leaders respond the same way.“Neither today, nor tomorrow nor never Mexico will pay for that stupid wall. If Trump wants a monument to his ego, let him pay for it!!” former Mexican President Vicente Fox tweeted on Wednesday shortly after Trump made the border claim again at a news conference.“There is no way,” Luis Videgaray, Mexico’s new foreign secretary , said this week. For Mexico, he said, the wall issue is “a matter of national dignity and sovereignty.”Trump has vowed to begin construction on the wall soon after his Jan. 20 inauguration. He plans to press Congress to fund the project and then find ways to have Mexico reimburse those costs later.The caustic back and forth between Trump and top Mexican officials, which along with fears of a trade war has sent the value of the peso plunging, raises the question: Can Trump really force Mexico to pay for the wall? We talked to several experts about that — as well as what Trump’s threats against Mexico could mean for the economies of both countries.

Canada names Chrystia Freeland, leading Russia critic, as foreign minister - Chrystia Freeland was sworn in as Canada’s top diplomat on Tuesday, as part of a wide-ranging cabinet shuffle that also saw Ahmed Hussen, a Somali-Canadian who arrived in Canada as a 16-year-old refugee, appointed as Canada’s immigration minister. Freeland, whose tenure as trade minister was marked by her efforts to push forward the trade agreement between Canada and the European Union, will also continue to be responsible for Canada-US trade.  The shakeup to cabinet comes less than two weeks before Donald Trump’s inauguration. Senior Canadian officials have met several times with Trump’s advisers in an effort to build bridges with the incoming administration, Justin Trudeau, Canada’s prime minister, told reporters on Tuesday. “Obviously, the new administration to the south will present … both opportunities and challenges, as well as a shifting global context,” he said. About three-quarters of Canada’s exports headed to the US last year. Much of this trade flowed through Nafta, the trade agreement routinely disparaged by Trump as the “worst deal in history”. Trump has vowed to renegotiate the pact and raised the spectre of withdrawal if the US fails to secure a better deal for its workers. In the days following Trump’s election, the Canadian government said it would be open to revisiting the decades-old trade pact. Freeland will now oversee this file, drawing on her extensive network of contacts in the United States and her background as a former economic journalist. But her strong views on Russia risk driving a wedge between Canada and Trump, who has repeatedly praised Putin.

 U.S. tanks roll into Germany to protect against potential Russian invasion - CBS News: U.S. Tanks rolled into Germany this weekend. The deployment -- which also includes 3,500 U.S. Troops -- is to protect Eastern Europe against a potential Russian invasion. In the dock area of the German city of Bremerhaven all around is American military hardware just off the boat -- everything from Humvees to tanks. The official name for this display of military muscle is Operation Atlantic Resolve. Its purpose is to reassure America’s nervous European allies that the U.S. military will stand with them against any aggressive moves by Russia. Moves, like the 2014 invasion of Crimea, when Russian troops arrived in what had been Ukraine -- and seized it for the Kremlin.America’s response is a decision to stop the draw down of U.S. troops in Europe, and reverse it -- in the first buildup since the end of the Cold War. “We intend to reassure all those here in Europe that we are committed to peace and security, and to send a signal to anybody else who would differ with that, that that’s not gonna work,” said Lt. General Timothy Ray, deputy commander of the U.S.’s European command. That anybody else would be Vladimir Putin, who is on record as saying its stupid and unrealistic to think that Russia would attack anyone. But just in case, Operation Atlantic Resolve is big and very visible deterrent.

Thousands Of US Troops Arrive In Europe In "One Of Largest Deployments Since The Cold War" -- Just days after we reported that the US had begun deploying some 2,800 tanks, trucks and other military equipment to Germany, from where they would be transported by rail and road to Eastern Europe as part of a buildup of NATO reinforcements against "Russian expansion", the next US deployment has made its way to Europe over the weekend, when some 4,000 US troops arrived in the German port of Bremerheven, on their way to Wroclaw, Poland under a planned NATO operation to "reassure the alliance’s Eastern European allies" in the face of what NATO has dubbed mounting Russian aggression. The American soldiers landed in Wroclaw, home to a key Nato and Polish air base in south-west Poland. The troops will be followed by the roughly 2,800 tanks and other pieces of military equipment which are currently en route from Germany.   The delivery of US Abrams tanks, Paladin artillery, and Bradley fighting vehicles, as well as supporting troops, marks a new phase of America’s continuous presence in Europe, which will now be based on a nine-month rotation. Why provoke Russia with yet another mass deployment?  Because as NATO Major General Timothy McGuire told reporters, last week, when asked if the large deployment was meant to send a message to Russia, "The best way to maintain the peace is through preparation."  And while we are quoting, here is another good line from the movie Spice Like Us: "A weapon unused is a useless weapon." The US military industrial complex is doing everything in its power to make sure a lot of weapons are used in the future.

American Troops "Roll Into Poland" In Largest Deployment Since The Cold War -- "American soldiers rolled into Poland on Thursday, fulfilling a dream Poles have had since the fall of communism in 1989 to have U.S. troops on their soil as a deterrent against Russia."That's how the AP begins its report on the first deployment of US soldiers into the central European country, previewed here earlier in the week as "One Of Largest Deployments Since The Cold War", even as Russia warned that the move represented a threat to its national security, and the Kremlin said "Russia regarded the move as an aggressive step along its borders." NATO, however, has ignored Russian concerns and threats of retaliation and as a result soldiers in camouflage with tanks and other vehicles crossed into southwestern Poland on Thursday morning from Germany and headed for Zagan, where they will be based.  While in the past the US and other Western nations have carried out exercises on NATO's eastern flank, this deployment, which includes around 3,500 U.S. troops and 2,800 tanks, trucks and other military equipment, marks the first-ever continuous deployment to the region by a NATO ally. It also represents a commitment by outgoing President Obama to "protect" a region that became deeply nervous over Russia's response to the CIA-orchestrated presidential coup in Ukraine, the annexation of Crimea, and the resulting proxy war in east Ukraine.

