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

Saturday, January 21, 2017

week ending Jan 21

Will The Fed Start Reducing Its Balance Sheet? Here Is Goldman's Answer -- With the fate of Fed's balance sheet suddenly under Wall Street's spotlight, following last week's hints by several Fed presidents that a runoff in the balance sheet may be on the horizon and prompting various sellside analysts to share their thoughts. Overnight, Goldman too decided to opine on the rising debate of what happens next to the Fed's $4.2 trillion balance sheet, and cutting to the case, says that it continues to expect full reinvestments to end in the middle of 2018 (i.e., no runoff for at least 18 months), but adds that while "we would be very surprised to see a discussion of asset sales under Chair Yellen’s leadership" a shift to "more active management of the maturity of new Treasury purchases could be an option; shortening the duration of new purchases would quicken portfolio runoff once it begins." Goldman also confirms what other analysts have said previously, namely that "ending reinvestments would result in an increase in MBS issuance to private investors. For Treasuries, the impact on duration supply will depend on how the incoming administration chooses to adjust its sources of financing." However, should inflation indeed spike up and surprise to the upside as Jeff Gundlach recently hinted, the Fed may have no choice but to engage in just this kind of balance sheet deleveraging, which many have said should have taken place prior to the Fed's launch of rite hikes in December of 2015.

  • Recent public comments from Fed officials have renewed interest in the outlook for the central bank’s balance sheet. Here we tackle the most common questions from investors.
  • At the moment, the Fed fully reinvests principal payments into Treasuries and agency MBS, and we still expect this to continue until the middle of 2018.
  • We would be very surprised to see a discussion of asset sales under Chair Yellen’s leadership, but a shift to more active management of the maturity of new Treasury purchases could be an option; shortening the duration of new purchases would quicken portfolio runoff once it begins.
  • Ending reinvestments would result in an increase in MBS issuance to private investors. For Treasuries, the impact on duration supply will depend on how the incoming administration chooses to adjust its sources of financing.
  • For broader financial conditions, the impact will likely depend on how the committee communicates the end to reinvestments. One of the important lessons from the Fed’s experience with QE has been that signaling channels appear most important..

For more details on Goldman's opinion, read the full Goldman Q&A on the Fed’s Balance Sheet:

Not So Fast With Those Fed Hikes: Brainard Warns Costs Of Trump Stimulus Could Be "Significant" - Delivering her first speech on monetary policy since September, closely watched Fed governor Lael Brainard, considered to be one of Janet Yellen's most trusted peers, said monetary policy "could be affected for some time by uncertainty surrounding fiscal policy and its effects on the economy", specifically the magnitude, timing and composition of these changes. And while the Fed's recent shift to incorporate the "Trump stimulus" in its forecasts has been duly noted, and according to some has made the Fed more hawkish as the central bank expects substantial stimulus even with employment near capacity (granted, ignoring the 95 million Americans out of the labor force), Brainard on Tuesday took a modest step back and acknowledged that while expansionary fiscal policy could prompt the central bank to undertake a faster pace of interest rate increases and begin shrinking its balance sheet sooner than expected, the details of the policy shifts under Donald Trump are still quite uncertain and could come at "significant costs."In other words, the Fed may bypass the near-term impact of the Trump stimulus, and focus on the longer-term, more adverse and deflationary implications by what the president-elect will unveil.  Still, she conceded that fiscal stimulus that targets households and businesses that are likely to spend and invest rather than save will raise aggregate demand. That can speed recovery when the economy far from full employment and price stability, but at this point, it will "more likely result in inflationary pressures," she said in remarks prepared for the Brookings Institution in Washington. That is because data shows full employment is "within reach" and there are "signs of gradual progress toward our inflation target."  “Fiscal expansions that affect only aggregate demand and are enacted when the economy is near full employment and 2 percent inflation are relatively less likely to sustainably boost economic activity and relatively more likely to be accompanied by increases in interest rates."At the same time, she warned, because these policies do not affect the economy's long-term growth potential "but do result in persistent fiscal deficits, they can lead to substantial increases in the debt-to-GDP ratio," reducing "the space for fiscal policy to stabilize the economy in the event of future adverse shocks."

Key Measures Show Inflation close to 2% in December --The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.5% annualized rate) in December. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.5% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report. Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.3% (3.4% annualized rate) in December. The CPI less food and energy rose 0.2% (2.8% annualized rate) on a seasonally adjusted basis.  Note: The Cleveland Fed released the median CPI details for December here. Motor fuel was up 42% annualized in December.

10-Year Treasury Inflation Forecast Reaches 2.0% - The Treasury market’s implied inflation forecast via 10-year yields touched 2.0% on Wednesday (Jan. 18) for the first time in more than two years as Federal Reserve Chair Janet Yellen gave an upbeat assessment of the US economic outlook. “The economy is near maximum employment and inflation is moving toward our goal,” she said in speech. Although minds continue to differ as to whether the economy is on a sustainable path to higher growth, the Treasury market continues to price in a future of higher inflation. For the first time since Sep. 2014, the implied forecast via the yield spread on the nominal less inflation-indexed 10-year Notes reached 2.0%, based on daily data via Meantime, the hard data on inflation is climbing. Yesterday’s December report on consumer prices shows that headline inflation is running at a 2.1% annual pace—the highest rate in nearly two years. Core CPI, which is considered a more reliable measure of pricing trends, is even higher, running at 2.2% for the year through last month. Although the annual change in core CPI has been slightly higher recently—2.3% in Feb. 2016—the current rate is close to that post-recession peak.

China Sells Most US Treasuries Since 2011 As Foreign Central Banks Liquidate A Record $405 Billion In Last Year -- The wholesale liquidation of US Treasuries continued in November, when according to the just released TIC data, foreign central banks sold another $936 million in US paper in November 2016, which due to an offset of $892 million in buying one year ago, means that for the 12 month period ended November, foreign central banks have now sold a new all time high of $405 million in the past 12 months, up from a record $403 million in LTM sales as of one month ago.Where did the selling come from?While Japan sold about $23 billion in November, its fourth month of consecutive selling, it was China which drove the selloff, dumping a whopping $66.4 billion in US Treasuries in its 6th consecutive monthly sale of US paper, and the biggest monthly selloff since December 2011. The monthly sale also brings China's total Treasury holdings to the lowest level since early 2010.Curiously, reversing its recent trend, Saudi Arabia bought just over $3 billion in Treasury, and has added $10.7 billion in US paper in the past 2 months, the most since July 2006.

Fed's Beige Book: Modest expansion, Tight labor markets -- Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Boston based on information collected on or before January 9, 2017." Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest pace across most regions from late November through the end of the year. Manufacturers in most Districts reported increased sales with several citing a turnaround versus earlier in 2016. Growth in the energy industry was mixed; two Districts reported weakness in coal production but others reported improvements in coal, oil, or gas activity. Most Districts said that non-auto retail sales had expanded, but several noted that sales over the holiday season were disappointing and reports in more than one District suggested that growth in e-commerce had come at the expense of bricks-and-mortar retailers. All Districts reported varying degrees of growth in employment and a majority described their labor markets as tight. Residential construction and sales were generally mixed, although San Francisco reported strong real estate market activity throughout the 12th District. Financial conditions were stable. Firms across the country and industries were said to be optimistic about growth in 2017.  And on residential real estate for Boston: Continuing recent trends, residential real estate markets in the First District showed robust increases in sales and prices relative to last year. ... Home prices also rose year-over-year. For single-family homes, the median sales price increased in every reporting region. ... Overall, contacts were optimistic about the outlook for the end of the year and into 2017.  Real estate is solid.

Beige Book Notes Minimum Wage Increases, Warns Of Building Margin Pressures -The Fed's latest beige book, perhaps the most boring report released by the Federal Reserve, found 10 of the 12 Fed districts growing at the now ubiquitous "modest or moderate pace" with Cleveland growing only slightly and New York reporting little change for the fourth period in a row.  However, despite stagnant growth, margin pressures are building as input prices are rising faster than final goods prices. The good news for US workers is that according to the Fed, labor market conditions remained tight in the majority of the districts. Employment growth ranged from slight to moderate and most Districts indicated that wages increased modestly. A couple of Districts mentioned layoffs, but even in those Districts, as in other regions, most responding firms were said to have added employment, on net. District reports cited widespread difficulties in finding workers for skilled positions; several also noted problems recruiting for less-killed jobs. Wages in some Districts were pushed up a bit by increases in the states’ minimum wages and most Districts said wage pressures had increased. The Boston, Philadelphia, Cleveland and Atlanta Fed districts reported further tightening in their labor markets over the period, with wage pressures likely to rise and the pace of hiring to hold steady or increase. Manufacturing activity appeared to be robust at the end of 2016  into the new year.

January 2017 Beige Book: Reading Between The Lines - Little Change in the Rate of Growth: The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) stated "the economy continued to expand at a modest pace across most regions from late November through the end of the year". The previous report stated the economy expanded at "that the economy continued to expand across most regions from early October through mid-November". Analyst Opinion of this month's Beige Book Does not seem that there is much change to the rate of growth. So much for the FOMC saying the economy is strengthening. This issue of the Beige Book came in a new format: .... The modifications will standardize specific core topics included in each of the 12 Federal Reserve Bank District reports, provide a more consistent presentation of the national summary, and enhance the design of the publication. The national summary, along with each District report, will consistently cover three core topics: overall economic activity, employment and wages, and prices. Each District report will continue to include other topics or industry-specific reports of particular interest in that District. Additionally, the national summary will include highlights from each District. The summary for this release: Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest pace across most regions from late November through the end of the year. Manufacturers in most Districts reported increased sales with several citing a turnaround versus earlier in 2016. Growth in the energy industry was mixed; two Districts reported weakness in coal production but others reported improvements in coal, oil, or gas activity. Most Districts said that non-auto retail sales had expanded, but several noted that sales over the holiday season were disappointing and reports in more than one District suggested that growth in e-commerce had come at the expense of bricks-and-mortar retailers. All Districts reported varying degrees of growth in employment and a majority described their labor markets as tight. Residential construction and sales were generally mixed, although San Francisco reported strong real estate market activity throughout the 12th District. Financial conditions were stable. Firms across the country and industries were said to be optimistic about growth in 2017.

IMF boosts growth forecast for US, cites Trump impact - (AP) -- The International Monetary Fund on Monday raised its forecast for the U.S. economy over the next two years, saying President-elect Donald Trump's policies should boost economic growth, particularly in 2018. But officials warned that if Trump’s protectionist trade proposals set off a trade war, that could be "quite destructive" for the global economy.The IMF also increased 2017 growth projections for a number of other countries including China, Germany, Japan and Britain, but warned that the global economy faced a number of downside risks from rising protectionism to a jump in interest rates. The 189-nation global lending agency’s latest economic outlook took note of the significant impact Trump’s election has already had in giving a boost to U.S. stock prices, interest rates and the dollar. The new outlook puts U.S. economic growth at 2.3 percent this year and 2.5 percent in 2018. That would be an improvement from lackluster U.S. growth around 1.6 percent in 2016. During the campaign, Trump said his economic policies of tax cuts, regulatory reform and boosts in infrastructure spending would lift U.S. growth to annual rates of 4 percent.The new forecast represents a boost of 0.1 percentage point this year and an increase of 0.4 percentage point for 2018, when Trump’s stimulus plans would be expected to be phased in. That is a half-point higher growth than the IMF was forecasting in October, before Trump’s election.

Is The Next Recession Around The Corner? Probably Not  - from the Dallas Fed -- A "profits recession" often predicts a real recession. A view of recessions as gluts of competition explains why this time a real recession is not imminent. Gross domestic product (GDP) growth slowed considerably during the first half of 2016. Wages have increased faster than inflation since 2014, cutting into firms’ profit margins. Following dismal earnings through mid-2016, some market participants spoke about a “profits recession." These developments prompt a natural question: When is the next real recession coming? Economists remain far from a consensus on what causes recessions, but there is general belief in a model in which recessions are caused by large exogenous shocks that by their nature are unpredictable. There is, however, an alternative paradigm that views recessions as coordination failures among firms trying to time their contraction or exit from the market. This interpretation of recessions as gluts of competition allows analysis of the economy’s current state and evaluation of how fragile the economy is. The recent path of economic variables viewed through this depiction of business cycles sheds new light on the factors that may have been at play recently and how they will shape the next downturn. An interpretation of the data implies that a recession is likely within the next two to three years; a downturn, however, is not imminent.

US debt soars 86% under Obama presidency to nearly $20 trillion - The United States national debt will have grown by about $9 trillion to over $19.6 trillion under President Barack Obama, according to the website The site tracks how much the US debt grows in real time. It shows that when Obama entered the Oval office in 2008, the national debt stood at $10.7 trillion. Thus, the increase is 86 percent.By the time Donald Trumps is sworn in, the debt will have grown to almost $20 trillion. The largest budget item is Medicare/Medicaid which has seen over $1.1 trillion added to US debt. Social Security accounted for $900 billion, while $585 billion was spent on defense and war.With some of the payments attributable to George W. Bush’s bills, many economists say vast spending during the 2008 financial crisis helped the American economy to mitigate its consequences. However, many are concerned such spending will affect taxpayers. At the moment, every US citizen owes over $205,000 with $7,600 interest, with every American family owing nearly $810,000.

Federal watchdog: U.S. government spending "unsustainable" - CBS News: U.S. government spending is increasingly outstripping its revenue, which will eventually cause the federal debt to soar and harm the U.S. economy. This baleful assessment, issued by the U.S. Government Accountability Office on Tuesday, comes as the incoming Trump administration plans large increases in infrastructure and military spending, along with big tax cuts for corporations and individuals. While the GAO report’s findings are hardly new, the timing of the release as a new Congress and presidency get under way puts the issue back in the spotlight. The study projected that the spending-revenue imbalance will put “the federal government on an unsustainable long-term fiscal path.” Without any changes to spending patterns, debt could expand to three times gross domestic product by 2090, according to the GAO, the government watchdog agency. After six years of shrinking deficits, the GAO said, the red ink increased to $587 billion in fiscal year 2016 (ending last Sept. 30), with U.S. debt held by the public at about $14.2 trillion. “These figures are only expected to grow,” the report said. The primary causes are growing spending on entitlements -- Social Security, Medicare and Medicaid, largely due to the population’s aging -- and ever-higher interest on the national debt, the GAO said. Among the economic effects of expanding the nation’s balance sheet is higher debt. That would put pressure on the rest of the federal budget, restricting lawmakers’ ability to respond to unforseen events and increasing the likelihood of another financial crisis.

Dynamic Scoring is More Voodoo Economics (Video) - We discuss the $20 Trillion National Debt, the $5 Trillion Central Bank Balance Sheet and the 105 Percent Debt to GDP Ratio in the context of the environment that Donald Trump is going to inherent as President in this video. No more experimental policies, we know what works, cut government spending, keep tax revenue constant, and start paying down the National Debt. Every American needs to know these 3 charts backward and forward because you are the one who has to pay for this government spending and debt obligations over your lifetime. It is time that our government goes on a spending diet, no more military jets that we don`t really need, let alone can actually afford. There are no magic, fantasyland budgetary solutions and Dynamic Scoring and Laffer Curve nonsense to justify an agenda is unacceptable with a $20 Trillion National Debt staring us in the face this year. It is time to break it down to solid finance basics, spend less, keep revenue increasing slightly to account for the entitlements hitting the budget with babyboomers` entitlements obligations starting in 2018, build a budget surplus each year, and start paying down the National Debt with some Fucking Financial Discipline.

With days left in office, President Obama ushers in dozens of policies. But will they stay seated? - WaPo - In the past week, the Obama administration overturned a decades­-old policy toward Cuban immigrants, forged two major agreements to address racial bias in big-city police departments and approved an unexpected cut in mortgage insurance premiums for hundreds of thousands of low-income and first-time home buyers. Officials even made time, after years of lobbying, to add the rusty patched bumble bee to the list of endangered species. In the final days before President Obama leaves office, administration officials are rushing to complete dozens of tasks that will affect millions of lives and solidify the president’s imprint on history. But in many cases, their permanence is uncertain, and President-elect Donald Trump is already pledging to undo some of them after taking office. “He is clearly using executive power aggressively and trying to do as much as possible in his final days,” Princeton University history and public affairs professor Julian Zelizer said in an email. “It is clear that a president who was once reluctant to use the power of his own office has changed his heart, especially now that he sees a radically conservative Congress and Republican president-elect are getting ready to dismantle much of what he has done.” On Thursday alone, the administration designated three new national monuments and expanded another two in sites including a forest in the Pacific Northwest and a school for freed slaves in South Carolina; took away one of the special immigration privileges Cubans arriving in the United States without visas have enjoyed for 50 years; announced sanctions designations against 18 senior Syrian officials for their role in the use of chlorine as a chemical weapon in 2014 and 2015; awarded the Presidential Medal of Freedom to Vice President Biden; and accused Fiat Chrysler of cheating on national emission standards for some of its diesel trucks.

Obama Loved Austerity and the New Democrats Remain Addicted to It -- Bill Black: I know the Republicans are complete hypocrites about federal deficits and debt. I know their dishonesty and faux deficit and debt hysteria, when a Democrat is president, harms the Nation and the world through the infliction of self-destructive austerity. Austerity’s primary victims are the working class and government social programs for the poor and working class. That means that the Democrats should never mimic the Republicans’ dishonesty, hysteria, and willingness to inflict austerity on the people of America and the world. Unfortunately, the New Democrats embraced the economic malpractice of austerity with the passion of a convert. Michael Meeropol, an economist whose work I respect greatly, has rightly chastised me for failing to explain that fiscal austerity produces enormous winners, not just losers, and that this fact helps explain why the economic malpractice of austerity is so common. Austerity is a policy that aids the wealthy and harms the non-wealthy. One of the greatest triumphs of the wealthy is to get vast numbers of the non-wealthy to fail to understand this point.   The New Democrats’ passionate support for austerity reflects the interests of its primary donors – Wall Street elites. Austerity produces higher unemployment rates. It can cause deflation. It leads to cuts in public employment and funding for social programs. High unemployment allows CEOs to force lower wages and creates a political climate in which CEOs are able to get legislation and rule changes embracing “labor flexibility.” That phrase is a euphemism for making it easier for firms to fire workers without. CEOs use high unemployment to induce an international race to the bottom on worker protections and wages under the pretext that doing so is essential for U.S. firms to maintain “global competitiveness.” Deflation is a superb situation for (net) creditors. They get repaid in a currency that is gaining value. Deflation reduces interest rates, so the market value of existing long-term fixed rate debt instruments (bonds) can increase substantially.

Infrastructure Delusions -- Paul Krugman - Ben Bernanke has a longish post about fiscal policy in the Caligula Trump era. It’s not the most entertaining read; perhaps because of the political fraughtness of the moment, Bernanke has reverted a bit to Fedspeak. But there’s some solid insight, a lot of it pretty much in line with what I have been saying. Notably, Bernanke, like yours truly, argues that the fiscal-stimulus case for deficit spending has gotten much weaker, but there’s still a case for borrowing to build infrastructure...But he gently expresses doubt that this kind of thing is actually going to happen...Let me be less gentle: there will be no significant public investment program, for two reasons.First, Congressional Republicans have no interest in such a program. They’re hell-bent on depriving millions of health care and cutting taxes at the top; they aren’t even talking about public investment...But this then raises the obvious question: who really believes that this crew is going to come up with a serious plan? Trump has no policy shop, nor does he show any intention of creating one; he’s too busy tweeting about perceived insults from celebrities, and he’s creating a cabinet of people who know nothing about their responsibilities. Any substantive policy actions will be devised and turned into legislation by Congressional Republicans who, again, have zero interest in a public investment program. So investors betting on a big infrastructure push are almost surely deluding themselves. We may see some conspicuous privatizations, especially if they come with naming opportunities: maybe putting in new light fixtures will let him rename Hoover Dam as Trump Dam? But little or no real investment is coming.

Public Infrastructure Investment in the National Interest - Larry Summers - On Monday, I gave a speech at Brookings and then had a discussion with my Harvard colleague Ed Glaeser on aspects of infrastructure investment.  Here are the links to the video and transcript.  While for reasons described below I believe the Trump campaign proposals are wholly ill conceived, I remain convinced that an increased and improved program of public infrastructure investment would be very much in the American national interest.  The case for public investment today rests largely on grounds of long run policy and microeconomic efficiency given the sub-5 percent unemployment rate. My remarks and conversation with Ed focused on five main issues.

  • First, improved infrastructure has benefits that go well beyond what is picked up in standard rate of return on investment calculations.  Because infrastructure is integrative, we often fail to fully understand the benefits of investment.
  • Second, there is a particularly compelling case for maintenance investment.  Ed and I agreed that there was a presumption that this should be the case since all of the incentives facing political decision makers work against adequate maintenance.  Deferred maintenance liabilities are largely unmeasured, unnoticed and passed on to subsequent generations of elected officials.  No one can name a maintenance project. 
  • Third, there are important new infrastructure investment projects that almost certainly have high rates of return.  I have previously used as an example the renewal of the US air traffic control system.  While vacuum tubes are no longer in use in our system, radar technology of the kind used during World War II is pervasive, and there is essentially no role for GPS in our current architecture.
  • Fourth, better infrastructure investment is as important as more infrastructure investment.  Quality is as important as Quantity.  Progressives are right to decry the inadequate level of public investment in the United States.  Conservative complaints about regulatory obstacles, problems in project selection, inefficient procurement, and inattention to the use of pricing in assuring the efficient use of infrastructure are equally valid. 
  • Fifth, while the case for expanded infrastructure investment does not depend on Keynesian stimulus or aggregate demand considerations, secular stagnation risks reinforce the argument for increased public investment.

Bill Black: Trump Far More Interested in Business Deals than the Business of the Nation -- naked capitalism, Jerri-Lynn here: President-elect Donald Trump on Wednesday discussed how he proposes to manage conflicts of interest between his business empire and his role as President. In the following Real News Network interview,  Bill Black shreds the adequacy of this proposed solution. Trump’s business interests pose an obvious constitutional problem.  But as I’ve written in this post, US Constitution’s Emoluments Clause: a Nothingburger for Trump, “Just because something’s unconstitutional, doesn’t mean that any such unconstitutional activity will necessarily be prevented, precluded, or punished.” I continue to stand by that earlier analysis (much as I might wish otherwise). And I think I’ll go so far as to say that Professor Black– notwithstanding the justifiable outrage he expresses toward Trump’s position in the interview below — appears equally flummoxed by the question of what can be done to force Trump to address the obvious conflicts and thereby defuse the constitutional concern.

Donald Trump criticizes House Republicans' tax plan: WSJ - President-elect Donald Trump has criticized a key plank of House Republicans' corporate tax plan, The Wall Street Journal reported Monday. In an interview with the newspaper, Trump described the measure known as "border adjustment" which would tax imports and exempt exports as "too complicated." According to the Journal, oil companies and retailers have expressed their displeasure at the measure, arguing that it would raise their tax bills and prompt an increase in prices given their dependence on imported goods. Trump also told the newspaper that the dollar was already "too strong" and that recent attempts by China to support the yuan were aimed at allaying fears that authorities were deliberately weakening the currency. Speaker Paul Ryan is in frequent communication with the president-elect and his team about reforming the tax code to save jobs in the U.S., the speaker's press secretary AshLee Strong said. "Changing the way we tax imports and exports is a big part of that, and we're very confident we'll get it done," Strong said. You can read the Journal article here.

The Case Against Cutting Top Marginal Tax Rates - Ozimek - For some people, cutting income tax rates is an evergreen strategy for expanding the economy. If you cut income taxes, the argument goes, people will work more. Under this logic, cutting the top marginal tax rates is good for everyone because these households work more, which increases the size of the economy. There’s one simple problem with this argument: High-income workers already work a lot.  Here is a simple graph that tells the story. While the employment-to-population ratio has fallen over time, it’s actually still very high for richer people. The employment-to-population rate is 88% or higher for adults ages 25 to 54 with family incomes in the top 20%. It is possible that this could increase, but there is less room for improvement than there is for the overall prime-aged employment rate of 77%. The story looks similar when we examine how many hours a week people put in. Workers with higher family incomes tend to put in the longest hours already, rising to 43 hours per week for those at the top of the income scale. In contrast, workers in the bottom 5 percentile of family income average only 28 hours per week. Overall, a very simple look at the data suggest that the households who are facing the top marginal tax rates already work a lot. It seems unlikely that there is much room to improve here, which suggests a limited upside to cutting top marginal income tax rates. In contrast, employment rates and hours worked for the lowest income has much more room to improve. This suggests that cutting taxes and even subsidizing employment would be better focused on low-income workers.

The Progressive Case for Abolishing the Corporate Income Tax - Ed Dolan -To no one's surprise, Republicans are pushing for big cuts in the corporate tax rate. And while most observers assume conservatives and progressives will be at loggerheads over those cuts, that is not inevitable. Indeed, there is a strong progressive case for sharply lowering the corporate income tax rate — or abolishing it altogether.  President-elect Trump has proposed lowering the top bracket from its current 35 percent to 15 percent, offsetting some of the revenue loss by eliminating many tax preferences. For their part, House Republicans have proposed a 20 percent top rate, also eliminating some important deductions and preferences. Meanwhile in the Senate, many Democrats, who retain the power to filibuster tax reform legislation, are digging in their heels against the corporate rate cuts, with progressive superstar Elizabeth Warren leading the charge. In a recent New York Times op-ed, she wrote, "Congress should increase the share of government revenue generated from taxes on big corporations — permanently." In the 1950s, she points out, the corporate tax accounted for more than 30 percent of federal revenue, compared to less than 10 percent today.  She is right on the numbers but wrong that the glory days of the corporate tax are worth recapturing. Here's why. Although corporations bear the legal obligation to fork over the tax, they cannot bear the economic burden because they are not real people — a point progressives are quick to agree with in the contexts of campaign contributions, free speech and criminal liability in fraud and antitrust. More to the point here, the economic burden of the tax (the incidence of the tax, as economists put it) must ultimately fall on corporate stakeholders — principally shareholders and workers.But figuring out just how that economic burden is divided has proven to be an intellectually challenging and politically polarizing exercise, as a r eport available from the Urban Institute and Brookings Tax Policy Center details. Economists trying to do the numbers face not only the usual difficulties of identifying the right data and constructing the right econometric model to test alternative theories but some unique problems, too.

McCain Proposes Massive $5 Trillion, 5-Year Defense Budget; Blames "Flawed Obama Defense Strategy" - Just weeks after it was revealed that the Pentagon attempted to bury a study, that it itself had actually commissioned, which revealed staggering financial waste on Department of Defense programs, John McCain has proposed a new military budget that would exceed Obama's proposed spending by $430 billion over 5 years and total over $5 trillion, in aggregate.  In a 33-page white paper called "Restoring American Power", McCain described his proposals as just a start toward repairing the "damage that has been done to our military over the past eight years" under the Obama administration. “President-elect Donald Trump has pledged to ‘fully eliminate the defense sequester’ and ‘submit a new budget to rebuild our military.’ This cannot happen soon enough." “The damage that has been done to our military over the past eight years will not be reversed in one year. Just stemming the bleeding caused by recent budget cuts will take most of the next five years, to say nothing of the sustained increases in funding required thereafter.”

Donald Trump open to shift on Russia sanctions, 'One China' policy -- US President-elect Donald Trump said in an interview with the Wall Street Journal he would keep intact sanctions against Russia “at least for a period of time,” and also said he wouldn’t commit to the “one China” policy until he sees progress from Beijing in its currency and trade practices. In excerpts from an hour-long interview published by the Journal on Friday, Mr Trump said: “If you get along and if Russia is really helping us, why would anybody have sanctions if somebody’s doing some really great things?” Mr Trump suggested he might do away with the sanctions — imposed by the Obama administration in late December in response to Moscow’s alleged cyber attacks — if Moscow proves helpful in battling terrorists and reaching other goals important to Washington, the Journal reported.Mr Trump told the newspaper he is prepared to meet with Russian President Vladimir Putin some time after he is sworn in on January 20. “I understand that they would like to meet, and that’s absolutely fine with me,” he said. Asked if he supported the “one China” policy on Taiwan that has underpinned US relations with Beijing for decades, Mr Trump told the Journal: “Everything is under negotiation including One China.” Mr Trump angered the Chinese by taking a congratulatory phone call after his election win from Taiwan’s leader and questioning the “one China” policy. The United States has acknowledged the Chinese position that there is only one China and that Taiwan is part of China.Mr Trump has said in the past he would label China a currency manipulator after he takes office. In the interview, he said he wouldn’t take that step on his first day in the White House. “I would talk to them first,” he said. But he made plain his displeasure with China’s currency practices. “Instead of saying, ‘We’re devaluating our currency,’ they say, ‘Oh, our currency is dropping.’ It’s not dropping. They’re doing it on purpose,”

In Stunning Pair Of Interviews, Trump Slams NATO And EU, Threatens BMW With Tax; Prepared To "Cut Ties" With Merkel  -- In two separate, and quite striking, interviews with Germany's Bild (paywall) and London's Sunday Times (paywall), Donald Trump did what he failed to do in his first US press conference, and covered an extensive amount of policy and strategy, much of which however will likely please neither the pundits, nor the markets.Among the numerous topics covered in the Bild interview, he called NATO obsolete, predicted that other European U nion members would join the U.K. in leaving the bloc and threatened BMW with import duties over a planned plant in Mexico, according to a Sunday interview granted to Germany’s Bild newspaper that will raise concerns in Berlin over trans-Atlantic relations. Furthermore, in his first "exclusive" interview in the UK granted to the Sunday Times, Trump said he will offer Britain a quick and “fair” trade deal with America within weeks of taking office to help make Brexit a “great thing”. Trump revealed that he was inviting Theresa May to visit him “right after” he gets into the White House and wants a trade agreement between the two countries secured “very quickly”. Trump told the Times that other countries would follow Britain’s lead in leaving the European Union, claiming it had been deeply ­damaged by the migration crisis. “I think it’s very tough,” he said. “People, countries want their own identity and the UK wanted its own identity.”

Germany says NATO concerned about Trump 'obsolete' remark | Reuters: Germany's Foreign Minister said on Monday that U.S. President-elect Donald Trump's comments that NATO was obsolete had aroused concern across the 28-member alliance. Frank-Walter Steinmeier, speaking after a meeting with alliance Secretary-General Jens Stoltenberg in Brussels, said Trump's remarks contradicted views expressed by designated Defense Secretary James Mattis. He spoke also of "amazement". "I've spoken today not only with EU foreign ministers but NATO foreign ministers as well and can report that the signals are that there's been no easing of tensions," Steinmeier told reporters when asked about Trump's interview with Bild newspaper and the Times of London. "Obviously the comments from President-elect Trump, that he views NATO as obsolete, were viewed with anxiety," he said. Trump, who is due to be sworn in as president on Friday, said NATO was obsolete because it had not defended against terrorist attacks. He said also he had always had "great respect" for German Chancellor Angela Merkel, but criticized her 2015 decision to allow in a wave of a million migrants as a "catastrophic mistake" that opened the door to terrorist attacks. U.S. Secretary of State John Kerry said it was "inappropriate" for Trump to weigh directly into the politics of another country by his remarks. "He will have to speak to that, as of Friday he is responsible for that relationship."

Key NATO Commander Agrees With Trump, NATO Is Obsolete - With most of the political leadership in other NATO member nations lash US President-elect Donald Trump for calling the alliance “obsolete,” he doesn’t appear to be alone, with top NATO commander Gen. Denis Mercier saying he agrees that there are parts of NATO which are absolutely obsolete. Gen. Mercier is France’s Air Force Chief of Staff as well as NATO’s Supreme Allied Commander Transformation, and says he believes NATO is far too focused on deploying troops abroad, and sending expeditionary forces into various countries, singling out Afghanistan in particular. Mercier argued that NATO should revamp its anti-terror efforts to focus on helping countries develop their own long-term plans for counter-terrorism operations instead of just deploying NATO troops around the world. The Supreme Allied Command Transformation (ACT) is meant to focus on future threats, and its express purpose is to modernize parts of NATO that are approaching obsolescence. It is not wholly surprising, then, that the commander would see significant parts of NATO that are obsolete, though the fact that he was willing to public affirm as much right now reflects a major break with the political leadership, which is desperate to present NATO as both relevant and irreplaceable.

Anxious European Leaders Seek An Early Audience With Trump - European leaders, anxious over Donald Trump’s unpredictability and kind words for the Kremlin, are scrambling to get face time with the new American president before he can meet with Russian President Vladimir Putin, whose provocations have set the continent on edge. One leader has raised with Trump the prospect of a U.S.-EU summit early this year, and the head of NATO — the powerful military alliance Trump has deemed “obsolete” — is angling for an in-person meeting ahead of Putin as well. British Prime Minister Theresa May is working to arrange a meeting in Washington soon after Friday’s inauguration.  For European leaders, a meeting with a new American president is always a sought-after — and usually easy-to-obtain — invitation. But Trump has repeatedly defied precedent, making them deeply uncertain about their standing once he takes office. Throughout his campaign and in recent interviews, Trump has challenged the viability of the EU and NATO, while praising Putin and staking out positions more in line with Moscow than Brussels. “There are efforts on the side of the Europeans to arrange a meeting with Trump as quickly as possible,” Norbert Roettgen, the head of the German Parliament’s foreign committee and a member of Chancellor Angela Merkel’s party, told AP. Trump backs Britain’s exit from the European Union, casting the populist, anti-establishment movement as a precursor to his own victory. In a recent joint interview with two European newspapers, Trump said of the EU, “I don’t think it matters much for the United States.” In fact, eager to stage an early show of Trans-Atlantic solidarity, Donald Tusk — the former Polish prime minister who heads the EU’s Council of member state governments— invited Trump to meet with the EU early in his administration, according to a European Union official. But a senior Trump adviser essentially rebuffed the offer, telling the AP this week that such a gathering would not be a priority for the incoming president, who wants to focus on meetings with individual countries, not the 28-nation bloc.

Beijing Responds: Tells "Relevant Parties" In The U.S. That "One China" Principle Is Non-Negotiable - Following Trump's Friday night interview with the WSJ, in which the president-elect suggested he would use any available leverage to realign the U.S.’s relationship with its two biggest global strategic rivals, China and Russia, Beijing responded promptly when China's foreign ministry said on Saturday that its "One China" principle was the non-negotiable political basis for China-U.S. relations, and urged all "relevant parties" in the United States to recognize the sensitivity of the Taiwan issue.“The one-China principle, which is the political foundation of the China-U.S. relations, is non-negotiable,” China's foreign ministry said in a statement on its foreign ministry website.The statement was address to "relevant parties" in the US, by which Beijing meant Donald Trump.“In order to avoid disruption to the sound and steady development of the China-U.S. relations and bilateral cooperation in key areas, we urge relevant parties in the U.S. to fully recognize the high sensitivity of the Taiwan question, approach Taiwan-related issues with prudence and honor the commitment made by all previous U.S. administrations of both parties on adhering to the one-China policy and the principles of the three joint communiques”The comments, posted on the foreign ministry's website, were a direct response to remarks by U.S. President-elect Donald Trump in an interview with the Wall Street Journal in which he said the "One China" policy was negotiable, although he also conceded that he would not label China of being a currency manipulator "on day one", as he had stated previously.

China Warns Trump "It Will Take Off The Gloves" If He Continues To Provoke Beijing --In the latest indication that China is becoming increasingly unsettled by Trump's relentless attacks on legacy diplomacy with China, and especially the "One China" policy, two leading state-run newspapers warned on Monday that Beijing will "take off the gloves" and take strong action if Trump continues to provoke Beijing over Taiwan once he assumes office.The reaction was provoke by Trump's latest US interview, in which he told the WSJ that the "One China" policy was up for negotiation. China's foreign ministry, in response, said "One China" was the foundation of China-U.S. ties and was non-negotiable. "If Trump is determined to use this gambit in taking office, a period of fierce, damaging interactions will be unavoidable, as Beijing will have no choice but to take off the gloves," the otherwise calm English-language China Daily said. It added that Beijing's relatively measured response to Trump's comments in the Wall Street Journal "can only come from a genuine, sincere wish that the less-than-desirable, yet by-and-large manageable, big picture of China-U.S. relations will not be derailed before Trump even enters office".But China should not count on the assumption that Trump's Taiwan moves are "a pre-inauguration bluff, and instead be prepared for him to continue backing his bet". "It may be costly. But it will prove a worthy price to pay to make the next U.S. president aware of the special sensitivity, and serious consequences of his Taiwan game," said the national daily. The far more fiery state-run nationalist tabloid, The Global Times, echoed the China Daily, saying Beijing would take "strong countermeasures" against Trump's attempt to "impair" the "One China" principle.

Trump’s Team Is Shaping Up to Be Dangerously Incoherent - Liberals, and even many conservatives, are finding some relief in the hearings for President-elect Donald Trump’s cabinet, as nominee after nominee repudiates his most extreme and heterodox positions. The New York Times last week unexpectedly endorsed retired General James Mattis as secretary of defense, writing, “It was encouraging that he had no qualms in stating views at odds with positions Mr. Trump campaigned on”   Hot Air’s Ed Morrissey argued, “and that while Trump might push the rhetorical boundaries, his Cabinet officials will take a more traditional path.”  But this reassuring assessment isn’t the only possibility. It’s also possible that the differences between Trump and his cabinet are more rhetorical than anything. The Washington Post’s Chris Mooney noted that, while Tillerson and Pompeo acknowledge the scientific consensus on climate change, they have “a tendency to either avoid full engagement with the issue or to minimize it.” This “could mean that in practice, as the Trump administration governs, we will see something like what happened under George W. Bush: The issue may be acknowledged at times, but not treated with a lot of urgency.” In other words, these cabinet members may well support policies that, either actively or passively, are in line with climate deniers like Trump. Another possibility, especially on the international stage, is that mixed signals could stir confusion and even strife. Trump has taken a belligerent stance with China, calling on it to do more to curb North Korea’s nuclear program, saying that the longstanding One China policy is negotiable, threatening a trade war, and warning about its building islands on the South China Sea—all of which has caused Chinese state media to raise the specter of war. Tillerson has echoed some of Trump’s hawkishness on China, but in modulated ways, and on the issue of North Korea he takes a very different line: that the United States has to be “clear-eyed” in what can realistically be expected from the Chinese government. If relations between China and the U.S. deteriorate, as seems likely, there will be the added problem of who the Chinese government tries to engage with in their negotiations. Will they think the relatively conciliatory Tillerson is setting policy, in which case changing policy on North Korea can be regarded as secondary? Or will they believe Trump is driving policy, in which case they will go into negotiations with greater pessimism about finding common ground?

Russia expects dialogue with Trump on nuclear weapons: Lavrov | Reuters: Russia expects to have a dialogue with the Trump administration on strategic stability, including on nuclear weapons, Russian Foreign Minister Sergei Lavrov said on Tuesday. Lavrov added to reporters that such a dialogue could cover hypersonic weapons, a U.S. missile shield in Europe, space weapons and nuclear testing. He said that Russia was ready to meet with Donald Trump's administration to discuss these issues after the U.S. president-elect takes office.

The macro-economics of US border taxes - The financial markets have begun to wake up to the fact that the Republican reforms to US corporate taxation will probably include important new “border adjustments” to the definitions of company revenues and costs. The basic idea is that US should shift to a “territorial” system, with corporations being taxed only on revenues and costs incurred within the US itself, and not on their worldwide aggregates, which is the principle behind the present system. [1]A border tax was not explicitly part of the Trump platform before the Presidential Election. It was, however, included in the tax plan published last year by Paul Ryan in the House of Representatives, and Mr Trump has recently tweeted that companies that do not “make in USA” can expect to “pay big border tax”. That might be compatible with the Ryan plan, though it also might not be.Although most other countries already operate “territorial” systems, the Republican plan includes other features that would make the new tax regime operate like a tariff on imports into the US, combined with a subsidy on many exports from the US, a combination that would have profound international economic consequences. This is not just an obscure change to the details of America’s corporate tax code. It would be seen by trading partners as a protectionist measure that could disrupt world trade. The direct effects of a border tax adjustment to the US corporate tax regime would be likely to raise American inflation, cut imports, boost exports and raise tax revenue, possibly by over $1.2 trillion over a decade. However, it would also raise the dollar’s exchange rate, which could offset or cancel out some of these other effects.

As a thinker, Donald Trump is in some ways underrated Tyler Cohen - President-elect Donald Trump criticized a cornerstone of House Republicans’ corporate-tax plan, which they had pitched as an alternative to his proposed import tariffs, creating another point of contention between the incoming president and congressional allies.The measure, known as border adjustment, would tax imports and exempt exports as part of a broader plan to encourage companies to locate jobs and production in the U.S. But Mr. Trump, in his first comments on the subject, called it “too complicated.”“Anytime I hear border adjustment, I don’t love it,” Mr. Trump said in an interview with The Wall Street Journal on Friday. “Because usually it means we’re going to get adjusted into a bad deal. That’s what happens.”  Here is the WSJ piece.  I am not suggesting, however, that I favor his preferred alternative or for that matter most of his other policy ideas.  By the way, here is Trump on heroes.  A willingness to think things through from scratch is in some ways admirable, but dangerous in matters of foreign policy and nuclear weapons, where predictability is at a premium.   And see some related remarks from Conor Sen.

Dollar Tumbles After Trump Calls Currency "Too Strong", Slams Border-Adjustment Tax --  One can probably put the time of death of the Trumpflation rally as 11:47pm on Monday night. That's when the WSJ published the latest excerpt of its Friday interview with Donald Trump, in which the president-elect himself said the dollar was already “too strong.” He blamed this is in part due to China holding down its currency and added that “our companies can’t compete with them now because our currency is too strong. And it’s killing us.” The yuan is “dropping like a rock,” Mr. Trump said, dismissing recent Chinese actions to support it as done simply “because they don’t want us to get angry.”As the WSJ added, Trump broke with a recent tradition of presidents refraining from comments on the dollar’s level, and more to the market's surprise, he is now talking the dollar down, not up. As a reminder, the USD is up 4% against a broad basket of currencies since he was elected, and roughly 25% since mid-2014. The sentiment was echoed everal hours later by Trump advisor Scaramucci who told a Davos audience that "we must be careful of a rising dollar."In short: the dollar's rise may be over for the time being.Trump didn't only lash out at the greenback, and in the same interview, which was originally conducted on Friday but whose details were only released on monday, he slammed the Border Adjustment Tax (BAT), the "cornerstone of House Republicans’ corporate-tax plan, which they had pitched as an alternative to his proposed import tariffs" and which some have speculated could catalyze as much as a 15% move higher in the USD.  "Anytime I hear border adjustment, I don't love it", Trump told the WSJ, calling the Border Tax Adjustment "too complicated. "The border adjustment measure is part of U.S. House of Representatives Speaker Paul Ryan's "Better Way" tax reform blueprint, which was discussed with top members of the transition team during a meeting on Capitol Hill on Monday.  The measure intends to boost U.S. manufacturing by taxing imports while exempting U.S. business export revenues from corporate taxation. Though some tax experts believe Trump has given his support for the border adjustment provision, he termed the measure as getting "adjusted into a bad deal" in the interview.