Poland Acquires First Strike Capability To Pose Threat To Russia - It should be noted that quite often the most interesting arms contracts escape media attention. That’s how it was in 2016. Signing a multi-billion-dollar military aid package between the United States and Israel and the subsequent White House approval for long-awaited fighter sales to the Middle East hit the radar screen. In late September, the US approved the sales of Boeing fighters worth a total of around $7 billion to Kuwait and Qatar.  The same month, a $38-billion Israeli arms package over the next 10 years - the largest of its kind ever – was finalized and signed. The news about those contacts was a real scoop hitting the headlines of all mainstream media outlets. In late November, the State Department approved another transaction- the acquisition of 70 AGM-158B JASSM-ER (extended range) missiles for Poland. The deal undeservedly failed to attract much attention. In fact, it matters much and changes a lot. The prospects for the acquisition of the extended range version were discussed as far back as 2014. The US obviously procrastinated due to political considerations. The decision to make the deal go through makes Poland the first state outside the United States to acquire the JASSM-ER.  In 2014, Poland signed a contract to procure the JASSM AGM-158A version for its F-16C/D jets. The stealth missile is designed to destroy ground targets at distances 370+km (230 mi). As of 2014, the JASSM had also entered service in Australia and Finland. The 370 km is a great range for the purpose of self-defense. But Poland badly wanted strategic conventional first strike capability. With the JASSM-ER deal reached, its dream has come true. Using a more efficient engine and larger fuel volume in an airframe with the same external dimensions as the JASSM, the JASSM-ER has an operational range of 1000+km (620 mi) – an effective stealth weapon to knock out key stationary infrastructure sites located deep in Russia’s territory. The weapon boasts a penetrating warhead.

Why Global Growth Is Still Feeble, in Eight Charts - The World Bank may be projecting a moderate pickup this year in global growth, but that doesn’t mean the economy is out of the woods. Yes, the world’s biggest growth engine, the U.S., is picking up steam and a rebound in commodity prices is helping to stabilize many of the world’s commodity-exporting emerging-market economies. But the outlook for the global economy is still dim. Beyond the long-running crises still vexing policy makers, here are eight charts that help explain why.Stagnating trade is a key symptom of the ailing global economy.Global uncertainty has topped crisis levels as the world’s largest economies undergo major political shifts, largely with a more protectionist bent. Many economists fear the U.S.-China tensions could devolve into a trade war. The future of the European Union is under threat as the U.K. negotiates an exit and anti-euro platforms gain momentum ahead of key continental elections. Chinese leadership is preparing a major leadership reshuffle. Elsewhere, Turkey’s attempted coup, conflicts in the Middle East and corruption scandals in several of the world’s largest emerging-market economies are injecting fresh worries into markets.Growth in productivity—goods and services produced per hour of labor and a critical component for economic expansion—has languished in both advanced and developing economies.All of those factors have put a damper on investment. Capital expenditures—spending on new projects—are falling.Corporate acquisitions, meanwhile, are on the rise, a strategy firms often resort to when they see limited options for growing through investment in new capacity.And while many emerging markets have learned from the past, debt is on the rise, particularly in corporations. Low-income commodity exporters especially have seen their debt balloon.  Debt problems in China, the world’s second-largest economy, are still a threat to the world. The World Bank and the International Monetary Fund have warned Beijing needs to step up its efforts to rein in credit, particularly calling for a retreat from government-fueled growth. But when private investment shrank last year, the government used its leverage to prevent a marked deceleration.

Those Hostile to Negative Rates Are ‘Ignorant,’ Rogoff Says  - The critics of negative interest rates are “ignorant” in their analysis of the unprecedented measures forced on central banks across the world over the past years, according to U.S. economist Kenneth Rogoff. It’s impossible to analyze the effects of the “early experiment” with negative rates because central banks were left to themselves amid a global fiscal retrenchment, Rogoff, a professor at Harvard University, said Wednesday in an interview after speaking at the Skagen Funds annual conference in Oslo. “I find a lot of what is written by representatives of the financial sector, they’re very hostile to negative rates, to be kind of ignorant,” he said ahead of a tour of Scandinavia, where sub-zero rates first saw the light of day. “They’re talking about their short-term profits, and their short-term interest, but it’s a long-run policy if you do the homework, if you lay the groundwork, it would certainly work very well.”Policy makers from Stockholm to Zurich and Tokyo have come under fire for cutting rates below zero as they grappled with near non-existent inflation and anemic growth in the wake of the global financial crisis. Critics at mainly commercial banks have argued they are endangering financial stability by stoking consumer borrowing, reducing the ability of lenders to make money and putting future pensions at risk. Those questioning the efficacy of the policy got more rhetorical ammunition this week when a report showed inflation in Denmark, where rates have been negative for almost half a decade, was the lowest in 63 years in 2016. According to Rogoff, it’s impossible to draw any conclusions because the efforts to restore growth and inflation have been one-sided. But done “correctly” it can restore “complete control over inflation expectations,” he said. “To do it correctly, you have to make legal, tax, institutional changes,” he said. “And second, you need to be able to do whatever it takes.” Unlike current efforts, a successful implementation of negative rate policies would “involve the whole government.” “Central banks can’t by themselves make the legal changes, tax changes, market changes,” he said. “Even for paper currencies, in some countries like the U.S., they can’t do it by themselves. Basically they tip-toed into negative rates.”

Italy Unemployment Unexpectedly Deteriorates To Highest Since June 2015; Youth Unemployment Jumps To 39.4% -- While the rest of Europe's troubled periphery has been enjoying a slow, if steady, economic improvement in recent years (it is unclear if it would sustain should the ECB's QE backstop be withdrawn and sovereign interest rates spike), in an unexpected deterioration reported earlier this morning, Italy’s unemployment rate rose to the highest level since June 2015, as the country struggles to regain a solid economic footing. According to Italy's statistics agency Istat, the jobless rate jumped to 11.9% in November, up from a revised 11.8% the month before, and well above the 11.6% consensus forecast. Despite the headline deterioration, there were 19,000 more people employed in Italy in November compared with the month before, Bloomberg reports.

 In Shocking Move, Beppe Grillo Calls For UKIP Split, Urges Hook Up With European Federalist Liberals - In a stunning post on his blog published on Sunday, the founder of Italy's Five-Star Movement (M5S), Beppe Grillo, said his political movement should cut ties with Nigel Farage's anti-EU UK Independence Party (UKIP) in the European Parliament, and seek a hook up with the European liberals led by European Federalist Guy Verhofstadt. Should this unexpected switch go ahead, it could, according to Reuters, see 5-Star "enter mainstream European politics and move away from the anti-system fringes", a shift that might reassure other EU capitals that have grown uneasy about its rising popularity.  In his blog post, Grillo said in a post on his blog that since Farage had led Ukip to Britain voting to leave the EU, the two parties no longer shared common goals and he recommended leaving the Europe of Freedom and Direct Democracy (EFDD). Recent events in Europe, such as Brexit, have led us to reconsider the nature of the EFDD group,” Grillo wrote. “With the extraordinary success of the leave campaign, Ukip achieved its political objective: to  leave the European Union. In some ways the recommendation is forward-looking, and anticipates the departure of UK MEPs from the next legislature. As Grillo said “let’s discuss the concrete facts: Farage has already abandoned the leadership of his party and British MEPs will leave the European parliament in the next legislature. Until then, our British colleagues will be focused on developing the choices that will determine the UK’s political future.” As The Guardian notes, Grillo and Farage forged an alliance over lunch in Brussels after 2014’s European elections, in which Ukip took the largest share of the vote in Britain and M5S came second in Italy after winning 17 seats. Both said at the time that the group was aimed at “restoring freedom and national democracy”, with Farage adding: “Expect us to fight the good fight to take back control of our countries’ destinies.”However, since then Grillo said the two parties had only voted together around 20% of the time over the past 2-1/2 years. He added that UKIP had achieved its political goal when Britain voted last year to leave the European Union. "To stay in EFDD would mean we would face the next 2-1/2 years without a common policy objective," Grillo wrote.

 High Inflation, Low Rates Are a Threat to Merkel - There's a big threat to Germany's traditional political parties ahead of this year's general election, and it isn't immigration or populism. It's the inflation eating away at Germans' savings as the European Central Bank keeps interest rates near zero. Germans, from serious economists to tabloid writers, have long decried the ECB's lax monetary policy. With its stated goal of driving price growth closer to 2 percent a year, it only benefits the more profligate nations of southern Europe: They can borrow more at the lower rates, and inflation reduces the real amount of their debt. In the second quarter of 2016, the latest for which Eurostat data are available, Greece, Portugal, France, Belgium and Italy all increasedtheir debt to economic output ratios. It was largely thanks to their efforts that, in that quarter, total euro zone government debt increased by 204 billion euros ($216 billion) year-on-year. Germany, along with the Netherlands, Ireland and Finland, was among those countries that reduced their debt-to-gross domestic product ratio.  High inflation -- or at least higher inflation -- causes distress to savers, the bedrock of the country's middle class. On average, German households save almost 17 percent of current income, one of the highest rates among developed nations. They keep about 40 percent of their savings in bank deposits and most of the rest in life insurance, used to save for retirement. Savings accounts in Germany pay about 1 percent annual interest today; insurance yields are only marginally higher and going down. In December, inflation in Germany jumped to 1.7 percent year-on-year, compared with 1.1 percent for the whole euro area. The Bloomberg consensus forecast for 2017 German inflation is 1.6 percent, up from 0.4 percent in 2016; that means a negative real interest rate for savers. It's a scary prospect, and the euroskeptic Alternative for Germany (AfD) party, which currently polls third after the two ruling coalition parties -- Chancellor Angela Merkel's Christian Democratic Union and the Social Democrats -- is going to use it to its advantage.