Apple in Trumpland: How the new administration could upend Apple’s business -- Trump’s journey from dark horse candidate in a crowded Republican field to unlikely nominee to president-elect was powered by unending media coverage and harsh rhetoric. And much of his rhetoric was about American companies and jobs—chiefly, the desire that they bring manufacturing jobs into America and stop outsourcing them to other countries. Apple was a frequent target of Trump’s criticism on the campaign trail. This was the candidate, remember, who encouraged supporters to boycott Apple because of its encryption policies while also condemning the company for building its products overseas. Since his election, Trump has backed away from or moderated his tone on some of the issues he brought up during the campaign, most notably his pledge to investigate and jail Democratic opponent Hillary Clinton for her alleged mishandling of sensitive information during her tenure as secretary of state and his stated desire to keep money out of politics (several of his cabinet appointees are major donors). Trump has continued to focus on Apple in particular, though. In a conversation with New York Times editors and reporters in the days following the election, Trump claimed to have spoken to Apple CEO Tim Cook about building “a big plant in the United States” and about cutting taxes and regulations that would currently keep Apple from doing so (though he didn’t name any regulations in particular). Apple manufactures most of its products with a pair of Chinese partners, Foxconn and Pegatron. And while human rights advocates and the press have long criticized the working conditions in these factories, the fact of the matter is that outsourced labor is nearly universal among gadget companies. Efforts to move this production to American shores usually fizzles out, as it did in 2013 when Google opened a factory for Motorola phones in Texas only to close it a year later.

Abe's No. 2 brands Trump 'hysterical,' urges him to lay off threats | The Japan Times: A close aide to Prime Minister Shinzo Abe said U.S. President-elect Donald Trump pitches his opinions in a “hysterical” manner and urged him to behave more “gently.” “You behave more quietly and calmly. Be more gentle,” Toshihiro Nikai, the No. 2 man in Abe’s ruling Liberal Democratic Party, said Friday during the recording of a TV program to be broadcast later, referring Trump’s way of blaming Japan and other countries for the U.S. trade deficit. The LDP secretary-general also questioned Trump’s demand that Japan pay more for hosting the U.S. military presence, asking: “Is it suitable for the president of a superpower to rant something in a unilateral and hysterical manner?” The veteran lawmaker who has held a number of key posts, including trade minister and head of the LDP General Council, the party’s top decision-making body. Nikai also lashed out at Trump in connection with his criticism of Toyota Motor Corp.’s plan to build a factory in Mexico, and his threat to slap heavy duties on Toyota vehicles shipped to the U.S. from there. Japanese companies are doing business “complying with international rules,” Nikai said, adding that no matter how Trump threatens Toyota, it will make little difference.

Trump Now Threatening Automakers in Canada and Germany - NBC News: Already taking aim at Mexico, President-elect Donald Trump is now warning he might enact a 35 percent "border tax" on Canadian and German automobile imports. "You can build cars for the United States, but for every car that comes to the USA, you will pay 35 percent tax," Trump told the German newspaper Bild, in an interview published Monday. "In the long term, the United States would be shooting itself in the foot by imposing tariffs or other trade barriers," said Matthias Wissmann, president of the German automotive industry association VDA.Trump specifically focused on BMW, noting that it is building a plant in Mexico that would produce vehicles for the U.S. market. But BMW would not be alone among German automakers. Audi last year opened a Mexican plant that is now the sole global source for the newly redesigned Q5 sport-utility vehicle. And Mercedes-Benz is preparing to set up a joint venture with Nissan's Infiniti brand in the Mexican city of Aguascalientes, where it will produce some of its new entry-luxury models. Mexico has become one of the world's top five automotive manufacturing sites in recent years, in part due to low labor costs but also because it has negotiated more free trade agreements than any other country but Israel, auto industry experts note.

German Automakers Fire Back at Trump - Fox Business - BMW and other German automakers don’t appear ready to surrender in a new battle between President-elect Donald Trump and foreign car production. After taking shots at Detroit’s Big Three, Trump turned his fury to the Germans on Monday, calling out the country’s car industry. “I would tell BMW if they want to build cars in Mexico and sell in the U.S.A. without a 35% tax, they can forget it,” Trump said in an interview with German newspaper Bild, translated by The Wall Street Journal. “They can build cars for the U.S.A. but for every car that comes into the U.S.A. they will pay a 35% tax. What I’m saying is, they have to build their factory in the U.S.A. It will be much better for them and for our efforts.” Unlike their American counterparts Ford (F) and General Motors (GM), German automakers are so far holding firm. BMW is standing by its decision to build a new $1 billion factory in Mexico, saying the facility will supply cars to global markets. BMW also noted that its assembly plant in South Carolina, where the company is spending $1 billion to increase capacity, is now the company’s largest in the world. “The issue is about commitment and BMW made a significant commitment to the U.S. when it began manufacturing vehicles in America more than 22 years ago,” BMW said in a statement.

Trump & Autos: Koreans Suck Up, Germans Don't - I just wanted to update you on this mildly disturbing trend of various multinational concerns actually paying attention to what the trade troglodyte Trump has to say.   I will not get into a long spiel about how global supply chains are so interconnected that most things are no longer "made" in a single country. Rather, let's focus on the misguided actions stemming from those responding to such naive (Trumpian) views. LG and Samsung were among the Trump toadies in trying to curry favor with the president-elect. Not to be outdone, Hyundai and sister company Kia are now doing the same: Hyundai Motor Co. and affiliate Kia Motors Corp. said they will spend $3.1 billion in the U.S. in the next five years, joining other vehicle manufacturers in announcing investment plans amid threats from President-elect Donald Trump of higher levies on auto imports from Mexico. The planned U.S. investment by South Korea’s two largest automakers is about 50 percent more than the $2.1 billion they spent in the previous five-year period, The group is considering building a new factory in the U.S. and may produce Hyundai Motor’s upscale Genesis vehicles and a U.S.-specific SUV in the country…  What's even more curious is that this move is a pre-emptive one since they haven't been "scolded" by Trump yet: How about the Germans? Stung by criticism that they're putting a plant in Mexico instead of the US for carms primarily destined for the US market, BMW has struck back by pointing out the vast amount of its North American production which actually occurs Stateside: German carmakers pushed back Donald Trump’s threats of import duties on the autos they make in Mexico, pointing to extensive production expansion in the U.S. in recent years. BMW AG, which the president-elect singled out in an interview with German newspaper Bild on Sunday, sought to defuse potential tensions by stating that its largest factory is in South Carolina and that cars made at a planned, smaller factory in Mexico will be exported globally. Trump said BMW will face a 35 percent import duty on vehicles it exports to the U.S. from Mexico. “We take the comments seriously, but it remains to be seen if and how the announcements will be implemented by the U.S. administration,”  It's a stereotypical German reaction to nonsense like Trump's: factual and to the point. The real question is whether the Koreans are simply bull***tting the bull***t artist by publicizing plans to ramp up US production capacity that was already on the drawing board. As before, I'd be most dismayed if they diverted investment originally bound for Mexico due to Trump's verbal emissions.

GM Announces 7,000 New U.S. Jobs As Trump Touts "All The Jobs I Am Bringing Back…Big Stuff” -- Confirming rumors that leaked yesterday, GM has just announced plans to invest $1 billion in its U.S. manufacturing operations and add 7,000 jobs domestically, over the next "few years".  Of course, the move follows similar announcements from Ford and Fiat-Chrysler over recent weeks in an apparent effort to appease the incoming Trump administration amid threats of a 35% import tariff and after years of outsourcing automotive manufacturing jobs to Mexico.  To add icing to the cake, GM notes that 450 of the new jobs will come from insourcing jobs previously moved to Mexico.  Per General MotorsGeneral Motors today announced that it will invest an additional $1 billion in U.S. manufacturing operations. These investments follow $2.9 billion announced in 2016 and more than $21 billion GM has invested in its U.S. operations since 2009.The new investments cover multiple new vehicle, advanced technology and component projects. A combination of 1,500 new and retained jobs are tied to the new investments.  The company also announced it will begin work on insourcing axle production for its next generation full-size pickup trucks, including work previously done in Mexico, to operations in Michigan, creating 450 U.S. jobs."As the U.S. manufacturing base increases its competitiveness, we are able to further increase our investment, resulting in more jobs for America and better results for our owners,”  said GM Chairman and CEO Mary Barra.  “We will continue our commitment to driving a more efficient business,” said Barra, “as shown by our insourcing of more than 6,000 IT jobs that were formerly outside the U.S., streamlining our engineering operations from seven to three, with the core engineering center being in Warren, Michigan, and building on our momentum at GM Financial and in advanced technologies.  These moves, and others, are expected to result in more than 5,000 new jobs in the U.S. over the next few years.” GM also highlighted their efforts to work with tier two suppliers to "insource" those manufacturing jobs as well. 

Lockheed Agrees To Cut F-35 Price Below $100 Million In Latest Victory For Trump - Less than a month after president-elect Trump first tweeted about the F-35's high costs, and a week after he brought up the F-35 in his first press conference, Reuters reports that The U.S. Department of Defense and Lockheed Martin are close to deal for a contract worth almost $9 billion as negotiations are poised to bring the price per F-35 below $100 million for the first time. A Dec. 6 tweet bashed Chicago-based Boeing for what he referred to as the “out of control” cost of the Air Force One presidential airplane. Weeks later he turned in Boeing’s favor at the expense of Lockheed, tweeting that he had asked the company to “price out a comparable F-18 Super Hornet” because of the F-35’s high costs. He also briefly brought up the F-35 in a Wednesday news conference intended to clarify his business conflicts, saying he would “do some big things” with the program and find a way to trim costs and improve the plane. And then, after emerging from a meeting with President-elect Donald Trump at Trump Tower in New York last Friday, Lockheed Martin chief executive Marillyn Hewson told reporters that the Bethesda, Md.-based defense giant is close to a new contract deal that would cut the cost of the F-35 Joint Strike Fighter program and also create jobs. Which leads to tonight's news, via Reuters, that they are close to deal for a contract worth almost $9 billion as negotiations are poised to bring the price per F-35 below $100 million for the first time, people familiar with the talks said Wednesday.

Border Tax "Back On The Table" After Trump Walks Back "Provocative" Statement --Just a day after Trump's WSJ comments on the dollar being overvalued, and criticism on the proposed Border-Tax Adjustment sent the dollar into a tailspin and hit global risk level, Trump appears to have walked back his statements in an interview granted to Axios in which he "walked back some of the more provocative statements he had made only days before." As Axios notes, "a top adviser told us the sober tone reflects a bumpy few days inside Trump Tower — and the realization that he's days away from truly running the nation." Here are the highlights from the Axios interview conducted on Tuesday:

  • Trump said health care is his most urgent domestic topic, telling us he spoke with President Obama again on Monday about the topic. He back-tracked a bit from his promise of insurance for everybody, saying he wanted to find a mechanism — Medicaid block grants, perhaps — to help the poorest get insurance. "You know there are many people talking about many forms of health care where people with no money aren't covered. We can't have that," he said.
  • On Friday, he told The Wall Street Journal that border-adjustment, a vital part of the House Republicans' corporate tax-reform plan, was "too complicated." Now, it's suddenly back on the table. "It's certainly something that's going to be discussed," he said. "I would say, over the next month-and-a-half, two months, we'll be having more concrete discussions. Right now, we're really focused on health care more than anything else."
  • Trump earlier this week unsettled allies overseas by calling NATO obsolete and seeming to put Germany's Angela Merkel and Russia's Vladimir Putin on par as possible US allies. Trump told us ALL WORLD LEADERS are on par, with a fresh chance to prove themselves. "So, I give everybody an even start; that right now, as far as I'm concerned, everybody's got an even start," he said.
  • Trump's advisers tell us privately that many parts of the operation remain messy — in large part, they say, because New Jersey Gov. Chris Christie left them with virtually no preparation for a transition. Advisers told us horror stories of struggles to fill key roles — including getting handed files of candidates, most of whom were Democrats. This is only adding to the confusion and slowed policy-making discussions.

Trump also opined on recent intelligence briefings:  "I've had a lot of briefings that are very … I don't want to say 'scary,' because I'll solve the problems," he said. "But … we have some big enemies out there in this country and we have some very big enemies — very big and, in some cases, strong enemies."

Would the GOP's border tax adjustment lead to a trade war? - AEI: Among the bolder tax reform ideas being contemplated by the Republican congressional leadership is a border tax adjustment aimed at improving the U.S. trade balance. There are, however, good reasons to doubt whether such a tax would achieve that goal considering how foreign exchange markets might react and how our trade partners might respond to such a tax adjustment. More importantly, there are all too many reasons to fear that the introduction of a border tax adjustment might inflict serious damage on both the U.S. and the global economies by taking us down the path toward a full-blown trade war. The essence of the border tax adjustment proposal, which currently seems to enjoy serious congressional support, involves two basic elements. The first involves exempting U.S. companies from the payment of taxes on any profits that they made from exporting. The second involves the imposition of the corporate tax, at its proposed new rate of 20 percent, on the value of imports. Taken together, these two elements would in themselves be equivalent to a U.S. dollar depreciation of around 15 percent. The imposition of a border tax adjustment on imports would also have a direct impact on U.S. inflation, since it would raise the cost of imports to U.S. consumers and thereby bump up the consumer price index.

Trump Warns Canada, Mexico He Will Begin NAFTA Renegotiation "Within Days Of Inauguration" -In the latest unexpected and ad hoc announcement on North American trade arrangements, the Globe and Mail reports that Trump's Commerce Secretary pick, Wilbur Ross, has informed Canadian officials that he plans to reopen NAFTA talks within days of his inauguration, and that rules of origin and independent dispute tribunals will be central in negotiations of North American Free Trade Agreement. Ross has indicated new administration will send a formal letter notifying Canada and Mexico of plans to renegotiate Nafta within days of Trump’s inauguration. According to the G&M, Trump "want to discuss country of origin rules and the independent dispute-settlement mechanism that are key features of the 1994 NAFTA pact, officials say."Country of origin rules, which govern how much content from outside NAFTA a product can contain and still qualify to be shipped duty-free, are specific to each product and spelled out in writing. They cover every kind of good and service, from suits to cars. The Trump administration is expected to take a harder line on exactly what can cross the border duty-free.NAFTA’s tripartite dispute panels are also on Mr. Ross’s radar, officials say. The United States has long complained these independent panels are unaccountable and give too much power to Mexico and Canada.  However, in what is modest good news for Canada, a senior government official told The Globe and Mail the signals from Mr. Trump’s trade team indicate the trade focus will largely be aimed at Mexico, essentially cutting the United States’ southern neighbour out of many NAFTA benefits.

Trump commerce nominee Ross to tell senators: 'I am not anti-trade' | Reuters: President-elect Donald Trump's nominee for U.S. commerce secretary, Wilbur Ross, will tell senators on Wednesday he is not "anti-trade" but that the United States should not put up with malicious practices or unfair subsidies from foreign trading partners. "I am not anti-trade. I am pro-trade. But I am pro-sensible trade, not trade that is detrimental to the American worker and to the domestic manufacturing base," Ross said in a prepared testimony to the Senate Commerce, Science and Transportation Committee that was seen by Reuters. The 79-year-old billionaire investor said in his prepared opening statement that his wide-ranging investments had given him first-hand experience of the unfair trading practices of other countries, including non-tariff barriers to imports and government subsidies for exports to the United States. "I think I’ve probably had more direct experience than any prior Cabinet nominee has had with unfair trade in the steel business, in the textile business, in the auto parts business and other sectors," Ross said. "I am very well aware of the issues many companies face, and I’m sensitive to both the issues abroad and the issues here at home." Trump has voiced a hard line on trade with China and Mexico, saying major changes are needed to reduce their chronic trade surpluses with the United States. He has threatened to declare China a currency manipulator and levy tariffs on Chinese and Mexican goods, but little is known about his specific plans. Ross, who has been designated the leader of Trump's trade strategy, will tell the committee that countries should have access to the U.S. market if they "agree to play by our standards of fair trade."

President Trump's Triffin problem - Frances Coppola --In many eyes, President-elect Trump is a loose cannon. He says things that upset people the world over. Many of them perhaps should not be taken too seriously - after all, he is a showman. But it would be a mistake to dismiss his rhetoric on trade. There, he is in deadly earnest - and it does not bode well either for America or for the world.  Trump's trade agenda was set in Peter Navarro & Wilbur Ross's paper (pdf) of September 2016. Peter Navarro's most famous work is the documentary "Death By China" which essentially blames China for all America's woes. Wilbur Ross is a businessman who made a fortune from buying up and restructuring manufacturing businesses, many of them protected by George Bush's trade tariffs. Both of them are unashamedly protectionist, labelling countries running large trade surpluses as "cheaters" and "manipulators" and demanding that the rules of international trade be changed to benefit America at their expense. Both of them have been appointed to top trade jobs by Donald Trump. Navarro & Ross identify three causes for what they describe as "America's economic malaise". Two of them - high taxation and over-regulation - are long-standing complaints by America's right-wing business community. But the third is new. Navarro & Ross explicitly blame America's trade deficit for poor GDP growth. And they claim that the trade deficit is entirely due to unfair practices by America's principal trading partners:   Trump views America’s economic malaise as a long-term structural problem inexorably linked not just to high taxation and over-regulation but also to the drag of trade deficits on real GDP growth. Trade policy factors identified by the Trump campaign that have created this structural problem include: (1) currency manipulation, (2) the equally widespread use of mercantilist trade practices by key US trading partners, and (3) poorly negotiated trade deals that have insured the US has not shared equally in the “gains from trade” promised by textbook economic theory. Many people have pointed out gross economic errors in Navarro & Ross's analysis.  At Vox, Matt Yglesias explains how imports contribute to exports: imposing high tariffs on imports simply raises business costs, reducing business profits and threatening people's jobs. The economist Greg Mankiw notes that they fail even to mention the effect on the capital account (foreign investment in America) of closing a current account deficit. Paul Krugman describes their discussion of VAT as "utterly uninformed". And Larry Summers says Trump's global economic plan is based on a "misunderstanding of how the global economy works".

Trump vows ‘insurance for everybody’ in Obamacare replacement plan WaPo. President-elect Donald Trump said in a weekend interview that he is nearing completion of a plan to replace President Obama’s signature health-care law with the goal of “insurance for everybody,” while also vowing to force drug companies to negotiate directly with the government on prices in Medicare and Medicaid. Trump declined to reveal specifics in the telephone interview late Saturday with The Washington Post, but any proposals from the incoming president would almost certainly dominate the Republican effort to overhaul federal health policy as he prepares to work with his party’s congressional majorities. Trump’s plan is likely to face questions from the right, after years of GOP opposition to further expansion of government involvement in the health-care system, and from those on the left, who see his ideas as disruptive to changes brought by the Affordable Care Act that have extended coverage to tens of millions of Americans. In addition to his replacement plan for the ACA, also known as Obamacare, Trump said he will target pharmaceutical companies over drug prices. “They’re politically protected, but not anymore,” he said of pharmaceutical companies. The objectives of broadening access to insurance and lowering health-care costs have always been in conflict, and it remains unclear how the plan that the incoming administration is designing — or ones that will emerge on Capitol Hill — would address that tension.

Trump puts pressure on GOP Congress | TheHill: Donald Trump is putting pressure on his own party to move fast on his legislative priorities, but his push could be hindered by his low approval ratings as he enters the Oval Office. The president-elect startled congressional Republicans over the weekend when he told The Washington Post that a replacement for the Affordable Care Act should provide “insurance for everybody.” He also promised that he would make drug companies negotiate prices with the government for the Medicare and Medicaid programs — a position more common among Democrats than Republicans. In the same interview, Trump insisted that lawmakers needed to be swifter in pushing his agenda forward. “The Congress can’t get cold feet because the people will not let that happen,” Trump said. That was not the first shot across the bows from Trump. As the new Congress was being sworn in, he implicitly criticized House Republicans for seeking to gut an independent ethics office. He won that fight and the proposal was reversed. In a Wall Street Journal interview published on Tuesday, Trump also condemned an element of tax reform favored by many Capitol Hill Republicans. The president-elect told the newspaper that “border-adjustment” — a move that would, in essence, tax imports but not exports — was “too complicated.”

The Unhealthy Return to Individual Responsibility in Health Policy –It is still an open question—at least for a little while longer—what exactly the Republicans’ Affordable Care Act “repeal and replace” promise will entail.  However, the broad contours of the Republican strategy, which both Congress and President Trump have made clear they will pursue at all deliberate speed, are already visible.Speaker of the House Paul Ryan (R-Wis.) foreshadowed the Republicans’ central approach in his Patient’s Choice Act, a health care plan he put forward in 2009. That plan emphasized a desire to empower individuals to make healthy decisions, asserting that a “large percentage of heart disease, stroke, and type 2 diabetes, as well as many cancers, could be prevented if Americans would stop smoking, start eating better, and start exercising.” According to Ryan, the aim of health reform should be to encourage “individuals to adopt healthy lifestyles and behaviors.”Ryan’s assumption—a theme also echoed in the other major Republican proposals on the table—is that personal responsibility will serve as a salve to the wounds of the American healthcare system. Impliedly, if Americans would only jog more and eat more vegetables, then we could dramatically reduce cancer and strokes and save a fortune on medical care.  Republicans like Ryan will advocate for individual responsibility for healthcare through policy tools that reduce insurance coverage and, in turn, lower federal and state spending on medical care. With less insurance as the keystone to reforms, individuals and families will pay an increasing share of their medical care costs.  Put simply, Republicans are relying on the belief that people with more “skin in the game” will make more responsible decisions about their health and less wasteful choices about their healthcare consumption. These ideas are naïve.

Noam Chomsky: The US Health System Is an “International Scandal” — and ACA Repeal Will Make It Worse - Changes are coming to America's health care system. Not long from now, the Affordable Care Act could be history. President-elect Donald Trump wants to repeal so-called Obamacare, although he is now urging Republicans to repeal and replace it at the same time. But replace it with what? The political culture of the most powerful nation in the world is such that it vehemently defends the right of people to buy guns but opposes the right to free and decent health care for all its citizens. In all likelihood, the Trump health care plan will be one based on "free market principles." Under such a plan, as Noam Chomsky notes in the exclusive interview for Truthout that follows, poor people are likely to suffer most. In other words, the scandalous nature of the US health care system is bound to become even more scandalous in the Trump era. Welcome back to the future. (interview transcript)

The Economics of the Affordable Care Act -  Dean Baker at INET - The Affordable Care Act (ACA), which President-elect Donald Trump and the Republican-controlled Congress have vowed to repeal, was crafted to overcome two basic problems in the provision of health care... First, the costs are incredibly skewed, with just 10 percent of patients accounting for almost two thirds of the nation’s healthcare spending. The other problem is asymmetric information: Patients have far more knowledge about the state of their own health than insurers do. This means that the people with the largest costs are the ones most likely to sign up for insurance. These two problems make it impossible to get to universal coverage under a purely market-based system. ... Covering the least costly 90 percent of patients is manageable, but the cost of covering the least healthy 10 percent is exorbitant. ... The ACA gets around this problem by requiring that everyone buy insurance — a mandate that allows people with serious health problems to get insurance at a reasonably affordable price. Since many people cannot afford an insurance policy even if it’s based on average costs, the ACA also provided subsidies to low and moderate income people. It pays for the subsidies primarily through a tax on the wealthiest households, those with incomes over $200,000. Thus far, the ACA has actually worked better than expected in most respects. ... Insofar as the ACA has run into problems, those have been attributable to too few healthy people in the health care exchanges, and too little competition among insurers. Many commentators have wrongly blamed the problem in the exchanges on a failure of young healthy people to sign up for insurance. This is not the cause of the problem, since more people are getting insured than had been projected. The reason fewer healthy people are showing up on the exchanges is that fewer employers dropped insurance than had been projected. ... By continuing to provide insurance for their workers despite the ACA, employers are effectively keeping healthy people out of the exchanges. The other problem with the exchanges has been limited competition, as many insurers have dropped out after the first few years. The loss of competition has meant higher prices. ... One way to make insurance more affordable would be to reduce the costs of the health care system as a whole. Americans pay twice as much per person as people in other wealthy countries, with few obvious benefits in terms of outcomes. But such cost cutting would mean reducing the incomes of drug companies, doctors, and insurance companies — the big winners under the current system. It seems unlikely the Republicans will go this route. They are more likely to restore a version of the pre-ACA situation, in which many more people are uninsured and most workers know that their insurance is only as secure as their job.

CBO Estimates of Repealing the Affordable Care Act a.k.a. “Obamacare” - Menzie Chinn - From the CBO yesterday: CBO and JCT estimate that enacting [H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015, which would repeal portions of the Affordable Care Act (ACA) eliminating, in two steps, the law’s mandate penalties and subsidies but leaving the ACA’s insurance market reforms in place] would affect insurance coverage and premiums primarily in these ways:

  • The number of people who are uninsured would increase by 18 million in the first new plan year following enactment of the bill. Later, after the elimination of the ACA’s expansion of Medicaid eligibility and of subsidies for insurance purchased through the ACA marketplaces, that number would increase to 27 million, and then to 32 million in 2026.
  • Premiums in the nongroup market (for individual policies purchased through the marketplaces or directly from insurers) would increase by 20 percent to 25 percent—relative to projections under current law—in the first new plan year following enactment. The increase would reach about 50 percent in the year following the elimination of the Medicaid expansion and the marketplace subsidies, and premiums would about double by 2026.

Republicans are losing the argument over Obamacare repeal. Can that save it? --I continue to believe that repeal of large chunks of the Affordable Care Act remains likely to happen within the next few weeks or months. But that doesn’t mean Republicans are winning the public argument over it. Indeed, the most likely outcome at this point is that Republicans end up forging ahead with repeal even though the politics of it have shifted against them. A number of new data points this morning suggest that this is what is in the process of taking place. First, Mike DeBonis reports that congressional Republicans are shying away from holding town hall meetings, possibly because they fear that public blowback from constituents worried over repeal will create precisely the sort of bad optics that hit Democrats amid the Tea Party summer of 2009: Seven years after unruly Democratic town halls helped stoke public outrage over the Affordable Care Act, Republicans now appear keen to avoid the kind of dustups capable of racking up millions of views on YouTube and ending up in a 2018 campaign commercial. One week after the Republican Congress kicked off the process of repealing the landmark health-care legislation, only a handful of GOP lawmakers have held or are currently planning to host in-person town hall meetings open to all comers — the sort of large-scale events that helped feed the original Obamacare backlash in the summer of 2009…. That may be because such freewheeling events — especially with a hot topic like the ACA on the table — can devolve into chaos, with made-for-social-media moments brought to you by anyone with a smartphone in the audience….As the piece details, a number of specific viral moments have already taken place involving people either upset about losing Obamacare, or, in one case, flatly claiming it saved his life. All of this is pretty unexpected. Wasn’t repeal supposed to be primarily greeted with a great outpouring of tearful public relief and catharsis over the glorious moment of liberation that is finally at hand after many long years of darkness and oppression?

Unraveling the Obamacare mandate -- The attempted imposition of the notorious Obama-era “HHS mandate” on religious organizations, especially Catholic institutions, reflected an attitude that has been pervasive during Obama’s presidency, which is one of barely concealed hostility toward persons or organizations holding on to traditional religious beliefs. It should be the first order of business of the incoming Trump administration to rid the federal government of this attitude and the associated policies that flow from it. The place to begin that process is with the HHS mandate itself. The mandate is a rule, finalized initially in 2013, that requires nearly all employers in the United States to provide all manner of free contraception in their health-plan offerings. The Obama administration went out of its way to impose this requirement even on many Catholic institutions, such as universities and hospitals, knowing full well that the requirement violated fundamental teachings of the church. It then provided only the narrowest of exemptions to the general requirement and fought every legal challenge trying to provide greater latitude to religious organizations or employers with religious sensibilities.  The issuance of the rule and its narrow exemptions precipitated an avalanche of legal challenges, many of which are still ongoing. The Obama administration chose to take the approach that only houses of worship should be fully exempt from the mandate’s obligations, and then it proceeded to specify an “accommodation” for other religiously affiliated employers that provided no real relief.  Not surprisingly, this non-accommodation was seen by Catholic employers as woefully inadequate and a shell game.  The Little Sisters of the Poor, who own and run nursing homes for the poor elderly, took their case to the Supreme Court, resulting in a decision that called on the Obama administration to work with the organizations objecting to the mandate to come up with a mutually agreeable solution.

The Republican Health-Care Debate - Where do things stand among Republicans in Washington regarding the repeal and replacement of Obamacare? Every day seems to bring fresh twists in the story, and the basic thread can be hard to follow. Is this the beginning of an arduous but ultimately fruitful legislative process? Is it the painful end of an illusion? Will it yield in a quagmire or a vindication for the party that has made the fight against Obamacare its foremost mission for more than half a decade? One lesson I’ve learned from working on public policy in and out of government is that in a complex legislative debate, success and failure often feel exactly the same while they are happening. They both feel pretty much like pandemonium. During the lengthy period when some basic questions of strategy and substance are still open, everything seems up for grabs and the entire edifice always looks on the edge of collapsing. So it is not easy to judge the prospects for success by orderliness or discipline along the way. A better yardstick is whether there is a plausible strategy being championed by a critical mass of people on both sides of Pennsylvania Avenue. By that measure, the effort to replace Obamacare is in some trouble. On its face, the legislative strategy lawmakers are now pursuing is not a good fit for the substantive policy objectives it is expected to achieve, and Republicans have yet to come to terms with the mismatch. But we are very early in the process, there is a growing awareness at all levels of the inadequacies of the approach, the incoming administration has yet to truly have its say, and ample opportunity remains for Republicans in Congress to correct their course as they go. That course will inevitably change several times before the story ends. What follows, with due apologies for its length, is one observer’s general sense of where things stand. I’ll lay out the logic of the reigning strategy, take up its faults, consider the role the incoming administration has played, offer some reflections on where things might be headed.

Business euphoria over Trump gives way to caution, uncertainty | Reuters: Early optimism among business lobbyists and executives that Donald Trump's election heralded better days has slowly given way to uncertainty as the president-elect fires off mixed and sometimes confusing messages on healthcare, taxes and trade. An initial euphoria in the business world fueled a powerful post-election stock rally. Some of that has frayed as questions arise over the nuts and bolts of Trump's campaign promises, although many in the business community said they remained optimistic. Doubts deepened over the weekend as Trump declared he would replace President Barack Obama's signature healthcare plan known as Obamacare with "insurance for everybody" - a goal far beyond Republican designs - and criticized a key component of a plan in Congress to overhaul corporate taxes. In a later interview, he appeared to adjust both stances, possibly adding to the confusion. "It is fair to say that since the election, there has been mounting uncertainty about exactly what the specific policies are likely to be with regard to tax reform and replacing Obamacare," a financial industry official said. Expectations for faster growth, tax reform and a quick repeal of Obamacare, officially known as the Affordable Care Act, have "given way to 'We are not really sure what he means by that,'" the official said. A veteran Republican financial lobbyist said she was under constant pressure from clients to predict what the new administration was planning but had no reliable answers.

Five things to watch in round 2 of Trump confirmation fights | TheHill: Eight nominees are heading to Capitol Hill this week to face what is expected to be an hourslong grilling from lawmakers — and half are on Democrats’ hit list. The Senate will hold hearings this week for Betsy DeVos, Rep. Tom Price (R-Ga.), Steve Mnuchin and Oklahoma Attorney General Scott Pruitt, Trump’s picks for Education, Health, Treasury and Environmental Protection Agency chiefs, respectively.Here are five things to watch during what's expected to be an explosive week of hearings. Senate Majority Leader Mitch McConnellR-Ky.) has stressed that he wants to confirm Trump’s national security team on the first day of his administration, despite the pomp surrounding the inauguration.  Sen. John Cornyn (R-Texas), the Senate’s No. 2 Republican, told The Hill that at a "minimum" he wants votes on day one to confirm five of Trump's picks: Sen. Jeff Sessions (R-Ala.) as attorney general, Rep. Mike Pompeo (R-Kan.) as CIA director, retired Gen. John Kelly as Homeland Security secretary, Rex Tillerson as secretary of State and former Sen. Dan Coats (R-Ind.) as director of national intelligence. But to get any of Trump’s nominees through the Senate on the first day, Republicans will need help from Democrats, who could use the upper chamber’s procedural levers to drag out a nomination, potentially for days.Democrats haven’t publicly ruled out letting nominees through, but stressed that all paperwork must be finalized and lawmakers given enough time to review it before they get a full vote before the Senate. Republicans note that the then-Democrat controlled Senate confirmed seven of President Obama’s nominees on the same day of his 2009 inauguration, with five additional nominees confirmed within the first week.

U.S. Senate Democratic leader attacks Trump's health pick on ethics charge | Reuters: U.S. President-elect Donald Trump's choice to run the Department of Health and Human Services may have broken the law by making a stock purchase just before he introduced legislation that would have benefited the firm, the Senate's leading Democrat charged on Tuesday. A confirmation hearing for Tom Price, a Republican congressman and orthopedic surgeon from Georgia, was scheduled for Wednesday before the Senate Health Committee. If confirmed, he would be a key player in carrying out Trump's plans to overhaul Democratic President Barack Obama's signature healthcare law. CNN reported on Sunday that Price bought between $1,001 and $15,000 worth of shares last March in Zimmer Biomet Holdings Inc (ZBH.N), a medical device manufacturer. Days later, he introduced legislation in the House of Representatives that would have delayed a regulation that could have ultimately damaged the company, CNN said. Senator Chuck Schumer of New York, the leader of the Democratic minority in the Senate, called on the Office of Congressional Ethics to investigate whether Price had violated the 2012 Stock Act, a law designed to combat insider trading. Schumer said Price's Zimmer Biomet purchase may have been in violation of that law. "It may be that this trade was illegal," Schumer said on the Senate floor on Tuesday afternoon. The Trump transition team said late on Monday that the stock purchase was directed not by Price but by a broker and that the congressman himself did not become aware of the stock buy until well after the legislation was introduced. The transition team urged CNN to retract the story.Schumer did not sound convinced. "Now they say there's a broker, it's kind of strange that this broker would pick this stock totally independently of him introducing legislation that's so narrow and specific to this company," Schumer told CNN on Tuesday.

Bernie Sanders and Trump’s Pick for Health and Human Services Face Off Right to Health Care -- Since his stunning election night victory, Donald Trump and the greater Republican Party have been noncommittal at best about the former’s vow to preserve the country’s Medicare, Medicaid and Social Security benefits. So during Wednesday’s confirmation hearing, Sen. Bernie Sanders decided to put the president-elect’s pick to lead the Department of Health and Human Services on the spot.“Is the President-elect, Mr. Trump, going to keep his word to the American people and not cut social security, Medicare and Medicaid, or did he lie to the American people?”Tom Price, an orthopedic surgeon staunchly opposed to government spending on healthcare, answered meekly that he had “no reason to believe” that Trump has changed his position on the matter.But the fireworks were only just beginning.“The United States of America is the only major country on Earth that does not guarantee healthcare to all people as a right,” Sanders continued. “Canada does it, every major country in Europe does it. Do you believe that healthcare is a right of all Americans, whether they’re rich or they’re poor? Should people, because they are Americans be able to go to the doctor when they need, to be able to go into a hospital because there are Americans?”“We are a compassionate society,” began Price.   “No we’re not a compassionate society,” Sanders shot back. “In terms of our relationship to poor and working people, our record is worse than virtually any other country of any other major country on Earth and we have the highest rate of childhood poverty of any other major country on Earth and half of our senior older workers have nothing set aside for retirement, so I don’t think compared to other countries we are particularly compassionate.”  Watch the tense exchange:

Price hearing: dramatic ACA metaphors and the meaning of “access” -- In a four-hour Senate confirmation hearing Wednesday, Rep. Tom Price (R-Ga.), Donald Trump’s nominee to run the Department of Health and Human Services, tried unsuccessfully to ratchet down the rhetoric surrounding the fate of the Affordable Care Act. He repeatedly emphasized that “nobody is interested in pulling the rug out from under anybody.” And in broad strokes he described the Republicans' replacement plan—which has yet to be revealed—as a beefed-up version of the ACA; a plan that covers even more people, has better benefits, and is cheaper. He went on, explaining:  We believe that it’s absolutely imperative that individuals that have health coverage be able to keep health coverage, and move—hopefully—to greater choices and opportunities for them to gain the kind of coverage they want for themselves and for their families… There’s been a lot of talk about individuals losing health coverage. That is not our goal, nor is it our desire, nor is it our plan. The assurances stopped there, however, as did hope of calming the fevered debate on the subject. Senators on the Committee on Health, Education, Labor and Pensions, which held the hearing, continued to pepper the discussion with dramatic statements. Republicans compared the ACA to a collapsing bridge and described it as being in a death spiral. Democrats compared repealing the mammoth health law without replacement legislation to jumping out of a plane without a parachute. There were several moments in the hearing in which it seemed as though there could be constructive discussion and bipartisan cooperation to improve healthcare in the country. They were dashed by Price’s vague responses and lack of details. His rhetoric rattled Democrats, who repeatedly asked for guarantees that the gains made by the ACA wouldn’t be rolled back.

Trump's Health Secretary pick Tom Price in trouble over insider trading accusations - First came the Wall Street Journal, which reported just before Christmas that Rep. Tom Price of Georgia, the president-elect’s pick for secretary of health and human services, had traded more than $300,000 in health care stocks over four years while advocating or sponsoring legislation that could have increased their value. Then the New York Times followed with word that Price, Rep. Chris Collins of New York, and a handful of other insiders had been offered a sweetheart deal on stocks for a tiny Australian company that then quintupled in value. On Monday, CNN weighed in with a story that revealed that Price had purchased shares in a medical device company just a week before introducing legislation to delay regulations that could significantly harm the firm. Sen. Chuck Schumer of New York, the minority leader, called for an investigation. “This new report makes clear that this isn’t just a couple of questionable trades, but rather a clear and troubling pattern of Congressman Price trading stock and using his office to benefit the companies in which he is investing,” he said. There may be no time for that. Price’s Senate confirmation hearings this week before the Health, Education, Labor and Pensions Committee and the Finance Committee, had already been set to be contentious, with Medicare and the Affordable Care Act being hot topics.

Trump's Cabinet Picks Are A Sorry Lot -  by Linda Beale - Trump's appointees for many of the important Cabinet positions seem to be primarily wealthy crony capitalists with radical ideologies that are in direct conflict with the agency missions. Consider just the following three:

  • Betsy DeVos--Trump's choice as education secretary-- is a billionaire heiress (ie., another one born with a silver spoon in her mouth) who has no experience in running major programs (the student loan portion of the Education portfolio is a trillion-dollar budget with enormous complexity), shows little understanding of the broad issues in education, has never supported public schools, and has wrecked Michigan's education system by funding a multimillion-dollar initiative pushing support of for-profit charter schools that siphon off public dollars  for the private enrichment of corporate managers, provide public dollars for religious education, and remain totally unaccountable to the taxpaying public while performing abysmally in their job of educating students.  Not surprisingly, at her confirmation hearing she refused to support "equal" accountability for private and public schools. She supports the completely discredited "conversion therapy"  for gays and will likely work to reverse the protections won for LGBTQ students based on her personal religious beliefs.  DeVos has never taught, has never served on a school board, and has never even sent her own children to public schools or participated in a PTA meeting.  She showed at her confirmation hearing that she has little or no understanding of educational issues of importance, such as the Federal laws requiring appropriate education for students with disabilities or nondiscriminatory opportunities for female and LGBTQ students. Her answer on whether guns should be allowed on school grounds was--(a paraphrase) Yes, because who knows, it might be necessary to protect children by shooting at a grizzly bear, and acknowledged that she would support Trump's proposal to ban gun-free school zones… 
  • Scott Pruitt--Trump's choice for the EPA--is an Oklahoma oil and gas yesman who has fought for years to undermine the regulatory power of the EPA--suing the EPA 14 times alongside the oil companies during his Attorney General stint-- so that the oil and gas industry can pollute at will without fearing the power of the federal government to reign them in.  Fracking in Oklahoma has been clearly connected to a sharp increase in the number of earthquakes near fracking wells, but Scott Pruitt would rather expend state dollars on suing the EPA to try to eliminate regulations meant to protect people, communities, and the environment.  Pruitt is a climate change denier who accepts that human activity affects climate but denies the scientific consensus about the pace of warming, suggesting at his confirmation that the discussion of climate change was too "personalized" and not "precise" enough  to merit vigorous action; he has financial ties to oil and gas companies and so, unsurprisingly, he wants to use his role as EPA head to prevent the EPA from fighting pollution that endangers every American's health as well as the planet we and other species live on.  As pointed out in the confirmation hearing, one of the letters Pruitt sent as A.G. was drafted for him by Devon Energy:  he was serving an oil company, not the public, but he claimed such actions were appropriate. Interestingly, Pruitt claims to be in support of state's rights--except when the state's rights run counter to the interests of oil companies...
  • Andy Puzder--Trump's choice for Labor--is a constant friend of Big Business  and an ideological critic of almost any worker protection, from much-needed minimum wage increases to $15 an hour to a national program that provides insurance for minimum wage earners (the Affordable Care Act) to any other business regulations that, in his view, impede Big Business's ability to make big profits for its owners.  Thus, he is directly opposed to the mission of the department he would lead..  As the fast-food executive head of Restaurant Holdings, Inc., the parent company of Carl's Jr., he has demonstrated his view that big companies should be able to use workers however they want to make money for the managers and wealthy shareholders, with little regard for ordinary workers' wellbeing.  For instance, the Carl's chain is known for the kind of scheduling that requires workers to show for a 4 hour shift that might result in the worker being sent home after 1 hour because there is lower demand...
These three appointees illustrate that Donald Trump has no interest in "draining the swamp" of crony capitalism that has at times seemed to be much too important in DC.  He is actively feeding the swamp monster, with selection of billionaire crony capitalists who want to remake the government to smooth the way for Big Business to do whatever it wants, without protective regulations for workers, the environment, or consumer protection.  This is the 4-decade-long Republican attack on ordinary Americans taken to the extreme--deregulation, tax cuts for the wealthy (with hidden tax increases for everybody else), militarization for the military-industrial complex, and privatization of services like education and health care that the government does best because the profit motive ensures corruption and high costs.

Democrats need to stop throwing everything they can at Trump | TheHill: Thirty-five Democrats in the House have sent a letter to Attorney General Loretta Lynch urging her to appoint an independent Special Counsel because Donald Trump “has repeatedly engaged in actions constituting unauthorized foreign policy in violation of the Logan Act.” Dating back to 1799, the law has resulted in a grand total of one indictment (during Thomas Jefferson’s presidency) and no conviction. But the Logan Act remains a convenient statute to brandish against disruptors of foreign-policy orthodoxies. The Jan. 12 letter — relying on an arcane and wobbly relic of a law — is an example of opportunism that isn’t even opportune. Worse, it’s an effort to spur Justice Department action that would establish a dangerous precedent. When the letter charges that “in several cases Mr. Trump’s actions directly contravene and undermine official positions of the United States government,” the complaint rings hollow. In our lifetimes, countless private citizens — and quite a few members of Congress — have sought to contravene and undermine official U.S. positions. Often that has been for the better. The members of Congress who signed the letter should know that. Many are ostensibly aligned with the kind of dissent that has been — and will be — essential to pull this country away from disastrous wars overseas. More than half of the letter’s signers — 19 of the 35 — are in the Congressional Progressive Caucus.It should be obvious that the Logan Act is antithetical to free speech and other vital liberties. The law provides for up to three years in prison for “any citizen of the United States” who — without authorization from the U.S. government — “directly or indirectly commences or carries on any correspondence or intercourse with any foreign government,” with intent to influence that government “in relation to disputes or controversies with the United States.”