 German Industrial Output Rises in Sign of Economic Strength -  German industrial production rose in November, adding to signs that Europe’s largest economy saw a strong finish to the end of last year.Output, adjusted for seasonal swings, gained 0.4 percent from October, when it advanced a revised 0.5 percent, the Economy Ministry in Berlin said on Monday. The reading, which is typically volatile, compares with a median estimate for a 0.6 percent increase in a Bloomberg survey. A separate report from the Federal Statistics Office showed exports increased 3.9 percent in November, with imports up 3.5 percent. The reports follow a string of data published last week that underlined Germany’s economic strength heading into a year that will bear challenges from national elections in autumn to risks from Britain’s exit negotiations with the European Union. A survey of purchasing managers suggested manufacturing and services expanded at the fastest pace in a year in December, unemployment continued to decline and the inflation rate posted a record increase to 1.7 percent. “Germany is doing well -- the economy is growing fast enough to bolster employment and slow enough to avoid inflationary tensions,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “If it wasn’t for the rest of the world, it would be in an optimal position.” The euro was little changed after the report and traded at $1.0535 at 8:28 a.m. Frankfurt time. Output was bolstered by a 1.5 percent surge in construction, according to the Economy Ministry. Manufacturing rose 0.4 percent in November from the previous month, while energy production fell 0.4 percent. Production was up 2.2 percent from a year earlier.

 Forget Free College! German Green Party Pledges To Pay For 'Pros' For Those Needing "Sexual Assistance"Mish --The happy hookers union will be happy with this proposal: Germany Green Party pledges to pay for free sex with prostitutes for anyone who needs ‘sexual assistance’ and can’t afford it. Sex with prostitutes will be paid for by the Government for anyone too poor for a hooker and deemed to need sexual assistance under German Green Party plans.The party’s care spokeswoman Elisabeth Scharfenberg says doctors should have the right to issue the free prescriptions to their patients for ladies of the night.Prostitution is legal in Germany and carries little of the taboos associated with it in many other countries.There are brothels in virtually every town and a trend recently began with working girls offering ‘sexual assistance’ to dementia sufferers, the handicapped and people living in care homes.‘I can imagine a public financing of sexual assistance,’ Scharfenberg said in an article in the Welt am Sonntag newspaper.The Greens’ plans consists of patients obtaining a medical certificate confirming that ‘they are unable to achieve sexual satisfaction in other ways, as well as to prove they are not able to pay sex workers on their own’.  Scharfenberg said: ‘Municipalities could discuss appropriate offers on site and grants they would need.’

Hundreds of neo-Nazis have 'gone underground' in Germany — and experts are worried they're creating new right-wing terrorist groups — There were 600 arrest warrants for neo-Nazis outstanding in Germany last month, Deutsche Welle reports.  Some 454 arrest warrants were issued in 2016 alone for people who "have been deemed on account of relevant police information to belong to the category 'crime motivated by the political right.'" Ninety-two of them are being sought for politically motivated crimes.  Those people have "gone underground" which, according to Matthias Quent, a researcher into right-wing extremism who spoke to DW, increases the risk of creating new right-wing extremist terrorist structures.  "The discourse is incredibly uninhibited," he told DW. "If the perception is that the state is no longer capable of protecting its borders, or its people, from terrorism, there is an increase in the perceived legitimacy of forming one's own organisations, of resorting to violence oneself, of arming oneself."  After years of decline, the number of people who are thought to be far-right extremists in Germany grew nearly 8% from 21,000 in 2014 to 22,600 in 2015, according to Interior Ministry data released in June last year.In its annual report, the Interior Ministry added that the "intensity of right-wing extremist militancy" was observed in spring 2015 — and it has only got more pronounced since then, with in resurgence of threats against journalists and politicians.  This date coincides with the start of a mass arrival of asylum seekers in Germany. Attacks against refugee centres have grown and in October 2015, Cologne Mayor Henriette Reker — a supporter of Chancellor Angela Merkel's "welcome-policy" toward refugees — was stabbed in the neck by an anti-immigration protester.

Germany saw a 69% drop in migrant arrivals in 2016 --Efforts to keep unwanted foreigners out of Europe are working. After a record influx in 2015, Germany and Sweden saw dramatic drops in migrant arrivals last year.Just 280,000 migrants arrived in Germany in 2016—a 69% reduction from the 890,000 arrivals in 2015. The number of asylum seekers in Sweden also dropped by 80% last year. The German interior mi nister attributed the decline to the cut-off of migrant routes from war torn areas in the Middle East and Africa, specifically the closure of the Balkan route, as well as an agreement between the European Union (EU) and Turkey to stem migration into Europe.The controversial EU-Turkey deal allows Turkey to receive up to €6 billion ($6.8 billion) in aid, visa-free travel to Europe for Turkish citizens, and renewed EU membership talks in return for an agreement from Turkey to take back those who cross over to Greece. The deal, which has been slammed by human-rights groups, has resulted in the deportation of 801 migrants to Turkey in 2016.After welcoming refugees in 2015, German chancellor Angela Merkel was forced to backpedal last year as the country of 80 million people became overwhelmed. In 2015, the country took in five times more migrants than the year before. More than half of the arrivals—about 484,000 migrants—came from Syria.Germany was the first European country to free Syrian refugees from the Dublin Protocol—a bureaucratic trap that forces refugees to apply for asylum in the first safe country they reach. The protocol imposed an undue burden on countries at the EU’s external borders, including Greece and Italy, which quickly became overwhelmed by migrant arrivals. As criticism mounted, Merkel defended her open-door policy, saying “we can manage this.” She has since expressed regret for her go-to mantra, describing it as a “simple slogan, an empty formula” at a press conference last year. She also apologized for how her government handled the refugee crisis, though still affirmed that her open door policy was the right thing to do at the time.

EU Court: Muslim girls must swim with boys in Switzerland - Switzerland has won a European Court of Human Rights (ECHR) case allowing it to force Muslim parents to send their daughters to mixed school swimming lessons. A panel of seven judges found that freedom of religion had been “interfered with” but that the move was legitimised by the aim of “social integration”. They were ruling on a legal challenge brought by two Swiss-Turkish parents from Basel, Aziz Osmanoǧlu and Sehabat Kocabaş, who refused to send their daughters to mixed swimming lessons on the grounds “that their beliefs prohibited them from allowing their children to take part”. Education officials in the canton of Basle Urban advised the couple they could be fined up to 1,000 Swiss francs (£813) each but despite mediation attempts by the girls’ school, they continued not to attend the compulsory classes. Mr Osmanoğlu and Ms Kocabaş were ordered to pay a fine of CHF 350 per parent and child – a total of CHF 1,400 (£1,138) - for “acting in breach of their parental duty”. The Basel court of appeal dismissed their claim the following year, and another appeal was thrown out by Swizerland’s federal court in 2012. The couple then lodged their case with the ECHR, alleging that the requirement to send their daughters to mixed swimming lessons violated Article 9 of the European Convention on Human Rights. The ECHR unanimously threw out their complaint, finding there had been no violation of freedom of religion, and that Switzerland’s right to facilitate “successful social integration according to local customs and mores” took precedence over parents’ wish to refuse. Swiss, Swedish, Spanish, Serbian and Slovakian judges were among the panel who delivered Tuesday’s ruling, which found that although freedom of religion had been “interfered with”, the move was legitimate as it was “seeking to protect foreign pupils from any form of social exclusion”.

Does Immigration Boost Growth? A Look at Data From Around the World - Yves here. This post confirms the intuition of many readers, that immigration is not a plus for growth…at least in the post-financial-crisis low-growth environment. And there is no sign we are getting out of that ditch any time soon. By Mike Kimel. Originally published at Angry Bear This post uses data from the World Bank to look at the effect of migration on countries around the world. I will begin by looking at all countries for which the World Bank has data, then drill down. So to begin, the data used in this post:

  • 1. Net migration, by country available here. The most recent data is from 2012. Net migration is defined as the “total number of immigrants less the annual number of emigrants, including both citizens and noncitizens. Data are five-year estimates.” As an example, the US reportedly had net migration of 5,007,887 (i.e., positive) in 2007 through 2012, while Bangladesh had a figure of -2,226,481 (i.e., negative) in the same years. That should fit with your intuition.
  • 2. PPP GDP per capita. Data available here. The last year for which data is available is 2015.
  • 3. Data on population through 2015.

I started by looking at immigration relative to the size of the population. I assumed that the net migration figure was the same in each of the five years. (I know – not correct, but reasonable.) I then divided the Net Migration from 2012 by Population from 2012. I then compared that to the annualized growth in PPP GDP per capita from 2012 to 2015. In other words, I looked at the Net Migration as a share of the Population in 2012 and the growth rate in the subsequent three years. I put both series up on a scatter plot. Before I put up the graph, I would also note that I did leave some data out. It goes without saying that if a country did not report information, I did not include it. Additionally, countries reporting zero net migration were left out. After all, even North Korea has escapees, er, migrants, even if they won’t admit to it. Otherwise, everything went into the pot leaving a sample of 176 countries. Here’s what the relationship between Net Migration (from as a share of the Population in 2012 and the growth in PPP GDP per capita from 2012 to 2015 looks like for them:

 Draghi, Renzi and Monti victims of cyberattacks -- The president of the European Central Bank, Mario Draghi, and two former Italian prime ministers, Matteo Renzi and Mario Monti, were among the victims of cyberattacks by two alleged hackers based in London, according to a copy of an Italian arrest warrant obtained by POLITICO. The two Italian citizens, 45-year-old nuclear engineer Giulio Occhionero and his 47-year-old sister Francesca Maria Occhionero, were arrested on Tuesday morning in Rome. They are currently being held in Regina Cœli prison in Rome and are due to be questioned on Wednesday. The pair are accused by investigators of setting up a “cyber espionage center to monitor institutions, governments, professional firms, and entrepreneurs,” and illegally collecting “information concerning state security” to create dossiers on politicians, managers and bankers. The “Eye Pyramid” investigation — named after the malware used in the repeated and prolonged cyberattacks — found that the alleged hackers sent “phishing” emails to nearly a dozen politicians, bankers and law enforcement personalities in Italy. Targets for the messages, which purported to come from legitimate sources but in fact concealed software for illegally extracting data, included Fabrizio Saccomanni, the former deputy governor of the Bank of Italy, Piero Fassino, the former mayor of Turin, and several members of a Masonic lodge. The emails were also sent to Renzi’s personal account, Draghi’s Bank of Italy account and Monti’s official account as a senator. According to Italian law enforcement officials familiar with the investigation, Giulio Occhionero was a high ranking representative of the “Grand Orients” Masonic lodge and had been shortlisted for the office of Master Mason. He was also working to set up a separate lodge, officials said. They believe the motivation for the alleged hacking operation may have been to sell data on leading figures in the Italian establishment.