Ryan, Bannon strike surprising truce - Paul Ryan and Stephen Bannon are getting along. In meetings at Trump Tower and on Capitol Hill, the House Speaker and senior adviser to President-elect Donald Trump have embarked on a surprising collaboration, top aides say, sketching out a plan for tax reform that could be among the next president's first major legislative achievements. Ryan, a Wisconsin Republican, met last week in his office with several Trump aides. Over an Italian dinner, Ryan discussed the House GOP’s reform plan with Bannon, as well as Trump's son-in-law Jared Kushner, incoming White House chief of staff Reince Priebus, incoming White House policy director Stephen Miller and Treasury Secretary-designate Steven Mnuchin. This budding relationship has surprised and delighted members of Trump’s incoming administration, which has otherwise been dogged by reports of infighting. And it offers hope to Republicans worried that a feud between the two men would spell disaster for the party's agenda. Trump senior adviser Kellyanne Conway told The Hill that Bannon and Ryan have been able to move beyond their bitter past and find compromise in conservative economic principles. "Their shared brain power and shared resolve are a large part of why significant tax reform will be done sooner rather than later in a Trump administration," Conway said.

Dems Will Jab at Mnuchin, But Will They Land Any Punches?: Treasury Secretary-designate Steven Mnuchin's time as OneWest's chief executive — and the bank's controversial foreclosure practices — is expected to draw ample attention at his nomination hearing Thursday, but it will not be the only issue to come up as senators try to gauge how he would lead President-elect Trump's financial policies. Thanks to Democrats rewriting confirmation rules when they were in control, the Senate's current GOP leaders only need a majority of the chamber to approve Mnuchin. But analysts say how well Mnuchin answers questions will still matter, particularly if some Republicans have reservations about the nominee. The Senate Finance Committee hearing could also provide a window into Mnuchin's views on key financial services issues, such as housing finance reform and the fate of the Financial Stability Oversight Council. "The base case is he gets confirmed. The president usually gets his or her nominees for top cabinet positions pretty quickly. But Mnuchin is a wild card…If he performs poorly that is the only point where his confirmation becomes in doubt," At the start of the crisis, Mnuchin led a team of investors to acquire assets of the failed IndyMac Bank in Southern California and formed OneWest. But the new bank garnered a reputation for aggressively foreclosing, and has been at the center of Democrats' efforts to put Mnuchin in a negative light. "OneWest, I would expect is going to be a centerpiece," of the hearing, said Kurt Walters, spokesman for the progressive group Demand Progress Action. Demand Progress, the Progressive Change Campaign Committee and Allied Progress Action are running ads featuring stories of borrowers who were foreclosed on by OneWest in the lead-up to Mnuchin's hearing. Democrats have gone so far as to call Mnuchin the "Foreclosure king" and launched a web portal for consumers to submit anecdotal complaints about foreclosure experiences with OneWest during the mortgage crisis, in addition to holding events on Capitol Hill with former OneWest borrowers. Consumer groups have particularly focused on how OneWest, which was sold to CIT, foreclosed on seniors with reverse mortgages. (Mnuchin became vice chairman of CIT.) But with all the attention on the bank's foreclosure practices, Mnuchin is likely preparing his defense for what could be aggressive questioning, observers said.

Mnuchin Hearing Descends Into Early Chaos After Senator Offers "Valium" To Colleague - Earlier this morning we predicted a fiery confirmation hearing for Trump's Treasury Secretary pick, Steven Mnuchin.  And right on cue, the confirmation had barely begun when it was promptly derailed after Senator Pat Roberts of Kansas suggested that his colleague, Senator Ron Wyden (D-OR), should pop a valium before the next round of questioning. “Sen. Wyden, I’ve got a Valium pill here that you might want to take before the second round....just a suggestion, sir." Of course, the comment didn't go over well with Democrats on the Senate Finance Committee as Senator Sherrod Brown (D-OH) pounced on the remarks sending the hearing into a moment of pure chaos with Finance Committee Chairman Orrin Hatch (R-Utah) struggling to regain control. “I just can’t quite believe that the senator would say that.  I just hope that doesn’t set the tone for 2017.” .@SenPatRoberts to @RonWyden: “I’ve got a Valium pill here that you might want to take…" — CSPAN (@cspan) January 19, 2017

Treasury pick defends record at bank called ‘foreclosure machine’ - Treasury secretary nominee Steven T. Mnuchin defended his ties to offshore business entities and his management of a controversial California bank during a testy confirmation hearing on Thursday. Speaking before the Senate Finance committee, Mnuchin said corporations listed in his financial disclosure in the Cayman Islands and Anguilla were not used for his personal benefit but were set up to serve nonprofits and pensions. A memo compiled by Democratic committee staffers obtained by The Washington Post showed Mnuchin initially omitted those accounts -- as well as more than $100 million in personal assets -- from his nomination paperwork. Mnuchin has revised his disclosures. “In no way did I use [offshore entities] to avoid U.S. taxes,” Mnuchin said. “I can assure you I pay all my taxes as was required.” Mnuchin, a veteran Wall Street investor, has also come under fire for his 2009 purchase of failed subprime mortgage lender IndyMac from the federal government. Mnuchin renamed the bank OneWest and ran it for six years. During that time, he said, the bank modified over 100,000 of the country’s most troubled loans and saving thousands of jobs in the process, according to his statement. “I have been maligned as taking advantage of others’ hardships in order to earn a buck,” Mnuchin told lawmakers Thursday. “Nothing could be further from the truth.” The hearing began with a sharply combative tone before Mnuchin even began speaking -- an unusual departure for what is typically a staid and wonkish committee. Chairman Sen. Orrin Hatch (R-Utah) decried “stupid arguments” over Mnuchin’s qualifications to manage the nation’s finances and accused Democrats of obstructing President-elect Donald Trump’s nominees. Ranking member Sen. Ron Wyden (D-Oregon) shot back by accusing Mnuchin of using loopholes in international tax law to shield millions of dollars from taxation. Republican Sen. Pat Roberts of Kansas then interjected with a suggestion that Wyden take a Valium, an attempt at what he called a “pinprick” of levity. Sen. Sherrod Brown (D-Ohio) objected to the remark, forcing Hatch to gavel the committee to order.

Mnuchin's Hearing Sparks Arguments About Tax Havens, Foreclosures, and Valium -  On Thursday, the Senate Finance Committee held a confirmation hearing for our populist president-elect’s pick for Treasury Secretary: A multimillionaire whose résumé includes a diploma from Yale, several years at Goldman Sachs, a stint running a bank that specialized in foreclosures, and experience running a Cayman Islands–based hedge fund that was named after the sand dunes outside his house in the Hamptons. Steven Mnuchin neglected to mention that last enterprise in the financial-disclosure form he submitted shortly after his nomination last year. And, as one might lose track of spare change left in an old coat pocket, Mnuchin also forgot all about the $95 million in real-estate assets that he’d left lying across the North American continent.So, the Democratic members of the Finance Committee had a lot of material to work with on Thursday. After decrying the “truly disgusting inequity and abuse of America’s tax laws,” Wyden declared. “There’s no clearer example than Mr. Mnuchin’s hedge fund setting up outposts in Anguilla and the Cayman Islands, an action that can be explained only by the islands’ zero percent tax rate … Millions of dollars in profits from Hollywood exports like the movie Avatar were funneled to an offshore web of entities and investors.”  Wyden went on to savage Mnuchin’s use of a “dynasty trust” to “shield tens of millions of dollars from taxes,” as well as his funding of a tax-exempt foundation that pushed for the the approval of a bank merger he stood to profit from. Mnuchin argued that his decision to incorporate Dune Capital in the Cayman Islands was merely “an accommodation to pension funds and nonprofit institutions and a small number of foreign investors” who would benefit from that arrangement. He then promised that, as Treasury Secretary, he would scrutinize the rules that incentivized him to base his business in a foreign tax shelter.Later, Mnuchin defended himself against the charge that the bank he helped found had deployed abusive and/or illegal tactics to foreclose on embattled homeowners.“It has been said that I ran a ‘foreclosure machine,’” Mnuchin said. “This is not true. On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a ‘loan-modification machine.’” It’s true that Mnuchin was not responsible for the suffering of many of the people his bank foreclosed on. By the time he and his partners purchased the California mortgage giant IndyMac, it had already distributed countless so-called liar loans to borrowers who would never be able to repay them. When Mnuchin renamed the institution OneWest, 178,000 foreclosures were already in the pipeline.

What Steve Mnuchin Thinks About The "Strong Dollar" -- In Steven Mnuchin's nearly 6 hour confirmation hearing on Thursday, there was just one critical exchange lasting all of 90 or so seconds. It was Mnuchin's response to a question from Senator Pat Toomey how he feels about a strong dollar. The question was naturally predicated by Trump's recent interview with the WSJ in which he voiced concern about the dollar’s recent appreciation, saying the currency was “too strong." Mnuchin's response: the dollar is "very, very strong", and "what you see is people from all over the world wanting to invest in the U.S. currency;" However, he hedged saying that while a strong dollar is great in long term, "it was meant to be that perhaps in the short term, the strength in the currency as a result of free markets and people wanting to invest here, may have had negative impacts on -- on our ability in trade." Here is the exchange in full:

Treasury pick Mnuchin clarifies GSE stance: No 'recap and release' – President-elect Donald Trump’s pick for Treasury secretary said he did not support a plan – known as “recap and release” – for returning Fannie Mae and Freddie Mac to the private sector, clarifying earlier remarks that had caused confusion about the incoming administration’s housing finance agenda. In his confirmation hearing Thursday, Mnuchin said he was “never [supportive] of recap and release” for the government-sponsored enterprises. Mnuchin suggested his comments from December, made in a television interview shortly after his nomination was announced, were misread. “What I’ve committed to is that I will work with both the Democrats and Republicans. We need housing reform, so we shouldn’t just leave Fannie and Freddie as-is for the next four or eight years under government control without a fix,” Mnuchin said in his confirmation hearing before the Senate Finance Committee. To date, the legislative reform proposals for Fannie and Freddie have ranged from unwinding them while retaining a government backstop for mortgages, to getting the government out of the housing finance system entirely. But some read Mnuchin’s December interview on Fox Business as supporting a proposal, backed by Fannie and Freddie investors, to recapitalize the mortgage giants and preserve them in some form. “We gotta get Fannie and Freddie out of government ownership,” he said on the cable news channel. “We'll make sure that when they're restructured, they're absolutely safe and they don't get taken over again.” He struck a more cautious tone in his confirmation hearing. While he said he wanted to work with lawmakers on a long-term reform plan for the GSEs, it was unclear which reform approach he or the new administration would support.

Wolf Richter: Mnuchin as Sears Director Oversaw Asset Stripping, Underfunding of Pension; Faces Conflict as Treasury Secretary – naked capitalism - Yves here. It is frustrating to see the Democrats dissipate energy on “Russian stooge” hysterics and fail to have a coherent approach for achieving their supposed aim of stymieing Trump. While only a small handful of Cabinet nominees in the modern era have failed to win confirmation, the hearings can still allow the opposition to set down some markers. Mnuchin is one of Trump’s worst picks by virtue of being a bog-standard bankster-loyal Rubinite on macroeconomic policy (strong dollar, budget hawk), having a been the CEO of an unusually predatory mortgage servicer, yet unlike other members of the Goldman partner club that have been up for the Treasury, lacking relevant experience. From what I could infer, the Democrats left much fewer marks on Mnuchin than they did on most of the other Trump nominees. Some of that may be that they feel they can’t object to Mnuchin saying that he will continue many of the Clinton-Obama finance-friendly policies, and Mnuchin is arguably no less qualified than the lackluster Jack Lew. However, as Wolf recounts, Bob Menendez did get a few licks in on Mnuchin’s role at Sears, both as board member and investor, and how profitable asset stripping is putting taxpayers at risk in a pension restructuring.Donald Trump taps business partner, fellow developers, to head $1 trillion infrastructure plan - President-elect Donald Trump has tapped two fellow New York-area real estate developers and partners, Richard LeFrak and Steve Roth, to lead a council of 15 to 20 builders and engineers that will oversee his $1 trillion infrastructure proposal, Trump tells The Wall Street Journal. Trump and his transportation secretary nominee, Elaine Chao, propose that most of the improvements to America's roads, bridges, and other infrastructure be privately financed, encouraged through tax breaks of up to 82 percent for participating investors. Trump said that the council would throw out some proposed projects, and "some of the projects they'll expand. But all of the projects, they'll make sure we get a tremendous bang for the buck." LeFrak (pictured), like Trump the wealthy scion of a New York real estate dynasty, has known Trump for decades and the two men socialize together. Roth, The Journal reports, is chairman and CEO of Vornado Realty Trust, which controls two of Trump's most valuable assets — the president-elect earned some $22.7 million pretax last year from the two projects, office buildings at 1290 Sixth Ave. in New York City and 555 California Street in San Francisco. Trump told The Wall Street Journal that he had just met with LeFrak and Roth, and "they've already agreed to do it." Neither man responded to The Journal's request for comment.

Potentially nasty fight looms over Trump U.S. Supreme Court pick | Reuters: Senate Democrats are gearing up for a potentially ugly fight over Donald Trump's U.S. Supreme Court pick, with some liberal activists urging them to do everything possible to block any nominee from the Republican president-elect. Democrats are still seething over the Republican-led Senate's decision last year to refuse to consider outgoing President Barack Obama's nomination of appeals court judge Merrick Garland for a lifetime post on the court. The action had little precedent in U.S. history and prompted some Democrats to accuse Republicans of stealing a Supreme Court seat. Trump last week vowed to announce his appointment within about two weeks of taking office on Friday. He said he would pick from among 20 candidates suggested by conservative legal groups to fill the lingering vacancy caused by the death of conservative Justice Antonin Scalia last Feb. 13. Scalia's replacement could tilt the ideological leaning of the court for years to come, restoring the long-standing conservative majority that disappeared with Scalia's death just at a time when it appeared liberals would get an upper hand on the bench. Liberal groups are gearing up for a battle, with the People For the American Way calling the judges on Trump's list of candidates "very extreme." "We're hearing from Senate Democrats and parallel concern among outside groups that this is going to be a major fight," said Marge Baker, the group's executive vice president. "We'll be arguing that Democrats use every means at their disposal to defeat the nominee. This is going to be 'all hands on deck,' using all means at our disposal."

Trump slow to vet ultra-rich ambassador candidates - Republican bundlers have been aggressively lobbying Donald Trump’s transition team for plum diplomatic posts in Western Europe — but so far have been met with almost no vetting, according to transition sources and top donors, despite the past business troubles of some contenders. Trump’s moneyed donors are especially driven to jockey now for the ambassador positions, given that President Barack Obama’s current appointees have been notified that they have to vacate their posts by Jan. 20. Story Continued Below The president-elect has also accelerated the timetable for some of the highest-profile ambassador slots, having already named his representatives for Israel and China — longtime bankruptcy lawyer David Friedman and Iowa Gov. Terry Branstad, respectively. For the more swanky posts in Western Europe, top donors including New York real estate developer Peter Kalikow and financiers Lew Eisenberg and Duke Buchan have already received word from the Trump transition that they’re being considered for prime postings in Italy and Spain, top donor and transition sources say. Despite the rush, candidates for the posts say they have not heard from transition officials about the intensive background checks, which typically take about three months for the White House personnel office and FBI to review. This includes a 47-query questionnaire, an SF-86 form for security clearance and an SF-278 Public Financial Disclosure Report that details every stock, bond and asset.

With Blacks Alarmed by His Tone, Trump Meets With Martin Luther King III -- With tensions escalating between President-elect Donald J. Trump and prominent black leaders, Mr. Trump met privately on Monday with the eldest son of the Rev. Dr. Martin Luther King Jr. on the holiday devoted to the civil rights hero.The hastily arranged meeting at Trump Tower occurred as Mr. Trump feuded publicly with Representative John Lewis, Democrat of Georgia, who fought for civil rights alongside Dr. King.It has highlighted the challenges Mr. Trump faces as he prepares to take office on Friday deeply distrusted by minorities across the country, many of whom have been offended by his false allegations that President Obama was born outside the United States, appalled that his candidacy drew backing from white supremacist organizations, and dismayed at policy proposals they consider antithetical to their interests. Mr. Trump on Monday did not address those issues, appearing in the lobby to allow news cameras to capture pictures of him shaking hands with Martin Luther King III, but ignoring questions shouted by reporters about their conversation or his statements about Mr. Lewis.

Every Trump tweet activates thousands of computer algorithms - Every Donald Trump tweet is a seismic event.   Like it or not, whether the posts offer insight or incitement, these social-media musings set off cascades of activity: Teams of Trump Tower–ologists attempt to decode the meaning of each of the 140 characters, talking points are sharpened, and cable-news producers cry out for new chryons.But that only covers the human response to the president-elect’s posts. Each Trump tweet also activates thousands of computer algorithms: Stocks are instantly bought and sold and emails fired off — even electrical currents are affected. (There’s even an app that alerts investors when Trump tweets about companies.) Though it’s impossible to know just how many high-frequency-trading algorithms are moving shares on the basis of @realdonaldtrump, one measure of the magnitude of his Twitter feed’s algorithmic influence is the Internet service IFTTT. For the uninitiated, IFTTT — which stands for “if this, then that” — allows users who know nothing about coding to create cause-and-effect algorithms. The free service makes it simple to get notifications if it’s going to rain tomorrow, to automatically sort and archive your photos as you take them, or even adjust your thermostat automatically when you enter or leave the house. As my Wall Street Journal colleague Geoffrey Fowler put it, it’s the Internet’s best productivity tool.I asked IFTTT how many people have set up algorithms to track Trump. “We have just under 1,000 people using IFTTT to keep up with Donald Trump tweets,” spokeswoman Anne Mercogliano replied. The most popular Trump algorithms automatically email his tweets to users, or post them in intracompany message boards like Slack, she said.

Explosive memos suggest that a Trump-Russia tit-for-tat was at the heart of the GOP's dramatic shift on Ukraine - An unverified dossier provided to US intelligence officials alleges that President-elect Donald Trump "agreed to sideline" the issue of Russian intervention in Ukraine during his campaign after Russia promised to feed the emails it stole from prominent Democrats' inboxes to WikiLeaks.  The dossier was part of an opposition-research project conducted by a former British spy, Christopher Steele, at the behest of anti-Trump Republicans and, later, Democrats. Steele was the former head of the Russia desk in Moscow for Britain's Secret Intelligence Service, also known as MI6. The memos he wrote made their way to US intelligence officials sometime last year. A summary of his findings, collected from the network of Russian intelligence sources he had cultivated, was presented to Trump, President Barack Obama, Vice President Joe Biden, and the country's top lawmakers on intelligence matters earlier this month as part of a classified briefing about Russia's intervention in the US presidential election. The dossier's claim about a Ukraine-WikiLeaks quid pro quo alleges that Trump would refrain from speaking forcefully, if at all, during the 2016 presidential campaign about Russia's 2014 incursion into eastern Ukraine. In return, Russia would provide WikiLeaks the documents it stole from the Democratic National Committee. Throughout the campaign, Trump broke from traditional GOP orthodoxy and established himself as the most sympathetic Republican candidate toward Russia, stressing a need to work with the country on various geopolitical issues.  Trump has not commented on the dossier's specific claims, but he did cite a conservative-leaning news outlet in a tweet Saturday to call the dossier itself a "complete fraud."

CIA director warns Trump to watch what he says, be careful on Russia | Reuters: CIA Director John Brennan on Sunday offered a stern parting message for Donald Trump days before the Republican U.S. president-elect takes office, cautioning him against loosening sanctions on Russia and warning him to watch what he says. Brennan rebuked Trump for comparing U.S. intelligence agencies to Nazi Germany in comments by the outgoing CIA chief that reflected the extraordinary friction between the incoming president and the 17 intelligence agencies he will begin to command once he takes office on Friday. In an interview with "Fox News Sunday," Brennan questioned the message sent to the world if the president-elect broadcasts that he does not have confidence in the United States' own intelligence agencies. "What I do find outrageous is equating the intelligence community with Nazi Germany. I do take great umbrage at that, and there is no basis for Mr. Trump to point fingers at the intelligence community for leaking information that was already available publicly," Brennan said. Brennan's criticism followed a tumultuous week of finger-pointing between Trump and intelligence agency leaders over an unsubstantiated report that Russia had collected compromising information about Trump. The unverified dossier was summarized in a U.S. intelligence report presented to Trump and outgoing President Barack Obama this month that concluded Russia tried to sway the outcome of the Nov. 8 election in Trump's favor by hacking and other means. The report did not make an assessment on whether Russia's attempts affected the election's outcome.Trump has accused the intelligence community of leaking the dossier information, which its leaders denied. They said it was their responsibility to inform the president-elect that the allegations were being circulated.

In Scathing Attack, CIA Director Brennan Warns Trump To "Watch What He Says" --The departing CIA director John Brennan has launched a scathing attack on Donald Trump, warning the President-elect does not fully understand the threat posed to the US by Russia. "I think Mr. Trump has to understand that absolving Russia of various actions it has taken in the past number of years is a road that he needs to be very, very careful about moving down." As Reuters reports, Brennan's comments, during an interview on "Fox News Sunday," exposed the simmering tensions between the president-elect and the intelligence community he has criticized and is on the verge of commanding."Spontaneity is not something that protects national security interests and so therefore when he speaks or when he reacts, just make sure he understands that the implications and impact on the United States could be profound," Brennan said."It's more than just about Mr. Trump. It's about the United States of America.""What I do find outrageous is equating intelligence community with Nazi Germany," Brennan said. "I do take great umbrage at that."Brennan also questioned the message it sends to the world if the president-elect broadcasts he does not have confidence in the United States' own intelligence agencies."The world is watching now what Trump says and listening very carefully.If he doesn’t have confidence in the intelligence community, what signal does that send to our partners and allies as well as our adversaries?" "There is no basis for Mr Trump to point fingers at the intelligence community for 'leaking' information that was already available publicly,"

US intelligence warns Israel and Britain about Trump -- The degree of paranoia within some parts of the US intelligence community about Donald Trump is best illustrated by what seem to be authoritative news reports that US spies have warned their Israeli counterparts against sharing Israeli secrets with Donald Trump’s administration lest it be leaked to the Russians. The clear implication is that some parts of the US intelligence community do genuinely believe that Trump is somehow under the Kremlin’s control, or that the Kremlin has leverage over him. The report by Ronen Bergman in Ynetnews reads as follows Donald Trump’s upcoming inauguration as the next president of the United States is causing Israeli intelligence officials to lose sleep as well. Discussions held in closed forums recently raised fears of a leakage of Israeli intelligence top-classified information, clandestine modus oprandi and sources, which have been exposed to the American intelligence community over the past 15 years, to Russia – and from there to Iran. The cause of concern are the suspicions of unreported ties between the president-elect or his associates and the Kremlin, whose agents are also associated with intelligence officials in Tehran. These fears, which began upon Trump’s election, grew stronger following a meeting held recently between Israeli and American intelligence officials (the date of the meeting is not mentioned to protect the sources of the report). During the meeting, according to the Israelis who participated in it, their American colleagues voiced despair over Trump’s election, as he often lashes out at the American intelligence community. The American officials also told the Israelis that the National Security Agency (NSA) had “highly credible information” that Russia’s intelligence agencies, the FSB and GRU, were responsible for hacking the Democratic Party (DNC) servers during the elections and leaking sensitive information to WikiLeaks, which hurt Democratic presidential candidate Hillary Clinton.

British Pol Claims Trump Marked for Assassination - – British politician George Galloway has warned Donald Trump the American deep state is engaged in a “soft coup d’etat” and the CIA is planning to assassinate him. “There is a clear and present danger on his life."   George Galloway is a somewhat popular but wildly leftist, English politician who says thing that other pols avoid. That's why it's no surprise that he is behind this assassination story.Galloway has been involved in the Iraq-oil-for-food controversy along with numerous other controversies and has been kicked out of the Labor party years ago for making statements against the Iraq war.His statements regarding a potential Trump assassination are similarly incendiary but like some other statements are, nonetheless, surely agreed to by some other British politicians and mainstream voters as well.If I were him, I wouldn’t be going near any grassy knolls. I wouldn’t be on any motorcades in Dallas. I wouldn’t be traveling in an open-top car. “I’d be very careful if I was Donald Trump about my personal security. I think I’d have to employ guards to guard the guards.“Galloway, who has served 31 years as an elected British Member of Parliament, also dismissed claims that Russia was interfering in US politics – and instead pointed the finger at British intelligence services.“It turns out it was Britain that was interfering in the US presidential elections – not Russia. At least I’ve seen no evidence the Russians were, but there is plenty of evidence emerging about the British role.

Will The CIA Assassinate Trump? Ron Paul Warns Of "More Powerful, Shadow Government" - It isn’t just that Donald Trump routinely thumbs his nose at the establishment, insults media figures he sees as unfair and bucks conventional wisdom. It is that President-elect Trump is defying the will of the deep state, military industrial complex base of ultimate power in the United States. That is why he is treading dangerous waters, and risks the fate of JFK. Trump publicly dissed the intelligence community assessments on Russian hacking; they retaliated with a made up dossier about the alleged Trump-Putin ‘golden shower’ episode. While it may be a silly falsehood, it may also be serving as a final warning that they get to script reality, not him.Perhaps they want Trump to feel blackmailed and controlled by alluding to fake dirt, while reminding him of the real dirt they hold on his activities (whatever it may be).Insulting the credibility of the intelligence community in a public way – as the man elected to the highest office in the land – is liable to ruffle a few feathers, and it could provoke a serious response.Trump knows the power of the people he is taunting, but he may not be aware of where the line is between play in political rhetoric and actually irritating and setting off those who control policy.There is plenty of Trump misbehavior that can be simply written off, or trivialized, but cutting into the war and statecraft narrative of the shadow government steering this deep state is a deviation too far.It is one thing to play captain, but another to imagine that you steer the ship. They are happy for Trump to take all the prestige and privileges of the office; but not for him to cut into the big business of foreign conflict, the undercurrent of all American affairs, the dealings in death, drugs, oil and weapons, and the control of people through a manipulation of these affairs. If President Trump takes his rogue populism too far, he will suffer the wrath of the same people who took out Kennedy… there are some things that are not tolerated by those who are really in charge.

Civil War Two Is Underway - What's Left In The CIA's Bag Of Tricks?Kunstler --  I dunno about you, but I rather enjoy watching the praetorian Deep State go batshit crazy as the day of Trump’s apotheosis approacheth. I imagine a lot of men and women running down the halls of Langley and the Pentagon and a hundred other secret operational redoubts with their hair on fire, wondering how on earth they can neutralize the fucker in the four days remaining. What’s left in their trick-bag?  Bake a poison cheesecake for the inaugural lunch? CIA Chief John Brennan has been reduced to blowing raspberries at the incoming president. Maybe some code cowboys In the Utah NSA fortress can find a way to crash all the markets on Friday as an inauguration present. What does it take? A few strategic HFT spoofs? There will be lots of police sharpshooters on the DC rooftops that day. What might go wrong?  Civil War Two is underway, with an interesting echo of Civil War One: Trump dissed Civil Rights sacred icon Georgia congressman John Lewis, descendant of slaves, after said icon castigated Trump as “not a legitimate president.” That now prompts a congressional walk-out of the swearing-in ceremony. The New York Times is acting like a Manhattan socialite in a divorce proceeding, with fresh hysterics every day, reminding readers in a front-page story on Monday that “[Martin Luther] King’s birthday falls within days of the birthdays of two Confederate generals, Robert E. Lee and Stonewall Jackson.” Jeez! Who you gonna call? Ghostbusters?There’s not much Trump can do until Friday noon except tweet out his tweets, but one can’t help but wonder what the Deep State can do after that magic moment passes. I’ve maintained for nearly a year that, if elected, Trump would be removed by a coup d’état within sixty days of assuming office, and I still think that’s a pretty good call — though I hope it doesn’t come to that, of course. My view of this was only confirmed by Trump’s performance at last week’s press conference, which seemed, shall we say, a little light on presidential decorum.Perhaps it befits this particular Deep State to go down in the manner of an opéra bouffe. History repeats itself, first as tragedy, then as farce, old Karl Marx observed. What does the Union stand for this time? The rights of former SEC employees to sell their services to CitiBank? The rights of competing pharma companies to jack the price of insulin up from $20 to $250 a vial? The rights of DIA subcontractors to sell Semtex plastic explosives to the “moderate” jihadis of the Middle East? So the theme of the moment is that Donald Trump is a bigger crook than the servants and vassals of the Deep State. He ran for president so he could sell more steaks and whiskey under the Trump brand. He’s in violation of the emoluments clause in the constitution. Well, I’m not aware that George Washington, Thomas Jefferson, James Madison, or Andrew Jackson put their slaves in a blind trust after they became president. Anyway, at this point in our history, nobody can beat the Deep State for financial turpitude, certainly not a single real estate and hotel magnate.

Head of MI6 used information from Trump dossier in first public speech | The Independent: The head of MI6 used information obtained by former officer Christopher Steele in his Trump investigation, in a warning against Russian cyberattacks and attempts to subvert Western democracies, The Independent has learned. Sir Alex Younger’s briefing notes for his first public speech as head of the Secret Intelligence Service contained some of the material supplied by Mr Steele, according to security sources. Drawing on the alleged hacking carried out by Moscow in the US presidential campaign, he warned of the danger facing Britain and Western European allies, and especially to elections due to be held next year. Security sources stress that MI6 had extensive information, British and international, on the Russian threat apart from that of Mr Steele. But they pointed out that he is held in high regard and the contribution he provided was valuable.In one of his recent tweets, Mr Trump described Mr Steele as a “failed spy”. He also claimed in another tweet that “James Clapper [director of national intelligence] called me yesterday to denounce the false and fictitious report that was illegally circulated. Made up, phony facts. Too bad!” Mr Steele had, in fact, a highly successful career in MI6, received a number of commendations and is highly regarded by both British and American intelligence agencies. Mr Clapper pointed out that what he had actually said was that the intelligence service “has not made any judgement that the information in this document is reliable”.

John Helmer: Parsing the Dossier on Trump’s Alleged Russian Bedroom Antics - Yves Smith - Yves here. For many, dismissals of the Trump “Golden Showers” dossier by Democratic-leaning experts like the one below from Lambert in Water Cooler is enough to put the matter to bed:  Bob Woodward on Trump/Russia dossier:  ”That is a garbage document.” …”Trump’s right to be upset about that." — on @FoxNewsSunday -  Jonathan Allen (@jonallendc) January 15, 2017   Nevertheless, I encourage readers, particularly ones who had a gander through the actual “report,” to read Helmer’s analysis. There are enough things that were obviously dodgy, including the former MI6 member Christopher Steele, who’d been hawking the dossier for quite some time, as to raise questions as to why the media legitimated it now, when its posture even when the Republican and Dems were looking for Trump oppo that it was too dubious to take up. Do be sure to read the last 1/4 of Helmer’s story, where he describes important differences between what the dossier claimed about Russian election-related propaganda efforts in the US versus what Clapper has said.  As Lambert has remarked, this is not the behavior of a confident elite.

Veteran U.S. Intelligence Officials Call for Russian ‘Hacking’ Proof - MEMORANDUM FOR: President Barack Obama FROM: Veteran Intelligence Professionals for Sanity (VIPS) - Donald Trump prepares to take the oath of office Friday, a pall hangs over his upcoming presidency amid an unprecedentedly concerted campaign to delegitimize it. Unconfirmed accusations continue to swirl alleging that Russian President Vladimir Putin authorized “Russian hacking” that helped put Mr. Trump in the White House. As President for a few more days, you have the power to demand concrete evidence of a link between the Russians and WikiLeaks, which published the bulk of the information in question. Lacking that evidence, the American people should be told that there is no fire under the smoke and mirrors of recent weeks. We urge you to authorize public release of any tangible evidence that takes us beyond the unsubstantiated, “we-assess” judgments by the intelligence agencies. Otherwise, we – as well as other skeptical Americans – will be left with the corrosive suspicion that the intense campaign of accusations is part of a wider attempt to discredit the Russians and those – like Mr. Trump – who wish to deal constructively with them. Remember the Maine? Alleged Russian interference has been labeled “an act of war” and Mr. Trump a “traitor.” But the “intelligence” served up to support those charges does not pass the smell test. Your press conference on Wednesday will give you a chance to respond more persuasively to NBC’s Peter Alexander’s challenge at the last one (on Dec. 16) “to show the proof [and], as they say, put your money where your mouth is and declassify some of the intelligence. …” You told Alexander you were reluctant to “compromise sources and methods.” We can understand that concern better than most Americans. We would remind you, though, that at critical junctures in the past, your predecessors made judicious decisions to give higher priority to buttressing the credibility of U.S. intelligence-based policy than to protecting sources and methods. With the Kremlin widely accused by politicians and pundits of “an act of war,” this is the kind of textbook case in which you might seriously consider taking special pains to substantiate serious allegations with hard intelligence – if there is any.

Russian sex workers are world’s best, boasts Putin -- Putin bragged that Russian prostitutes were “without question the best in the world” yesterday but said he doubted that Donald Trump had succumbed to their temptations. Mr Putin poured scorn on claims that the US president-elect took part in a hotel sex party with two Russian prostitutes in 2013 as secret agents collected “kompromat” material that could be used for blackmail. “The masterminds of fakes, the nature of which are presently being spread against the US president-elect, [are] worse than prostitutes — they have no moral limits,” Mr Putin said in Moscow. Their “political struggle” demonstrated “a significant level of degradation of political elites in the West, including the US”, he added. The allegations were revealed last week in a dossier compiled by Christopher Steele, a former MI6 officer. They were denied by Mr Trump, who said that he was a germaphobe. Mr Putin said that prostitutes were women of “low social responsibility” and he doubted that Mr Trump “took the bait”. The dossier claimed that Mr Trump had asked prostitutes to urinate on a bed in his suite at the Ritz Carlton, believing it was once used by President Obama and his wife, Michelle. He was in the city for a Miss Universe pageant. “When Trump came to Moscow . . . he wasn’t any kind of political figure, we didn’t even know about his political ambitions,” Mr Putin said. “He was just a businessman, one of the richest people in America. Does someone think the special services run around after every American billionaire? Of course not, that’s total nonsense. “Secondly: [the idea that] Trump arrived and straight away ran to meet up with some Moscow prostitutes. This is an adult person and a person who has spent many years organising beauty contests. He spent time with the most beautiful women in the world. I find it hard to imagine that he ran to a hotel to meet with our girls ‘of low social responsibility’. They are without question the best in the world but I doubt Trump took the bait.”

Brennan Makes Even Crazier Plausible Deniability Claims about Trump Dossier - Marcy Wheeler- As I have laid out, the intelligence community has been making some odd claims about the Trump dossier. First, James Clapper claimed that the IC was the last to learn of the dossier, in spite of the fact that IC member FBI was getting the reports at least by August and probably earlier. Then, Sunday, John Brennan claimed the IC couldn’t be held responsible for leaking the dossier (though without denying that the IC had leaked it), because the dossier had already been out there; except the dossier — released with a report that post-dates all known public versions of the dossier — therefore post-dates what “was already out there.”  Brennan’s back with yet another claim, this in response to Trump’s insinuation that Brennan might have leaked it: Brennan claimed he has never read the dossier.“Was I a leaker of this? No,” Mr. Brennan said Monday in an interview at CIA headquarters, days before he ends a career that has spanned more than three decades and that took him from entry-level recruit to head of the nation’s most storied spy service.“First of all, this is not intelligence community information,” Mr. Brennan said. He noted that the dossier had been circulating “many months” and that he first heard about it from inquiring reporters last fall. To date, he hasn’t read the document and gave it no particular credence, he said.“I would have no interest in trying to give that dossier any additional airtime,” Mr. Brennan said. I mean, sure, you’re conducting one of the most sensitive briefings of recent history. The briefers here are all principals — along with Brennan and Clapper, Admiral Mike Rogers and Jim Comey. And you don’t even read the stuff that goes into it? You don’t review the underlying dossier that, you claim, you’re briefing just so Trump knows what the Russians have on him?

Obama Parting Shot Aims At Brennan, Clapper, Clinton: “The DNC Emails Were Leaked” -  Three U.S. Intelligence Agencies (CIA, NSA and FBI) claim that IT-Systems of the Democratic National Committee were "hacked" in an operation related to the Russian government. They assert that emails copied during the "hack" were transferred by Russian government related hackers to Wikileaks which then published them. President Obama disagrees. He says those emails were "leaked".Wikileaks had insisted that the emails it published came from an insider source not from any government. The DNC emails proved that the supposedly neutral Democratic Party committee had manipulated the primary presidential elections in favor of the later candidate Hillary Clinton. This made it impossible for the alternative candidate Bernie Sanders to win the nomination. Hillory Clinton, who had extremely high unfavorable ratings, lost the final elections.The President of the United States disagrees with those Intelligence Services. He says that the DNC emails were "leaked", i.e. copied by an insider, and then transferred to Wikileaks. (At the time around the leaking the DNC IT-administrator Seth Rich was found murdered for no apparent reason in the streets of Washington DC. The murder case was never solved.)Here is President Obama in his final press conference yesterday (vid @8:31): First of all, I haven't commented on WikiLeaks, generally. The conclusions of the intelligence community with respect to the Russian hacking were not conclusive as to whether Wikileaks was witting or not in being the conduit through which we heard about the DNC emails that were leakedThe DNC emails "that were leaked" - not "hacked" or "stolen" but "leaked".

Obama Makes Incredible Admission About WikiLeaks In Final Press Conference - President Barack Obama’s last press conference was a success, but only if you consider journalistic incompetence worthy of praise. During the one-hour affair, Obama answered questions ranging from the commutation of whistleblower Chelsea Manning’s sentence to personal queries concerning his and First Lady Michelle Obama’s approach when talking to their daughters about the 2016 election — not quite a hard-hitting last inquiry for an outgoing president who, as the Los Angeles Times recently noted, managed to keep U.S. military forces “at war for all eight years of [his] tenure.”But despite the media’s toothless strategy — showing the established press doesn’t understand its own role in a free society — the outgoing president made at least one admission most of the media has also ignored. Around the eight-minute mark of the press conference, Obama says he hasn’t “commented on WikiLeaks generally,” and that the “conclusions of the intelligence community with respect to the Russian hacking were not conclusive as to whether WikiLeaks was witting or not in being the conduit through which we heard about the [Democratic National Committee] DNC e-mails that were leaked.”   To Craig Murray, an author, broadcaster, and human rights activist, Obama’s comment clarified that the U.S. government hasno evidence of how WikiLeaks got the DNC material.”   Obama’s statement is important, Murray continues, because it “undermines the stream of completely evidence-free nonsense that has been emerging from the [U.S.] intelligence services this last two months, in which a series of suppositions have been strung together to make unfounded assertions that have been repeated again and again in the mainstream media.” Referring to the emails “that were leaked” and not the servers that were hacked, Murray adds, Obama appears to agree with several experts on this subject, making it clear the entire ordeal revolving around the alleged Russian interference in the 2016 presidential election is but a smokescreen.

DOJ Ordered To Preserve Gmail Records Of Clinton-Colluding Assistant AG Peter Kadzik --A Judicial Watch lawsuit seeking records related to potential collusion between the Justice Department and Hillary Clinton operatives during her email investigation has resulted in a federal judge issuing a rare order instructing the DOJ to preserve the Gmail records of the now infamous Assistant Attorney General Peter Kadzik.  The order came from U.S. District Court Judge Emmet Sullivan, a Clinton appointee, and gave the DOJ until this morning to report back on steps taken to preserve the personal email accounts of Kadzik.  Per Politico:"Defendant shall take all necessary and reasonable steps to ensure the preservation of all agency records and potential agency records between the dates of December 1, 2014 and November 7, 2016 in any personal email account of Assistant Attorney General for Legislative Affairs Peter Kadzik. Any question about whether a record is an agency record shall be resolved in favor of it being an agency record." Of course, as we pointed out back in the fall, various emails provided by WikiLeaks exposed Kadzik repeatedly colluding with the Clinton campaign by providing campaign manager, and long-time friend, John Podesta with inside information on the DOJ's investigation of Hillary's email scandal.  Moreover, proving just how close they were, in aSept. 2008 email, Podesta emailed an Obama campaign official to recommend Kadzik for a supportive role in the campaign saying that Kadzik was a “fantastic lawyer” who “kept me out of jail” that's a bond that lasts.

Boom: Trump eyes 10% spending cuts, 20% slash of federal workers --Making good on a promise to slash government, President-elect Trump has asked his incoming team to pursue spending and staffing cuts.Insiders said that the spending reductions in some departments could go as high as 10 percent and staff cuts to 20 percent, numbers that would rock Washington if he follows through.At least two so-called "landing teams" in Cabinet agencies have relayed the call for cuts as part of their marching orders to shrink the flab in government.The cuts would target discretionary spending, not mandated programs such as Medicare or Social Security, the sources said. The spending reductions are expected to be used to help pay for Trump's plan to boost the Pentagon's budget, tax cuts and some pet projects, potentially including the anti-immigration wall on the nation's southern border.The teams also are looking at staffing cuts over four years through attrition, a hiring freeze and reorganization.The plan is winning cheers in conservative, anti-tax and anti-spending corners in Washington that have long sought massive cuts in the bureaucracy.Presidents rarely cut spending, choosing freezes instead. In the meantime, federal spending has reached historic levels. Trump has picked a budget hawk, Rep. Mick Mulvaney, to head the Office of Management and Budget, a clear sign that spending cuts are a top priority.  Still, Trump is likely to face a wall of opposition from Democrats and federal unions who consider much of the federal workforce on their side.

Trump to Meet Boeing CEO a Second Time Over Air Force One, Says Source - Boeing Co. Chief Executive Officer Dennis Muilenburg will meet for the second time since the election with President-elect Donald Trump on Tuesday to discuss his company’s contract to build the next-generation version of Air Force One, the main presidential aircraft, according to a person familiar with plans to hold the meeting. The person, who asked not to be identified discussing a private meeting, didn’t have details on which aspect of the plane would be discussed. Trump shook the defense industry -- and put all large U.S. companies with government contracts on notice -- when he tweeted Dec. 6 that “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!” In the wake of that comment, Muilenburg vowed that Chicago-based Boeing could build a new version of Air Force One for less than $4 billion. “We’re going to get it done for less than that, and we’re committed to working together to make sure that happens,” Muilenburg said as he left the president-elect’s Mar-a-Lago resort in Florida last month. Muilenburg said he gave Trump his “personal commitment on behalf of the Boeing Company.”

Trump wants to manage the economy by running every business - Heidi Moore - If the economy is ever going to improve, President Trump is just going to have to do it himself. That, at least, seems to be Trump’s guiding principle as chief executive of the United States. Previous presidents used the office as a bully pulpit to talk about what should be done, in general macroeconomic terms. Trump, instead, is pursuing the ultimate in ultra-microeconomics; he acts like he wants to walk into the boardrooms of major corporations and tell them how they should be run, how many people they should hire and where. His method: Persuade executives to appease him personally and allow him to take credit for their job creation, in a kind of modern economic version of droit de seigneur. He praises the companies that help his interests and shames the ones whose executives express concerns about his erratic leadership or vague policies on free trade, health care or defense. The result: All major U.S. corporations are now in the customer service business, and Trump is their main customer. But Trump’s apparent understanding of the president’s duties on economic policy — that he should micromanage every part of it personally — can’t end well for workers, employers or stockholders. It can’t even end well for Trump, who will find out soon that his technique is limited and that he’s more likely to burn out than to make any kind of dent.