ECB Minutes Show Officials Worried About Political Uncertainty - European Central Bank policy makers extended their massive bond-purchase program by a longer-than-expected nine months to support the eurozone’s €10 trillion ($10.5 trillion) economy during a year of potential political upheaval, according to the minutes of their latest policy meeting, published on Thursday. The ECB last month said it would extend its so-called quantitative easing program through December this year, but would reduce the pace of purchases to €60 billion a month from €80 billion from April onward. That surprised investors, who had been betting on a six-month extension at the same pace. The program had been due to expire in March. ECB officials noted at their December meeting that the bloc’s economic recovery was gathering strength, pointing to improvements in the labor market and economic sentiment. But they were concerned about elevated political uncertainty, and worried that underlying inflation—stripping out volatile energy and food prices—was too low, according to the minutes. A series of national elections are scheduled to take place this year in some of the eurozone’s biggest economies, including Germany and France. Extending QE through year-end allows the ECB to provide stability during a period in which “volatility could easily emerge, relating in particular to shocks emanating from the political environment,” the minutes said. While inflation is expected to rise significantly over the coming months, a result of higher energy prices, underlying inflation had “failed to show any clear signs of a convincing upturn.” Inflation in the region rose to 1.1% last month, a three-year high. The ECB aims to keep inflation just below 2%, but has fallen short of that target for years. Still, the decision to slow the pace of bond purchases reflects a lower probability that the region will slide into deflation, according to the minutes. A few officials on the ECB’s 25-member governing council opposed both options to extend QE “in view of their well-known general skepticism regarding” the program, according to the minutes. Bundesbank President Jens Weidmann, a longtime critic of the ECB’s bond purchases, was among those opposing the extension. Some policy makers also argued for a longer extension, taking the program into next year, while others argued for a six-month extension at €60 billion a month, the minutes said.

Germany's Schaeuble urges ECB to start unwinding stimulus this year | Reuters: The European Central Bank should start unwinding its ultra-loose monetary policy this year, German Finance Minister Wolfgang Schaeuble said in an interview to be published on Friday, adding that it would not be easy. "The European Central Bank will have the tough task of getting out of the ultra-expansionary monetary policy," Schaeuble told the Sueddeutsche Zeitung newspaper. "It would presumably be right if the ECB dared to exit this year". Schaeuble added it was "possible and necessary" for the next government to lower taxes after Germany's general election in September. He said forecasts that inflation could reach 3 percent in Germany this year would exacerbate concerns about current low interest rates. While admitting he was no fan of the ECB's monetary policy, he added, "The ECB has a mandate for the eurozone, and it carries it out well." Schaeuble said the core issue was that a number of eurozone countries had not been able to boost competitiveness as required. "The problem is the weakness of the other countries, not Germany's strength," he said. The conservative minister said it would take a great effort to convince German citizens that the common currency provided more employment, social and business benefits than risks and negative consequences. To help Germany make the argument, he said it was essential that Italy and other countries stuck to the agreed rules.

Marine Le Pen In New York For Unexpected Visit, May Meet Trump --The leader of the French National Front Marine Le Pen, who according to a recent poll, has regained the lead in the first round vote of this year's French presidential election as the momentum of her main challenger Fillon has fizzled, is in New York on an unannounced visit less than four months before the election, according to a senior campaign official cited by Bloomberg. "Le Pen, who leads in the latest opinion poll for the presidency, is making a private visit to New York, her campaign chief of staff, David Rachline, said in a text-message exchange. He declined to say if she would meet publicly with President-elect Donald Trump or anyone from his entourage." “It’s not on her public agenda,” Rachline said, when asked if she planned a meeting with Trump or officials close to him. “We don’t communicate about private visits.”While it was not confirmed that Le Pen, who is set to launch her official campaign on Feb. 4 in a meeting with supporters in the French city of Lyon, will meet with Trump it is likely. She has repeatedly said she was supportive of Trump’s policies for the U.S. and called him “a sign of hope” for European anti-establishment politicians in a press conference this month.Trump has met on several occasions with Nigel Farage, the former leader of the U.K. Independence Party, most recently in December.

Leading French Presidential Candidate Le Pen Spotted At Trump Tower -- As we detailed earlier, leading French presidential candidate Marine Le Pen, is in New York for an unexpected visit. While she has no public agenda to meet with Donald Trump, she has just been spotted there drinking coffee. "Le Pen, who leads in the latest opinion poll for the presidency, is making a private visit to New York, her campaign chief of staff, David Rachline, said in a text-message exchange. He declined to say if she would meet publicly with President-elect Donald Trump or anyone from his entourage." Well she is in Trump Tower, grabbing coffee... As we noted earlier, while it was not confirmed that Le Pen, who is set to launch her official campaign on Feb. 4 in a meeting with supporters in the French city of Lyon, will meet with Trump it seems very likely give the picture above. She has repeatedly said she was supportive of Trump’s policies for the U.S. and called him “a sign of hope” for European anti-establishment politicians in a press conference this month.Trump has met on several occasions with Nigel Farage, the former leader of the U.K. Independence Party, most recently in December. What would the motive behind such a meeting be? Besides the usual pleasntries, it is possible that Le Pen will seek a loan from the US president-elect. Recall that as reported last month, "the National Front leader is 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."

 Britain will not deal with Marine Le Pen, UK’s ambassador to France says - Telegraph - Britain will not forge links with far-right Presidential candidate Marine Le Pen because the Government has a policy of not engaging with her party, the UK's ambassador to France has said. Lord Llewellyn, who was formerly David Cameron’s chief of staff in Downing Street, told MPs that while his staff are making contact with other French presidential candidates they have no relations with the Front National leader. He told the Foreign Affairs select committee: “With respect to the Front National, we have a policy of not engaging, there is a longstanding policy. That is the policy, which has been the policy for many years.” Crispin Blunt, the chairman of the committee expressed his surprise at the Government's position as Ms Le Pen is polling in second place and will make the final round run-off in May. Mr Llewellyn said that any change in the Government's policy would be a "matter for ministers". It comes after accusations that Britain failed to build links with Donald Trump because he was considered an outsider for the presidency. Ms Le Pen is widely expected to make the final round runoff in May against one of the other leading candidates, most likely either François Fillon, a centre-right Republican, or Emmanuel Macron, an independent.