Trump Team Shunning Davos Meeting of World’s Economic Elite - Donald Trump won’t send an official representative to the annual gathering of the world’s economic elite in Davos, taking place next week in the days leading up to his inauguration, although one of the president-elect’s advisers is slated to attend. Former Goldman Sachs President Gary Cohn, a regular attendee in the past, told the group he would skip 2017 after being named in December to head the National Economic Council, said people familiar with the conference. Other top Trump appointees will also pass up the forum. A senior member of Trump’s transition team said the president-elect thought it would betray his populist-fueled movement to have a presence at the high-powered annual gathering in the Swiss Alps. The gathering of millionaires, billionaires, political leaders and celebrities represents the power structure that fueled the populist anger that helped Trump win the election, said the person, who asked for anonymity to discuss the matter. Hedge fund manager Anthony Scaramucci is planning to travel to Davos, though. The founder of SkyBridge Capital and an early backer of Trump’s campaign, Scaramucci was named on Thursday as an assistant to the president.Scaramucci, who has attended the forum several times, made plans before being selected for the White House team and is traveling in an unofficial capacity, said Trump spokeswoman Hope Hicks. The forum schedule lists him on a Jan. 17 panel that will cover “the priorities, challenges and opportunities for the incoming government of the United States,” and identifies him as an executive member of Trump’s transition team.

Live From Davos: Ray Dalio, Christine Lagarde And Larry Summers Discuss How To Fix The "Middle Class Crisis" - How do you know with certainty that Davos has not only jumped the shark, but has become a parody of itself? One answer: when you have a handful of semi, and not so semi, billionaires - perplexed by the populist backlash of the past year - sit down and discuss among each other how a "Squeezed and Angry" middle-class should be fixed. As Davos puts it, "once the lynchpin of developed economies, it’s now threatened by job losses and stagnant wages, paving the way for the rise of populism. In emerging markets, middle class growth rates are stalling. Have middle class problems been forgotten?" It asks rhetorically "What can be done?"Apparently the answer is to have three people completely disconnected from the real world, sit down and provide "answers.":In this session, starting at 0800 GMT, IMF Managing Director Christine Lagarde, Italian Finance Minister Pier Carlo Padoan and Founder, Chairman and Co-CIO of Bridgewater Associates, Ray Dalio, discuss what's needed to restore growth in the middle class and confidence in the future.And then they wonder why the annual Davos echo chamber boondoggle has become not only a global farce, but a symbol of everything that is wrong with globalization today... Watch it live below..

Davos Elites Call For a Ban on Physical Cash... in the US. - Roughly two weeks ago, when writing about the cash ban in India, I stated: If you think the Elites aren’t watching this unfold with sheer delight you’re mistaken. Globally a war on cash has been declared. And India has now proved that it can be done with little consequence. The fact it INCREASE tax hauls (something every Government on the planet wants) is just icing on the cake.Fast forward to this week at the Davos Economic Forum in Davos Switzerland, and Nobel Prize winning economist Joseph Stiglitz all but said the exact same thing. Indian Prime Minister Narendra Modi has already removed 86% of his country's currency from circulation in an attempt to curb tax evasion, tackle corruption and shut down the shadow economy.Should the US follow suit? Joseph Stiglitz, Nobel Prize-winning economist, thinks so. Phasing out currency and moving towards a digital economy would, over the long term, have “benefits that outweigh the cost,” the Columbia University professor said on day one of the World Economic Forum's Annual Meeting in Davos…“I believe very strongly that countries like the United States could and should move to a digital currency,” he said, “so that you would have the ability to trace this kind of corruption. There are important issues of privacy, cyber-security, but it would certainly have big advantages.” Again… the War on Cash is not slowing down. India effectively removed 86% of the physical cash in circulation and no one was forced to resign. Put simply, India signaled to the global elites that you can implement a near complete ban on physical cash, and there are no real consequences as far as political aspirations.

These 8 Men Have As Much Money As Half The World --Just eight super-rich men hold the same amount of wealth as the poorest half of the world’s population, according to an analysis from the charity Oxfam released Sunday night.  Six of these billionaires, from Forbes’ list of the world’s richest people, are American entrepreneurs: Microsoft co-founder Bill Gates, Berkshire Hathaway chairman and CEO Warren Buffett, Amazon founder and CEO Jeff Bezos, Oracle co-founder Larry Ellison, former New York Mayor Michael Bloomberg and Facebook founder and CEO Mark Zuckerberg. Rounding out the list are Carlos Slim, the Mexican tycoon, and Amancio Ortega, the Spanish founder of a retail conglomerate that includes clothing chain Zara. Together their net wealth ― assets minus debts ― amounts to $426 billion. We cannot name the bottom half of humanity, more than 3.6 billion people, with that kind of precision, but they mostly live in the developing world. Worsening inequality threatens to upend the very fabric that’s held democracies together in the post-World War II global order. In the United States, the widening gulf between the rich and everyone else helped propel Donald Trump into office. Overseas, the trend is credited with sparking Brexit, the U.K.’s vote to leave the European Union. “Left unchecked, growing inequality threatens to pull our societies apart,” Oxfam writes in its report, citing Brexit, Trump’s campaign and “a worrying rise in racism and the widespread disillusionment with mainstream politics.”   In 2016, the richest 1 percent of the world held slightly more than half of the wealth of the entire planet, Oxfam notes. And the 1,810 billionaires on Forbes’s list ― 89 percent male ― hold $6.5 trillion, as much wealth as 70 percent of humanity. Put another way, billions of people are fighting over crumbs from half of a pie, while the rich dig into fat slices all to themselves.

Trump Has 6 Goldman Appointees- Swamp Drains You -- Trump is the car salesman dripping in gold that attracts a certain type of car buyer, the status seeker. Maybe if I buy from him, I'll be like him. Hillary is worse. At least Trump is transparent about his narcissism. Here's the thing, people are slowly catching on to the lies that systems perpetuate on people by co-opting leaders. The people know now that Wall Street is about money first, and service second. People are beginning to sense that Obama was not an instrument of change. The Hillary and DNC emails should have stripped voters' political delusions. Sadly that didn't happen. The power of denial is strong Liberals are now the new bitter-clingers. They hug their idealistic but inflexible beliefs in globalism and a premature Kumbaya world. This is exactly how Obama described the right. He called them bitter-clingers to guns and G-d.  Meanwhile a whole generation of Republicans actually thinks  Trump is the answer to their prayers of hope and change. Wake up. Trump is so happy he's on the inside now. He's the Howard Stern of finance/politics. Ranting to be let in. Then kissing the ring of the ones who made campaign contributions to Hillary.  Trump Now has 6 Goldman Appointees:

  1. Bannon – Sr. Adviser
  2. Scaramucci – Adviser
  3. Mnuchin – Treasury
  4. Powell – Counselor
  5. Cohn – NEC
  6. Clayton – SEC

Goldman Sachs is a fraternal culture.  You never really "leave" Goldman, just like there are no EX-Marines. So the question any reasonable person should be asking is "Why so many Goldman people?"  The answer is we believe right now Trump and GS are building a symbiotic relationship. They are trading debt for influence via soft dollar transactions. But we have no factual evidence. We are not journalists with the resources to prove this. But there is plenty of history to tell. If there is a real journalist out there who isn't worried about getting fired for taking the time to investigate a conflicted POTUS and an opportunistic bank with an amoral behavioral pattern now is the time to look. Not 4 years from now.

Inauguration boycott grows as Donald Trump meets Martin Luther King III - More than 30 members of Congress will boycott Donald Trump’s inauguration on Friday, amid escalating outrage over alleged connections between the president-elect’s team and Russia and disparaging remarks about civil rights veteran John Lewis. As the US marked its national holiday honoring Martin Luther King Jr on Monday, the number of Democrats pledging to shun Friday’s ceremony and celebrations rose. Keith Ellison, the first Muslim elected to Congress and a candidate for chair of the Democratic National Committee, joined them. Their extraordinary step was praised by progressive leaders. A little before 1pm, however, Martin Luther King III, the oldest child of Martin Luther King Jr, arrived at Trump Tower in New York to meet the president-elect. Around 50 minutes later, King emerged from the building’s elevators and spoke to reporters. Asked why he had met Trump, who did not talk to the press but was seen shaking his guest’s hand, he said it was a constructive meeting and added: “We have got to move forward.” King and William Wachtel, a New York lawyer, said they spoke to Trump about voter participation and how to carry forward King’s father’s legacy by making it “easier for everyone to vote”. “President-elect Trump has committed to working with us,” Wachtel said. In 2013, a supreme court decision struck down key elements of the 1965 Voting Rights Act, a central achievement of the civil rights movement designed to protect minority voters. “This president may well” be in adherence with the spirit of the Voting Rights Act “and once again make it easy for all Americans to vote”, Wachtel said.

China urges U.S. to bar Taiwan delegation from Trump inauguration | Reuters: The United States should not allow a delegation from Taiwan to attend U.S. President-elect Donald Trump's inauguration, China's Foreign Ministry said on Wednesday, raising a new bone of contention in Beijing's relations with the incoming government. Trump broke with decades of precedent last month by taking a congratulatory telephone call from Taiwan President Tsai Ing-wen, and he has also said the "One China" policy was up for negotiation, a position Beijing strongly rejected. A Taiwan delegation, led by former premier and ex-ruling party leader Yu Shyi-kun, and including a Taiwan national security adviser and some lawmakers, will attend Friday's inauguration, Taiwan's Foreign Ministry said this week. It is typical for Taiwan to send a delegation to U.S. presidential inaugurations. A spokesman for Taiwan President Tsai Ing-wen's office said no meetings were scheduled with the new Trump administration while the delegation was there for the event. China considers Taiwan a breakaway province, with no right to have any kind of diplomatic relations with other countries.

Trump's 'beachhead' teams primed to grab agencies' reins at noon Friday  - At 12:01 p.m. Friday, Donald Trump’s aides will deploy a team of temporary political appointees into federal agencies to begin laying the groundwork for the president-elect’s agenda while his nominees await Senate confirmation, sources familiar with the plan told POLITICO. While the transition team has been building the so-called beachhead teams for months, they are taking on outsize importance because few of Trump’s nominees will be confirmed by the time he’s sworn in. Trump’s transition has instructed members of the beachhead teams to skip the inauguration and be at their desks the moment he is sworn in, sources close to the transition said.  Trump transition spokeswoman Jessica Ditto disputed that beachhead members were given instructions that would require them to miss the inauguration.  "We have approximately 520 individuals on the beachhead teams and they have worked with the agencies to go in any time after 12:01 [p.m.] on Friday — each team has worked out their own timing," she said in an email. "These individuals are honored to help the Trump Administration on Day 1 and are ready to serve our country." Beachhead members will get badges just like any other federal employee and begin to take over the agencies, said Max Stier, president and CEO of the nonpartisan Partnership for Public Service, which advises incoming administrations on transitions. The goal is to ensure a smooth transfer of power not just at the White House, but at crucial federal agencies as well.

Trump team prepares dramatic cuts | The Hill - Trump is ready to take an ax to government spending. Staffers for the Trump transition team have been meeting with career staff at the White House ahead of Friday’s presidential inauguration to outline their plans for shrinking the federal bureaucracy, The Hill has learned. The changes they propose are dramatic. The departments of Commerce and Energy would see major reductions in funding, with programs under their jurisdiction either being eliminated or transferred to other agencies. The departments of Transportation, Justice and State would see significant cuts and program eliminations. The Corporation for Public Broadcasting would be privatized, while the National Endowment for the Arts and National Endowment for the Humanities would be eliminated entirely. Overall, the blueprint being used by Trump’s team would reduce federal spending by $10.5 trillion over 10 years. The proposed cuts hew closely to a blueprint published last year by the conservative Heritage Foundation, a think tank that has helped staff the Trump transition. Similar proposals have in the past won support from Republicans in the House and Senate, who believe they have an opportunity to truly tackle spending after years of warnings about the rising debt. Many of the specific cuts were included in the 2017 budget adopted by the conservative Republican Study Committee (RSC), a caucus that represents a majority of House Republicans. The RSC budget plan would reduce federal spending by $8.6 trillion over the next decade.

Trump Team Preparing "Dramatic Cuts To Government Spending" --According to a report from The Hill this morning, President-elect Trump's transition team is already working with career staff at the White House on plans to slash federal spending.  The Hill reports that significant cuts are expected to the budgets of the Department of Commerce, Energy, Transportation, Justice and State, among others, and would total $10.5 trillion over 10 years.The departments of Commerce and Energy would see major reductions in funding, with programs under their jurisdiction either being eliminated or transferred to other agencies. The departments of Transportation, Justice and State would see significant cuts and program eliminations.The Corporation for Public Broadcasting would be privatized, while the National Endowment for the Arts and National Endowment for the Humanities would be eliminated entirely. Overall, the blueprint being used by Trump’s team would reduce federal spending by $10.5 trillion over 10 years.  While details are scarce now, a 200 page "skinny budget" document is expected to be released within the first 45 days of Trump's administration with a "full budget" to be released toward the end of his first 100 days in office.Two members of Trump’s transition team are discussing the cuts at the White House budget office: Russ Vought, a former aide to Vice President-elect Mike Pence and the former executive director of the RSC, and John Gray, who previously worked for Pence, Sen. Rand Paul (R-Ky.) and Speaker Paul Ryan (R-Wis.) when Ryan headed the House Budget Committee.Vought and Gray, who both worked for the Heritage Foundation, are laying the groundwork for the so-called skinny budget — a 175- to 200-page document that will spell out the main priorities of the incoming Trump administration, along with summary tables. That document is expected to come out within 45 days of Trump taking office. The administration’s full budget, including appropriations language, supplementary materials and long-term analysis, is expected to be released toward the end of Trump’s first 100 days in office, or by mid- to late April.

Executive actions ready to go as Trump prepares to take office | Reuters -  Donald Trump is preparing to sign executive actions on his first day in the White House on Friday to take the opening steps to crack down on immigration, build a wall on the U.S.-Mexican border and roll back outgoing President Barack Obama's policies. Trump, a Republican elected on Nov. 8 to succeed Democrat Obama, arrived in Washington on a military plane with his family a day before he will be sworn in during a ceremony at the U.S. Capitol. Aides said Trump would not wait to wield one of the most powerful tools of his office, the presidential pen, to sign several executive actions that can be implemented without the input of Congress. "He is committed to not just Day 1, but Day 2, Day 3 of enacting an agenda of real change, and I think that you're going to see that in the days and weeks to come," Trump spokesman Sean Spicer said on Thursday, telling reporters to expect activity on Friday, during the weekend and early next week.Trump's advisers vetted more than 200 potential executive orders for him to consider signing on healthcare, climate policy, immigration, energy and numerous other issues, but it was not clear how many orders he would initially approve, according to a member of the Trump transition team who was not authorized to talk to the press. Signing off on orders puts Trump, who has presided over a sprawling business empire but has never before held public office, in a familiar place similar to the CEO role that made him famous, and will give him some early victories before he has to turn to the lumbering process of getting Congress to pass bills. The strategy has been used by other presidents, including Obama, in their first few weeks in office.

Trump promised to do these 10 things on his first day as president  — Behind in the polls in late October, Donald Trump ventured to Gettysburg, Pennsylvania, to give American voters a “contract” detailing what he would achieve during his first day in office. Beneath a list of 18 major actions was the flourish of Trump’s familiar signature and a blank space for voters to sign. But as Trump becomes president on Friday, it remains hazy as to which actions he will immediately take. The list included several items likely to fire up Republican voters but backed up by scant policy. It includes “begin removing the more than 2 million criminal illegal immigrants” and “cancel every unconstitutional executive action … by President Obama.” Trump has already backed down from one pledge to label China a currency manipulator, recently saying he would first like to speak with the Chinese leadership.A look at 10 of the key promises Trump made for his first day as president:

  • –Introduce a constitutional amendment for congressional term limits.
  • –Freeze hiring for the federal government to reduce payrolls, although the military, public safety and public health agencies would be exempt.
  • –Ban White House and congressional officials from becoming lobbyists for five years after they leave the government.
  • –Announce plans to renegotiate the North American Free Trade Agreement with Canada and Mexico or withdraw from the deal.
  • –Formally withdraw from the Trans-Pacific Partnership.
  • –Lift restrictions on mining coal and drilling for oil and natural gas.
  • –Remove any Obama-era roadblocks to energy projects such as the Keystone XL pipeline.
  • –Cancel U.S. payments to U.N. climate change programs and redirect the money to U.S. water and environmental infrastructure.
  • –Stop all federal funding to “sanctuary cities,” places where local officials don’t arrest or detain immigrants living in the country illegally for federal authorities.
  • –Suspend immigration from regions associated with terrorism where vetting is difficult.

Will Trump follow through on all his Day One promises?  Doesn’t Look Like It. - In rally after rally, and speech upon speech, Donald Trump built a verbal skyscraper of campaign promises about what he would do on his first day in the White House.Begin building a wall at the nation’s southern border. End the “war on coal.” Label China a currency manipulator. The list went on and on.   But now, as Trump prepares to take the oath of office Friday, his Day One executive actions and policy plans are a closely held secret, another prop in the Donald Trump show waiting to be unveiled with his trademark flourish and fanfare. And, his aides are playing down how much will be done during that first day, while also sending conflicting signals about whether the real work of governing will begin Friday, when Trump officially becomes president, or Monday, his first full workday in the White House. Incoming White House press secretary Sean Spicer said that Trump will probably sign four or five executive actions on Friday, mainly focused on logistics and government operations, with more coming Monday. Asked Thursday about Trump’s coming executive actions, Spicer declined to give specifics, but he mentioned President Obama’s health-care law, the fight against the Islamic State and immigration as “key issues” important to Trump. “He is committed to not just Day One, but Day Two, Day Three, of enacting an agenda of real change,” Spicer told reporters. “And I think that you’re going to see that in the days and weeks to come.” Regardless of what happens on Day One, advisers to the president-elect and others close to the transition process say that Trump will act quickly in the early days of his administration. His initial plans are to undo many of Obama’s executive actions and begin rolling back regulations, especially those that he believes are financially burdensome. At least to start, the advisers said, Trump will focus more on unraveling the past eight years of the outgoing administration than on launching a new vision.

5 takeaways from Trump’s inaugural address --  Donald Trump’s first words to the American people as President of the United States were delivered in a punchy, populist, 16-minute-short campaign rallying cry-turned-inaugural address that wrapped up as he pumped his fist in the air in victory and vowed to “Make America Great Again." Here are five takeaways from Trump’s sui generis Inauguration Day.

  • There is no pivot. He didn’t become “more presidential” when he clinched the Republican nomination. And he didn’t discover an off-ramp to the high road after he won the election last November in the upset of a lifetime. If you punched him during the transition, the president-elect still punched back. But what happened on Friday makes it official: vintage Trump is presidential Trump.
  • Trump is still saying he’ll drain the swamp. Trump framed his inaugural address in us-against-them terms, pitting hardworking Americans versus the Washington establishment. “For too long, a small group in our nation's capital has reaped the rewards of government, while the people have borne the cost,” Trump said. “Washington flourished, but the people did not share in its wealth. Politicians prospered, but the jobs left and the factories closed. The establishment protected itself, but not the citizens of our country.”
  • Crowd Size: Small. On Friday, the sea of red caps on the Mall celebrating Trump’s swearing-in didn’t stretch past the Smithsonian. Bleachers along the parade route from the Capitol to the White House sat empty. Despite Trump’s bragging that all the ball gowns in Washington, D.C. were sold out there were, in fact, dresses on the racks available, and there were plenty of vacant hotel rooms in the nation’s capital.
  • In the end, the most powerful Democrats showed up.  More than 60 Democratic House members stayed home.But at the end of the day, the big names showed. Trump’s defeated Democratic rival, former Secretary of State Hillary Clinton, was grinning and bearing the experience in her seat next to former President Bill Clinton. House Democratic Leader Nancy Pelosi and former DNC chair Rep. Debbie Wasserman-Schultz (D-Fla.) all showed up to support the peaceful transition of power and try to project a brave face of unity.
  • He bought the car. He owns it now. Reality comes at you fast. President Trump sat down Friday afternoon to sign three bills: he signed into law a bill that will allow retired Gen. James Mattis to serve as Defense Secretary; a proclamation for a national day of patriotism; as well as official documents sealing the deal that he is now president.

President Trump’s speech puts the world on notice - Ed Luce, Financial Times - In case there were any lingering doubts about the sincerity of Donald Trump’s “America First” campaign, he laid those to rest the moment he swore the oath of office. His brief inaugural address was perhaps the most xenophobic in US history.  The 45th president’s one specific foreign policy promise was to eradicate Islamist terrorism “from the face of the earth”. His only other message to the rest of the world was to put it on notice that America would take precedence again after an age in which the US had “defended other nations’ borders” and subsidised their armies. That age was over, he said. “I will fight for you with every breath that I have,” he promised America. “We will follow two simple rules: buy American and hire Americans.” The rest of the world should be on notice. Mr Trump intends to rip up the US-created global order. His address will go down as a turning point in America’s postwar role — and quite possibly its death knell.The contrast with Barack Obama’s inaugural address in 2009, in which he promised Iran he would “extend a hand if you are willing to unclench your fist”, was Manichean. Mr Obama spoke to a snow-filled scene of up to 2m people — something that Steven Spielberg said would have been impossible to set up for a movie. Mr Trump spoke to crowds a fraction of that size on a dreary Washington day.  That should perhaps be no surprise. He comes into office with the lowest approval ratings of any US president in modern history — twenty or so points below what is typical, and considerably below Mr Obama’s outgoing ratings. Unlike Mr Obama, he will inherit an economy in reasonable shape and no large scale US military wars. But the biggest contrast was in their tones. Mr Obama radiated hope. Mr Trump channelled rage.

The Trump Administration’s Regulatory Reform Options – President-elect Donald Trump’s regulatory agenda is no secret, but precisely how he can go about enacting it is less obvious. According to his campaign website, President-elect Trump’s regulatory goals include eliminating the country’s “most intrusive regulations.” The site specifically mentions the EPA’s Clean Power Plan and states that the Administration intends to reform “the entire regulatory code” in an effort to keep jobs in America. Other goals include reducing the size of an “already bloated government” after conducting “a thorough agency review” and creating a rule that would require the elimination of two regulations every time a new one is issued. The President-elect has even gone as far as asserting seventy percent of regulations can be cut. So, how do President-elect Trump and the new Congress go about eliminating regulations? The answer to that question may depend upon the precise form of each targeted regulation. Three of the tools that will be available for eliminating regulations are the Congressional Review Act (CRA), the rulemaking procedures in the Administrative Procedure Act (APA), and legislative repeal. The CRA allows Congress to invalidate certain rules by passing a Joint Resolution of disapproval. The CRA can be used to invalidate both major rules—those that are likely to have “an annual effect on the economy of $100 million or more”—and non-major rules. The procedures are largely the same for major and non-major rules, but invoking CRA procedures for a major rule can change the date the rule goes into effect. Importantly, if certain steps are followed, the expedited procedures under the CRA are not subject to filibuster in the U.S. Senate. Provided that the Joint Resolution is passed by both houses of Congress and signed by President-elect Trump within the first 60 days after the 15th business day of the new Congressional session, the rule is rescinded and the agency may not issue a similar regulation without new authorizing legislation.

 A Trump Administration, With Obama Staff Members Filling In the Gaps — Donald J. Trump arrived in Washington the day before his inauguration as the nation’s 45th president in a swirl of cinematic pageantry but facing serious questions about whether his chaotic transition has left critical parts of the government dangerously short-handed.  Mr. Trump will be sworn in at noon Eastern time on Friday, but his team was still scrambling to fill key administration posts when he got here on Thursday, announcing last-minute plans to retain 50 essential State Department and national security officials currently working in the Obama administration to ensure “continuity of government,” according to Sean Spicer, the incoming White House press secretary. The furious final staff preparations included designating Thomas A. Shannon Jr., an Obama appointee, as the acting secretary of state, pending the expected confirmation of Rex W. Tillerson. As of Thursday, only two of Mr. Trump’s 15 cabinet nomineesJohn F. Kelly, to head the Department of Homeland Security, and his nominee for defense secretary, Gen. James N. Mattis — had been approved by congressional committees and were close to assuming their posts. In all, Mr. Trump has named only 29 of his 660 executive department appointments, according to the Partnership for Public Service, which has been tracking the process. That is a pace far slower than recent predecessors, falling far short of the schedule originally outlined by Gov. Chris Christie of New Jersey, who was Mr. Trump’s transition director before Mr. Trump ousted him 10 weeks ago. None of this seemed to bother Mr. Trump. After arriving from New York, the president-elect trod solemnly down red-carpeted stairs from a government plane at Joint Base Andrews with his wife, Melania, then sped off to deliver a speech at a reception held at his ornate new hotel near the White House. There, he declared, with typical bluster, that his cabinet nominees had “by far the highest I.Q. of any cabinet assembled.”

Senate Confirms Mattis (Defense) & Kelly (Homeland) On Trump's First Day -- Just hours after President Trump was sworn into office, amid Chuck Schumer's jabs over HUD, the Senate has confirmed retired Marine General James Mattis as defense secretary and retired Marine General John Kelly as homeland security secretary. They were both expected to be confirmed easily, and were, but Democrats promised fights over several other nominees.  Mattis was the first to be confirmed by a vote of 98 to 1... (as The Hill reports) The Senate on Friday easily confirmed James Mattis to be President Trump’s secretary of Defense, hours after Trump’s inauguration. Mattis, a retired Marine general who most recently served as commander of U.S. Central Command, is highly respected by both Republicans and Democrats for his military service.He retired from the military in 2013, meaning he needed a waiver to bypass a law that says Defense secretaries must be out of uniform for at least seven years.Congress easily passed the waiver last week, and Trump signed the waiver legislation as his first act as president.Some Democrats had expressed concern about granting Mattis the waiver,citing the need to maintain civilian control of the military. But the concerns were not enough to prevent Mattis from becoming Pentagon chief. Followed shortly afterwards by Kelly... Senate confirms John Kelly to lead Trump's DHS As Munr Kazmir wrote recently, not only is Kelly a 45-year Marine whose impeccable credentials made him a four-star general, he’s also a man who understands the real threat. Much like President-elect Trump, General Kelly sees the Southern border as our Achilles heel and the easiest way for those wishing to do us harm to get into this country and perpetrate an attack. With Kelly at the helm, the border will be made secure and that threat will be destroyed.General Kelly has also shown the kind of guts the position of running the DHS demands. He strongly opposed President Obama’s statements about closing the detention camps at Guantanamo Bay, realizing that having so many suspected terrorists hellbent on destroying the United States roaming free would pose a grave problem. As Reuters reports, most of Trump's nominees will eventually be confirmed.

Trump’s executive order on Obamacare --Some misconceptions are floating around about what the executive order does and doesn’t do. Let me try to clarify.As I explained in a post last week, “[a]uthority to implement the ACA … 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 all this E.O. is. It’s a set of marching orders. It has no legal force. It changes nothing on its own. And these marching orders are pretty vague. After pruning away the bureaucratese, the executive order tells federal agencies, especially HHS, to do everything they can:

  • To eliminate any “fiscal burden on any State” or any “cost, fee, tax, penalty, or regulatory burden” on individuals and providers.
  • To give the states more flexibility.
  • To encourage the interstate sale of health insurance.

It remains to be seen how and when these orders will be carried out. But we can make some educated guesses (most of which we could’ve made even in the absence of the executive order). The instruction about state flexibility probably relates mainly to Medicaid waivers. Under President Obama, CMS refused to grant waivers that would have allowed states to impose certain types of burdens on Medicaid beneficiaries—especially work requirements, substantial cost-sharing, and time caps on eligibility for non-disabled adults. I expect Trump’s CMS to be more accommodating. I also expect HHS to issue revised guidance expanding the scope of 1332 waivers, which enable states to opt out of the ACA’s regulatory requirements if they devise an alternative. Much more significant, however, is the instruction to “waive, defer, grant exemptions from, or delay the implementation of” any “cost, fee, tax, penalty, or regulatory burden.” This reads like bureaucratic code for “kill the individual mandate by any means possible.” Some of that should be easy: I expect hardship exemptions to be expanded and IRS enforcement of the mandate to fall.What troubles me most is the instruction to “delay the implementation of” any “tax” on individuals. Back in 2013, the Obama administration delayed the implementation of both the employer mandate and some of the ACA’s insurance rules. The implementation delays were unlawful, as I argued at the time. I warned, too, that they were shortsighted:

Trump's Economic Plan: Create 25 Million Jobs, Grow GDP At 4%, Lower Taxes For All Americans - President Trump’s economic plan will create 25 million new jobs in next decade, “return to 4 percent annual economic growth,” "lower rates for Americans in every tax bracket, simplify the tax code, and reduce the U.S. corporate tax rate” according to a statement just posted on the White House wesbite.He has also proposed “a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations.”The statement also announced the US withdrawal from the Trans-Pacific Partnership and that he is committed to renegotiating NAFTA. "If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States’ intent to withdraw from NAFTA." From the White House website: To get the economy back on track, President Trump has outlined a bold plan to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth. The plan starts with pro-growth tax reform to help American workers and businesses keep more of their hard-earned dollars. The President’s plan will lower rates for Americans in every tax bracket, simplify the tax code, and reduce the U.S. corporate tax rate, which is one of the highest in the world. Fixing a tax code that is outdated, overly complex, and too onerous will unleash America’s economy, creating millions of new jobs and boosting economic growth. As a lifelong job-creator and businessman, the President also knows how important it is to get Washington out of the way of America’s small businesses, entrepreneurs, and workers. In 2015 alone, federal regulations cost the American economy more than $2 trillion. That is why the President has proposed a moratorium on new federal regulations and is ordering the heads of federal agencies and departments to identify job-killing regulations that should be repealed. […] By standing side-by-side with America’s workers and businesses, the President’s policies will unleash economic growth, create 25 million new jobs, and help Make America Great Again.

Day One for Donald Trump’s Economy, in Charts -- Donald Trump takes office Friday amid a long but historically weak economic expansion. Since his election, economists have raised forecasts and say the economy’s now more likely to outperform even those higher estimates.  Here, in charts, is the economy he inherits.The labor market has been a relative bright spot, though hiring has slowed a little as the labor market appears to tighten. Rising wages are another side-effect of a tighter labor market, though pay increases haven’t returned to prerecession norms, particularly for production workers and those who aren’t managers.Healthy job creation has drawn more Americans off the sidelines over the past year, but the number of prime-age workforce dropouts remains significantly higher than during the 1990s and early 2000s.The headline unemployment rate has fully recovered but joblessness is still elevated by another measure—the one that includes people who have stopped looking and people in part-time jobs who want full-time work.Some traditionally blue-collar sectors have rebounded but employment levels remain well short of their peak.Gross domestic product, a broad measure of output, has been advancing for a historically long stretch. Within the next four years, Mr. Trump either will face a recession, or preside over the longest economic expansion in U.S. history.Despite the length of the expansion, growth has been historically slow.Underlying economic data also shows a mixed picture. For example, the trade deficit has stabilized but that’s at least in part because of rising domestic oil production. Americans’ appetite for foreign goods remains robust, reflecting a strong dollar and relatively solid growth but also a trend toward moving production offshore.The U.S. is importing less oil because domestic production boomed with the widespread adoption of fracking techniques.The trade deficit with China, a hot topic during the election and still high on Mr. Trump’s agenda, has narrowed in recent months despite a strengthening dollar. Imports well outpace exports to the Asian nation.U.S. exports of goods and services across the globe have taken a hit from a strong dollar and slow overseas growth.A stronger dollar makes U.S. products more expensive overseas and foreign goods relatively cheaper at home. The dollar earlier this week tumbled to its lowest level in a month after Mr. Trump suggested he favored a weaker currency, though its value remains elevated.Expectations of rising interest rates are one factor behind the dollar’s climb. The Federal Reserve has kept its benchmark rate extraordinarily low for years, though policy makers lifted it for the second time in a decade in December and are signaling additional, gradual increases this year.Low interest rates have made mortgages historically affordable, though tight credit standards, demographics and other factors pushed homeownership rates to five-decade lows in mid-2016, a development Mr. Trump linked to the fading of the American Dream. But the rate has started to tick up since then, raising economists’ hopes that some of those worst-hit by the housing crisis are now returning to homeownership.A gauge of manufacturing activity last month hit its highest level in two years. Despite mixed economic signals and potential headwinds, U.S. consumers and businesses are optimistic a Trump administration will usher in stronger growth. The University of Michigan’s consumer sentiment index in December rose to the highest level since January 2004.

Economy under Trump: Plan for the worst - Larry Summers: There has not been so much anxiety about U.S. global leadership or about the sustainability of market-oriented democracy at any time in the past half-century. Yet with markets not only failing to swoon as predicted, but actually rallying strongly after both the Brexit vote and Trump’s victory, the animal spirits of business are running hot. Many chief executives are coming to believe that, whatever the president-elect’s infirmities, the strongly pro-business attitude of his administration, combined with Republican control of Congress, will lead to a new era of support for business, along with much lower taxes and regulatory burdens. This in turn, it is argued, will drive major increases in investment and hiring, setting off a virtuous circle of economic growth and rising confidence.  While it has to be admitted that such a scenario looks more plausible today than it did on Election Day, I believe that it is very much odds-off. More likely is that the current run of happy markets and favorable sentiment will be seen, with the benefit of hindsight, as a sugar high. John Maynard Keynes was right to emphasize the great importance of animal spirits, but other economists have also been right to emphasize that it is political and economic fundamentals that dominate in the medium and long terms. History is replete with examples of populist authoritarian policies that produced short-run benefits but poor long-run outcomes.

Chris Hedges on How the ‘Deep State’ Will Influence the Trump Presidency - In a new episode of his RT show “Redacted Tonight,” host Lee Camp sits down with Truthdig columnist Chris Hedges to discuss the “collapse of the mainstream media and the continued rise of [the] deep state.”The two examine recent headlines over alleged Russian hacks during the 2016 election. Hedges condemns the mainstream media for “hyperventilating” over the alleged hacks, adding that the media fervor about Russia has “insidious” roots.“It’s about shutting down the voices of the dissidents,” Hedges says. He explains that America always needs an enemy and that Russian President Vladimir Putin is “easier to demonize” than someone like FBI Director James Comey, who was initially seen as the enemy when Hillary Clinton lost the presidential election.Hedges notes that there are also economic factors at play. The “war machine,” he says, needs to “demonize Russia” because it “is earning billions of dollars in Eastern Europe with the expansion of NATO.”Camp asks how Donald Trump, who presented himself as a political outsider, will handle these economic and political forces when he becomes president. Hedges responds:I’m not sure Trump has any fixed beliefs. And it’s clear that the deep state—the security and surveillance apparatus, the war machine—all sectors of the deep state, Democrat and Republican, are going to put the screws on him to ratchet up or continue this aggressive posture towards Russia. Partly because there are large sections of the U.S. economy, i.e., the defense industry, for whom this is a huge profit-making venture.The two also discuss how dissidents will be handled by the Trump administration and whether American society has anything to hope for. Watch the full video below.

Will the World be Safer or More Dangerous Under a Trump Presidency? -I was on a panel at the always insightful Suits and Spooks conference in Washington DC last week (it's an eclectic mix of IC pros and cybersecurity execs from around the world).   The topic of discussion on my panel was the title of this post:  will the world be safer or more dangerous under a Trump presidency?  One of my answers was a simple, synthetic (as opposed to analytic) framework for understanding Trump's foreign policy: 

  • Since WW2, US foreign policy has been completely dominated by national security policy.  In fact, it's hard to imagine a US policy that doesn't view the world through a militaristic, cold war lens.  This means that ALL other aspects of foreign policy are conducted in support of (slaved to) national security policy.  In particular, US trade policy is configured to promote the economic growth of allied nations (originally to fight the cold war) even if this trade relationships damages US economic performance. 
  • Trump inverts that policy relationship.  In Trump's post cold war world, US foreign policy will be dominated by trade policy.  Even national security policy will be subservient to trade policy.  If trade policy is dominant, we'll see China, Mexico and the EU (Germany) become competitors.  Russia, in contrast will become an ally since it doesn't pose a trade threat. 
  • National security under this regime will be used to reinforce and grow positive trade relationships.  For example, military tension with China creates the opportunity for sanctions that simulate the function of tariffs (allowing the US to circumvent trade organizations and domestic resistance to tariffs).   In a national security policy slaved to trade, any and all security guarantees extended to other nations will require a positive trade arrangement with the US.  The US simply won't protect or extent security guarantees to any nation that has a non-beneficial economic relationship with the US (i.e. runs a trade deficit).  

Buffett Says "America Will Work Fine Under Trump", "Overwhelmingly" Supports Trump's Cabinet Picks --And just like that one of Hillary Clinton's biggest supporters, Warren Buffett, has flipped and after predicting doom under Trump, now expects prosperity for the US under America's new president.  In an interview with CNBC, the Omaha billionaire, said that "America works" and added that "It'll work wonderfully under Hillary Clinton, and I think it'll work fine under Donald Trump." The reason for his optimism: Buffett told CNBC the United States has the "secret sauce." "It doesn't work all the time perfectly," the billionaire said, "but you just look at where we go, milestone after milestone. Never bet against America." With that mantra as a guiding principle, Buffett said, "we're almost always a buyer of stocks over time." Focusing more on the stock market, Buffett reverted to his infamous optimism and reiterated his call to invest for the long haul; he acknowledged that he doesn't know where the stock market will go in the next "10 days or a year or two years." But he is confident that "It's going to be higher 10 years, 20 years from now.""There will be hiccups from time to time in the economy," he cautioned. "[But] we'll do well over time." Especially if the government bails out his core investments during periods of extreme drawdown, as happened during the financial crisis. In a separate interview Buffett told Bloomberg he “overwhelmingly” supports President-elect Donald Trump’s choices for cabinet positions, many of whom are former bankers, and close friends. “I feel that way no matter who is president,” Buffett said Thursday in New York at the premiere of a documentary about his life. “The CEO -- which I am -- should have the ability to pick people that help you run a place.”

Russell Brand: Reality under Barack Obama and Donald Trump will not be too different - Russell Brand has offered his perspective on Barack Obama’s presidency as the outgoing president prepares to bid farewell to the White House – and it’s a pretty damning verdict. The actor and comedian suggests that despite President-elect Donald Trump appearing to be the antithesis of Obama, the reality for most people under the two presidents may not be too dissimilar. “If you are not in arse-breaking poverty, you just want nice stuff to be said. And Barack Obama is a president that says nice stuff,” Brand said. “At least we get to see a nice guy saying nice stuff, while those children are being bombed in other countries. “If that’s what our democracy is reduced to – the stuff we listen to while the same thing happens – then that’s not a very good system is it?”Brand didn’t neglect to mention the good Obama has done while in office: positive movement on tackling climate change, making healthcare affordable, and LGBTQ rights. But there are also the negatives: a reported 2.5 million immigrants deported – something Brand pointed out Trump has threatened to do, to much outrage, but has already been happening – and an unprecedented expansion of drone war. Brand’s argument is that things didn’t really change under Obama, and they won’t under Trump.

OCC fintech charter opens 'henhouse' to payday lenders: consumer groups — Consumer protection groups opposing the Office of the Comptroller of the Currency's plan to offer limited-purpose bank charters to fintech companies raised concerns that the move could allow payday lenders to operate nationally. "The OCC charter throws the door to the henhouse wide open for the payday loan foxes that have long sought to dig their way into our states," said PaydayFreeLandia, a coalition of consumer protection groups operating in states that have banned payday lending, in a statement Friday.

White House Outlines Broad Principles on Fintech - Just days before President Obama will leave office, the White House released a white paper advocating for the U.S. government to engage in efforts to promote the fintech industry. In the document titled "A Framework for Fintech," which was published Sunday, the National Economic Council — an arm of the White House — laid out broad objectives and provided a series of recommendations to policymakers and regulators to foster the industry's growth. "The United States remains the global leader in fintech as measured by total investments," said the white paper. "However, the U.S. leadership position in fintech should not be taken for granted." The document's release followed a summit the White House hosted for fintech stakeholders in June. The new framework did not offer up any specific policy recommendations, but it outlined 10 guiding principles for policymakers grappling with the fast-growing industry. These included the importance of consumer protection, promoting financial inclusion, overcoming technological bias, protecting financial stability and building cybersecurity measures. "Policymakers and regulators should continue engaging with the private sector to foster innovation in fintech while protecting consumers, businesses, and the financial system," the white paper said. The paper advocated for a "21st century financial regulatory framework," advising financial regulators to modernize how they engage with the industry. Regulators should rely on "data-driven analysis," be open to using technology themselves and be flexible with how they engage with the industry, the White House said. The paper commended initiatives like the Consumer Financial Protection Bureau's Project Catalyst, and the Office of the Comptroller's "Responsible Innovation" initiative. The NEC suggested that policymakers also take inspiration from the United Kingdom's efforts to promote financial innovation — which includes a regulatory sandbox option for fintech companies — as well as efforts undertaken by Singapore. However, the white paper also warned that regulators and fintech companies should be careful to mitigate the risks associated with the fast-growing industry.

How OCC's fintech plan can make CRA relevant again - The Community Reinvestment Act is experiencing a midlife crisis. The CRA — which Congress passed 40 years ago to encourage financial institutions to meet the needs of their physical communities — is at a crossroads between its core purposes of financial inclusion and an ever-changing financial industry. The CRA’s spirit is in dire need of reinvigoration in the digital age. A solution is potentially on its way via the Office of the Comptroller of the Currency. In December, the OCC released its anticipated whitepaper that proposed applying CRA-like principles to its pending fintech charter. The idea is to incentivize chartered fintech companies to make financial inclusion commitments similar to those made by traditional banks under the CRA, but under a different framework. Since the CRA only applies to traditional banks, the OCC based its proposals on the agency’s broad authority to ensure fair treatment and equal access in the financial market.  We firmly believe that America wins when the country’s financial institutions meet the needs of all Americans, not just a few. Due to the OCC’s positive overtures, we are cautiously optimistic about the agency’s financial inclusion proposal, though more details are needed. If the framework embraces the following three principles, we are confident that the CRA’s spirit will be revived in a way that will ultimately improve the likelihood of every American enjoying equal, fair and safe access to the benefits of financial innovation.

  • Encourage innovations that expand access to financial services while discouraging those that are unfair to consumers.
  • Encourage the use of technologies that promote financial health and stability.
  • Encourage use of technologies that transfer cost savings to consumers.

NY Regulator Slams Plan for Federal Fintech Bank Charter - Creating a new federal bank charter for financial technology companies would not only stifle competition in a burgeoning sector of the economy, but also usurp already effective state regulation, New York's financial services superintendent has argued in a letter to the Treasury Department opposing the plan. Maria Vullo said the charter proposal by the federal Office of the Comptroller of the Currency (OCC) would represent the intrusion of federal officials into what she called the "fully functional and deeply rooted state regulatory landscape" over "fintech" companies. It would raise the "serious risk of regulatory confusion and uncertainty, stifle small business innovation, create institutions that are too big to fail, imperil crucially important state-based consumer protection laws and increase the risks presented by non-bank entities," she told Comptroller of the Currency Thomas Curry in a letter dated Jan. 17. Vullo was responding to the OCC's solicitation for public comments on a white paper it released on Dec. 1, 2016, in which it outlined the issues involved in creating the new bank charter. The OCC, which is an independent office within the U.S. Department of the Treasury, said it currently has the power under the National Bank Act and the Home Owners' Loan Act to grant charters to special-purpose national banks. The comptroller's office said it believes financial technology companies would qualify as special-purpose entities if they engage in one of three functions that fall within traditional banking activities: receiving deposits, paying checks or lending money. Among the questions the OCC said it wanted feedback on were whether the public would benefit from granting fintech companies national bank charters; what capital and liquidity requirements should it consider imposing on such companies, and would a fintech chartered-entity have competitive advantages over the full-service banks the OCC now charters.  Vullo argued that her office's oversight already includes the activities of fintech companies that lend or transfer money and operate virtual currency exchanges. Vullo contended that while state law gives the financial services department clear authority to exercise authority in these areas in New York, it is far from certain whether federal statutes give the OCC the power to create a national bank charter for fintech companies. Vullo also cautioned that creating the new charter would probably lead to a small number of financial technology companies having the resources to qualify for the charters, while squeezing smaller, more innovative companies out of the business.

NY Says OCC Fintech Charter Puts Consumers At Risk - -- New York’s top financial watchdog on Tuesday blasted a federal regulator’s proposal to create a new charter for nonbank online lenders and other financial technology firms, saying that the new charters would open the door to weakening state consumer protection laws.  New York Superintendent of Financial Services Maria T. Vullo said that the Office of the Comptroller of the Currency’s plan to issue special charters to so-called fintech firms could give online firms a vehicle to evade state laws banning payday lending and other activities. By seeking to provide a national charter to such firms, the OCC is opening the door to federal preemption of state consumer protection laws that could lead to predatory lending similar to what was seen in the mortgage market in the runup to the financial crisis, Vullo’s letter said.Many state regulators already oversee financial technology firms, with New York leading the way with its BitLicense, a first-of-its-kind licensing regime for virtual currency firms, Vullo’s letter said.Allowing fintech firms to get a national charter will eliminate the close scrutiny that state regulators can provide and make the market significantly less safe, the New York Department of Financial Services chief said in her letter.“The OCC should not use technological advances as an excuse to attempt to usurp state laws that already regulate fintech activities where they intersect with banking and lending, whether depository or nondepository,” Vullo said.The OCC announced the creation of its special fintech charter in early December. The charters would allow fintech firms that collect deposits, issue checks or make loans, among other traditional banking activities, to have a single national standard for their operations, allowing them to operate across the country in exchange for strict oversight

Regulators risk doing more harm than good with cyber rules - American Banker - Every day seemingly brings a fresh reminder of the nation's vulnerability to cyberattack, whether from criminals, terrorists or hostile nation-states. A recent report by the nonpartisan Presidential Commission on Enhancing National Cybersecurity details those threats, and proposes thoughtful and innovative solutions to the next administration. The report also illustrates how U.S. and global banking regulators are doing more harm than good in this area, and need to stand down.  The nation's banks understand the existential threat posed by cyberattacks. They employ tens of thousands of cybersecurity professionals — many of them former members of the intelligence community, law enforcement or the military, as well as some of the brightest minds in computer science and social engineering. The largest banks have disclosed that they spend $400 million to $600 million annually on cyberdefense.  These firms are also at the forefront of private-sector-driven initiatives to meet the threat. Over 7,000 financial services firms now share real-time threat information and analysis through the Financial Services Information Sharing and Analysis Center (FS/ISAC).  On an entirely different track, though, U.S. and global regulators have announced a series of new or pending regulations dictating how banks should manage this risk. There is every reason to conclude that their rules will do more harm than good. First, the banking agencies have little cyberexpertise. Examiners generally have no security clearances, and certainly do not participate in real-time responses to attacks. So it should surprise no one that the rules they draft in this area are simplistic and written in one size to fit all.  Second, they are writing static rules to govern an incredibly dynamic, hostile battlefield. And common rules can provide a roadmap to those looking to penetrate bank systems. Finally, the rules are frequently conflicting or overlapping, and require firms to misallocate extraordinary time and resources to writing policies and procedures, documenting compliance with them, and defending that process to auditors and examiners, rather than frequently updating their strategies to meet changing threats. Bank regulators also are proposing rules that diverge both in lexicon and approach from the National Institute of Standards and Technology's cybersecurity framework issued in 2014 and updated through constructive public-private sector collaboration.

Will OCC's New Charter Go Beyond Fintech Firms? -- The Office of the Comptroller of the Currency's decision to offer a special-purpose charter for fintech firms may entice more players than expected, including mortgage lenders and even some payday lending shops. In the leadup to the charter's release last month, most had expected it to focus on marketplace lenders and others with a more technologically oriented business model. But the wording of the charter is broader, potentially allowing other nonbank players a way to enjoy the benefits of federal pre-emption and avoid state-by-state registration. "The way they characterized the charter in the white paper has more people seeing greater possibilities," said Pete Mills, the senior vice president of residential policy and member engagement at the Mortgage Bankers Association. "What is the technology aspect of this that makes you eligible for the fintech charter?" Observers said there is an argument that such firms, particularly given the use of new technologies to reach their customers, should qualify for the new charter. "The fact that I take the application over the internet, does that make me a fintech?" said Jeffrey Taft, a partner at Mayer Brown. "Is the OCC going to look at that very broadly?" Allowing mortgage lenders to apply for the charter would also address what some view as an unequal treatment by regulators of mortgage lenders and national banks. The state-by-state licensing system "puts nonbank mortgage lenders at a very substantial disadvantage to national banks that do mortgage lending," said Gerard Comizio, partner and head of the banking practice at Fried Frank. Some attorneys are even hearing interest in the charter from payday lenders. Though it might be a long shot for them to obtain the OCC's blessing, observers say that the agency might at some point prefer to handle these companies through direct supervision. "If the [Consumer Financial Protection Bureau's] payday lending proposal is ultimately implemented, it's going to steer a lot of those companies into a more regulated and — from the CFPB's perspective — consumer-protective space," said John ReVeal, a partner at Bryan Cave. This "could make the OCC more comfortable" in dealing with payday lenders.

Does the OCC really have the power to charter fintech firms? - — The Office of the Comptroller of the Currency is moving too far and too fast in its push to offer a fintech charter, overlooking skepticism that it lacks sufficient legal authority, according to a growing coalition of critics. Critics have already sounded off on the OCC's plan to offer fintech firms a federal chartering option, arguing that oversight is better left to the states. But state regulators and Senate Democrats also question whether the OCC has the authority to create the new charter regime without a clearer congressional mandate.

Financial data gathering needs a common standard - There is no singular standard to share financial data with services like Mint, OnDeck Capital or Credit Karma. The financial industry has made attempts to collaborate, but our efforts have failed to produce complete alignment around a single data-access standard — harming consumers' ability to make informed financial decisions based on timely and accurate data. The only way to fuel financial services innovation and address the critical requirements of security and privacy is to collaborate on a global standard. With more than 7,000 installations globally, OFX is the leading bank standard for financial data access that has stood the test of time. Last year the OFX Consortium released OFX Version 2.2, which uses an OAuth token — a protocol that lets customers access their financial data in a portal of their choosing — rather than relying on traditional login credentials to grab financial data. Many financial institutions are upgrading to the latest version. An alternative standard banks are using is the Durable Data API or DDA (not to be confused with direct deposit account). Financial institutions are adopting this standard because of its modern API format and because it formally introduces OAuth as an authentication standard for data access. Although these data standards are evolving and industry players are collaborating with each other to improve financial data access for consumers, gaps in data quality and consistency still exist because of the lack of a single data-access standard. Furthermore, many digital financial services still rely upon screen scraping to collect financial data. Screen scraping is not only a very antiquated approach for data collection, but it introduces security concerns in addition to lacking sufficient reliability and accuracy. To solve the gaps, we believe a global standard for connectivity is the future of data access. The Center for Financial Services Innovation, the authority on consumer financial health in the United States, released late last year the Compass Principles to serve as a framework for industrywide consumer-data-sharing collaboration. Data aggregators (including my own company), banks and fintech players pitched in to develop the principles that will ensure the financial digital products and services are secure, inclusive and innovative.

Fintech companies form lobbying group focused on data sharing - A consortium of fintech companies have formed a new industry group to advocate for allowing consumers to share their financial data with chosen third parties. The Consumer Financial Data Rights group consists of many well-known names in the fintech industry, including Affirm, Betterment, Digit, Envestnet-Yodlee, Kabbage, Personal Capital, Ripple and Varo Money, among others. Many of the member companies provide consumers with personal financial management or wealth management tools, and rely on their users sharing their bank data with the firms. The group's formation comes as the debate about sharing financial data has grown louder, with banks and fintech firms often on opposing sides. Even the Consumer Financial Protection Bureau has weighed in on the matter. Typically, these third parties have relied on the practice of screen scraping -- getting authorization from customers to log in to their online banking accounts on their behalf to obtain data, such as transaction history. Banks argue that the practice is risky and can lead to identity theft and fraud, while data aggregators have claimed that banks simply are trying to stave off competition. But the new lobbying group says its focus is promoting the sharing of data via open application program interfaces as the way forward. The group said its first action will be the submission of a joint comment letter in response to an advanced notice of proposed rulemaking on Enhanced Cyber Risk Management Standards issued by the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. The submission will encourage the regulators to establish a risk hierarchy with regard to cybersecurity risk in the fintech industry and will note the importance of continuing to allow consumers to access secure tools that enable their financial well-being, the group said in a release. "Consumers and small business owners need to be able to view their entire financial picture to make decisions that are truly in their best interests,” “The ability to freely access financial data empowers customers to take actions to improve their financial lives, whether it’s accessing capital to grow a business or better understanding their income streams."

LIVE FROM DAVOS: Henry Blodget leads a conversation about the fintech revolution -- Henry Blodget, the global editor-in-chief and CEO of Business Insider, moderates a panel from the World Economic Forum in Davos on how innovation is changing the global finance service industry. The session includes:

  • David Craig, president, financial and risk, Thomson Reuters, United Kingdom
  • Francisco González, group executive chairman, Banco Bilbao Vizcaya Argentaria (BBVA), Spain International Business Council
  • Eric Jing, chief executive officer, Ant Financial Services Group, China
  • Dan Schulman, chief executive officer, PayPal, US
  • Cecilia Skingsley, deputy governor, Swedish Central Bank (Sveriges Riksbank), Sweden

 Over $100 Billion Redeemed From Hedge Funds In 2016 As Only 32% Outperform Their Benchmark --Two months ago, when looking at the monthly Evestment hedge fund fund flow report, we reported that investors had redeemed a net $14.2 billion from the industry in October, the fourth consecutive month of redemptions, bringing Year-to-date HF outflows to a net $77 billion removed from the industry. The breadth of redemption pressure in October was the industry’s largest in 2016 with 61% of reporting funds estimated to have net outflow during the month. Two months later it has only gotten worse, but before we get into the details, here is a quick summary of just why, courtesy of JPMorgan. As JPM's equity strategist explains in a note summarizing active manager performance, 2016 was one of the most challenging years for active equity managers with only 32% of fundamental and quantitative funds outperforming their benchmarks. JPM estimates that large cap U.S. fundamental managers underperformed by a median 33 bp before fees, with Value managers outperforming (+0.77 bp vs. benchmark) and Growth managers underperforming (-79 bp vs. benchmark).

Investors "Stunned" To Learn Hedge Funds Expense Bar Tabs, Private Jets, Trader Bonuses - With storm clouds already building above the hedge fund industry, which as reported last nightposted deplorable results in 2016 as only 32% of fundamental and quantitative funds outperformed their benchmarks according to JPM data - the worst performance this decade - leading to the largest redemption requests since the financial crisis, as over $100 billion was withdrawn from the industry last year, the latest shock to hedge fund investors, already displeased with underperforming the S&P for years, is the realization that they also pay for many if not all hedge fund expenses, resulting in substantial payments over and above those envisioned by the conventional 2 and 20% model. The reason for their confusion and/or anger is simple: as Reuters points out, some of the more prominent hedge funds such as Citadel LLC and Millennium Management LLC charge clients for such costs through so-called "pass-through" fees, which can include everything from a new hire's deferred compensation to travel to high-end technology. And it all adds up with investors often paying more than double the industry's standard fees of 2% of assets and 20 percent of investment gains, which in light of recent performance has already infuriated countless investors leading to a historic outflow from active to passive managed funds. Clients of losing funds last year, including those managed by Blackstone Group LP's Senfina Advisors LLC, Folger Hill Asset Management LP and Balyasny Asset Management LP, likely still paid fees far higher than 2 percent of assets.

S.E.C. Inertia on Paybacks Adds to Investor Harm - Gretchen Morgenson --In August 2015, the S.E.C. struck a settlement with Citigroup over an exotic investment strategy involving municipal bonds that the bank sold to clients from 2002 to 2008. Credit Eric Risberg/Associated Press   When securities laws are broken and investors get hurt, the Securities and Exchange Commission often rides to the rescue, using its regulatory muscle to extract penalties that can be returned to victims. But as a cadre of harmed Citigroup investors is learning, it is one thing to persuade a wrongdoer to pay reparations and quite another to disburse the money. This particular matter dates to August 2015, when the S.E.C. struck a settlement with Citigroup over an exotic investment strategy involving municipal bonds that the bank sold to clients from 2002 to 2008. Contending that Citigroup had misrepresented the investments’ risks, the S.E.C. ordered the creation of a so-called fair fund to be distributed to investors. Citigroup neither admitted nor denied the allegations but agreed to pay $180 million into the fund. That was over 16 months ago. Today, the wronged investors are not only still awaiting their money, but they have yet to see any plan outlining how the $180 million will be distributed, the S.E.C.’s website shows. Receiving reparations in cases like these is a multistep process that the S.E.C. details on the site. Typically, restitution funds sit in an account at the United States Treasury. Disbursement is generally overseen by outside entities appointed by the S.E.C.; their fees are paid by the institution providing the funds.Fair funds were established by the Sarbanes-Oxley Act of 2002; they allow the S.E.C. to exact civil penalties in addition to recovering ill-gotten gains, a process known as disgorgement.  The S.E.C. website shows that the Citigroup case is one of roughly 80 fair fund and disgorgement plans currently operating.

Corporate Financial Strip Mining - The Plague of Stock Buybacks - A paper by William Laconic entitled "Profits Without Prosperity" looks at the main reason why high levels of corporate profitability after the Great Recession have not translated into economic prosperity for Main Street, USA. Here is a graph from FRED showing what has happened to after tax corporate profits since 2000: While the growth in corporate profits has levelled somewhat since 2012, at $1.679 trillion in the third quarter of 2016, profits have grown by $270 billion since their pre-Great Recession peak in 2006.  With that in mind, why has it seemed like Corporate America appears to be suffering from lethargy?  According to the author of the paper, the blame can be laid at the feet of corporate stock buybacks.  Let's look at a bit of corporate history to help explain the current situation. From the end of the Second World War until the 1970s, Corporate America took a "retain and reinvest" approach to business; they retained their earnings and reinvested them in both human and mechanical capital.  Companies used their profits to train their workforces and purchase additional machinery (among other things) to improve their competitiveness, ultimately leading to higher but sustainable levels of both profitability for companies and prosperity for workers.  This approach can be considered value creation.  In the late 1970s, things began to change; companies changed their operating philosophy and took a "downsize and distribute" approach; they reduced costs and distributed the increased cash to shareholders.  Companies reduced investments in both human and mechanical capital and used the freed up cash to enrich both employee and non-employee shareholders which led to increased income inequality and higher base levels of unemployment.  This approach can be considered value extraction. It should not be surprising to anyone who has been paying attention over the past few years, but the value that Corporate America has extracted from itself has been used to enrich company executives at the same time as the growth in wages for "working stiffs" have done this since 1978:

Bill Black: A Letter to Warren Buffett and Charlie Munger about Hiring Proven Whistleblowers - The Wall Street Journal recently published a summary of a study of “desired director traits.” A survey of 369 supervisory directors from 12 countries by search and advisory firm Russell Reynolds Associates asked which behaviors they thought are most important to creating a board culture that drives effectiveness and company performance. The study found that the five most highly valued traits in a director are, in descending order:

  • Courage
  • Willing to constructively challenge management
  • Sound business judgment
  • Asking the right questions
  • Maintaining an independent perspective and avoiding “group think”

The first two traits are essentially the same – courage. Traits three through five are closely related to each other. The fifth has an element of courage as well, the courage to fend off “group think” and the CEO’s views and maintain an “independent perspective.”  I confess that I do not believe the study about the ideal director. More precisely, I do not believe that CEOs think directors with these traits are ideal. Indeed, I think these are precisely the traits that CEOs most fear. Warren Buffett agrees.The typical corporation has a compensation committee, and believe me, they don’t ask Dobermans to be on it; rather, they want Chihuahuas who’ve been sedated. I would love to be proven wrong about the traits that CEOs value in directors. There is a simple, direct manner in which they could prove me wrong. The way that CEOs could prove me wrong would greatly improve the integrity and effectiveness of the firms they run, so this is a win-win-win. Whistleblowers exemplify each of the five most useful traits. Two of my co-founders of Bank Whistleblowers United (BWU), Richard Bowen and Michael Winston should be among the most heavily recruited people in the world to become board members at Fortune 50 firms if the answers that the directors gave in the survey reflect the true views of CEOs.

Western Union (WU) Admits Anti-Money Laundering and Consumer Fraud Violations, Forfeits $586M in Settlement --The Western Union Company (NYSE: WU), a global money services business headquartered in Englewood, Colorado, has agreed to forfeit $586 million and enter into agreements with the Justice Department, the Federal Trade Commission (FTC), and the U.S. Attorney’s Offices for the Middle District of Pennsylvania, the Central District of California, the Eastern District of Pennsylvania and the Southern District of Florida. In its agreement with the Justice Department, Western Union admits to criminal violations including willfully failing to maintain an effective anti-money laundering (AML) program and aiding and abetting wire fraud. “As this case shows, wiring money can be the fastest way to send it – directly into the pockets of criminals and scam artists,” said Acting Assistant Attorney General Bitkower. “Western Union is now paying the price for placing profits ahead of its own customers. Together with our colleagues, the Criminal Division will both hold to account those who facilitate fraud and abuse of vulnerable populations, and also work to recoup losses and compensate victims.” “Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs,” said Chairwoman Ramirez. “The agreements we are announcing today will ensure Western Union changes the way it conducts its business and provides more than a half billion dollars for refunds to consumers who were harmed by the company’s unlawful behavior.”

The anti-laundering penalty box (slide show) Violations of Bank Secrecy Act and anti-money-laundering compliance remains a hot topic for financial institutions as regulators can bar them from branch building and bank acquisitions. Here are some notable regulatory actions that are still unresolved.

Will Trump give banks a break on BSA? Don't bet on it - American Banker - Banks hoping for relief from Bank Secrecy Act oversight under the Trump administration might be disappointed. Donald Trump’s election as the next president has created some expectation for relaxed regulation in several areas. But some industry observers believe oversight of BSA and anti-money-laundering compliance is unlikely to let up.

What Wall Street Wants From Trump --During his campaign Mr Trump pledged to “dismantle” the sweeping Dodd-Frank reforms that Mr Obama and Congress introduced in 2010 to rein in risk-taking and prevent a repeat of the 2007-09 crisis. Since his victory, shares in the big US banks have rocketed, none more than Goldman Sachs. The bank was derided by Mr Trump on the campaign trail, but has now seen several former executives nominated for positions of power, including Steven Mnuchin as Treasury secretary and Gary Cohn as head of the White House’s national economic council. The wife of Jay Clayton, the nomination for the new head of the Securities and Exchange Commission, works as a wealth adviser at Goldman, though she will quit if her husband is confirmed, according to a person familiar with her plans. Soaring stock prices are based on the hope that Mr Trump will be very good for “unleashing business”, said Jamie Dimon, chairman and chief executive of JPMorgan Chase, during a Goldman-sponsored event in New York last month. “The banks will benefit a little bit both from higher [interest] rates and a higher economic activity and possibly some reduced regulation,” he said. “Hopefully, that will turn out to be true.” While some bankers are queasy at the prospect of more change after spending six years adapting to the Dodd-Frank Wall Street Reform and Consumer Protection Act, others are salivating. At the top of their wish list for a Trump administration is ending the ban on proprietary trading known as the Volcker rule and taming the Consumer Financial Protection Bureau — two hallmarks of the legislation. Unpicking Dodd-Frank would be easier in some ways than undoing Mr Obama’s Affordable Care Act, the first target of congressional Republicans. Obamacare is made up of multiple interdependent parts, making it hard to tamper with unpopular bits without jeopardising the components Americans like. Dodd-Frank’s 2,300 pages, by contrast, contain 16 discrete sections that could be plucked out one by one. But Brandon Barford, a partner at Beacon Policy Advisors, says Wall Street bankers will be disappointed if they expect a rapid repeal of post-crisis regulations. Dodd-Frank is down the list of Republican leaders’ priorities, below the budget, healthcare and tax reform, he said. “There is a renewed sense of urgency among banks and conservative members of Congress to push for the repeal of various aspects of Dodd-Frank. However, the practical constraints of the slow-moving Senate are going to become evident very quickly.”

Dodd-Frank: Another Fossil Of The Pre-Trump Past? -- When Donald Trump announced Sullivan & Cromwell partner Jay Clayton as his nominee for SEC Chairman, the President-elect himself neatly summarized what Wall Street and corporate America can expect as a result: “We need to undo many regulations which have stifled investment in American businesses,” said Trump. The financial community may have further reason for euphoria: Clayton has no government background, which will likely mean less if any of the prosecutorial instinct that’s been driving the SEC’s agenda over the past eight years. The contrast to current Chair Mary Jo White – formerly a star-power U.S. Attorney – could not be bolder. Clayton’s career has been all about capital formation and complex financial instruments. Top of the regulatory hit list is, of course, Dodd-Frank – yet, as with any radical policy departure, the devil’s in the proverbial details, especially as the whistleblower provisions are impacted. Of all the law’s provisions, these mandated incentives for employees to report corporate misdeeds have borne the most impressive results. Tamper with that and you invite a political firestorm even this confrontational President might not welcome, especially if huge new corporate scandals follow in the aftermath. “It would be very surprising to see the whistleblower provisions go away,” says Clifford Histed, a partner at K&L Gates and former supervisory federal prosecutor with the Commodity Futures Trading Commission (CFTC). “Money is a powerful motivator and the whistleblower awards have enabled the SEC and CFTC to bring significant cases. It would be surprising for any administration to affirmatively cut off a source of leads unless there are appropriate countervailing considerations.”

Dodd-Frank bill chokes banks; CHOICE Act offers better approach (Rep. Robert Pittenger, R-N.C) The dichotomy in views of the proper role of government could not be more apparent than through the lens of the Dodd-Frank Act, President Obama’s financial bailout bill. Despite the law’s proven stranglehold on economic growth, Democrats continue to vehemently defend its 400 new promulgated regulations over the financial system, indubitable absence of accountability for the Consumer Financial Protection Bureau, and protections which enshrine “too big to fail” banks. Those of us who subscribe to free market principles, with reasonable guidelines and restraints, attest to the albatross of Dodd-Frank, which has impeded access to capital and credit for small businesses and entrepreneurs, the lifeblood of our economy and job creation. Let’s examine the facts: In 2010, there were more than 7,093 community banks nationwide; now, after Dodd-Frank, we have only 5,521 open for business, a major loss for small towns in America. ▪ North Carolina has been hit particularly hard, losing more than 40 percent of our banks over the past seven years. The severe decline of community-chartered banks stems directly from compliance costs created by Dodd-Frank. Community banks are under the same stringent loan requirements of major international banks. The “big brother” approach from the federal government has deterred community banks from loaning on their own merit, bound to the same rigid requirements of the large international institutions. Republicans have offered an alternative. The Financial CHOICE Act, which I cosponsored, enhances U.S. market resiliency and promotes economic growth through appropriate and effective regulation. The CHOICE Act takes taxpayers off the hook for bank bailouts, creates more accountability for federal bureaucrats, and engenders a responsible regulatory environment conducive to economic growth.

Ending Too Big to Fail -- More than six years after the Dodd-Frank Act passed in July 2010, the controversy over how to end ‘too big to fail’ (TBTF) remains a key focus of financial reform. Indeed, TBTF – which led to the troubling bailouts of financial behemoths in the crisis of 2007-2009 – is still one of the biggest challenges in reducing the probability and severity of financial crises. By focusing on the largest, most complex, most interconnected financial intermediaries, Dodd-Frank gave US officials a range of crisis prevention and management tools. These include the power to designate specific institutions as systemically important financial institutions (SIFIs), a broadening of Fed supervision, the authority to impose stress tests and living wills, and (with the FDIC’s Orderly Liquidation Authority) the ability to facilitate the resolution of a troubled SIFI. But, while Dodd-Frank has likely made the US financial system safer than it was, it does not go far enough in reducing the risk of financial crises or in ensuring credibility of the resolution mechanism. It is also exceedingly complex.1 Against this background, the Federal Reserve Bank of Minneapolis (2016) recently announced The Minneapolis Plan to End Too Big to Fail (‘the Plan’). While the Plan raises issues that require further consideration – including the potential for regulatory arbitrage and the calibration of the tools on which it relies – it is straightforward, based on sound principles, and focuses on cost-effective tools. In this sense, the Plan represents a big step forward.

Bank Failures by Year -- In 2016, five FDIC insured banks failed. This was the lowest level since 2007. Most of the great recession / housing bust / financial crisis related failures are behind us. The first graph shows the number of bank failures per year since the FDIC was founded in 1933.Typically about 7 banks fail per year, so the 5 failures in 2015 was close to normal. Note: There were a large number of failures in the '80s and early '90s. Many of these failures were related to loose lending, especially for commercial real estate. A large number of the failures in the '80s and '90s were in Texas with loose regulation. Even though there were more failures in the '80s and early '90s then during the recent crisis, the recent financial crisis was much worse (large banks failed and were bailed out). The second graph includes pre-FDIC failures. In a typical year - before the Depression - 500 banks would fail and the depositors would lose a large portion of their savings. Then, during the Depression, thousands of banks failed. Note that the S&L crisis and recent financial crisis look small on this graph.

Macro Musings Podcast: Anat Admati -- My latest Macro Musing podcast is with Anat Admati.   Anat is a professor of finance and economics at Stanford University. Since the crisis in 2008, she has also been a fervent advocate of banks using more equity and less debt to fund their investments. As part of this effort, Anat coauthored the book "Bankers' New Clothes: What's Wrong with Banking and What to Do About it". She joined me to talk about these and other issues related to the stability of the U.S. banking system. It was a fun and interesting conversation throughout. We covered everything from the distortions created by the Basel bank regulations to the still inordinate amount of bank leverage to the prospects for a safer financial system. One of the more sobering implications of our discussion is that the U.S. banking system is not much safer today than it was in 2008. This is a point also made by Larry Summers in a recent Brookings Paper.  You can listen to the podcast on Soundcloud, iTunes, or your favorite podcast app. You can also listen via the embedded player above.

Deutsche Bank To Scrap Bonuses For 2016: As Many As 90% Of Bankers, Traders Affected --While Deutsche Bank shareholders have certainly seen some recent relief following last year's stock acrobatics which sent the the largest German lender crashing to all time lows last fall, the bank's employees have far less to look forward to.First, it was a report by the NY post, according to which Deutsche Bank may hold back on giving out bonuses to as many as 90% of bankers and traders, noting that only the top 10% of revenue generators may get a bonus for 2016, and even that would be paid out over the next five years, according to a source briefed on internal discussions. The bank was rocked last year by concern about its capital adequacy, a 23% in its share price and rising litigation bills from Europe to the U.S. Chief Executive Officer John Cryan, 56, has eliminated jobs, suspended dividends and sold risky assets to shore up profitability and capital buffers. The bank on Tuesday reached a $7.2 billion final settlement with the U.S. Justice Department over its sales of mortgage securities before the financial crisis. It’s still seeking to end an investigation related to its Russian unit. While reports have suggested that the settlement could affect the bank’s ability to pay bonuses, it couldn’t be confirmed if the bank had used incentive compensation for the settlement. The post added that this wouldn’t be the first time that John Cryan, Deutsche’s CEO, has cut bonuses since taking over in 2014: last year, the bank cut the bonus pool by 11 percent and delayed paying its employees until March. Then earlier today, Bloomberg confirmed the news when it reported that Deutsche will tell senior employees as soon as this week that they probably won’t get a bonus for 2016 because of the lender’s performance last year.

Jamie Dimon's 2016 Pay: $28,000,000 -- Moments ago JPM released an 8-K which revealed Jamie Dimon's total compensation for the year. The answer: $28 million, up from the $27 million he was paid in 2015. Which, since Jamie Dimon is already a billionaire, will hardly make an impact on his bottom line. JPMorgan Chase & Co. (the “Firm”) announced that the independent members of the Board of Directors (the “Board”) approved Mr. James Dimon’s total compensation for 2016, in the amount of $28,000,000, compared to last year’s total compensation of $27,000,000. Mr. Dimon’s total compensation includes an annual base salary of $1,500,000 and performance-based variable incentive compensation of $26,500,000. $5,000,000 of the variable incentive compensation will be delivered in cash and the remaining $21,500,000 will be delivered in the form of Performance Share Units ("PSUs"). Both base salary and cash incentive remain unchanged from last year. The key features of Mr. Dimon's 2016 PSU award, including financial metric, performance goals, payout levels, vesting and hold requirements, also remain unchanged from the PSU award granted last year.

Morgan Stanley CEO James Gorman 2016 Pay: $22,500,000 --With all eyes focused on Washington, on a Friday evening, Morgan Stanley just revealed that 58-year-old Morgan Stanley CEO James "don't call me Jim" Gorman was paid $22.5 million. Despite a notable drop in earnings from expectations and a focus on cost-cutting, Gorman got a 7.1% pay rise (almost double that of Jamie Dimon). Analysts expected Morgan Stanley to earn $3.155 in 2016. By the end of 2016 the firm realized just $2.756... but thanks to Trump's election victory, the stock soared...As Bloomberg notes, Gorman received $1.5 million in salary as well as restricted stock units, Mark Lake, a company spokesman, said Friday. The restricted stock is valued at about $5 million based on Wednesday’s closing price. The New York-based firm will report other components of Gorman’s pay package in coming months.

Draining the Swamp in Washington Through Community Banking --  Pam Martens -- The currency of Washington’s power politics is campaign money. Much of that campaign money flows from Wall Street’s biggest banks: its lobbyists, its Political Action Committees, its employees and their spouses. After flooding the presidential campaign with money, Wall Street is then rewarded by being allowed to make cabinet hiring decisions as part of the new President’s transition team, ensuring continuity government and an incurable malignancy on American democracy. To begin the process of draining the corrupt swamp in Washington, it means cutting off the money flow from Wall Street – not looking for a new savior who is deeply indebted to the same Wall Street banks. Tens of millions of U.S. consumers have the power to pull the plug on the swamp by moving their deposits from big Wall Street banks to their local community banks or their credit union. This would not only deplete Wall Street’s coffers to corrupt in Washington, it would provide the cash to reinvigorate the cities and towns that Wall Street has blighted through its dirty swap deals and its evil genius subprime housing bust.  Community banks have the same level of FDIC insurance as the big banks, so you’re not taking on more risk when you move your money – providing you hold your funds in FDIC-insured accounts and stay within the insurance limit. FDIC-insurance is backed by the full faith and credit of the U.S. government. (You should ask for a statement in writing from your new bank that the type of account you have selected is insured. See video below for more details. Mutual funds, municipal bonds and annuities are not FDIC-insured, even when you buy them from a bank.)  Federal credit unions have their own Federal insurance system known as the National Credit Union Share Insurance Fund (NCUSIF). See details on this program here.

Should customer analytics belong only to banks? - Banks tend to use customer analytics to cross-sell products to consumers and do things that benefit their own bottom line. Fintech startup believes that to keep people happy long term, you have to give them the insights that are helpful to them, whether or not the messaging would help the bank. Doing so might not help profits, but it might make for more loyal customers, says's CEO Omar Green. Green, who formerly worked at Intuit, wants to help consumers benefit from their account data, just as Wall Street firms benefit from buying anonymized data. applies multiple artificial engines to consumers' spending and banking transactions and gleans insights that it immediately shares with them. "The system needs to be able to give you an 'attaboy' at those points where you feel you should have one," says Omar Green, CEO of Banks' customer analytics programs are typically set up to learn about customer behavior in order to market them certain products. Green recalled an event where he spoke on this topic — bankers in the audience accused him of being anti-marketing. "I started laughing and said no, we don't tend to think of ourselves that way, but I can see how you could come to that conclusion," Green said at the event. "Think about if it were you: If you found out through that something about an external trigger made you susceptible to spending too much, wouldn't you want to know that before your bank knew that?"

CFPB says student loan giant Navient cheated borrowers: The nation's largest student loan servicer was hit with a Consumer Financial Protection Bureau lawsuit Wednesday over allegations that it has "systematically and illegally" failed borrowers. Navient, formerly part of Sallie Mae, created repayment obstacles for tens of thousands of student borrowers by providing incorrect payment information, processing payments incorrectly and failing to act when borrowers complained, according to the federal lawsuit filed in the middle district of Pennsylvania. The company also cheated borrowers out of their rights to lower repayments, according to the CFPB lawsuit, which seeks financial relief for student borrowers who were harmed. "For years, Navient failed consumers who counted on the company to pay back their student loans," said CFPB Director Richard Cordray. "At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs." Navient services the loans of more than 12 million borrowers, including more than six million accounts under a contract with the U.S. Department of Education. In all, the company services more than $300 billion in federal and private student loans. The CFPB civil action also targets Navient Solutions, a company division responsible for loan servicing, and Pioneer Credit Recovery, a subsidiary that specializes in collections on student loans that fall into default. "The allegations of the Consumer Financial Protection Bureau are unfounded, and the timing of this lawsuit — midnight action filed on the eve of a new (U.S. presidential) administration — reflects their political motivations," Navient said in a statement issued in response to the legal action.

CFPB suit against Navient followed apparent 'ultimatum'- The Consumer Financial Protection Bureau and two states on Wednesday sued the nation's largest student loan servicer, Navient, formerly part of Sallie Mae, for allegedly systematic failures in processing loan payments and failing to enroll borrowers in less expensive repayment plans. The CFPB alleged that Navient added $4 billion in interest charges to the principal balances of borrowers by enrolling borrowers in multiple, consecutive forbearance plans instead of in cheaper, alternative repayment plans.

Spat between CFPB, GOP intensifies with auto lending report --In another apparent escalation in the clash between Republicans and Consumer Financial Protection Bureau Director Richard Cordray, House GOP leaders charged Wednesday that Cordray "may have violated federal law" when the agency cracked down on indirect auto lenders starting in 2013. Republican members of the House Financial Services Committee released a report and documents alleging that Cordray and the CFPB used a "suspect legal theory and flawed statistical methodology" to extract settlements from auto lenders that were accused of discriminating against minorities.

Bankers cry foul over CFPB's five-star complaint rating - Bankers are trying to stop the Consumer Financial Protection Bureau from allowing consumers to rank how companies handle complaints on a one- to five-star scale and to publish narratives of consumer experiences in an online public database.  The financial services industry is outraged at the proposal, which could go into effect as early as Jan. 29 if approved by the Office of Management and Budget. The OMB has approved all of the CFPB’s past data collection requests, a CFPB spokesman said.

Dems: CFPB’s Cordray Would Sue If Forced Out - Top Democrats vowed Tuesday to defend the Consumer Financial Protection Bureau, predicting Director Richard Cordray will file a lawsuit if he were fired by Donald Trump after he is sworn in as president. Sens. Chuck Schumer of New York, Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts — all members of the Banking Committee — told reporters on a conference call that Cordray would legally challenge any attempt to remove him before his term ends in July 2018. The Trump transition team signaled last week that the president-elected is at least considering such a move. "Do not tell Richard Cordray he's fired," Sen. Schumer said in comments directed at Trump. "We think the odds are high a legal challenge would work, and we are urging the administration to forgo that long process and keep Cordray." A CFPB spokesman declined to comment Tuesday on Democrats' remarks or Cordray's willingness to file suit if he were forced out. However, the agency has said previously that Cordray has no intention of resigning. Cordray likely would file a temporary restraining order or an injunction if Trump sought to fire or remove him from office, Schumer and Warren said. "No agency head has been fired for cause for a century — it is an extreme and unprecedented step," Warren told reporters on the 25-minute conference call. "It would be a real battle." Committee Democrats also sent a letter Tuesday to Cordray praising his leadership and "tough law enforcement against financial fraud," which they called "the guiding star" of his tenure. Cordray's more than 150 enforcement actions against various companies had returned $12 billion to an estimated 29 million consumers, the Democrats noted. Last week former Rep. Randy Neugebauer, R-Texas, met with Trump to interview for the CFPB spot on Wednesday, senior Trump spokesman Sean Spicer told reporters, according to a report by The Huffington Post. Under the Dodd-Frank Act, Cordray can only be fired "for cause," which is defined as "inefficiency, neglect of duty or malfeasance in office." Some lawyers have said the Trump administration is building a "for cause" dossier against the CFPB chief.

As Trump takes power, fiduciary advocates renew defense of rule | On Wall Street: Fiduciary advocates fortified the case for the regulation on the eve of President-elect Trump's inauguration, a signal that they are prepared for a prolonged fight over the rule's fate. The future of the Department of Labor's regulation, which begins implementation April 10, is somewhat uncertain. Several groups, including the U.S. Chamber of Commerce and SIFMA, filed a lawsuit in federal court in Texas that seeks to overturn the rule. A judge is expected to make a decision in the case soon. And while Trump has not spoken out on this specific rule, he has expressed his desire for a sweeping regulatory rollback. Plus, key advisers to the president-elect, such as soon-to-be former hedge fund magnate Anthony Scaramucci, have called for the rule to be overturned. ( "The election clearly reenergized those who are fighting to kill the rule. It energized us accordingly to defend the rule," says Barbara Roper, director of investor protection at the Consumer Federation of America, a consumer advocacy group. "There is an added sense of urgency now," she adds.In a report issued this week, the federation says the need for the rule is clear when one looks at differences in claims the industry is making in the lawsuit and how firms advertise their brokers to clients. Industry trade associations maintain that their brokers are in fact salespeople who do function as advisers and should not be regulated as such, the authors say. But these same firms often frame their registered reps as advisers. It's a "legal farce," say the report's authors, Roper and her colleague Micah Hauptman, financial services counsel at the Consumer Federation of America.

Moody's Reaches $864 Million Subprime Ratings Settlement - Moody’s Corp. agreed to pay almost $864 million to resolve a multiyear U.S. investigation into credit ratings on subprime mortgage securities, helping to clear the way for the firm to move beyond its crisis-era litigation. Moody’s reached the agreement with the U.S. Justice Department and 21 states, which accused the company of inflating ratings on mortgage securities that were at the center of the 2008 financial crisis, the Justice Department said Friday in a statement. That penalty is about a third of the $2.5 billion that Moody’s earned in the four years leading up to the crisis. Standard and Poor’s, after fighting the U.S. in court for two years, settled similar claims with the U.S. for $1.5 billion last year.While Moody’s failed to abide by its own standards in rating some securities according to the government, it said the settlement doesn’t contain a finding it violated the law or any admission of liability. “The agreement acknowledges the considerable measures Moody’s has put in place to strengthen and promote the integrity, independence and quality of its credit ratings,” the company said in an e-mailed statement. “Moody’s has agreed to maintain, for the next five years, a number of existing compliance measures and to implement and maintain certain additional measures over the same period.”

RBS Said to Mull Multibillion-Dollar Charge Over U.S. Mortgages - Royal Bank of Scotland is considering taking a multi-billion dollar charge in the fourth quarter for a U.S. mortgage securities probe, that would give an indication of the size of the full settlement, according to people with knowledge of the matter. The U.K. taxpayer-owned lender could base a provision on Deutsche Bank AG’s $7.2 billion settlement and Credit Suisse Group AG’s $5.3 billion accord with the U.S. Justice Department, said the people, who asked not to be identified because the details are private. The Edinburgh-based bank is among the final few global lenders yet to settle in a years-long probe that’s garnered more than $50 billion in penalties for the DOJ since it began investigating the pre-crisis sale of mortgage bonds. Before taking a provision, RBS would need approval from its non-executive board and external auditors, according to a person with knowledge of the matter. RBS must also consider that President Elect Donald Trump may make changes at the DOJ that could affect banking industry penalties, the person said. “In light of recent U.S. DOJ settlements with other banks, we see the possibility that RBS will book a significant provision as early as the fourth quarter,”   In the fourth quarter, RBS could take a 2.7 billion-pound ($3.3 billion) conduct and litigation charge, driven by the U.S. probe, Citigroup Inc. analysts led by Andrew Coombs wrote in a note to clients last month. While the bank has about 9 billion-pounds of provisions for regulatory and legal matters on its balance sheet, it will probably need more to cover residential mortgage-backed securities settlements and associated legal costs, according to analysts. The bank is scheduled to report full-year earnings on Feb. 24.  Senior RBS executives are said to favor a charge in the fourth-quarter because the bank is on-track for a 2016 net loss. And making such a provision before a settlement is reached would reduce the impact on financial performance this year, the people said.

Premium Reduction May Give FHA Competitive Edge Over GSEs: The Federal Housing Administration program could see a $50 billion increase in single-family loan endorsements this year if a planned 25-basis-point annual premium cut goes into effect on Jan. 27. Most of the FHA's windfall will come at the expense of Fannie Mae and Freddie Mac, which is sparking anger among private mortgage insurers. "The economics for marginal conventional borrowers paying private MI should shift back in favor of FHA execution," said Satish Mansukhani, an MBS strategist at Bank of America/Merrill Lynch. He expects FHA lenders will see a 12% increase in purchase mortgage activity and a 2% increase in refinancings due to the premium reduction announced Jan. 9 by Department of Housing and Urban Development Secretary Julian Castro. On the purchase side, "it moves the pendulum a little more in favor of the FHA. I think you will see FHA market share pick up," said Scott Buchta, head of fixed-income strategy at Brean Capital. Lindsey Johnson, president and executive director of the U.S. Mortgage Insurers, warned that taxpayers are currently exposed to $1.3 trillion in mortgage risk outstanding at FHA. "Arbitrary reductions to the FHA's MIP is bad policy because it pulls borrowers who would otherwise be served by the conventional Fannie Mae and Freddie Mac market, which is backed by private mortgage insurance for first losses versus the taxpayer," Johnson said in a statement.The incoming Trump administration may delay or rescind the premium reduction.

Trump Team Said to Plan Delay of FHA Premium Cut: The incoming Trump administration is likely to postpone a 25-basis-point reduction in the Federal Housing Administration's annual mortgage insurance premium, housing policy sources said. After he is sworn in on Friday, Donald Trump plans to issue an executive order freezing a number of actions by the Obama administration. The FHA premium reduction will be among the policies put on hold, according to a housing industry lobbyist. The Trump transition team was not immediately available for comment Wednesday. The premium cut was slated to take effect Jan. 27. Housing and Urban Development Secretary Julian Castro announced the plan to reduce the mortgage insurance premium on Jan. 9. Assuming Trump signs his executive order, his nominee for HUD secretary, Ben Carson, will have time to review the mortgage insurance premium reduction and decide whether it should take effect. Several Washington sources said they expect the Trump administration to eventually rescind the FHA premium reduction. "Given the reaction from Republicans on the Hill to the [premium] reduction, and Dr. Ben Carson's own comments at his nomination hearing last week, lenders and borrowers are feeling the uncertainty, and ought to be prepared for the likelihood of the new administration reversing course quickly after the inauguration,"

HUD suspends FHA mortgage insurance rate cut an hour after Trump takes office -- An hour after Donald Trump assumed the presidency Friday, his administration indefinitely suspended a pending rate cut for mortgage insurance required for FHA-backed mortgages, which are popular with first-time home buyers and those with poor credit. The move by the Department of Housing and Urban Development — one of the first acts of Trump’s administration — reversed a policy announced in the waning days of the Obama presidency that would have trimmed insurance premiums for typical borrowers by hundreds of dollars a year. Some Republicans expressed concern that the rate cut could cost taxpayers if the loans started to go sour and the Federal Housing Administration was unable to cover the losses. The agency needed a $1.7-billion bailout from the U.S. Treasury in 2013 after it expanded its role last decade following the collapse of the subprime mortgage market. The FHA does not issue loans, but instead insures mortgages and collects fees from borrowers to reimburse lenders in the case of default. Borrowers can qualify for an FHA-backed mortgage, with down payments as small as 3.5%, even with a credit score as low as 580, which could signal a past bankruptcy or debts sent to collection.