U.K. Considers Promising EU Citizens They Can Stay After Brexit -U.K. Prime Minister Theresa May’s government is considering a unilateral pledge to allow three million European citizens residing in the country to remain after Brexit, even before British expatriates obtain the same assurance about their future. Brexit Minister David Jones told lawmakers in London on Tuesday that he wanted the rights of EU nationals living in the U.K. to be among the first questions settled in talks over the country’s exit from the bloc. “It is certainly something that is being considered,” Jones told the EU committee of the House of Lords, when asked if there was merit in making a unilateral declaration to guarantee EU residents’ rights. The fate of three million EU nationals living in the U.K. is one of the most difficult questions for May to resolve. She has said she wants to ensure they can stay in Britain after the country leaves the EU but that she’s waiting for other European leaders to guarantee similar rights for British nationals living elsewhere in Europe first.

 Johnson Meets Trump Advisers as U.K. Builds Post-Brexit Ties - U.K. Foreign Secretary Boris Johnson met with some of Donald Trump’s top advisers as Britain looks to build ties with the incoming administration ahead of the country’s withdrawal from the European Union. The sessions involved Trump’s chief strategist, Steve Bannon, and the president-elect’s son-in-law, Jared Kushner, on Sunday evening before Johnson traveled to Washington to visit with congressional leaders. The talks were “positive and frank” and covered relations with Syria, Russia and China, the BBC reported, citing unidentified aides. Johnson arrived in the U.S. after Prime Minister Theresa May stressed the importance she places on forging links with the new administration as Britain seeks to expand trade and security co-operation after Brexit. In Washington on Monday he will meet with House Speaker Paul Ryan and a trio of senators -- Majority Leader Mitch McConnell of Kentucky, Bob Corker of Tennessee and Ben Cardin of Maryland. “The special relationship we have with the United States is an important relationship in terms of security and stability around the world,” May said in an interview Sunday on Sky News. “The conversations I’ve had, I think we’re going to look to build on that relationship for the benefit of both the United States and the U.K. and I think that’s something that’s optimistic and positive for the U.K. for the future.” Trump said he’ll meet May in the spring after she sent her two most senior aides on a secret trip to the U.S. in mid-December for talks with members of his team. May made critical comments about Trump before his election. “I look very much forward to meeting Prime Minister Theresa May in Washington in the Spring,” Trump said on Twitter Saturday. “Britain, a longtime U.S. ally, is very special!”

Theresa May will have to put country first to make Brexit work - Nick Clegg, FT -Theresa May’s long-awaited address setting out her Brexit priorities is as major as it gets — especially after the abrupt resignation of Sir Ivan Rogers. The government looks brittle, so this speech needs to settle nerves. Anxious special advisers in Downing Street will be demanding ever more reading material on everything from the workings of Europol to north Atlantic fish quotas. I have a tip for Mrs May: put the briefings away, tell your gatekeepers to cool down and give the civil servants a rest. Then, with a clear head, make a judgment about what you believe is in the national interest. It is a prime minister’s job to make judgments, not to hoover up information hoping to find some ingenious technocratic solution to Brexit. The choice facing Mrs May is stark: a hard, swift break from the EU — the most politically convenient option — will do most damage to the UK’s prosperity and security. Alternatively, a softer Brexit, minimising economic disruption and retaining some links with Brussels for crime fighting, climate change and other areas, will bruise the prime minister’s political standing.  So Mrs May’s place in history will come down to her willingness to put country before party. If she is ready to be brave, the outlines of a way forward are becoming clearer. There are, in fact, only two big judgments for her to make: whether the UK stays in the single market, and how to control immigration. If she makes the right calls, the other ingredients for a workable Brexit could fall into place.

Brexit could leave fields of rotting crops in Britain if migrant workers stay away - Farmers here are warning that fruits and vegetables — including their beloved strawberries — could be left to rot in the fields this summer because Eastern Europeans are reluctant to work on British farms following the Brexit vote. Britain’s immigration policy will be one of the central themes of the upcoming Brexit negotiations, which are expected to last up to two years. And many industries that rely on foreign labor — from construction to cleaning — are anxious about continued access to migrant workers after Britain leaves the European Union.  But the agricultural industry says it is already struggling with a worker deficit. A recent survey by the National Farmers Union (NFU), an industry lobbying group, found that 47 percent of the companies that provide agricultural labor said they did not have enough workers to meet demand between June and September of last year. Britain’s horticulture sector is hugely reliant on its 80,000 seasonal workforce, the vast majority of whom come from Eastern Europe. The industry is calling on the government to introduce temporary work visas for foreign workers from countries outside the E.U., such as Ukraine or Bosnia.“Every strawberry at Wimbledon last year was picked by an Eastern European. If we don’t want shortages going forward, we need to get a new visa scheme sorted now,” said John Hardman, director of HOPS Labor Solutions, one of Britain’s largest recruiters of migrant farm labor. Speaking from an airport in Romania, where he recruits many of the 12,000 seasonal workers his company helps to bring over from Eastern Europe, Hardman said that Britain is becoming a harder sell because of the devalued currency and perceptions of xenophobia.