Will rising rates + looser regs = mortgage excess? Possible, but doubtful  - American Banker - In past cycles, when interest rates rose and origination volume was harder to come by, mortgage lenders relaxed underwriting criteria, undercut each other on price, or both, hurting loan quality.Rates are rising again. Moreover, a new president who campaigned on a platform of reduced regulation is about to take office, and his administration seems poised at the very least to temper the recent zeal for enforcement. It's only natural to wonder if the combination could put the industry back on the path to the excesses that led to the financial crisis a decade ago.Answer: It's unlikely, but not impossible. Since the crisis, tight regulation and oversight have resulted in very conservative loan origination practices. The consensus is that the mortgage underwriting pendulum is now firmly on the conservative side, leaving plenty of room to loosen criteria without reverting to the unsound practices that caused the subprime meltdown."When you have a straitjacket on, it doesn't affect your ankles. You can still walk around," said Daniel Jacobs, executive vice president and managing director of MiMutual Mortgage, Port Huron, Mich.Lenders can "squirm about to get where we need to go, but we still don't have the use of our arms," he said. "In the past bubble, we had full use of all of arms and our hands and our fingers and we don't right now."  Of course, the rules that Jacobs considers straitjackets — the qualified mortgage and ability-to-repay rules — are products of the Dodd-Frank Act, which Trump vowed to repeal. Among those who are worried is Phil McCall, chief operating officer at Aces Risk Management, a quality control and audit technology provider. "We can't forget why we got to where we are," he said. During the height of the mortgage boom, there was "very little regulatory oversight and we saw how it got out of control." In his view, Dodd-Frank and the Consumer Financial Protection Bureau brought a lot of good processes and procedures into the industry.

Flood Elevation Plan Sparks Concerns about Housing Affordability: "If we're serious about protecting people and property from flooding, we have to think differently than we did 40 years ago," said HUD Secretary Julian Castro. The Department of Housing and Urban Development's proposed guidance has stirred up a debate on elevation standards as flooding occurs more frequently and in more unexpected places. In its current form, the HUD proposal would impact Federal Housing Administration-insured construction projects in floodplains as well as substantial improvements to existing single-family homes and multifamily buildings. Privately financed projects would not be affected. But that could still add up to a big impact, industry representatives said. The higher elevation requirements could impact affordability and "may limit the number of newly constructed homes available to many first-time and low-to-moderate income borrowers," wrote Thomas Kim and Steve O'Connor of the Mortgage Bankers Association in a Dec. 21 comment letter. Ed Brady, the chairman of the National Association of Home Builders, also warned that the new elevation requirements and flood proofing requirements for multifamily construction would "make many projects infeasible, due to increased construction costs and the inability to offset these cost through higher rents." HUD issued the proposal in response to an executive order by President Obama directing the department to expand its flood risk management policies.

Down Payment Takes a Large Percentage of Buyer’s Income: To meet a 20% down payment, homebuyers on average have to spend more than two-thirds of the average annual income, according to a report from Zillow. A 20% down payment for a median-price home valued at $192,500 will cost $38,500. In some of the larger and more expensive markets, including the San Francisco and Los Angeles metropolitan areas, buyers may need to pay more than 180% of the average annual income to afford a 20% down payment on a median-priced home. "Saving enough cash for a down payment is a major barrier to homeownership, especially in expensive markets, where a 20% down payment can cost nearly $200,000," Zillow Chief Marketing Officer Jeremy Wacksman said in a news release Friday. Homebuyers of course can put less than 20% down, but that will not allow them to get the lowest possible rate. And with rates now rising, a bigger down payment consequently can lock in major savings: Zillow calculated that lowering the interest rate on a $200,000 loan by half a percentage point will save $20,000 over the loan's lifetime. Plus there is the additional cost of mortgage insurance, whether from a private company or the Federal Housing Administration. "While it's possible to buy a house with a smaller down payment, 20% ensures the best rates," Wacksman said. "As important as it is to find a monthly payment you can afford, some buyers' budgets will come down to the amount of cash they can bring to the table."

Higher Rates Create Obstacles for Millennial Homebuyers: Fitch: Higher interest rates will add stress for millennials looking to buy a home, according to an analysis from Fitch Ratings. Rate increases have cut down millennial borrowers' mortgage capacity by 9% since the beginning of October, Fitch said Thursday. And if rates go higher, particularly in a short period of time, they could be added to the list of factors dampening millennial homeownership that also includes tight underwriting standards, high student loan payments, rising rents and low wage growth. Those issues contributed to a lower homeownership rate among those under the age of 35, which dropped to 35% in 2016 from 41% in 2000. "Historically low rates have been one of the few factors that have helped young adults to buy homes," Fitch wrote. The drop in mortgage capacity could therefore leave "more millennials out of what has historically been one of the most important wealth-creation mechanisms, and could contribute to long-term shifts in savings and consumption."

New York Fed chief Dudley has an idea — homeowners should tap into equity - New York Fed President William Dudley on Tuesday encouraged homeowners to find “prudent” ways to tap into the equity that has built up in the homes, saying the boost in consumption would be a welcome shot-in-the-arm to the economy. The shape of household finances was a hidden strength of the economy, he said. “The good news is that, while the current expansion is quite old in chronological terms, it is still relatively young in terms of the health of household finances,” Dudley said in a speech to the National Retail Federation. “Whatever the timing, a return to a reasonable pattern of home equity extraction would be a positive development for retailers, and would provide a boost to economic growth,” Dudley said. Homeowners may have overlearned the lessons from the housing boom and bust, the New York Fed [resident said.Even though home values have risen over 40% since 2012, housing debt has stayed virtually flat, he said. “The previous behavior of using housing debt to finance other kinds of consumption seems to have completely disappeared,” and people are leaving the wealth generated by rising home prices “locked up” in their homes, he said. In his speech, Dudley said economic conditions, especially prices, did not seem to warrant an aggressive response from the U.S. central bank. “While economic shocks are, by their very nature, difficult to forecast, the risk that the Fed will snuff out the expansion anytime soon seems quite low because inflation is simply not a problem,” Dudley said.

Home Purchase Share Increased in December: Ellie Mae: As mortgage rates continued to move higher, the share of home purchase loans began to increase in December, according to Ellie Mae's latest Origination Insight Report. The share of purchase loans rose to 54% from 53% the previous month, Ellie Mae said Wednesday. The Pleasanton, Calif.-based company said that the 30-year note rate moved up to 4.05% from 3.81% in November. Closing rates also rose to 73.2%, the highest in all of 2016. The closing rate for refinances ticked up to 69.6% from 68.7% the month before, while the rate for purchases increased to 77% from 76.1% during that same timeframe. "As rates began to increase we saw purchases tick back up in December, signaling the start of a trend we expect to continue into 2017," Jonathan Corr, president and CEO of Ellie Mae, said in a news release. "We also saw closing rates rise to the highest percentage in 2016 as homebuyers locked in rates and lenders closed loans before the conclusion of the year." Additionally, Ellie Mae reported that the average time to close rose a day month over month to 50 in December. And the average FICO scores dipped slightly to 726 in December from 728 in November.

MBA: Mortgage Applications Increase in Latest Weekly Survey - From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 13, 2017. The previous week’s results included an adjustment for the New Year’s holiday. ... The Refinance Index increased 7 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index increased 25 percent compared with the previous week and was 1 percent lower than the same week one year ago. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,000 or less) decreased to its lowest level since December 2016, 4.27 percent, from 4.32 percent, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Mortgage Rates Back Near 2-Month Lows --Mortgage rates moved lower today, generally recovering the losses seen last Friday.  This brings many lenders back in line with the lowest levels since November 17th, although last Wednesday (Jan 11) was slightly better on average.  There hasn't been enough volatility to unseat 4.125% as the most prevalent 30yr fixed "note rate" on top tier scenarios.  As such, today's improvement is limited to "effective rates" (which take closing costs into consideration). Heading into the 3-day weekend last week, we discussed the risk that the recent trend toward lower mortgage rates may have run its course, but that we'd need to wait until today to confirm.  Today's improvements keep hope alive.  That's no guarantee that rates will move lower, but at the very least it leaves borrowers with more options.  On the one hand, locking makes good sense with rates near the bottom of the recent range.  Those hoping for further improvements have some additional room overhead to set a "stop-loss" (a higher rate that would serve as the signal to lock and avoid further losses) at Friday afternoon's rates.

Home Inventory Fell to Three-Year Low in December: Redfin: As the country's homes for sale inventory declines, prices and the percentage of homes going under contract quickly are rising, according to Redfin. The housing inventory dropped 12.7% in December from a year earlier to the lowest level reported in three years, Redfin reported Thursday. Among homes sold last month, 32.7% were under contract within two weeks, which Redfin characterized as "the largest reduction in inventory in any single month…on record." "We’ve never before seen homes turn over so quickly at a national level," Redfin Chief Economist Nela Richardson said in a news release. "This tells us that buyers are not deterred by low inventory, election uncertainty and slightly higher mortgage rates. If anything, these headwinds are motivating them to act sooner rather than later." In December, homes went under contact in 54 days on average, five days fewer than a year ago. And home prices rose 4.7% year over year last month. Still, not every housing market is experiencing these conditions. Six metropolitan areas recorded home price declines in December, including Baton Rouge, La., where home prices fell 7.7% from a year earlier.

Lawler: The Household Conundrum, Part I: The CPS/ASEC Data - A major challenge facing housing analysts is the lack of any timely and accurate time series of the characteristics of the housing market, including both the number of and the characteristics of occupied or vacant housing units. Instead, analysts are faced with numerous and often conflicting household and/or housing stock estimates based on different surveys conducted by different areas of the Census Bureau. For analysts trying to assess which, if any, of the various surveys (which are based on samples) provides the “best” estimates of the number of and the characteristics of US households, one approach is to compare the survey estimates to counts from the decennial Census, which attempts to provide complete coverage of the population, households, and the housing stock, as well as all of their characteristics. While some might think that such a comparison is straightforward, in fact it can be a little tricky. First, household estimates (totals and/or characteristics) are based on either population estimates or housing stock estimates available at the time the survey results are published. While initial population and housing stock estimates for any given year are almost always revised – sometimes by a sizable amount subsequent to the compilation of decennial Census counts – household estimates for those years are typically not revised. As such, the historical time series on households from most surveys are not consistent with current population/housing stock estimates.

Housing Starts increased to 1.226 Million Annual Rate in December -- From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in December were at a seasonally adjusted annual rate of 1,226,000. This is 11.3 percent above the revised November rate of 1,102,000 and is 5.7 percent above the December 2015 rate of 1,160,000. Single-family housing starts in December were at a rate of 795,000; this is 4.0 percent below the revised November figure of 828,000. The December rate for units in buildings with five units or more was 417,000. An estimated 1,166,400 housing units were started in 2016. This is 4.9 percent above the 2015 figure of 1,111,800. Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,210,000. This is 0.2 percent below the revised November rate of 1,212,000, but is 0.7 percent above the December 2015 estimate of 1,201,000. Single-family authorizations in December were at a rate of 817,000; this is 4.7 percent above the revised November figure of 780,000. Authorizations of units in buildings with five units or more were at a rate of 355,000 in December. An estimated 1,186,900 housing units were authorized by building permits in 2016. This is 0.4 percent above the 2015 figure of 1,182,600. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) increased in December compared to November. Multi-family starts are up 9% year-over-year. Multi-family is volatile, and the swings have been huge over the last four months. Single-family starts (blue) decreased in December, and are up 4% year-over-year. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in December were above expectations due to the sharp increase in multi-family starts. However October and November were revised down slightly, combined. Another solid report.

New Residential Housing Starts in December Beat Consensus - The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for December new residential housing starts.The latest reading of 1.226M was above the forecast of 1.200M. The November count was revised upward by 12K.Here is the opening of this morning's monthly report:Privately-owned housing starts in December were at a seasonally adjusted annual rate of 1,226,000. This is 11.3 percent (±10.4%) above the revised November rate of 1,102,000 and is 5.7 percent (±12.0%)* above the December 2015 rate of 1,160,000.Single-family housing starts in December were at a rate of 795,000; this is 4.0 percent (±9.2%)* below the revised November figure of 828,000. The December rate for units in buildings with five units or more was 417,000.An estimated 1,166,400 housing units were started in 2016. This is 4.9 percent (±2.5%) above the 2015 figure of 1,111,800. [link to report]  Here is the historical series for total privately-owned housing starts, which dates from 1959. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.

Housing Starts Beat On Jump In Rental Units, Single-Family Permits Rise To Highest Since 2007  --Confirming the recent strength in economic data, today the Commerce Department reported that housing starts jumped to 1,226k up from a revised 1,102k in the prior month, and above the 1,188K estimate, driven by a 54% surge in multi-family units, which rose from last month's disappointing 271K to 417K in December, returning to the trending observed in past years. On a percentage bases, starts rose 11.3% in December sequentially, after falling 16.5% the prior month. Offsetting the spike in multifamily starts, single family starts fell to 795k from 828K the month before. This was the lowest print since September. Offsetting the strong starts number, and in somewhat of a mirror image to the starts numbers, building permits fell modestly to 1,210k vs 1,212k in Nov.; missing estimates of a 1,225k print. Permits fell 0.2% in Dec. after falling 3.8% the prior month. Looking at the components, single-family permits jumped to 817K, the highest print since 2007, while multi-family permits dipped once again, declining from 395K, to 355K, the lowest since March of 2016, suggesting that future rental inflation may accelerate as builders are once again shifting their attention to single-family units.

December 2016 Residential Building Sector Mixed: The headline residential building permits decline continued, whilst housing starts where strong. Our analysis shows little good news in this sector. The backward revisions this month were moderately up.The nature of this industry normally has large variations from month to month so the rolling averages are the best way to view this series - and it shows permits collapsing, and even completions decelerating - not good as it is showing a contracting sector. The bottom line is that permits for 2016 is statisticall unchanged from 2015, but construction completions are up 10 %. Looking at residential construction employment, the year-over-year growth of employment is slightly BELOW the growth of housing starts. This is easily explained with the poor growth in housing starts.

New Residential Building Permits: December Slightly Below Forecast -  The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for December new residential building permits. The latest reading of 1.210M was a small decrease from 1.212M in November and below the forecast of 1.225M. Here is the opening of this morning's monthly report: Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,210,000. This is 0.2 percent (±1.8%)* below the revised November rate of 1,212,000, but is 0.7 percent (±1.6%)* above the December 2015 estimate of 1,201,000.Single-family authorizations in December were at a rate of 817,000; this is 4.7 percent (±1.7%) above the revised November figure of 780,000. Authorizations of units in buildings with five units or more were at a rate of 355,000 in December.An estimated 1,186,900 housing units were authorized by building permits in 2016. This is 0.4 percent (±0.8%)* above the 2015 figure of 1,182,600. [link to report]Here is the complete historical series, which dates from 1960. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.

Housing permits portend good news for 2017: This morning's housing report was good news for two reasons. First of all, single family permits (red) made another post recession high: Single family permits tend to peak at the same time as permits overall, but they are less noisy, and they were not affected by the NYC distortion of 18 months ago that caused the big spike. Secondly, permits overall were above 1200 for the 4th month in a row. When we take the quarterly average (blue in the graph below) we see that except for the May-June 2015 NYC-caused spike, the 4th Quarter of 2016 was the best since the Great Recession: This is a reflection of the low interest rates post-Brexit. At some point in the next few months, the spike since the US presidential election will cancel that out. But since housing leads the economy as a whole by 12-18 months, this is good news for 2017. When we get the rest of December's housing data next week, I will update more extensively.

Comments on December Housing Starts --The housing starts report this morning was above consensus because of the sharp increase in multi-family starts. Multi-family is frequently volatile month-to-month, and has seen especially wild swings over the last four months. Meanwhile single family starts were decent.   Just remember that multi-family can be very volatile ... This first graph shows the month to month comparison between 2015 (blue) and 2016 (red).Multi-family starts are down 3.1% in 2016, and single-family starts are up 9.3% year-over-year.Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years - but has started to decline.  Completions (red line) have lagged behind - but completions have been generally catching up (more deliveries, although this has dipped lately).  Completions lag starts by about 12 months. I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).

NAHB: Builder Confidence decreased to 67 in January - The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 67 in January, down from 69 in December. Any number above 50 indicates that more builders view sales conditions as good than poor.From CNBC: Homebuilder confidence pulls back by 2 points in January after election euphoria  A monthly sentiment index retreated 2 points in January, and December's seven-point jump was revised down by one. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) now stands at 67...."NAHB expects solid 10 percent growth in single-family construction in 2017, adding to the gains of 2016," said NAHB Chief Economist Robert Dietz. "Concerns going into the year include rising mortgage interest rates as well as a lack of lots and access to labor."  Regionally, on a three-month moving average, sentiment in the Northeast rose two points to 52 and rose three point in the Midwest to 64. The South and West each held steady at 67 and 79, respectively.This graph show the NAHB index since Jan 1985. This was below the consensus forecast of 69, but still another solid reading.

NAHB Housing Market Index: "Builder Confidence Holds Firm in January" - The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.The latest reading of 67, down 2 from last month, came in below the forecast of 69. The previous month was revised downward from 70 to 69.Here is the opening of this morning's monthly report:Builder confidence in the market for newly-built single-family homes remained on firm ground in January, down two points to a level of 67 from a downwardly revised December reading of 69 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).“Builders begin the year optimistic that a new Congress and administration will help create a better business climate for small businesses, particularly as it relates to streamlining and reforming the regulatory process,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. [link to report]Here is the historical series, which dates from 1985.

AIA: Architecture Billings Index increased in December Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From the AIA: Architecture Billings Index ends year on positive noteThe Architecture Billings Index (ABI) concluded the year in positive terrain, with the December reading capping off three straight months of growth in design billings. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the December ABI score was 55.9, up sharply from 50.6 in the previous month. This score reflects the largest increase in design services in 2016 (any score above 50 indicates an increase in billings). The new projects inquiry index was 57.2, down from a reading of 59.5 the previous month.“The sharp upturn in design activity as we wind down the year is certainly encouraging. This bodes well for the design and construction sector as we enter the new year”,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “However, December is an atypical month for interpreting trends, so the coming months will tell us a lot more about conditions that the industry is likely to see in 2017.”  
• Regional averages: Midwest (54.4), Northeast (54.0), South (53.8), West (48.8)
• Sector index breakdown: commercial / industrial (54.3), institutional (53.3), mixed practice (51.9), multi-family residential (50.6)

Pittsburgh Mall Once Worth $190 Million Sells For $100 -- We have frequently noted the precarious state of the U.S. mall REITs (see "Myopic Markets & The Looming Mall REITs Massacre" and "Is CMBS The Next "Shoe To Drop"? GGP Sales Suggest Commercial Real Estate Crashing"), but the epic collapse of the Galleria at Pittsburgh Mills paints a uniquely horrific outlook for mall operators.  The 1.1 million square foot mall, once valued at $190 million after being opened in 2005, sold at a foreclosure auction this morning for $100 (yes, not million...just $100).  According to CBS Pittsburgh, the mall was purchased by its lender, Wells Fargo, which credit bid it's $143 million loan balance, which was originated in 2006, to acquire the property. Pittsburgh Mills mall auctioned off for a hundred bucks. Bid by Wells Fargo which is holding 149 Mill. Debt on mall. Like many malls around the country, Pittsburgh Mills has suffered the consequences of weak traffic amid tepid demand from the struggling U.S. consumer resulting in massive tenant losses.  According to the Pittsburgh Tribune, the mall is only 55% occupied and was last appraised for $11 million back in August. The value of the mall has been plummeting since it opened in July 2005. Once worth $190 million, it was appraised at $11 million in August. The mall has lost a number of key tenants over the years, including a Sears Grand store. The mall's retail space is nearly half empty, with about 55 percent occupied.

Consumer Price Index: Headline CPI Rises Above 2% -  The Bureau of Labor Statistics released the December Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 2.07%, up from 1.69% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.20%, up from the previous month's 2.11%. This is the first month of Headline CPI above 2% since June 2014, 30 months ago.Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.1 percent before seasonal adjustment.Continuing their recent trends, the shelter and gasoline indexes increased in December and were largely responsible for the seasonally adjusted all items increase. The shelter index rose 0.3 percent in December, while the gasoline index increased 3.0 percent.Recent trends also continued in the food indexes, as the food at home index again declined, offsetting an increase in the index for food away from home and leaving the overall food index unchanged for the sixth consecutive month. The energy index continued to rise, advancing 1.5 percent in December, primarily due to an increase in the gasoline index.The index for all items less food and energy rose 0.2 percent in December, the same increase as in November. Along with the shelter index, the indexes for motor vehicle insurance, medical care, education, airline fares, used cars and trucks, and new vehicles were among the indexes that increased. The indexes for apparel and communication declined in December. [More…] was looking for a 0.3% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 2.1% for Headline and 2.2% for Core. The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

December 2016 CPI Inflation -- More of the same.  Not much to report this month.  Shelter inflation continues its upward march.  Non-shelter core inflation held steady at about 1.2%. Since last month, interest rates have been declining - a bearish signal.  Unless there is a bold and quick action on Dodd-Frank after the inauguration that removes liabilities for banks that would lend to the lower tier of the housing market, I still an leaning toward a bit of a bumpy patch ahead.

LA area Port Traffic increases Year-over-year in December -- From the Port of Long Beach: Port Trade Dips to 6.8 Million TEUs in 2016 Slowed by industry headwinds and challenges that included a major customer declaring bankruptcy, the Port of Long Beach still moved almost 6.8 million containers in 2016, its fifth best year ever.  Overall cargo declined 5.8 percent in 2016 compared to 2015, as the Port was impacted by new ocean carrier alliances and the August bankruptcy of Hanjin Shipping, a South Korean company and former majority stakeholder at the 381-acre Pier T container terminal — Long Beach’s largest. By year’s end, the Harbor Commission had approved an agreement for a subsidiary of Mediterranean Shipping Co., one of the world’s largest container ship operators, to take sole control of the long-term lease at Pier T. Although port traffic decreased in Long Beach, traffic was up in Los Angeles.  Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.  The 2nd graph is the monthly data (with a strong seasonal pattern for imports)

Rail Week Ending 14 January 2017: Some Improvement: Week 2 of 2017 shows same week total rail traffic (from same week one year ago) improved 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 0.9 %. The previous week's soft data may have been caused by a mismatch 2017 and 2016 - and this week improved marginally. The rolling averages improved. It seems the improving trend line is still in play.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 516,229 carloads and intermodal units, up 2 percent compared with the same week last year. Total carloads for the week ending January 14 were 253,223 carloads, up 4.4 percent compared with the same week in 2016, while U.S. weekly intermodal volume was 263,006 containers and trailers, down 0.3 percent compared to 2016. Five of the 10 carload commodity groups posted an increase compared with the same week in 2016. They included metallic ores and metals, up 17.6 percent to 21,979 carloads; miscellaneous carloads, up 17.3 percent to 9,895 carloads; and coal, up 13.3 percent to 85,133 carloads. Commodity groups that posted decreases compared with the same week in 2016 included petroleum and petroleum products, down 14.7 percent to 10,960 carloads; forest products, down 5.8 percent to 9,492 carloads; and chemicals, down 5.8 percent to 29,864 carloads. For the first two weeks of 2017, U.S. railroads reported cumulative volume of 474,369 carloads, down 1.6 percent from the same point last year; and 483,277 intermodal units, down 7.5 percent from last year. Total combined U.S. traffic for the first two weeks of 2017 was 957,646 carloads and intermodal units, a decrease of 4.7 percent compared to last year.

Pentagon Tester: F-35 Program Rushing Tests, Delays Still Likely - The F-35 program office’s rush to make an August test deadline will increase risks yet still leave the effort well behind schedule, the Pentagon’s top weapons tester said in a report released today.That verdict, from the Office of Operational Testing and Evaluation, came as no surprise, though it is another black eye for Donald Trump’s least favorite combat jet.The report did note some progress, such as the completion of important ship-integration tests and steps toward fixing a dangerous ejection seat.  However, most of chief tester Michael Gilmore’s report focuses on what still needs to be done. And it’s plenty. OTE has noted some “276 deficiencies in combat performance” as part of the most recent rollout of improvements. The Pentagon and Lockheed Martin, the company that makes the planes, have been working on them, but their plans for the next block of improvements, Block 3FR6, will address fewer than half of the deficiencies.   As for Block 3F, the most recent set of upgrades, the report notes “significant, well-documented deficiencies resulting in overall ineffective operational performance…hundreds of which will not be adequately addressed with fixes and corrections verified with flight testing within the system [development and demonstration phase].”

GM Will Invest Over $1 Billion In New US Factories, Create More Than 1,000 Jobs  --Not a week seems to pass without some an automaker, foreign or domestic, making an unexpected round of concessions when it comes to Trump's ambitions to "Make it in the US."And so, days after first Ford, then Fiat Chrysler announced major expansion plans in the US (to the partial detriment of Mexico) the latest automaker to respond to Trump's Twitter criticism is General Motors, which according to the WSJ, will announce this week plans to invest at least $1 billion across several U.S. factories "a move aimed at underlining its commitment to U.S. manufacturing jobs in the wake of President-elect Donald Trump’s criticism of the auto maker’s imports from Mexico."The company will also announce that it will create more than 1,000 new jobs stemming from the investment but doesn’t plan to specify which of its factories are in line for more work. The move comes days after Mr. Trump publicly ratcheted up pressure on the nation’s largest auto maker. During his press conference last week, the president-elect thanked Ford Motor Co. and Fiat Chrysler Automobiles for recently announced U.S. investment plans that are expected to create a combined 2,700 jobs.   Recall that GM CEO Mary Barro was appointed to Trump's Strategic and Policy Forum, which as a reminder "is composed of some of America’s most highly respected and successful business leaders, will be called upon to meet with the President frequently to share their specific experience and knowledge as the President implements his plan to bring back jobs and Make America Great Again."

Riding The Wave? Or Making A Wave? -- January 18, 2017 -- The other day I asked whether PEOTUS Trump was riding the wave, or if he was making a wave.  Today, NBC News is suggesting that PEOTUS is simply riding the wave: GM's $1 billion investment was not driven by Trump and likely dated back to 2014. But several GM officials stressed that the latest moves were in the works for months and, in some cases several years, and were not a reaction to criticism by president-elect Donald Trump who, earlier this month, had threatened to impose "a big border tax" on GM for importing the hatchback version of its compact Chevrolet Cruze model from Mexico.  During an appearance at the North American International Auto Show in Detroit last week, GM Chairman and CEO Mary Barra said the automaker would not alter its global manufacturing strategy to comply with political pressure, and GM General Counsel Craig Glidden this week echoed the position in an interview with the Wall Street Journal.

Wilbur Ross, Trump's Commerce pick, offshored 2,700 jobs since 2004 | Reuters: Billionaire Wilbur Ross, chosen by Donald Trump to help implement the president-elect's trade agenda, earned his fortune in part by running businesses that have offshored thousands of U.S. jobs, according to Labor Department data attained by Reuters. As a high-stakes investor a decade ago, Ross specialized in turning around troubled manufacturing companies at a time when the U.S. economy was losing more than 100,000 jobs yearly due to global trade. A Senate confirmation hearing on his nomination to become commerce secretary is set for Wednesday. Supporters say Ross saved thousands of U.S. jobs by rescuing firms from failure. Data attained by Reuters through a Freedom of Information Act request shows that rescue effort came at a price: textile, finance and auto-parts companies controlled by the private-equity titan eliminated about 2,700 U.S. positions since 2004 because they shipped production to other countries, according to a Labor Department program that assists workers who lose their jobs due to global trade. [For a graphic click] The figures, which have not previously been disclosed, amount to a small fraction of the U.S. economy, which sees employment fluctuate by the tens of thousands of jobs each month. But Ross's track record clashes with Trump's promise to protect American workers from the ravages of global trade. Recently, Trump claimed credit for saving 800 jobs at a Carrier Corp. factory in Indiana, even touring the plant to shake hands with employees. He has targeted Ford Motor Co and other automakers to keep hundreds of jobs inside the U.S. borders. That disconnect could draw attention at his hearing, one of many scheduled this week for Cabinet nominees ahead of Trump's Jan. 20 inauguration. "He is not the man to be protecting American workers when he's shipping this stuff overseas himself," said Don Coy, who lost his job at the end of 2016 when a company Ross created - International Automotive Components Group - closed a factory in Canton, Ohio and shifted production of rubber floor mats to Mexico, eliminating 450 workers.

Industrial Production increased 0.8% in December --From the Fed: Industrial production and Capacity Utilization Industrial production rose 0.8 percent in December after falling 0.7 percent in November. For the fourth quarter as a whole, the index slipped 0.6 percent at an annual rate. In December, manufacturing output moved up 0.2 percent and mining output was unchanged. The index for utilities jumped 6.6 percent, largely because of a return to more normal temperatures following unseasonably warm weather in November; the gain last month was the largest since December 1989. At 104.6 percent of its 2012 average, total industrial production in December was 0.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.6 percentage point in December to 75.5 percent, a rate that is 4.5 percentage points below its long-run (1972–2015) average.This graph shows Capacity Utilization. This series is up 8.8 percentage points from the record low set in June 2009 (the series starts in 1967).Capacity utilization at 75.5% is 4.5% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.   The second graph shows industrial production since 1967. Industrial production increased in December to 104.6. This is 19.7% above the recession low, and is close to the pre-recession peak. This was above expectations of a 0.6% increase.

The Big Four Economic Indicators: A December Bounce -- Today's report on Industrial Production for December shows a month-over-month increase of 0.8 percent (0.83 percent to two decimals), which was above the consensus of a 0.6 percent increase. However, the previous month was revised downward from -0.4 percent to -0.7 percent. Industrial Production peaked in November 2014, only one point higher than its pre-recession peak in November 2007. It has contracted for 17 of the last 25 months. The year-over-year change is 0.5 percent, the first YoY increase after 15 consecutive months of YoY contraction.Here is the overview from the Federal Reserve:Industrial production rose 0.8 percent in December after falling 0.7 percent in November. For the fourth quarter as a whole, the index slipped 0.6 percent at an annual rate. In December, manufacturing output moved up 0.2 percent and mining output was unchanged. The index for utilities jumped 6.6 percent, largely because of a return to more normal temperatures following unseasonably warm weather in November; the gain last month was the largest since December 1989. At 104.6 percent of its 2012 average, total industrial production in December was 0.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.6 percentage point in December to 75.5 percent, a rate that is 4.5 percentage points below its long-run (1972–2015) average. [view full report]The chart below shows the year-over-year percent change in Industrial Production since the series inception in 1919, the current level is lower than at the onset of 15 of the 17 recessions over this time frame of nearly a century.

December 2016 Industrial Production Up - Now In Expansion: The headlines say seasonally adjusted Industrial Production (IP) improved. Headline manufacturing also improved. Our view is marginally worse than the headlines. The market expected a significant improvement this month in industrial production - and it was good. The manufacturing surveys all predicted improvement - and it was delivered. As there was significant downward revision in last month's data, the best way to view this is the 3 month rolling averages which improved but remain in contraction. Manufacturing employment growth has evaporated.

  • Headline seasonally adjusted Industrial Production (IP) was up 0.8 % month-over-month and up 0.5 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth accelerated 1.3 % month-over-month, and is up 0.5 % year-over-year.
  • The unadjusted year-over-year rate of growth accelerated 0.3 % from last month using a three month rolling average, and is down 0.3 % year-over-year.

IP headline index has three parts - manufacturing, mining and utilities - manufacturing was up 0.2 % this month (up 0.2 % year-over-year), mining up 0.0 % (down 2.8 % year-over-year), and utilities were up 6.6 % (up 6.2 % year-over-year). Note that utilities are 10.8 % of the industrial production index, whilst mining also is 10.8 %.

NY Fed: Manufacturing Activity Continues to Expand in New York Region - From the NY Fed: Empire State Manufacturing Survey Manufacturing firms in New York State reported that business activity grew in January. The general business conditions index was little changed at 6.5, its third consecutive positive reading. The new orders index fell seven points to 3.1, indicating that orders increased at a slower clip than last month, and the shipments index held steady at 7.3, pointing to an ongoing increase in shipments. ... ...The index for number of employees rose but held below zero at -1.7, a sign that employment levels edged slightly lower; the average workweek index, at -4.2, pointed to a small decline in hours worked. .. Indexes for the six-month outlook suggested that respondents remained very optimistic about future conditions. The index for future business conditions was unchanged at 49.7, matching last month’s multiyear high. This was close to expectations, and suggests manufacturing activity expanded further in January.

Empire State Manufacturing Survey: Continued Modest Growth - This morning we got the latest Empire State Manufacturing Survey, which shows continued modest growth. The diffusion index for General Business Conditions at 6.5 was little changed from the previous month's 7.6, which was a downward revision from 9.0.The forecast was for a reading of 8.5.The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state.Here is the opening paragraph from the report.Business activity continued to grow modestly in New York State, according to firms responding to the January 2017 Empire State Manufacturing Survey. The headline general business conditions index was little changed at 6.5. The new orders index fell to 3.1, pointing to a small increase in orders, and the shipments index held steady at 7.3. Inventories edged higher for the first time in more than a year. Labor market conditions remained weak, though less so than in recent months, with manufacturers reporting a slight decline in employment and somewhat shorter workweeks. Both input prices and selling prices increased more rapidly this month, with the prices paid index climbing to its highest level in nearly three years, and the prices received index also jumping to a multiyear high. Indexes for the six-month outlook continued to convey a high degree of optimism about future conditions, with the index for future business conditions matching last month’s nearly five-year high. [source] Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

Philly Fed: Manufacturing Activity Continued to Improve in January --Earlier from the Philly Fed: Manufacturing Activity Continued to Improve in JanuaryEconomic conditions continued to improve in January, according to the firms responding to this month’s Manufacturing Business Outlook Survey. The indexes for general activity, new orders, and employment were all positive this month and increased from their readings last month. Manufacturers have generally grown more optimistic in their forecasts over the past two months. The future indexes for growth over the next six months, including employment, continued to improve this month...The index for current manufacturing activity in the region increased from a revised reading of 19.7 in December to 23.6 this month. ... The general activity index has remained positive for six consecutive months, and the activity index reading was the highest since November 2014....Firms reported an increase in manufacturing employment this month. ... The current employment index improved 9 points, registering its second consecutive positive reading.  Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Philly Fed Manufacturing Index: Continued Improvement - The Philly Fed's Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to the direction of the broader Chicago Fed's National Activity Index.The latest Manufacturing Index came in at 23.6, up from last month's 19.7. The 3-month moving average came in at 17.3, up from 13.2 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 56.6, an increase over the previous month's 48.7.Today's 23.6 came in well above the 15.8 forecast at Here is the introduction from the survey released today:Economic conditions continued to improve in January, according to the firms responding to this month’s Manufacturing Business Outlook Survey. The indexes for general activity, new orders, and employment were all positive this month and increased from their readings last month. Manufacturers have generally grown more optimistic in their forecasts over the past two months. The future indexes for growth over the next six months, including employment, continued to improve this month. (Full Report)The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012, and a shallower contraction in 2013. 2015 saw a contraction with an improvement in 2016. In the next chart, we see the complete series, which dates from May 1960. For proof of the high volatility of the headline indicator, note that the average absolute monthly change across this data series is 7.7.

Weekly Initial Unemployment Claims decrease to 234,000 ---The DOL reported:In the week ending January 14, the advance figure for seasonally adjusted initial claims was 234,000, a decrease of 15,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 247,000 to 249,000. The 4-week moving average was 246,750, a decrease of 10,250 from the previous week's revised average. This is the lowest level for this average since November 3, 1973 when it was 244,000. The previous week's average was revised up by 500 from 256,500 to 257,000.There were no special factors impacting this week's initial claims. The previous week was revised up. The following graph shows the 4-week moving average of weekly claims since 1971.

Initial Claims Crash To 44 Year Lows But Over 700,000 More People Are On Jobless Benefits Since Trump Was Elected -- 1.74mm people were 'continuing' to claim jobless benefits before Donald Trump was elected. In a mysterious fluke of statistical smoke and mirrors, that marked the absolute trough in the data series - showing just how awesome the economy was for Hillbama. Last week's 2.46mm print for continuing claims suggests (while seasonal aspects are at play), over 700,000 more people are now claiming unemployment benefits than before Trump was elected. But, by the magic of seasonal adjustments, initial jobless claims plunged back to its cycle lows -the best levels since Nov 1973!!

Real wage growth vs. labor force participation -- This is the second of four installments looking at whether and by how much people who are out of the labor force decide to seek employment as an economic expansion continues.  This is part of a broader issue of how close we are to full employment. In the first installment, I showed that once we separate labor force participation into men and women, then we see two separate but equally stable long term trends.  Men's participation has declilned at a fairly steady -0.3% YoY over the long term, while women's participation increased by about +0.5% YoY over from 1955 to the late 1990s.  Once we account for that secular trend, in both cases we find that within any given business *cycle,* both men's and women's participation has increased compared with that trend as the economy improves, and deteriorates compared with the long term trend during and around recessions.  In short, as an economy improves, people are drawn off the sidelines into the labor pool. In this installment, I'll look at whether this increase in participation correlates with real wage growth. Once again, I'll separate men's and women's participation.  Here is the YoY% change in men's participation, +0.3%, compare with the YoY% change in real wage growth (green) from 1955 to the present:

Minimum Wages and Productivity - I had a chuckle reading a report in today’s New York Times that describes a pair of papers on the minimum wage presented at the recently-concluded economics meetings in Chicago, especially the first, an experimental study by John Horton of NYU.  Horton set up an online matching system between employers and workers, where each made wage offers for a variety of tasks that could be performed remotely.  The design allowed him to measure the actual productivity of workers in these tasks if they successfully concluded a deal with the employers.  Then he imposed a minimum wage to see what would happen.  The result was that employers sought out the most productive workers when they had to pay higher wages to everyone.   There was lots of back and forth in the article about whether this result would generalize to a minimum wage established over all employers within a region rather than just a few (who could better pick and choose), but for me the irony is that this is exactly what proponents of the minimum wage hope it will achieve.  That is, one of the main purposes of setting a floor under wages is to generate incentives for firms to increase productivity. Note that it is the firm that is expected to do this.  Economists for some reason tend to assume that productivity is essentially a worker attribute, like how tall you are or whether you’re left-handed.  No doubt workers differ greatly according to their potential productivity, but most actual, realized productivity is the result of the way the work is set up—whether the output is of lesser or greater value, how much and what kind of equipment the worker has available to work with, what kinds of skills the work develops and makes use of, and how much opportunity the worker herself has to tinker with the job to make it go better.  These are employer choices.  In a world of low wages employers have less incentive to invest in the productivity of work, so they don’t.  If increasing labor productivity is a major social goal—and it should be—then making labor more expensive is a good thing, all else being equal.  The only trick is to see that, in the modern, mechanized interdependent world, it’s the quality of the job that turns the worker’s potential productivity into the real thing.

Millennials earn 20% less than Boomers did at same stage of life: — Baby Boomers: your millennial children are worse off than you. With a median household income of $40,581, millennials earn 20 percent less than boomers did at the same stage of life, despite being better educated, according to a new analysis of Federal Reserve data by the advocacy group Young Invincibles. The analysis being released Friday gives concrete details about a troubling generational divide that helps to explain much of the anxiety that defined the 2016 election. Millennials have half the net worth of boomers. Their home ownership rate is lower, while their student debt is drastically higher.The analysis of the Fed data shows the extent of the decline. It compared 25 to 34 year-olds in 2013, the most recent year available, to the same age group in 1989 after adjusting for inflation. Education does help boost incomes. But the median college-educated millennial with student debt is only earning slightly more than a baby boomer without a degree did in 1989. The home ownership rate for this age group dipped to 43 percent from 46 percent in 1989, although the rate has improved for millennials with a college degree relative to boomers. The median net worth of millennials is $10,090, 56 percent less than it was for boomers. Whites still earn dramatically more than Blacks and Latinos, reflecting the legacy of discrimination for jobs, education and housing. Yet compared to white baby boomers, some white millennials appear stuck in a pattern of downward mobility. This group has seen their median income tumble more than 21 percent to $47,688. Median income for black millennials has fallen just 1.4 percent to $27,892. Latino millennials earn nearly 29 percent more than their boomer predecessors to $30,436. The analysis fits into a broader pattern of diminished opportunity. Research last year by economists led by Stanford University's Raj Chetty found that people born in 1950 had a 79 percent chance of making more money than their parents. That figure steadily slipped over the past several decades, such that those born in 1980 had just a 50 percent chance of out-earning their parents.

Wealth Inequality and Sentimental Credit - Noni Mausa - I go to the store and buy a loaf of bread. I have used a tiny scrap of credit to mobilize a farmer, a baker, a truck driver, and probably a score of others to exert their skill and energy to have a loaf of bread there when I arrive. Though my credit is sliced very thin and passed around to these dozens of people, and though it travels backwards in time, so to speak, to reward them, it is merely a placeholder for an exchange of human effort. My “credit” is not necessarily cash or even money. It is simply whatever leverage I can wield to direct human effort to my benefit. Sometimes, of course, it takes the form of cash, but just as often it can manifest as pity, fear, misdirection, beauty, hope, hatred, fun, or family feeling. One way to increase one’s own power is to increase your ability to work one or another of these levers. Currently, people focus on only one of these – the possession of money, in the forms of cash, investments, steady incomes, etc. When the possession or control of cash increases in a small group, we call this wealth inequality. But another way to increase inequality lies in reducing people’s access to non-cash credit, what you might call sentimental credit. Sentimental credit is the credit the poor depend on when all else is stripped from them. This is the reason why people in the poorest countries are often described as generous, welcoming, lovely, cheerful, honourable, charitable, and keenly alive to community and family connections. It’s why these people create intricate art and music and wonderful food out of the unlikeliest poor materials, and tell long and fascinating stories. It’s why their land, however poor, is seen as their home, with loyalty, respect and family-feeling. In deeply poor communities, sentimental credit circulate available resources, earns respect and trust, cultivates family feeling, builds pride, and basically keeps things together. People in these societies who aren’t generous, who are miserable to be around, who take but never give, who take no pride in skills, who know no stories, can get along fine if they have a good supply of cash and can live in a relatively anonymous society. Otherwise, they are, ahem, evolutionally impaired. How does this apply to the descent of America into an unequal society?  I have wondered for several years at a growing pattern of fragmentation in America. In all ways this pattern has moved opposite to the fibres that strengthen sentimental credit. In culture, vulgarity. In communities, intolerance. When encountering the poor and needy, contempt. In the legal system, tolerance of fraud and injustice. In families, shrapnel-dispersion of children and families which makes mutual support or even communication difficult, and weakens their attachment to the land they stand on. In skills and knowledge, disrespect of excellence, or institutional barriers to acquiring or using it. Were the props of sentimental credit in the United States targeted and willfully kicked away as conventional, anonymous credit was consolidated in fewer and fewer hands? Which was cause? Which was effect? And how can they be rebuilt?

How U.S. Immigrants’ Jobs Are Shifting -- America’s most recent immigrants are more educated and more likely to fill professional and technical jobs than their predecessors, highlighting the changing demographics of non-native workers and a potential shift in the political landscape on immigration. Jed Kolko, chief economist at job site Indeed, used Census Bureau data to dissect the occupational, educational and geographical background of immigrants in the U.S. He shows the most recent arrivals—those who came to the U.S. in the past five years—gravitating to jobs as medical scientists, software developers, physical scientists and economists. By contrast, earlier immigrants were more likely to land in blue-collar jobs at beauty salons, on construction sites or operating sewing machines.“These changes in who immigrants are, where they live, and what they do will affect the politics of immigration in the new Trump administration,” Mr. Kolko said. “The employers who oppose restrictions on new immigrants will increasingly come from technical industries and research organizations, and workers who have felt most threatened by immigration in the past might become less so.” Donald Trump, who takes office Friday, won the November election on a platform that included opposition to illegal immigration and a promise to build a wall along the Mexican border. A Wall Street Journal analysis late last year showed that GOP voters in areas that diversified rapidly were more likely to vote for Mr. Trump, underscoring political fallout from a wave of Hispanic newcomers who settled in the Midwest.Business and populist wings of the Republican Party, meanwhile, appear poised for a potentially divisive fight over foreign workers. Mr. Kolko’s research indicates that much of the debate over immigration policy may be rooted in occasionally outdated perceptions.

If Trump Builds the Wall, What Will Happen to our Food System? -- Donald Trump made a crackdown on illegal immigration a central facet of his campaign—and, for many Americans, framed it in a shockingly aggressive way—but the idea has been circulating in political circles for years. Many studies have been done about the impact of different immigration policy scenarios on the food system, and the findings might shock you.  One of the most comprehensive studies on how immigration policy impacts the food system was commissioned by the American Farm Bureau Federation in 2014. Their report examines several policy scenarios, including what the authors refer to as the “enforcement only” option, which they define as “strengthened border security and…more aggressive use of deportation”—essentially Trump’s plan to date. The Farm Bureau strongly condemned this strategy, recommending instead “an adjustment of status for experienced, but unauthorized, agricultural workers”—in other words, making them legal. The report found that stemming the flow of undocumented immigrants across the southern border—which currently accounts for between 50 and 70 percent of the agricultural workforce—would cause retail food prices to jump an average of five to six percent, and that “the quantity and variety of grocery store produce would diminish.”  The price shocks would not be diminished evenly across the supermarket aisles, with foods that are typically imported (like olives) or produced primarily with mechanized means (grains and legumes), staying roughly the same. The biggest price increases would be seen in the produce department—as fruits and vegetables are by far the most labor intensive foods to produce—though the researchers did not provide a specific number.

Scarcity, Money, and Undocumented Immigrants -- Scarcity refers to having less than one needs -- time, money, calories when on a diet. For example, not having enough money reduces a person's cognitive capacity as much as missing one full night of sleep. When Scarcity, by Sendhil Mullainathan and Eldar Shafir, was published, Slipster Katie Porter connected its lessons about the mental tax of not having enough to adding a "cushion" to a chapter 13 plan. And now, Slipster Nathalie Martin's recently published paper, Survival in the Face of Scarcity: The Undocumented Immigrant Experience, uses her hour-long interviews with 50 undocumented immigrants living in Albuquerque, New Mexico to explore how their acute financial scarcity impacts their lives. Though the paper is focused on undocumented immigrants, some of the lessons of the narrative that Martin weaves apply equally to all cash-strapped people.  The individuals who Martin interviewed generally live in poverty, which is typical of the undocumented immigrant population. They also face unique barriers to escaping that poverty, such as unstable employment, fear of the legal system, and a propensity to be taken advantage of because of their immigration status. They also face barriers to escaping poverty more typical of financially insecure individuals, such as the propensity to be targeted for predatory credit products and a fear of traditional banking institutions. The result of their poverty is an (as anticipated) hyper-vigilance about money. One of the most effective parts of the paper is Martin's recounting of how interviewees talked of problems in the financial lives by discussing how much they owed or were over-charged down to the dollar or penny. In short, when you don't have enough money, every penny counts, and counting every penny all the time makes it difficult to focus on other parts of life, such as your job. It is a vicious cycle for anybody, but even more so for undocumented immigrants who routinely are taken advantage of by employers. And it is a textbook example of the effects of scarcity, as detailed by Mullainathan and Sharif.

More on the Economic Hardship of Young Adults - Yves Smith - In the US, the cost of the aftermath of the crisis has fallen heavily on young people, mainly due to bad policy responses to the crisis that we’ve described at length as it was happening: the failure to restructure bad loans (particularly mortgages) and impose costs on banks and investors, not just homeowners; the refusal to engage in enough fiscal spending, not just during the crisis but in deficit fights during the Obama Administration. That isn’t to say that other groups haven’t suffered too. Remember that older, less educated whites have suffered a decline in lifespans, which is unheard in anything other than post-USSR economic collapse. And even though some people in their 50s and 60s are sitting pretty, virtually all the ones I know outside McKinsey and top Wall Street circles are looking at working till they drop.  But young people have suffered in a very large way and don’t have any reason to expect much improvement. And the impact on them of diminished earnings early in their career is more serious than taking a hit for a similarly long period later in one’s working life. Various studies have found that lower earnings at the start of one’s career lead to diminished lifetime earnings.  Reader UserFriendly flagged two disheartening sightings on how young adults are suffering. As we’ll see, the report from Fortune is directionally correct in showing how much lower typical incomes are for young people now versus in the 1980s. However, they over-egged the pudding by taking a period of time that ended with pre-recession peak incomes that it took the better part of a decade to reach again. From Fortune, summarizing a report by a group called the Young Invincibles, using Fed data:The report found that millennials—15 to 34-year-olds in 2013—were worth roughly half as much as the boomer generation and are earning about 20% less in comparison to young adults in 1989. While millennials earned $40,581 on average in 2013, members of the boomer generation earned $50,910 annually in 1989.Meanwhile, young adults with debt and a degree in 2013 earned roughly the same as those who had no degree at all in 1989: $50,000.The lower number on the paycheck has also materialized in the form of a lower net worth. While Millennials are worth about $10,900, the Boomers were worth $25,035 at the same age.The lower number on the paycheck has also materialized in the form of a lower net worth. While Millennials are worth about $10,900, the Boomers were worth $25,035 at the same age. While this does not break down income by age group, this chart illustrates how using 1989 as the basis for comparison over-eggs the pudding, since it was the peak year in a strong recovery after a severe recession (the Fred chart is interactive, so if you visit the site, you can see the values for each year. Unfortunately, the series does not go back before 1984):

Rape Victim Jailed For a Month, Treated Like a Prisoner To Force Her To Testify in Court — A Houston woman has been traumatized by the District Attorney’s office, following her report of being raped by a serial rapist. According to Click2Houston, “Jenny, who is in her 20s, was the star witness in the rape trial of Keith Hendricks after he violently raped and choked her. Hendricks was eventually sentenced to two life sentences for raping women.” But during the trial, Jenny broke down while testifying against Hendricks. Fearing that her star witness would not return to testify, prosecutors decided Jenny, who suffers from bipolar disorder, would need to go to the hospital, and then to jail. Yes, that’s right. After a brief stay at St. Joseph’s Medical Center, Jenny was “handcuffed, put in the back of a patrol car and taken to jail,” according to her attorney Sean Buckley.  Adding insult to injury, apparently, not only was the witness raped, forced to testify in front of others about her trauma but then she was rewarded by being forced to spend nearly a month in jail. A month! The highly unusual move occurred when prosecutors presented the trial judge with a “witness bond.” The judge, Stacey W. Bond, signed the order but cannot comment on the case because the rapist is appealing his conviction. So to paint the picture, at least for around 30 days, both the victim and the perpetrator were locked behind bars. This miscarriage of justice just re-victimized the victim and led to a historic shake-up in the district attorney’s office.

Food-Stamp Recipients Can Now Order From Amazon, Other Online Retailers - Food-stamp recipients can use their taxpayer-funded benefit to order online from retailers like Amazon under a new Obama administration initiative that aims to facilitate the shopping experience for rural and urban residents. It marks the latest of many costly experiments by the administration to expand the fraud-infested program, which has seen a record-high number of beneficiaries under President Obama. To eliminate the welfare stigma, the administration renamed food stamps Supplemental Nutrition Assistance Program (SNAP) and the rolls swelled to an astounding 46.5 million in 2016. This cost American taxpayers and eye-popping $70 billion, according to government figures. It’s all part of the president’s longtime goal to eradicate what he and the First Lady call an epidemic of “food insecurity” among the nation’s low-income residents. Part of the problem is that this demographic has limited access to healthy food choices, the administration says, and the government must provide them with nutritional options. This is why taxpayers have been forced to dole out tens of millions of dollars to bring fruits and vegetables to the nation’s inner cities, coined “food deserts” by the administration because they lack healthy fare. The new online ordering program will help address this, according to the federal agency that runs the bloated food-stamp program, the U.S. Department of Agriculture. (USDA).

No Agricultural Economist Was Harmed–Let Alone Interviewed–During the Making of this Article: This past weekend, the New York Times ran an article about the kinds of food SNAP recipients purchase, based on a new USDA report. Here is how the NYT article began: The United States Department of Agriculture, which oversees the $74 billion food stamp program called SNAP, has published a detailed report that provides a glimpse into the shopping cart of the typical household that receives food stamps.The findings show that the No. 1 purchases by SNAP households are soft drinks, which accounted for 5 percent of the dollars they spent on food. The category of “sweetened beverages,” which includes fruit juices, energy drinks and sweetened teas, accounted for almost 10 percent of the dollars they spent on food.  Had the NYT’s intention been to provide arguments to those who wish to dismantle SNAP–a program which, in 2014, provided an average of $125 to spend on food to 46.5 million Americans with low or no income; that’s one in seven Americans–it wouldn’t have done a better job. This is especially given that title: “In the Shopping Cart of a Food Stamp Household: Lots of Soda.”My Twitter feed came alive with (justified) criticism of the article. My University of Minnesota colleague Joe Soss wrote a long response on his Facebook page which should be read in full to appreciate just how bad the NYT reporting was, part of which reads as follows:The story hammers away at the idea that “the No.1 purchases by SNAP households are soft drinks, which account for about 10 percent of the dollars they spend on food.” Milk is No. 1 among non-SNAP households, we’re told, not soft drinks. At the start of the article, [NYT reporter Anahad] O’Connor frames these and other alleged facts with a quote that tells readers what SNAP really is: “SNAP is a multibillion-dollar taxpayer subsidy of the soda industry.” The story doubles down on this misleading image of the program by ending with a discussion of how the big soda companies lobby to keep the SNAP funds flowing — and with a quote asserting, “This is the first time we’ve had confirmation that this massive taxpayer program is promoting all the wrong kinds of foods.” I want to be clear here: This is bullshit. It’s a political hack job on a program that helps millions of Americans feed themselves, and we should all be outraged that the NYT has disguised it as a piece of factual news reporting on its front page

A more constructive approach to SSB restrictions in SNAP – Wilde - The New York Times this week published an article about "lots of soda" in the shopping carts of SNAP participants. This drew fire from the magazine Jacobin ("Reason in Revolt"), where Joe Soss noted several problems with the NYT article. For example, the NYT listed "milk" first among beverage choices for nonparticipant households, but the original USDA study (.pdf) showed no significant difference in the ranking of food choices for participants and nonparticipants. Here is a draft set of principles, which, if met, might make such a proposal deserving of support by anti-hunger organizations, legislators who care about food security, and the USDA.

  1. the policy to be piloted places a high value on both nutrition and food security, combining a policy of interest for public health nutrition goals (the SSB restriction) with policies of interest for food security goals (such as enhanced benefits for some participants who currently receive too little);
  2. the pilot is a true pilot (pilot scale, with genuine empirical curiosity about the outcome, and no assumptions in advance that the outcome will be favorable);
  3. the outcomes for the study include reduced SSB consumption (intended outcome) and questions about perceived stigma and SNAP participation (possible unintended outcomes);
  4. the pilot policy does not have other food choice restrictions beyond the SSB restriction (no hints at more broadly paternalistic plans to convert SNAP into WIC); and
  5. the research protocol has a trigger, enforced by the Institutional Review Board (IRB), ending the pilot in the event of any evidence that the pilot proposal threatens household food security.
I wish such a pilot SSB restriction were not caught up in our poisoned partisan struggle over the safety net more broadly. This is merely a small reasonable revision of the definition of SNAP eligible foods to exclude soda. It is not about "banning" soda, just about altering what can be purchased with SNAP benefits. If the proposed policy turns out to threaten food security, almost everybody in the public health nutrition community would drop their interest in it. And, if the proposal turns out to be successful, and perhaps even popular with SNAP participants themselves -- who may appreciate the health halo associated with the revised program -- then it may merit support within the anti-hunger advocacy community.

Betsy DeVos says guns in schools may be necessary to protect students from grizzly bears - On Tuesday, Betsy DeVos, President-elect Donald Trump’s Education Secretary nominee, answered a question about the presence of guns in schools during her confirmation hearing by saying students need protection from grizzly bears.Connecticut Sen. Chris Murphy (D) asked DeVos, “Do you think guns have any place in or around schools?”DeVos said that is decision “best left to locales and states to decide.”  When Murphy asked her again, DeVos said, “I will refer back to Senator Enzi and the school he was talking about in Wyoming … I would imagine that there is probably a gun in the schools to protect from potential grizzlies.”   When Murphy was a member of the House of Representatives, he represented the district including Newtown, Connecticut, where 20 elementary school students and six school employees were gunned down in the 2012 Sandy Hook massacre. Murphy invited DeVos to come to Connecticut and “talk about the rule of guns in schools.” Since January 2013, there have been 201 incidents of firearms being discharged on school grounds, according to findings from Everytown for Gun Safety and Moms Demand Action for Gun Sense that were released in November. Black students are disproportionately the victims of school shootings.

Betsy DeVos Wants to Use America’s Schools to Build “God’s Kingdom” - Although the DeVoses have rarely commented on how their religious views affect their philanthropy and political activism, their spending speaks volumes. Mother Jones has analyzed the Dick and Betsy DeVos Family Foundation's tax filings from 2000 to 2014, as well as the 2001 to 2014 filings from her parents' charitable organization, the Edgar and Elsa Prince Foundation. (Betsy DeVos was vice president of the Prince Foundation during those years.) During that period, the DeVoses spent nearly $100 million in philanthropic giving, and the Princes spent $70 million. While Dick and Betsy DeVos have donated large amounts to hospitals, health research, and arts organizations, these records show an overwhelming emphasis on funding Christian schools and evangelical missions and conservative, free-market think tanks, like the Acton Institute and the Mackinac Center, that want to shrink the public sector in every sphere, including education. The couple's philanthropic record makes clear that they view choice and competition as the best mechanism to improve America's education system. Overall, their foundation gave $5.2 million from 1999 to 2014 to charter schools, which are funded by taxpayers but governed by appointed boards and often run by private companies with varying degrees of oversight by state institutions. Some $4.8 million went to a small school they founded, the West Michigan Aviation Academy. Meanwhile, when it comes to traditional public schools run by the districts and accountable to democratically elected school boards—the ones that 86 percent of American students attend—the DeVoses were far less generous: Less than 1 percent of their funding ($59,750) went to support these schools. But the DeVoses' foundation giving shows the couple's clearest preference is for Christian private schools. In a 2013 interview with Philanthropy Magazine, Betsy DeVos said that while charters are "a very valid choice," they "take a while to start up and get operating. Meanwhile, there are very good non-public schools, hanging on by a shoestring, that can begin taking students today." From 1999 to 2014, the Dick and Betsy DeVos Family Foundation gave out $2,396,525 to the Grand Rapids Christian High School Association, $652,000 to the Ada Christian School, and $458,000 to Holland Christian Schools. All told, their foundation contributed $8.6 million to private religious schools—a reflection of the DeVoses' lifelong dedication to building "God's Kingdom" through education.

The Coming Crusade Against Public Education - Nation -- Betsy DeVos, whose nomination for secretary of education will be reviewed by the Senate Health, Education, Labor, and Pensions Committee on Tuesday, has never taught in a classroom. She’s never worked in a school administration, nor in a state education system, nor has she studied pedagogy. She’s never been to public school, and neither have her children. She has no record on higher education, except as an investor in the student-loan industry, which the Department of Education oversees.  What DeVos lacks in expertise she’s made up in money. The DeVoses have given some $200 million to conservative organizations and politicians—including nearly $1 million to 21 of the senators who will vote on her nomination—with particular devotion to the cause of privatizing public education.   DeVos has been deeply involved in education—as a lobbyist and philanthropist—since the early 1990s, particularly in her home state, Michigan, where she’s pushed to expand charter schools and to implement a voucher system that would funnel public dollars to private schools. DeVos adheres to the idea that free-market competition between schools will produce the best outcome for students. “The more of a ‘marketplace’ we have for education, the more, I think, the better,” she said in a 2015 interview. In another speech that year, she referred to public education as a “dead end,” and said that “government really sucks.”  But DeVos is not simply a free-market ideologue: She has also argued for education reform as a way to advance a Christian worldview. Like her father, DeVos has backed a number of right-wing religious organizations. During a convening of wealthy Christians in 2001, DeVos likened debate about public education to a religious battlefield, and described her work to promote school choice as a crusade to “advance God’s Kingdom” and to secure “greater Kingdom gain.” In the year prior to those remarks, the DeVoses spent more than $2 million backing a school-voucher referendum that would have permitted Michigan parents to pay tuition at religious schools with public money. The measure failed decisively—but soon DeVos may have a national platform from which to attack the separation of church and state. (Donald Trump campaigned on a proposal to spend $20 million on a federal voucher program, though there are several obstacles to that plan.)

Betsy DeVos and the Manichean impulse - Earlier this week, Secretary of Education nominee Betsy DeVos, a longtime education advocate and philanthropist, testified before the Senate education committee. In some quarters—in quite a few, actually—her nomination has been portrayed as a horrific development. Just days after DeVos’s nomination was announced, the New York Times ran an op-ed attacking her as anti-science because . . . she supports a less regulated version of charter schooling than did the op-ed’s author. The New Yorker wrung its hands at the sinister threat posed by DeVos having attended a religious high school. AFT president Randi Weingarten went to the National Press Club to denounce DeVos for being anti-education, anti-teacher, and a sworn enemy of the nation’s children. I’ll be clear. I think DeVos is a solid pick. I think she’s smart, thoughtful, and committed to doing what she thinks best (full disclosure: DeVos sits on the board of the American Enterprise Institute, where I’m director of education policy. So take my view for what you will). I like that DeVos hasn’t spent her life in education bureaucracies, is an outspoken champion of all kinds of educational choice, strikes those who’ve driven Obama-era school reform as an “outsider,” and is a small government conservative. But I’ve got no quarrel with those who oppose her. For many of us, the fact that she doesn’t have experience managing bureaucracies and would like to see Washington’s role shrink is a plus. For others, these things are red flags. Okay, I get it. Some oppose her nomination because they don’t want a Secretary of Education who supports school vouchers or for-profit charter school operators. That’s cool, too.  I have a big problem, though, with those who can’t leave it at that; who feel compelled to cast her as a malicious force or launch vitriolic attacks based on where she sent her kids to school. This feels like a natural but unfortunate extension of the overheated rhetoric around things like the Common Core and teacher accountability, where one side dismisses concerns as evidence of small-minded idiocy and the other thunders about a “war on teachers.” In those debates, many of us—and, I think, a big swath of the American people—wind up thinking, “A plague on both your houses.”

College Professors Organize National 'Teach-In' to Challenge 'Trumpism'Breitbart - Some 25 colleges and universities – many of them public – have answered a call by professors at UCLA to use their regular class time to “teach, organize, and resist” what they view as the discriminatory political agenda of President-elect Donald Trump.Slated for Wednesday, January 18, the teach-in, dubbed #J18, is taking place between the Martin Luther King, Jr. holiday and Trump’s inauguration. The event’s planners say:Let it be known that on #J18 and beyond, universities, colleges, and high schools refused to bear silent witness to the politics of hate and fear; that in these times, these places of teaching and learning not only served as a sanctuary for its students and workers but also stood up to proclaim the power of knowledge on the frontlines of social justice.On January 18, the professors are calling upon their colleagues to “Teach, Organize, Resist,” and “affirm the role of critical thinking and academic knowledge in challenging Trumpism.”They continue: On that day, we intend to teach about the agendas and policies of the new administration, be it the proposed dismantling of economic and environmental regulations or the threatened rollback of the hard-won rights that form the fragile scaffolding of American democracy. On that day, we intend to organize against the proposed expansion of state violence targeting people of color, undocumented people, queer communities, women, Muslims, and many others. On that day, we intend to resist the institutionalization of ideologies of separation and subordination, including white supremacy, misogyny, homophobia, Islamophobia, and virulent nationalism. In addition to UCLA, universities participating in the event to date include: American University, Washington, D.C.; University of California, Berkeley; University of Cincinnati; University of Dayton; University of Minnesota; New York University; Princeton University; Texas State University; University of Kentucky; Vanderbilt University; and University of Washington.

Vatterott's KC president said helping homeless student cost him his job -  Taking in a homeless person at work proved to be a bad idea, again. Brian Carroll said it cost him his job as campus president of Vatterott College in Kansas City, a post he’d held since June 2014. Carroll said he was fired Jan. 9, the Monday after allowing a student to stay overnight in the school’s library on Jan. 6. He said he knew the student was homeless, off medications he needed, lacked transportation and would be sleeping outside in near-zero temperatures. “I was thinking this is a life-threatening situation for the student,” Carroll said. Similar circumstances cost Prairie Village City Councilman David Morrison his elected post in 2012, though he was later reinstated by the Kansas Court of Appeals. Morrison had allowed a homeless friend to spend a few nights at City Hall. “I made a mistake,” Morrison said Tuesday. “I think I did the right thing but the wrong way.” Paul Ferrise, Vatterott’s regional vice president, said Tuesday that Carroll had made a “bad decision” in allowing the student to stay overnight on school property. Ferrise acknowledged Carroll was out of a job but declined to address Carroll’s version of what happened, citing limits in matters of personnel. “We’re going to protect his right to privacy and confidentiality,” Ferrise said. Ferrise said the school’s focus is on its students and their success, but Carroll had other choices, better choices, that night. He might have helped the student find a local shelter, for example. “Mr. Carroll had a range of options available to him to help the student. He made a bad decision,” Ferrise said.

World's Largest Education Company Crashes After Dire Warning, Warns Of "Unprecedented" Business Decline --British education group, and the world's largest education company, Pearson PLC lost a quarter of its market cap in an instant this morning after it issued a dire warning about the state of the textbook business, cut profit forecast, and warned of an "unprecedented" decline in its North American business. It also put its stake in the iconic Penguin Random House book business for sale in a bid to raise cash, not long after selling the Financial Times to the Nikkei. In an unscheduled update ahead of its full-year results in March, the former owner of the Financial Times said it was revising down its prior operating profit goal for 2017 and rebasing its dividend this year after a sharp slump in an arm of its American business. Pearson said its North American courseware market was “much weaker than expected”, with net revenues falling 30 per cent in the fourth quarter, taking the overall yearly decline to 18 per cent. Operating profit in 2017 will be 570 million pounds to 630 million pounds, the London-based company said in a statement, below the average analyst estimate compiled by Bloomberg of 702.9 million pounds. The world’s largest education company withdrew its profit goal for 2018 after sales of materials for U.S. higher education dropped 30 percent in the fourth quarter.“Whereas we had previously anticipated a broadly stable North American higher education courseware market in 2017, we now assume that many of these downward pressures will continue”, the company said. Furthermore, while Pearson said it expected 2016 operating profit in line with guidance, it scrapped its 2018 profit goal.Chief executive John Fallon said Pearson was taking “more radical action to accelerate our shift to digital models, and to keep reshaping our business”. “The education sector is going through an unprecedented period of change and volatility. We have already taken significant steps on restructuring, reducing our cost base by £375m last year”, said Mr Fallon. Pearson's sudden capitulation contrasts with months of optimistic statements CEO John Fallon about the challenges Pearson faces in the U.S., where college enrollments and its testing business are down, and textbook sales unexpectedly declined, Bloomberg reports.

Student Loan Giant Navient Sued By CFPB & Two States Over Alleged Illegal Practices -- Eighteen months after Sallie Mae spin-off Navient revealed that its wholly-owned subsidiary Navient Solutions Inc could one day be on the receiving end of a federal lawsuit related to its student loans servicing practices, the day has come to pass. The Consumer Financial Protection Bureau, along with two states, filed lawsuits against the nation’s largest student loan company for allegedly cheating borrowers out of repayment rights. The CFPB alleges in the lawsuit [PDF] that for years Navient — which services more than $300 billion in federal and private student loans for more than 12 million borrowers — engaged in a series of illegal and deceptive practices, including providing borrowers with incorrect information, processing payments erroneously, and failing to address customers’ complaints. Additionally, the CFPB claims that Navient illegally cheated struggling borrowers out of their rights to lower repayments through federal programs, which caused them to pay much more than they had to for their loans. According to the CFPB’s lawsuit, Navient, along with two subsidiaries — loan servicer Navient Solutions and collection arm Pioneer Credit Recovery — failed to provide the most basic functions of adequate student loan servicing at every stage of repayment for both private and federal loans. Specifically, the Bureau claims that Navient failed to correctly apply or allocate borrower payments to their accounts. In many cases, the CFPB found that Navient repeatedly misapplied or misallocated payments despite explicit instruction from borrowers on how the payments should be used. The CFPB claims that these errors occurred in two variations: allocating payments to multiple loans, or how the payment was applied to a specific loan, for example, allocating the funds to interest rather than principle or fees. For example, Navient may have allocated a payment intended to pay off a specific loan to all of the borrower’s loans, therefore prolonging the life of the loan that was supposed to be paid off. The company only fixed these errors, according to the complaint, when customers discovered the problem and submitted complaints.

Student Loan Collector Cheated Millions, Lawsuits Say - NYT -- Navient, the nation’s largest servicer of student loans, has for years misled borrowers and made serious mistakes at nearly every step of the collections process, illegally driving up loan repayment costs for millions of borrowers, according to lawsuits filed on Wednesday by a federal regulator and two state attorneys general. Navient handles $300 billion in private and federal loans for some 12 million people — touching about one in four student loan borrowers. Every customer may have been affected by Navient’s misdeeds, said Lisa Madigan, the attorney general of Illinois, announcing her own lawsuit with the one filed by the Consumer Financial Protection Bureau. Navient does not make the loans, but it holds lucrative contracts to collect payments each month on behalf of banks, government and other lenders. The damages sought could reach billions of dollars, said Ms. Madigan, who sued Navient and Sallie Mae — which split into the two companies in 2014. Washington State’s attorney general, Bob Ferguson, filed a similar lawsuit against both companies. The lawsuits describe routine mistakes and lapses in oversight that over time added up to systematic failures, eerily similar to the mortgage servicing industry’s bungling of borrower accounts and property foreclosures during the 2008 recession. Financial companies eventually paid more than $100 billion to settle mortgage-related lawsuits. Navient mishandled loan payments, buried critical information in fine print and set obstacles for borrowers trying to release co-signers from their loans, among other failings, according to the consumer bureau’s legal filing.

'US Government Caught Massively Fabricating Student Loan Default Data - Ever since 2012 we have warned that one of the biggest threats in the student loan bubble is not that it is soaring at an unprecedented pace, with the latest loan total number over $1.4 trillion, rising at a pace of nearly $100 billion per year, but that the government - either on purpose or due to miscalculation - was not correctly accounting for the true extent of delinquencies and defaults. Today, we finally got confirmation that, as speculated, the US government was indeed fabricating student loan default data, making it appear far lower than it was in reality. An the WSJ reported overnight many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed. The admission came last Friday, when the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers. This also means that the number of loan defaults in various cohorts is far greater than previously revealed. A spokeswoman for the Education Department said that the problem resulted from a "technical programming error." And so, the infamous "glitch" strikes again. When The Wall Street Journal analyzed the new numbers,the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country. In other words, virtually every single number was made to appear better than it actually was.  According to an analysis of the revised data, at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years. This is a stunning number and suggests that the student loan crisis is far greater than anyone had anticipated previously. It also means that the US taxpayer will be on the hook for hundreds of billions in government-funded loans once attention finally turns to who is expected to foot the bill for years of flawed lending practices.

Chicago hit with big market penalty for bond sale | Reuters: Chicago's $888.7 million of tax-free general obligation bonds fetched hefty yields and coupons on Thursday, as the city paid a stiff market penalty for its fiscal woes. Yields topped out at 6.20 percent for bonds due in 2038, lowered from an initial pricing level of 6.25 percent, with an infrequently seen 6 percent coupon. With most bonds in the muni market priced with 4 or 5 percent coupons, a 6 percent coupon indicates "that it is a distressed credit," said Daniel Berger, a muni analyst at Municipal Market Data (MMD). Only 2.6 percent of all municipal bonds sold since 2011 have had coupons of 6 percent or higher, including bonds sold by junk-rated Chicago Public Schools in December, according to Thomson Reuters data. Yields in Chicago's deal were also much fatter than those of other muni bonds carrying the same low-investment grade ratings of BBB-minus from Fitch Ratings and BBB-plus from S&P, said Dan Solender, lead muni bond portfolio manager at Lord Abbett. "Clearly based on the yield, the market is not seeing Chicago as an investment-grade investment," he said, noting that while the city has taken steps to address its problems, much remains to be done.

$1.9 billion error adds to California deficit projection | The Merced Sun-Star: Gov. Jerry Brown's administration miscalculated costs for the state Medi-Cal program by $1.9 billion last year, an oversight that contributed to Brown's projection of a deficit in the upcoming budget, officials acknowledged this week. The administration discovered accounting mistakes last fall, but it did not notify lawmakers until the administration included adjustments to make up for the errors in Brown's budget proposal last week. The Democratic governor called for more than $3 billion in cuts because of a projected deficit he pegged at $1.6 billion. "There's no other way to describe this other than a straight up error in accounting, which we deeply regret," said H.D. Palmer, a spokesman for the Department of Finance. The agency followed its normal practice by waiting to report the errors in the governor's next budget, he said. Brown's deficit projection was driven by more than just the accounting error, Palmer said, noting that California tax collections came in below expectations for most of the first half of the fiscal year. The massive hole in the Medi-Cal budget surprised state lawmakers. "It makes you wonder what else is not right. ... When something like this happens, the trust factor gets eroded, and you lose confidence in what's being provided to you,"

How Experts Enable Corruption: The Role of Conflicted Lawyers at CalPERS and Other Public Pension Funds - Yves Smith As Trump is about to be sworn in, the press and pundits are agog about his and his fellow Cabinet members’ deep and extensive conflicts of interest, and how dangerous they is for democracy.1 But the hue and cry about conflicts of interest is late in coming. They’ve been tolerated more and more over time even as they’d had visibly corrosive effects on the behavior of professionals and on government and corporate checks and balances. I plan to write about how neolibearlism corrupted experts, but due to how news is breaking this month, we’ll use public pension funds as a case study of corruption in the professional classes, meaning the Democratic party base that is the most agitated about Trump’s conduct. Mind you, these failings do not justify Trump’s lapses, but they do show these protests are disingenuous by revealing the long-standing failure to call out other abuses. Pension funds play a socially critical role. A key legal protection is that the staff and boards that oversee them are are fiduciaries, which means they are held to the highest standard of care under the law. Yet there is a yawning gap between theory and practice.Public pension funds in particular, due to the magnitude of fees and expenses paid to the outside fund managers that all but the very biggest hire, far too often have an outsized portion of their monies allocated to high fee alternative investments managers. Finance-savvy readers will know well the message of John Bogle: that even seemingly modest differences in fee levels makes a very large difference in investor returns over the 20+ year time horizon of retirement investing. Needless to say, the lofty charges that hedge and private equity funds suck out of investor commitments is a huge drag on potential returns compared to what it costs to run index funds. Perversely, public pension funds make extensive use of experts, yet corruption remains widespread. Worse, none of these hired guns appear to focus more intensely on board and staff responsibilty to beneficiaries and taxpayers even though underfunding is widespread and public pension funds are under attack.

How Unfunded Pensions Almost Sank Houston -When Houston Mayor Sylvester Turner took office last year, he inherited a sweeping pension crisis. The city had an unfunded liability of $5.6 billion, a figure representing Houston’s obligations to its fire, police, and municipal pension systems.Then it got worse: After he took office and got a closer look at the books, Turner saw the revised figure—$7.8 billion.Pensions are the storm clouds on the horizon that threaten to wash out the so-called Texas Miracle, the wave of new jobs that kept the Lone Star State afloat through the Great Recession. Taken together, the four largest cities in Texas—Houston, Dallas, Austin, and San Antonio—owe more than $22 billion in pension shortfalls. Dallas and Houston rank second and fourth, respectively, on the list of cities nationwide with the largest unfunded pension liabilities, per a ranking by Moody’s. (At number one? Chicago.) The road to pension crises is paved with good intentions. Officials in Houston and elsewhere tend to plan for funding pensions with sunny days in mind. When markets tank, the investments contributing to pension funds wither. And when the economy stumbles, cities sometimes withhold pension contributions to make up budget gaps. These effects add up over time, and correcting course usually involves contentious politics. Texas cities may have it worse than most because the local political climate is so hostile to tax revenues (even when Texas cities experience miraculous growth). Anywhere, though, officials and employees tend to kick the can down the road. It’s retirement, after all.

Baby Boomers Retirement Begins To Drain Cash in the US -- The WSJ has a piece out on the demographic effects of the baby boomers retiring:The largest generation in U.S. history has to start pulling its retirement money this year, kicking off a mandatory movement of cash that could total hundreds of billions in the coming decades.U.S. law requires anyone age 70 ½ or older to begin annual withdrawals from their tax-sheltered retirement accounts and pay taxes on those distributions. The oldest of the nation’s 75 million baby boomers cross that threshold for the first time this month, according to a U.S. Census Bureau estimate of when that demographic group began.The obligatory outflows from 401(k)s and IRAs are expected to ripple through the U.S. economy, the stock market and a money-management industry that relies heavily on fees from boomers’ tax-sheltered savings plans and assets.This is one of our six mega trends, the change in dependency ratios globally: Not really much here to add from the investment side, but I’m sure MBers will understand the pain that the baby boomers feel when they are asked to actually pay tax on investment earnings. I especially love the obligatory quote from a retiree:

Noam Chomsky: The US Health System Is an “International Scandal” — and ACA Repeal Will Make It Worse - Changes are coming to America's health care system. Not long from now, the Affordable Care Act could be history. President-elect Donald Trump wants to repeal so-called Obamacare, although he is now urging Republicans to repeal and replace it at the same time. But replace it with what? The political culture of the most powerful nation in the world is such that it vehemently defends the right of people to buy guns but opposes the right to free and decent health care for all its citizens. In all likelihood, the Trump health care plan will be one based on "free market principles." Under such a plan, as Noam Chomsky notes in the exclusive interview for Truthout that follows, poor people are likely to suffer most. In other words, the scandalous nature of the US health care system is bound to become even more scandalous in the Trump era. Welcome back to the future. (interview transcript)

Millions Are Uninsured - When People claim “Millions Are Uninsured Under the PPACA,” it is a garbage statement meant to elicit a negative reaction without going into the detail of who is uninsured and why. Repeatedly Charles Gaba, Maggie Mahar, Commonwealth Fund, Urban Institute, Kaiser Foundation, etc. have explained the numbers and the whys of the uninsured, most of which are not the fault on the PPACA.  I see commenters come to AB and outside AB discussing the uninsured. Some being legitimate bloggers claim “millions are uninsured” and some have exaggerated it even more with citing “tens of millions” with their credibility disappearing as they can not recite the make-up of or the reasons for the number as they do not know it or are trying to make a political statement. The latter being worst than the ignorance of the former.   There are reasons for the uninsured as detailed by Kaiser Family Foundation. For example, Republican states which do not allow expansion of Medicaid accounts for 2.6 million, undocumented citizens 5.4 million, those eligible for Employee sponsored insurance 4.5 million, and 3.0 million who could have unsubsidized insurance. Then there are 6.4 million adults and children eligible for Medicaid and another 5.3 million eligible for Premium Subsidies and for some reason have not chosen to be insured. Some states like Michigan do make it difficult to enroll in Medicaid. These are the Kaiser numbers for 2016 and they total ~27 millionfor uninsured and why. A “tens of millions” uninsured is a BS numeric when we start accounting for Republicans blocking Medicaid Expansion in states, undocumented immigrants, ESI available insurance, 6.4 million eligible for Medicaid, and another 5.3 million eligible for subsidies. Other than undocumented citizens and states blocking the Medicaid Expansion, there is access to healthcare insurance in one form or another through the PPACA, much of which exists today due to the PPACA, or Employer Sponsored Insurance. When we account < have not do they why for>, the number drop as there are those without subsidy who chose not to be insured, others who could be on Medicare or have Premium subsidies, and those who could have Employee Sponsored Insurance.

Here is one estimate of how many people additional people are dying each year because of 25 states opting out of Medicaid expansion, as implemented under the ACA. I don’t know of a calculation for what happens if legislation like H.R. 3762 is implemented.

IRS letters warn millions about health insurance penalty -- If you haven't signed up for health insurance, you may soon be getting a not-too-subtle nudge from the taxman. The IRS is sending personalized letters to millions of taxpayers who might be uninsured, reminding them that they could be on the hook for hundreds of dollars in fines under the federal health care law if they don't sign up soon through It's an unusual role for a revenue-collection agency. Fines are one of the most unpopular parts of the 2010 health overhaul, and there's a high likelihood they'll get repealed by Republicans, even if other parts of "Obamacare" survive. The administration is counting on IRS reminders to help sign up as many people as possible before open enrollment ends Jan. 31. That's soon after officials hand off President Barack Obama's signature program to a Trump administration committed to "repeal and replace." Letters bearing the IRS logo will be sent to an estimated 7.5 million people who either claimed an exemption from the law's requirement that most Americans carry health insurance, or who paid a penalty for being uninsured during the 2015 tax year. The coverage requirement was included in the law as a way to get healthy people into the insurance pool, helping to keep premiums in check. The penalty for this year could be $2,085 or more, depending on family size and income, says one draft version of the IRS letter. Another draft takes a somewhat different approach, leaving a blank space for the IRS to provide an individualized estimate of what the particular uninsured taxpayer might owe. The drafts were obtained by The Associated Press. Although the administration has made no secret of the IRS role in open enrollment this year, officials have not responded to requests for copies of the actual letters. Republicans say the whole thing is a waste of money. The campaign will cost about $4 million, say congressional aides.

The Reason Why Booker and the Big Pharma Dems Have No Excuse -  It’s devastating, and potentially lethal, when Americans can’t afford life-saving drugs because their elected representatives are in thrall to Big Pharma. It’s disappointing when Democrats offer implausible excuses for their votes, as Sen. Cory Booker and 12 other senators did last week.And it’s downright outrageous when those same Democrats claim their votes were driven by drug-safety concerns, since all 13 voted to lower drug safety standards when they supported the 21st Century Cures Act.If Booker and the others hadn’t broken with their party and ignored the needs of the American people, a budget amendment from Sens. Bernie Sanders and Amy Klobuchar would have paved the way for the importation of prescription drugs from Canada, where they cost far less than they do in the United States.This was a rare opportunity for bipartisan progress. Twelve Republicans broke with their party to support the amendment. If these Democrats hadn’t moved the other way, it would have passed. Their betrayal crushed one of the few remaining rays of hope for the millions of Americans whose health and financial security are endangered by the new Republican Congress. Booker attempted to defend his vote in a statement to Jezebel’s Ellie Schechet, in which he said: Any plan to allow the importation of prescription medications should also include consumer protections that ensure foreign drugs meet American safety standards. I opposed an amendment put forward last night that didn’t meet this test.  Nonsense. Canadian testing is as strong as its American equivalent, and most Canadian drugs are manufactured in the same locations as their US counterparts. And note the use of the word “foreign.” It seems designed to trigger xenophobic fears, and to hide the fact that drugs would only have been imported from one country: Canada.

Drugmakers alarmed by Trump pricing threat - FT - Before Donald Trump accused them of “getting away with murder”, the mood among pharmaceutical executives was buoyant as they gathered in San Francisco for the industry’s biggest annual gathering last week.   The bull case was that the election of Mr Trump as president and the dominance of Republicans in Washington had saved the industry from Hillary Clinton, who had pledged to crack down on the soaring price of prescription medicines that cost the US system $325bn in 2015, a 9 per cent increase on the previous year.  “The good thing about Trump is he’s not Hillary, and the good thing about Congress is they’re not Trump,” said Tim Walbert, chief executive of Horizon Pharma, in an interview before the president-elect’s intervention. For the first part of the week, investors sent healthcare stocks higher on the assumption that drugmakers would be able to continue charging premium prices.  Meanwhile, analysts predicted that forthcoming Republican tax reforms would enable large pharmaceutical groups to repatriate roughly $100bn of offshore cash, leading to a spate of dealmaking and share buybacks that would push valuations higher still.  But on Wednesday the party was interrupted by Mr Trump, who kicked off his first press conference in months with an unprompted broadside against drugmakers. His remarks wiped nearly $24bn from the value of biotech companies listed on the Nasdaq stock exchange. Some executives were particularly aggrieved by the president-elect’s characterisation of the industry as “murderers”.  Executives and investors could probably live with fiery rhetoric from Mr Trump were it not for his pledge to “start bidding” for medicines. “We’re the largest buyer of drugs in the world. And yet we don’t bid properly,” the president-elect said during the press conference. “We’re going to save billions of dollars over a period of time.”Analysts interpreted the remarks as a sign that Mr Trump intends to enable Medicare, the taxpayer-funded healthcare scheme for retirees, to directly negotiate drug prices, something it has been prohibited from doing since a 2003 law passed during the presidency of George W Bush. Medicare is the largest buyer of prescription medicines in the world, and so pharmaceutical profits would undoubtedly suffer were it able to drive down the price it pays for drugs. Some executives also fear that government-negotiated prices could serve as a reference for the amount they can charge private health insurers.

Anthony Bourdain Has a Lot to Say About the Opioid Epidemic Destroying Small-Town America - Anthony Bourdain has never been shy about his history of drug addiction. Now more than ever, he is incensed about the opioid pandemic sweeping rural and small-town America, which the Parts Unknown host and Appetites co-author sees as a notable factor in Donald Trump’s election. At 60, the iconic epicurean worshipped by coastal-dwelling foodies has emerged as an outspoken defender of Americans battling addiction. “When did we decide it was okay to write all these people off?” he asks. With little prompting, he launches into a fiery, thoughtful rant about our broken pharmaceutical industry. (In our short conversation, we also talk about food snobbery and George Orwell.)  Anthony Bourdain: Look, large corporations track their sales very carefully. If you’re pumping in millions of highly addictive narcotic pills to one tiny little town, or one tiny little state, you know what you’re doing. There’s no question, okay? In what way are they different from some corner boy in Baltimore slinging dope? I have a little more sympathy for the corner boy than I do for some billionaire, who’s already doing quite well, knowingly selling narcotics far and above any reasonable or acceptable level of need. Now that the number of prescriptions has dropped, under pressure, these same companies are looking internationally, for the same kinds of markets in countries like Cyprus. They’re targeting places that are less familiar with Oxycontin-style problems and selling them the same line of bullshit that they sold America so effectively. So I think it’s egregious.  Now that the white captain of the football team and his cheerleader girlfriend in small-town America are hooked on dope, maybe we’ll now stop demonizing heroin as a criminal problem and start dealing with it as the medical and public-health problem that it is, and should be.