More Brexit Delusion: City Issues Wish List That the EU Already Rejected -- Yves Smith - Apparently no one in the UK has gotten the memo that they lost their empire in the middle of the last century and are no longer in the position to push anyone around.  The Telegraph has written up what could easily be misread as a perfectly sensible move by the UK financial services industry: a pointed set of demand now that Prime Minister Theresa May’s promised Brexit trigger date of no later than the end of March is getting closer. Admittedly, that could slip if the Government loses its appeal of a high court ruling that Parliament must approve the Government’s Brexit plan. But as we’ll see soon, the real issue isn’t timing but continued British fantasies about the Brexit process and their degree of influence over it. Here are the key sections from the Torygraph piece:The City has ratcheted up the pressure on the Government by issuing a series of demands that banks and other financial firms want from a Brexit deal with Brussels, including a transition period to stop markets from falling into a tailspin.An influential lobby group chaired by veteran banker John McFarlane, the chairman of Barclays, has published a list of what it calls “key priorities” for ministers to consider in looming negotiations with the EU over the UK’s future relationship with Europe.The list from TheCityUK includes calls to “maximise access to EU markets”, a two-stage transition arrangement, and a plea to allow the clearing of euro-denominated derivatives – a £470bn-a-day industry- to stay in the UK….To avert the potential chaos, the CityUK wants an agreement on a staged transition to be struck at the start of Article 50. This would involve an initial “bridging period” spanning the UK’s exit to the ratification of the country’s deal with the EU, and then an “adaption period” that would allow companies to adjust to the new rules.Yes, and I’d like a pony.  One wonders if the trigger for this peculiar wish list is the well-publicized departure of Britian’s most senior EU diplomat, Ivan Rogers, who issued a not-all-that-coded attack on the Government’s “muddled thinking”. But demands like the ones that the banking industry is making are prime examples of the behavior that led Rogers to quit.

Irish court case on whether Brexit can be reversed to start this month | Reuters: A crowdfunded legal challenge to determine whether Britain's divorce from the European Union can be reversed once it has been triggered will be launched in Dublin by the end of January, the lawyer behind the case said. British Prime Minister Theresa May says she will invoke Article 50 of the EU's Lisbon Treaty by the end of March, triggering two years of formal divorce talks. Lawyers for the British government have said that, once started, the process is irrevocable, but some EU leaders say Britain can change its mind. Jolyon Maugham, a London tax lawyer, is taking legal action to seek a ruling from the European Court of Justice on whether Britain can unilaterally revoke Article 50 without the consent the other 27 EU states. He said "a letter before action" would be issued against the Irish state on Friday and that legal proceedings would begin in Dublin's High Court on or before Jan. 27. "If we change our minds we must be able to withdraw the notice without needing the consent of the other 27 Member States," Maugham said in a statement. He said the challenge, in which several unnamed UK politicians would act as plaintiffs, would also seek clarification of what rights they would lose as EU citizens when Article 50 was triggered and when they would lose these rights.

 No 10 blames NHS chief as hospital chaos grows - The Times - Theresa May’s senior aides have privately criticised the head of the NHS as Downing Street seeks to shift the blame for mounting chaos in hospitals. Key members of the prime minister’s team accused Simon Stevens, chief executive of NHS England, of being insufficiently enthusiastic and responsive. They expressed their views in internal meetings, The Times was told. No 10 was also understood to have been irritated by “political” interventions from Mr Stevens, including the suggestion that ministers should pay for social care by abandoning free bus passes and other pensioner perks.Pressure on the government over the NHS intensified yesterday as it was revealed that three times as many people waited more than 12 hours on a trolley for a hospital bed last week as in the whole of January last year. Mr Stevens was understood to have rejected claims made by Mrs May at the weekend that the NHS had been given more money than it needed. He is likely to confirm this today in front of MPs. Downing Street believes that Mr Stevens agreed a deal before the 2015 election that would avert a funding crisis. It has been dismayed at the clamour for more NHS cash when other public services, including the Home Office, overseen by Mrs May for six years, have coped with fewer resources. No 10 insisted that there would be no emergency cash injection for the NHS in the coming weeks and claimed that the A&E problems were not unusual for winter. A Downing Street source said: “Theresa May doesn’t believe in quick fixes. There are stark variants in performance trust by trust that are not explained by cash injections.” Senior aides to Mrs May were understood to have been critical of Mr Stevens, who was hired by David Cameron in 2014. It took several months for her to meet him and he speaks less often to her than he did to Mr Cameron.

 Gas and electricity prices 'top worry for consumers' - Energy prices are the top concern for an increasing number of consumers, while distrust for providers has also risen, a survey has found. Which? found that almost two-thirds of consumers (64%) are concerned about energy costs, a rise of eight percentage points since September. More than a third of consumers (35%) do not trust the market, an increase of six percentage points. The latest Which? findings come 30 days ahead of the watchdog's deadline for energy companies to submit plans on how they can help their customers on the most expensive tariffs move to better deals, as part of its Fair Energy Prices campaign. The consumer group said not one energy company had yet published a plan. It said the temporary freezing of standard tariff prices by some suppliers did not go far enough to help customers on the most expensive deals. Ofgem figures released last month showed around 66% of all households remain on standard variable tariffs, which are typically more expensive than fixed deals. The regulator released the figure as it published the first league table comparing the most expensive standard tariffs with the cheapest deals on the market to provide greater transparency to consumers.

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