One Of The World’s Top Aging Researchers Has A Pill To Keep You Feeling Young - Say someone came up to you selling a dietary supplement—a pill that you take once a day—that could boost your energy, improve your body’s ability to repair its DNA, and keep you healthier as you get older.It might sound like a scam, or more likely just another in a sea of confusing, undifferentiated claims that make up the $20 billion dollar supplement industry.  But let’s say that someone is MIT’s Lenny Guarente, one of the world’s leading scientists in the field of aging research. And he’s being advised by five Nobel Prize winners and two dozen other top researchers in their fields. You might pay a little more attention. Cofounding a supplement company seems an unlikely career move for someone like Guarente, a man who is one of the most well-respected scientists in his field. ("It is a departure," Guarente admits). Mostly, for him, getting involved in Elysium Health is a decision born out of opportunity and frustration. The opportunity is the chance to make a difference by translating findings in the booming field of aging research directly to consumers today. The frustration is that doing this has taken so long in the first place."My biggest hope is that we can make available to people something that is currently unavailable, and that it will have a positive impact on their health," Guarente says. Elysium Health actually had its beginnings in conversations between its other two, younger cofounders, Eric Marcotulli and Dan Alminana, who were then tech investors and gym buddies. Even though they’re both quite health-conscious, they knew they couldn’t halt the march of aging and all the ailments that come with it. Far more than diet or anything else people can control, the biggest risk factor for many of the diseases that kill us—including diabetes, cancer, and cardiovascular disease—is simply getting older

For $8,000 this startup will fill your veins with the blood of young peopleQuestionable “Young Blood” Transfusions Offered in U.S. as Anti-Aging Remedy - Just off a winding highway along the Pacific coast in Monterey, California, is a private clinic where people can pay $8,000 to have their veins pumped with blood plasma from teenagers and young adults.Jesse Karmazin is the entrepreneur who made the practice possible, by launching a clinical trial on the potential of “young blood” through his startup Ambrosia. He says that within a month, most participants “see improvements” from the one-time infusion of a two-liter bagful of plasma, which is blood with the blood cells removed.Several scientists and clinicians say Karmazin’s trial is so poorly designed it cannot hope to provide evidence about the effects of the transfusions. And some say the pay-to-participate study, with the potential to collect up to $4.8 million from as many as 600 participants, amounts to a scam.What's certain is that it’s based on some intriguing if inconclusive science. Karmazin, a 32-year-old Princeton graduate and competitive rower, says he was inspired by studies on mice that researchers had sewn together, with their veins conjoined, in a procedure called parabiosis.Over the last decade or so, such studies have offered provocative clues that certain hallmarks of aging can be reversed or accelerated when old mice get blood from young ones. Yet these studies have come to conflicting conclusions. An influential 2013 paper in Cell showed that a particular component in young blood, GDF11, increased muscle strength, for example, but other researchers could not replicate the finding.

CDC Knew Its Vaccine Program Was Exposing Children to Dangerous Mercury Levels Since 1999 -- Uncovered documents show that the U.S. Food and Drug Administration (FDA) and the Centers for Disease Control and Prevention (CDC) knew that infant vaccines were exposing American children to mercury far in excess of all federal safety guidelines since 1999. The documents, created by a FDA consulting toxicologist, show how federal regulators concealed the dangerous impacts and lied to the public.  In 1997, Congress passed the FDA Modernization Act . A provision of that statute required the FDA to "compile a list of drugs that contain intentionally introduced mercury compounds, and provide a quantitative and qualitative analysis of the mercury compounds on the list." In response, manufacturers reported the use of the mercury-based preservative, thimerosal , in more than 30 licensed vaccines.  FDA's Center for Biologics Evaluation and Research (CBER) was responsible for adding up the cumulative exposure to mercury from infant vaccines, a simple calculation that, astonishingly, had never been performed by either the FDA or the CDC. When the agency finally performed that basic calculation, the regulators realized that a six month-old infant who received thimerosal-preserved vaccines following the recommended CDC vaccine schedule would have received a jaw dropping 187.5 micrograms of mercury.  Instead of immediately ordering the removal of thimerosal, FDA officials circled the wagons treating the public health emergency as a public relations problem. Peter Patriarca, then director of the FDA Division of Viral Products, warned his fellow bureaucrats that hasty removal of thimerosal from vaccines would:  " … raise questions about FDA being 'asleep at the switch' for decades by allowing a potentially hazardous compound to remain in many childhood vaccines, and not forcing manufacturers to exclude it from new products. It will also raise questions about various advisory bodies regarding aggressive recommendations for use. We must keep in mind that the dose of ethylmercury was not generated by "rocket science." Conversion of the percentage thimerosal to actual micrograms of mercury involves ninth grade algebra. What took the FDA so long to do the calculations? Why didn't CDC and the advisory bodies do these calculations when they rapidly expanded the childhood immunization schedule?"

A Woman in Nevada Died from an Unstoppable Superbug - MIT Technology Review - The woman, who was in her 70s and appears to have acquired the infection in India after she broke her leg, died in September, but a report on her case was just published by the Centers for Disease Control and Prevention.India is known to have more antibiotic-resistant bacteria in the environment than the U.S., in part because poor sanitation and water quality leads people to take hundreds of millions of courses of antibiotics each year for diarrhea. This gives the bugs ample opportunity to develop defenses against the drugs.But the threat is global. A report issued last year by the U.K. government argued that if measures aren’t taken to stem the rising tide of antibiotic resistance, 10 million people a year could be dying from superbugs by 2050—more than currently die from cancer.Many doctors say the crisis is already under way. The director of the CDC, Tom Frieden, has called the broad class of superbugs known as CRE (for carbapenem-resistant enterobacteriaceae) “nightmare bacteria.” The bacteria that killed the woman in Nevada was a kind of CRE known as Klebsiella pneumoniae. STAT spoke with James Johnson, a doctor at the University of Minnesota who studies infectious disease. He offered an even more dire appraisal of the situation. “People have asked me many times, How scared should we be? … How close are we to the edge of the cliff? And I tell them: We’re already falling off the cliff,” he said.

How to Avoid a Post-Antibiotic World - Nicholas Bagley - Kevin Outterson and I have an op-ed in the New York Times today on combating antimicrobial resistance. Here’s a snippet:Congress needs to think bigger if it wants to fix the broken antibiotic business model. Although the patent system is good at producing new blood-pressure medications and cardiovascular drugs, it’s not the right fit for antibiotics. Because new antibiotics may be held in reserve for years, manufacturers can’t sell enough during the patent term to justify large research investments. Congress should instead reward manufacturers that bring a targeted, highly innovative antibiotic to market with a substantial financial prize; in exchange, manufacturers would surrender their patent.This kind of “market-entry” reward would enable public health officials and physicians to deploy new drugs precisely where they’re needed. Manufacturers would no longer have an incentive to milk their patent, marketing the drug for inappropriate uses. The antibiotic could also be sold at a reasonable price in developing countries, which might otherwise be unable to afford a patented antibiotic.Financing market-entry rewards would be expensive, perhaps $4 billion per year in total, or about 10 percent of the annual global bill for antibiotics. But you can’t defeat bacteria on the cheap. They’ve survived for billions of years because they’re so good at adapting to new threats. Staying one step ahead will require ingenuity, money and radical change. Tinkering around the margins isn’t going to cut it.Read the whole thing here!

U.S. agriculture department finds bird flu in Montana wild duck | Reuters: The U.S. Department of Agriculture said on Monday it had detected a type of bird flu in a wild duck in Montana that appeared to match one of the strains found during an outbreak of the disease in 2014 and 2015 that led to the deaths of millions of chickens. No U.S. poultry have been found to be sick or dead from the disease in connection with the latest discovery, the USDA said. Different strains of bird flu, which can be spread to poultry by wild birds, have been confirmed across Asia and in Europe in recent weeks. Authorities have culled millions of birds in affected areas to control the outbreaks. In 2014 and 2015, the United States killed nearly 50 million birds, most of which were egg-laying hens, during its bout of highly pathogenic avian influenza, or HPAI. The losses pushed U.S. egg prices to record highs and prompted trading partners to ban imports of U.S. poultry. “This finding serves as a powerful reminder that there is still HPAI circulating in wild birds, and producers and industry need to continue to be vigilant about biosecurity to protect domestic poultry," said Jack Shere, the USDA's chief veterinarian. The infected mallard duck in Montana was found as part of routine surveillance for bird flu, according to the USDA. The agency said it was actively looking for the virus in commercial poultry operations, live bird markets and in other wild migratory birds, which can carry the disease without appearing sick.

Don’t Panic: Scientists Report First Case of Bird Flu Jumping From Cat to Human - In a rather remarkable, but extremely rare case, a veterinarian recently caught a form of bird flu after being in close contact with cats in a Manhattan animal shelter. Yes, this means that the disease effectively “jumped” species. It’s the first known case of a human contracting the H7N2 influenza A virus strain from an infected cat, according to New York’s Department of Health and Mental Hygiene. Obviously, this has gotten people, especially cat owners, worried. “Every time a virus adapts in a new animal, like a bird to a cat, we get concerned about the health of the cats and the humans who care for those cats,” said NYC health department deputy commissioner for disease control,Dr. Jay Varma. But, and this is the key, the risk of getting infected with this form of bird flu is very, veryminimal. Ultimately, this fact reinforces the importance of reading before reacting. Since the U.S. election, conversations regarding “fake news” have been taking place across the internet, and (perhaps rightly) many have been placing the blame on those who fail to do proper research. Indeed, a quick glance at the comment section of articles covering this topic reveals a host of individuals that seem overly concerned about “a new plague.” Fortunately, experts are once again asserting that there is no real cause for fear, though (as always) they are urging caution and vigilance.  “Our investigation confirms that the risk to human health from H7N2 is low, but we are urging New Yorkers who have adopted cats from a shelter or rescue group within the past three weeks to be alert for symptoms in their pets,” said health commissioner Dr. Mary T. Bassett. “We are contacting people who may have been exposed and offering testing as appropriate.”

Monsanto, California Battle Over Listing Glyphosate as a Carcinogen - Next week, Monsanto and California's Environmental Protection Agency's Office of Environmental Health Hazard Assessment (OEHHA) will face off over the agency's plan to list the herbicide glyphosate as a carcinogen. The outcome of this legal battle could have major ramifications toCalifornia's long-established regulatory program.  It all started back in Sept. 2015 when the OEHHA issued a notice of intent to list the chemical as known to the state to cause cancer under the Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as Proposition 65. The OEHHA determined that glyphosate met the criteria under the "Labor Code" listing mechanism, which directs the office to add a chemical or substance to the Prop 65 list of known carcinogens if it meets certain classifications by the World Health Organization's International Agency for Research on Cancer (IARC). The France-based IARC concluded that glyphosate is "probably carcinogenic to humans (Group 2A)" in March 2015.  Monsanto then filed a lawsuit against the OEHHA in January 2016 to prevent the listing, arguing that the Labor Code listing mechanism is unconstitutional because the office delegated law-making authority "to an unelected and non-transparent foreign body that is not under the oversight or control of any federal or state government entity."  Glyphosate happens to be the main ingredient in Monsanto's Roundup, the world's most popular herbicide . The agribusiness giant has long maintained the safety of their flagship product and has vehemently denied glyphosate's link to cancer and has also demanded a retraction of the IARC's report.

Monsanto and EPA Seek to Keep Talks About Glyphosate Cancer Review a Secret - Monsanto and officials within the U.S. Environmental Protection Agency (EPA) are fighting legal efforts aimed at exploring Monsanto's level of influence over regulatory assessments of the key chemical in the company's Roundup herbicide , new federal court filings show. The revelations are contained in a series of filings made within the last few days in the U.S. District Court for the Northern District of California as part of litigation brought by more than 50 people who are suing Monsanto. The plaintiffs claim they or their loved ones developed non-Hodgkin lymphoma after exposure to Roundup herbicide, and that Monsanto has spent decades covering up the chemical's cancer risks. Lawyers for the plaintiffs want the court to lift a seal on documents that detail Monsanto's interactions and discussions with former top EPA brass Jess Rowland regarding the EPA's safety assessment of glyphosate , the active ingredient in Roundup. Monsanto turned the documents over in discovery but marked the documents "confidential," a designation plaintiffs' attorneys say is improper. They also want to depose Rowland. But Monsanto and the EPA are fighting both requests, the filings show. The EPA has spent the last few years assessing the health and environmental safety aspects of glyphosate as global controversy over the chemical has mounted. The World Health Organization's International Agency for Research on Cancer (IARC) declared in March 2015 that glyphosate is a probable human carcinogen , with a positive association found between glyphosate and non-Hodgkin lymphoma. Monsanto has been fighting to refute that classification because of financial and legal liability ramifications.  Rowland has been key in Monsanto's efforts to rebut the IARC finding because until last year he was a deputy division director within the health effects division of the EPA's Office of Pesticide Programs, managing the work of scientists who assessed human health effects of exposures to pesticides like glyphosate. And, importantly, he chaired the EPA's Cancer Assessment Review committee (CARC) that issued an internal report in October 2015 contracting IARC's findings. That 87-page report , signed by Rowland, determined that glyphosate was "not likely to be carcinogenic."

GMO grass that 'escaped' defies eradication, divides grass seed industry | --After more than a decade of unsuccessful efforts to eradicate the genetically modified grass it created and allowed to escape, lawn and garden giant Scotts Miracle-Gro now wants to step back and shift the burden to Oregonians.  The federal government is poised to allow that to happen by relinquishing its oversight, even as an unlikely coalition of farmers, seed dealers, environmentalists, scientists and regulators cry foul. The altered grass has taken root in Oregon, of all places, the self-professed grass seed capital of the world with a billion-dollar-a-year industry at stake. The grass has proven hard to kill because it's been modified to be resistant to Roundup, the ubiquitous, all-purpose herbicide. The situation is particularly tense in Malheur County, where Scotts' altered grass has taken root after somehow jumping the Snake River from test beds in Idaho. The battle pits farmer against farmer, regulator against regulator, seller against buyer. Scotts spokesman Jim King insists the company has done its part and significantly reduced the modified grass's territory. The U.S. Department of Agriculture, which for 14 years had refused to deregulate the controversial grass on environmental concerns, suddenly reversed course last fall and signaled it could grant the company's request as early as this week. Many find the prospect alarming. The Oregon and Idaho departments of agriculture oppose deregulation, as does U.S. Fish and Wildlife, which predicted commercialization of the grass could drive endangered species to extinction. "We don't understand the ecological or the economic impact of this," said Katy Coba, former director of the Oregon Agriculture Department. "We need to figure out the extent of the contamination." Some growers and dealers fear it's only a matter of time before the altered seed reaches the Willamette Valley, the heart of Oregon's grass business. "That would be a catastrophic event for Oregon's grass seed industry," Many international buyers will not buy genetically modified products, citing potential safety concerns. Some countries ban them outright. It was just three years ago that some Asian buyers suspended purchases of Northwest wheat after traces of genetically modified strains were detected.

USDA Grants Final Approval for Monsanto/Scotts' Genetically Engineered Grass -  The U.S. Department of Agriculture (USDA) issued a final deregulation decision Wednesday approving Monsanto and Scotts' genetically engineered (GE) bentgrass, even as the highly invasive creeping grass continues to spread unchecked beyond its Oregon and Idaho test plots.   Decades-old outdoor experiments have proven the bentgrass impossible to control since it escaped from "controlled" plots and invaded irrigation ditches, riverbanks and the Crooked River National Grassland, crowding out native plants and the wildlife that depends on them. Despite more than a decade of efforts and millions of dollars spent, the U.S. Department of Agriculture, Scotts and Monsanto have failed to curb the spread of the invasive grass. Yet now the USDA has capitulated to Monsanto's and Scotts' request that federal regulators relinquish any authority over the GE grass, leaving local landowners and state of Oregon to wrestle with the problem.  "The USDA's decision ignores a groundswell of united opposition from state departments of agriculture, the U.S. Fish and Wildlife Service, university professors, scientists, farmers and conservationists," said Lori Ann Burd, director of the environmental health program at the Center for Biological Diversity .  "Because this blatant bow to industry will continue to harm farmers, endangered species and the precious landscape, the USDA has left us with no choice but to explore our legal options to return the burden of controlling this weedy grass back to the shoulders of the corporate profiteers who brought it into the world."  The GE bentgrass has already illegally contaminated at least three Oregon counties and the ultralight grass seeds and pollen have proven impossible to eradicate. Farmers and noxious weed experts in eastern Oregon have been outspoken critics of the proposal to approve the grass. In response to widespread contamination, GE creeping bentgrass was declared a noxious weed in Malheur County in 2016. With this approval the responsibility for controlling contamination now shifts from the USDA, Scotts and Monsanto to individual farmers and landowners, left alone to grapple with the problem.

GMO Arctic Apples to Hit Shelves Next Month Without Clear Labeling - The first genetically modified (GMO) apples, which are engineered to resist browning when sliced, will arrive in select midwestern U.S. stores next month. The fruit, produced by Okanagan Specialty Fruits and sold under the brand name Arctic Apples , will be packaged as "grab-and-go" slices, according to Capital Press . A customer will only know that the fruit is genetically modified by scanning the packaging with a smartphone. The company is adhering to the new GMO food labeling act which allows businesses to use a QR code instead of clear wording that informs consumers if a product contains GMO ingredients. "We are selling it under the Arctic brand and we've had a lot of press and attention, so I assume most people will know what it is," Okanagan's founder and president Neal Carter told Capital Press. The company's product can be identified with its logo of a snowflake inside an apple outline. The apples first stirred up controversy in February 2015 when the U.S. Department of Agriculture (USDA) approved an aesthetically-improved genetically engineered food for the first time.  In order to prevent apples from browning, the company "silenced" an enzyme called polyphenol oxidase (PPO) that drives oxidation in apples. The benefit of these apples, as the company said , is that it cuts down food waste—about 40 percent of apples are currently wasted, with much of that waste from superficial bruising and browning.  Like the industry norm, Arctic Apples do not fully oxidize for three weeks after being cut into but without the flavor-altering, chemical additives used by the traditional sliced apple business.

Trump picks Sonny Perdue for agriculture secretary -  Donald Trump has chosen former Georgia governor Sonny Perdue to be his secretary of agriculture, completing a protracted search with implications for how the president-elect plans to deliver on his promises to the army of rural voters widely credited with helping him win the election. Trump on Thursday morning formally announced the pick — the final traditional Cabinet department chief to be selected. Perdue, a former Democrat who switched to the Republican Party before governing Georgia for two terms from 2003 to 2011, has a strong agricultural background, having grown up on a farm and earned a doctorate in veterinary medicine. As governor of Georgia, he also took conservative stances on immigration and voting rights and drew national headlines for holding a public vigil to pray for rain in 2007 amidst a crippling drought. Although Perdue’s Georgia is not among the nation’s top 10 agricultural states, it is home to 42,000 farms, with a strong focus in the cattle industry. “From growing up on a farm to being governor of a big agriculture state, he has spent his whole life understanding and solving the challenges our farmers face, and he is going to deliver big results for all Americans who earn their living off the land,” Trump said in a statement. By picking Perdue, Trump has passed on appointing any Latinos to his Cabinet, the first time Cabinet meetings will lack someone from the nation’s largest minority population since 1988. That’s the year Lauro F. Cavazos became Ronald Reagan’s last education secretary and the first Latino ever nominated to the Cabinet.

Trump’s Choice for Ag Secretary Not an Obvious Champion for Sustainable Agriculture -- President-elect Donald Trump has tapped Sonny Perdue, a long-time agribusiness leader, Democrat-turned-Republican state legislator, two-time governor of Georgia to lead the U.S. Department of Agriculture (USDA). Faced with a warming planet, increasing water scarcity, collapsing bee populations and other environmental challenges, the USDA needs a leader who will promote planet-friendly farming practices more than ever. Sonny Perdue is not an obvious champion for sustainable farming and he has made some troubling statements about climate change , but we look forward to learning more about his values and commitment. With his hands at the controls of the USDA, Perdue would influence how food is grown, inspected, labeled and sold. The agency's 100,000 plus employees also manage a network of programs aimed at preventing hunger in the U.S.; buy much of the food served up to millions of public school children; manage food aid to nations abroad; try to anticipate, prevent and eradicate the arrival of invasive species and crop pests; promote rural development and renewable energy ; and manage our national forests. The USDA also regulates food labels and claims, like USDA Organic, which have played a powerful role in growing the good food movement. For those of us focused on the environment, the billions spent each year by USDA to promote more environmentally friendly farming practices is a particular priority. The USDA has significant discretion in how these funds are spent and can choose to promote farming practices that work in harmony with the natural environment (e.g. using beneficial insects to control crop pests) or practices that effectively subsidize conventional industrial agriculture. Perdue would also likely be influential in establishing the next 5-year U.S. farm policy or Farm Bill, which helps shapes the nation's agriculture.

Robot Crop Pickers Limit Loss of U.S. Farm Workers to Trump Wall - Robotic devices like lettuce thinners and grape-leaf pullers have replaced so many human hands on U.S. farms in recent years that many jobs now held by illegal workers may not exist by the time Donald Trump builds his promised wall. For many American farmers, the automation push isn’t just about the President-elect’s goal to seal the border with Mexico, the traditional source of cheap migrant labor for the world’s largest agricultural exporter. There just aren’t enough crop pickers around as immigration slows, deportations rise and the prospects of congressional reform look remote.That’s what prompted Steve Tennnes, a fruit and vegetable grower in Charlotte, Michigan, to buy a $138,000 machine that can collect up to three times as many apples per hour than workers who currently use ladders and buckets, and do so more safely. He will be able to harvest more with fewer workers, and the benefits will expand as he replants his orchard over the next decade to make it easier for the device to operate among the trees. “The trade-off isn’t, do you want a machine or do you want workers,” Tennes, 39, said by telephone from his 120-acre farm, where he employs 72 workers and produces apples, peaches, blueberries, cherries, pumpkins and sweet corn. “It’s do you want to be in business or do you not want to be in business.”

Climate change will hurt crops more than it helps them, study suggests - Out of the many consequences of climate change, from melting glaciers to changing weather patterns, its effect on agriculture has emerged as one of the most complex issues for scientists to investigate. It’s also among the most globally significant.   As the world’s population approaches 8 billion people — and is expected to exceed 9 billion before midcentury — protecting global food security has become a top priority for scientists and policymakers alike. And figuring out how climate change might affect the world’s future crop yields is a major concern.  Previous studies have suggested a “nonlinear behavior of U.S. [crop] yields,” said Bernhard Schauberger, a PhD student and researcher at the Potsdam Institute for Climate Impact Research. One study suggested that in temperatures above 86 degrees, crops suddenly experience strong declines, he noted. Now a new study, led by Schauberger along with colleagues from institutes around the world, reaffirms the idea that high temperatures could seriously harm the production of some of the world’s most important food crops, including corn, soybeans and wheat. And that could have big implications for the world’s food supply — as the paper notes, these three crops alone account for about a third of total harvested land worldwide.   It’s a tricky research area — plants can react to the changing climate in a lot of complicated and even contradictory ways, and their responses may differ from one region and one crop to the next. In cold climates for instance, warmer temperatures might be a boon for plant life — research has already revealed a greening effect in certain northern regions of the world. In other places, hotter growing seasons could be devastating.  Then there’s also the controversial subject of whether increased carbon dioxide levels in the atmosphere could actually be good for crops — after all, plants use carbon dioxide to make the sugar they turn into energy.  The new study, published Thursday in the journal Nature Communications, indicates that high temperatures can have significant damaging impacts on crop yields — and while access to more water can do a good job of mitigating these effects, extra carbon dioxide may not be all that helpful after all.  

The FAO Food Price Index fell for the fifth consecutive year in 2016 -The FAO Food Price Index* (FFPI) averaged almost 172 points in December 2016, unchanged from November with strong gains in the prices of vegetable oils and dairy largely offsetting a fall in sugar and meat quotations. For 2016 as a whole, the index averaged 161.6 points, down 1.5 percent from 2015, representing the fifth consecutive annual decline. While prices of sugar and vegetable oils rose significantly in 2016, falling prices in cereal, meat and dairy markets kept the Index below its 2015 average. » The FAO Cereal Price Index averaged 142.1 points in December, up just 0.5 percent from November and broadly stable since September. » The FAO Vegetable Oil Price Index averaged 183 points in December. Driven primarily by palm and soy oils, the index gained 7.4 points (or 4.2 percent) from November and reached its highest level since July 2014. » The FAO Dairy Price Index averaged 192.6 points in December, up 6.2 points (3.3 percent) from November. » The FAO Meat Price Index* averaged 161.5 points in December, 1.8 points (1.1 percent) down from its revised value for November. » The FAO Sugar Price Index averaged 262.6 points in December, down 24.6 points (8.6 percent) from November.

$20 billion in farm subsidies doesn’t reach the poor, leaves them hungry - New research suggests that agricultural subsidies have done little to help those below the poverty line become more food secure. Despite $20 billion spent every year on wasteful subsidies, hunger and inadequate nutrition are endemic in the United States. More than 43 million Americans, including 13 million children, live below the poverty line and lack reliable access to nutritious food.  One long-standing rationale for subsidizing farmers is that as they raise more crops and rear more livestock, food prices paid by consumers will fall, and the poor will become food secure through that trickle-down process. However, as a new American Enterprise Institute report by Joseph Glauber, Dan Sumner and Parke Wilde shows, there is no evidence that the $20 billion in direct subsidies paid annually by taxpayers has any measurable effect on prices paid for food by households below the poverty line. These agricultural subsidy programs, far from addressing the needs of the poor, are mainly designed to serve wealthy farmers, not urban families in poverty or even rural households with modest or low incomes. Seventy-nine percent of all farm subsidies are paid to the top 10 percent of the largest farm operations, and farmers in the top 1 percent income bracket on average collect $1.5 million in annual farm subsidy welfare checks. In comparison, 80 percent of all farms receive only 9 percent of the total amount of subsidies paid to agricultural producers.

Looming famine threatens child survival as 5 million face starvation in Somalia -  The lives of hundreds of thousands of children are at risk as millions face the threat of famine in Somalia, warns World Vision. The International children's charity says that the fragile country is facing a health and nutrition crisis as a result of continued drought and conflict. Describing the country's malnutrition situation as "alarming", World Vision Somalia's National Director, Simon Nyabwengi, urged the international community to provide an immediate and concerted response to help save lives of the most vulnerable children."The crisis in Somalia risks sliding into yet another famine unless we act urgently and swiftly. Some 320,000 children under age 5 are acutely malnourished, and 50,000 of them are so severely malnourished they risk dying without emergency intervention. Compounding the crisis is the continued displacement of people as a result of fighting. This is one of the key factors curtailing our effort to build the resilience capabilities of villagers and communities in especially remote parts of Somalia." "Everyone in the humanitarian sector is on high alert and we don't want to see children dying again. Humanitarian organizations have become better at predicting such disasters and there is a looming crisis at hand, with heart rending consequences for children and their families and we must act now to prevent deaths. The landscape in Somalia is littered with animal carcasses. We must save the children, who will surely follow if we do not provide food, water, and health and nutrition assistance now."

Nearly 70,000 birds killed in New York in attempt to clear safer path for planes - Nearly 70,000 gulls, starling, geese and other birds have been slaughtered in the New York City area, mostly by shooting and trapping, since the 2009 accident in which a jetliner was forced to land in the Hudson river after birds were sucked into its engine. It is not clear whether those killings have made the skies any safer. Birds took the blame for bringing down the plane that Chesley “Sully” Sullenberger landed on the Hudson river eight years ago this weekend, an event that inspired the Tom Hanks-starring, Clint Eastwood-directed movie Sully, a box office hit last year. They have been paying for it with their lives ever since. An Associated Press analysis of federal data shows that in the years after bird-killing programs at LaGuardia and Newark airports were ramped up in response to the so-called “miracle on the Hudson”, the number of recorded bird strikes involving those airports actually went up. Combined, the two airports went from an average of 158 strikes per year in the five years before the accident to an average of 299 per year in the six years after it, though that could be due to more diligent reporting of such incidents. At Kennedy airport, which is on a major route for migrating birds and had a robust slaughter program before the Flight 1549 crash, the number of reported strikes has increased while the number of birds killed has dropped slightly. “There has to be a long-term solution that doesn’t rely so extensively on killing birds and also keeps us safe in the sky,” said Jeffrey Kramer, of the group GooseWatch NYC, suggesting better radar systems to detect problematic flocks. Officials involved in the bird-killing programs say they believe they have made flying safer, their strongest argument being that there hasn’t been a major crash involving a bird strike in the New York area since the “miracle on the Hudson”.

Warming climate may limit Lyme disease's spread in parts of the U.S. - While some research has linked the spread of Lyme disease to climate change, the details of that connection are complex. A new study suggests that a warming world may help tamp down the disease at the southern edge of the Northeastern coastal region where it is most prevalent. The research, published last week in the journal PLOS ONE, suggests that a warmer climate in the Southeastern United States has led to the evolution of deer ticks that are less likely to latch onto people, at least in some parts of the ticks' range. Other research has shown that climate change appears to be expanding the ticks' overall range, and that global warming may help spread many dangerous mosquito-borne diseases such as malaria and Zika into new areas. Scientists have known for years that Lyme is less common in the South, despite widespread prevalence of the parasite that causes it. A couple of years ago, some of the same researchers involved in the new work confirmed that southern ticks tend to bed down below the leaf litter, while their northern counterparts prefer climbing up stalks of grass or brush, primed to hitch a ride on human legs.  "No one understood why." To answer the question, Ginsberg and colleagues took larvae from two populations of ticks—one from Rhode Island and one a cross-breed of northern and southern groups—and exposed them to different climatic conditions in a lab. The researchers discovered that when humidity dropped below about 85 percent, ticks tended to die quickly under hotter, southern temperatures. If humidity remained higher, however, as it generally does deep under a blanket of leaves, ticks were able to survive the heat. With consistent exposure to high temperatures, the authors surmise, the southern populations have evolved with the instinct to lay low.

Ticks, Thriving in Warm Weather, Take a Ghastly Toll on New England Moose — Several times a year, Nathan Theriault will be walking deep in the Maine woods and make a gruesome discovery: a dead moose, thin and crawling with ticks. “They’re dying on the forest floor,” said Mr. Theriault, an outfitter and hunting guide in Eagle Lake, Me. The moose is an iconic image in the Northeast and a crucial part of its tourism and recreational economy. But in parts of northern New England, researchers say moose are being killed by droves of winter ticks that thrive when the fall is warm and the winter comes late. By the thousands, the ticks attach themselves to moose — calves are the most vulnerable — and essentially drain their blood and strength. Researchers say that over the last few years, ticks have killed about 70 percent of the calves they have tagged in certain regions, an indication that the tick is taking a significant toll. “Climate change, as shortening winter, plays to the advantage of the tick,” said Peter J. Pekins, the chairman of the natural resources and environment department of the University of New Hampshire and a professor of wildlife ecology. The high mortality rate is a finding from the first three years of a study, which now includes biologists in Maine, New Hampshire and Vermont, to track moose cows and calves with GPS collars and gather data about their health and survival. “They’ve wasted away. They’re eating every day but they just can’t come up with enough protein to combat this blood loss,” Mr. Pekins said of the dead moose calves. He is overseeing New Hampshire’s part of the study.

Call of the wild: can America’s national parks survive? -- This is one of 59 national parks which range across the United States, from the depths of the Grand Canyon in Arizona to the turrets of the Rocky Mountains in Colorado. All – plus hundreds of monuments and historic sites – are run by the National Park Service (NPS), which celebrated its centenary last year. The parks were created so that America’s natural wonders would be accessible to everyone, rather than sold off to the highest bidder.  Climate change is killing trees, threatening birds and mammals, and leading to devastating wildfires across the 85m acres run by the NPS. Patrick Gonzalez, the principal climate-change scientist at the NPS, told me about rising sea levels (there’s been a 22cm rise across the bay at Golden Gate National Recreation Area, California, since 1954); high ocean temperatures bleaching and killing coral in Virgin Islands National Park; and major vegetation types and wildlife moving upwards.Yosemite saw subalpine forests moving up into subalpine meadows over the last century and small mammals, including mice and ground squirrels, shifting 500m uphill. “As temperatures warm,” he said, “things on higher elevations get warmer and things on lower elevations move up.” Bark beetles, once killed by cold winters, are now surviving and wreaking havoc with trees. “You go to Rocky Mountains, Yellowstone… hillsides formerly covered in a green canopy of trees are now just rust-coloured areas.”If no action is taken, the glaciers of Glacier National Park may melt away; Joshua trees could die out in the park that bears their name; bison may disappear from Yellowstone; and the ancient cliff dwellings in Mesa Verde in Colorado could crumble away. The NPS is tackling the issue in two ways, said Gonzalez, first by cutting emissions from its own operations by 35% by 2020; and secondly, by adapting its management of the parks to cope with how things might look under climate change rather than trying to maintain them as pictures of the past. “With full implementation of the Paris climate agreement and further improvements in energy efficiency and sustainability we can avoid the most drastic effects of climate change,” he said.

97% of Endangered Species Threatened by Two Common Pesticides -- The U.S. Environmental Protection Agency (EPA) released its first rigorous nationwide analysis Wednesday of the effects of pesticides on endangered species, finding that 97 percent of the more than 1,800 animals and plants protected under the Endangered Species Act are likely to be harmed by malathion and chlorpyrifos, two commonly used pesticides. Another 78 percent are likely to be hurt by the pesticide diazinon. The results released Wednesday are the final biological evaluations the EPA completed as part of its examination of the impacts of these pesticides on endangered species. "We're now getting a much more complete picture of the risks that pesticides pose to wildlife at the brink of extinction, including birds, frogs, fish and plants," said Nathan Donley, senior scientist at the Center for Biological Diversity. "The next step will hopefully be some commonsense measures to help protect them along with our water supplies and public health." The three pesticides are all organophosphates, a dangerous old class of insecticides found in 87 percent of human umbilical-cord samples and widely used on crops such as corn, watermelon and wheat. Chlorpyrifos is currently under consideration to be banned for use on food crops in the U.S. The World Health Organization last year announced that malathion and diazinon are probable carcinogens. "The EPA is providing a reasonable assessment of those risks, many of which can be avoided by reducing our reliance on the most toxic, dangerous old pesticides in areas with sensitive wildlife."  Following these final evaluations from the EPA, the U.S. Fish and Wildlife Service and the National Marine Fisheries Service will issue biological opinions to identify mitigation measures and changes to pesticide use to help ensure that these pesticides will no longer potentially harm any endangered species in the U.S. when used on agricultural crops. As part of a legal settlement with the Center for Biological Diversity, these biological opinions are on deadline to be completed by December 2017.

Humans have destroyed 7% of Earth’s pristine forest landscapes just since 2000  --The world’s natural places are disappearing at a galloping clip, says a new study, released Friday in the journal Science Advances. It suggests that more than 7 percent of Earth’s natural, intact forest landscapes have been lost since 2000 — and these ecosystems may be in danger of disappearing entirely from at least 19 countries in the next 60 years.These landscapes represent some of “the last portions of the Earth that are not significantly affected by human influence,” said Lars Laestadius, a forest expert, consultant on natural resources policy and co-author of the new study. “As we lose these, we lose something that is bigger than ourselves.”   The study defines “intact forest landscapes” as areas greater than 500 square kilometers, or 193 square miles, containing a mosaic of forests and other associated ecosystems, such as plains or wetlands. The key is that these areas must be undisturbed by human activities — they can’t be fragmented by roads or deforestation or other industrial operations. Once that happens, the ecosystems cease to be considered “intact.” And as the new study indicates, this is happening more and more frequently around the world.Using satellite data, the researchers investigated changes to the world’s intact forest landscapes between 2000 and 2013. In 2000, they found that intact forest landscapes covered a total global area of 12.8 million square kilometers, or nearly 5 million square miles. But in the years since, human activities have altered and fragmented many of these areas. In total, truly intact forest landscapes declined by 7.2 percent. More than half these losses occurred in three countries alone: Russia, Brazil and Canada. In general, though, tropical parts of the world tended to suffer the greatest declines.

Isidro Baldenegro, Mexican Environmental Activist, Is Shot to Death   - A prominent environmentalist in Mexico was shot dead over the weekend, highlighting the dangers facing activists in Latin America and prompting calls for better protection of land and indigenous rights campaigners. Isidro Baldenegro, an environmental rights activist, was killed by gunmen on Sunday in Mexico's northern state of Chihuahua after having received death threats. A community leader of Mexico's indigenous Tarahumara people, Baldenegro was known for his fight against illegal logging in the country's Sierra Madre mountain region. For years he led non-violent protests against logging projects, including sit-ins and human blockades. "The killing of Isidro Baldenegro Lopez is a tragic illustration of the many dangers faced by those who dedicate their lives to defend human rights in Latin America, one of the most dangerous regions in the work for activists," said Erika Guevara-Rosas, Americas director at Amnesty International, in a statement on Wednesday.

60% of primate species now threatened with extinction - Are we really going to do this? Are we really going to watch mankind kill off our closest living biological relatives? Because that’s what’s happening, and unless we start making conservation a priority we will lose not only the world’s beautiful primates, but legions of other species as well. This is the conclusion of a report in the journal Science Advances. The authors of the study – the most comprehensive review of primate populations so far – say that 60 percent of primate species are currently threatened with extinction and some 75 percent have declining populations. "This truly is the eleventh hour for many of these creatures," "Several species of lemurs, monkeys and apes – such as the ring-tailed lemur, Udzunga red colobus monkey, Yunnan snub-nosed monkey, white-headed langur and Grauer's gorilla – are down to a population of a few thousand individuals. In the case of the Hainan gibbon, a species of ape in China, there are fewer than 30 animals left." And we have one big kahuna primate to thank for all of this; the one that hunts, pursues the pet and animal parts trade, logs tropical forests, build roads and mines "in needlessly destructive and unsustainable ways," Garber says. "These primates cling to life in the forests of countries such as China, Madagascar, Indonesia, Tanzania and the Democratic Republic of Congo." "Agricultural practices are disrupting and destroying vital habitat for 76 percent of all primate species on the planet," says Garber. "In particular, palm oil production, the production of soy and rubber, logging and livestock farming and ranching are wiping out millions of hectares of forest."

Kaziranga, India’s rhino paradise, has a poaching problem that’s proving hard to combat  -  Kaziranga National Park in India’s northeastern state of Assam, a UNESCO World Heritage site, has emerged as the global stronghold of the greater one-horned rhinoceros (Rhinoceros unicornis). The rolling hills and dense grasslands that allow rhinos to flourish also form an ideal habitat for their primary predator – human poachers on the hunt for rhino horn. Last month, two rhinos were killed in quick succession, taking the official toll of poaching to 18 in 2016, compared to 17 during the preceding year. On December 22, poachers in the park’s Bagori range shot down a male sub-adult rhinoceros estimated to be around 10 years old. This brazen killing occurred in the vicinity of the Amkathoni and Daflang anti-poaching camps in the early hours of morning. Hearing gun shots, forest guards rushed to the site, but the poachers managed to flee into the thick fog after chopping off the pachyderm’s horn. Later, forest personnel recovered the animal’s carcass from a nearby pond. A used cartridge from a .303 caliber rifle was also found near the site – about 5 km from National Highway 37 passing through the park. This was preceded by a similar incident, taking place in the early hours of Dec. 14, in the western range of Burapahar. Along with the dehorned body of a nine-year-old male, park officials recovered about a dozen cartridges from an AK-47 rifle. The use of such sophisticated weapons points to the involvement of insurgent outfits in rhino poaching, another worrying trend.   Burgeoning demand for rhino horns – particularly in the markets of Vietnam and China, where they are used in traditional medicines or as status symbols – have made their trade more and more lucrative in recent years. Time and time again, poachers are lured to the “rhino capital” of Kaziranga. ;

82 False Killer Whales Dead in Massive Stranding Off Everglades National Park -- Ninety-five false killer whales were stranded off the coast of Hog Key in Florida's Everglades National Park over the weekend. The National Oceanic and Atmospheric Administration (NOAA) wrote in a Facebook post this morning that 82 animals are now confirmed dead and 13 are unaccounted for. Earlier reports put the death toll at 81. Officials told the Miami Herald that this is the largest recorded stranding of such species in Florida. False killer whales belong to the dolphin family and get their name due to their resemblance to orcas. Females reach lengths of 15 feet and males are almost 20 feet. Adult false killer whales can weigh approximately 1,500 pounds. The U.S Coast Guard first spotted the stranding on Saturday near Hog Key, which is located in a dense network of islands off south west Florida. According to the Palm Beach Post , a rescue team reached the false killer whales—which included adults, juveniles and calves—by Sunday but could not save the vast majority of them. "Once on the scene, the response team attempted to herd the whales into deeper water, however, they were ultimately unsuccessful in that effort," NOAA's mammal stranding network Blair Mase explained to the publication.  Mase said that the false killer whales were beached and scattered along the shoreline in poor condition and "deeply embedded in the mangroves," making the effort to rescue them nearly impossible. Rescuers had to humanely euthanize nine of the animals. Seventy-two of the dolphins died on their own on Sunday.

GOP targets landmark Endangered Species Act for big changes - — In control of Congress and soon the White House, Republicans are readying plans to roll back the influence of the Endangered Species Act, one of the government’s most powerful conservation tools, after decades of complaints that it hinders drilling, logging and other activities.Over the past eight years, GOP lawmakers sponsored dozens of measures aimed at curtailing the landmark law or putting species such as gray wolves and sage grouse out of its reach. Almost all were blocked by Democrats and the White House or lawsuits from environmentalists.Now, with the ascension of President-elect Donald Trump, Republicans see an opportunity to advance broad changes to a law they contend has been exploited by wildlife advocates to block economic development.“It has never been used for the rehabilitation of species. It’s been used for control of the land,” said House Natural Resources Committee Chairman Rob Bishop. “We’ve missed the entire purpose of the Endangered Species Act. It has been hijacked.”Bishop said he “would love to invalidate” the law and would need other lawmakers’ cooperation.The 1973 act was ushered though Congress nearly unanimously, in part to stave off extinction of the national symbol, the bald eagle. Eagle populations have since rebounded, and the birds were taken off the threatened and endangered list in 2007.In the eagles’ place, another emblematic species — the wolf — has emerged as a prime example of what critics say is wrong with the current law: seemingly endless litigation that offers federal protection for species long after government biologists conclude that they have recovered.Wolf attacks on livestock have provoked hostility against the law, which keeps the animals off-limits to hunting in most states. Other species have attracted similar ire — Canada lynx for halting logging projects, the lesser prairie chicken for impeding oil and gas development and salmon for blocking efforts to reallocate water in California.

After 1,000 days, Flint is still without clean drinking water - Thursday marks exactly 1,000 days since clean drinking water last flowed from the faucets in Flint, Mich., where on April 24, 2014, state and local officials ceremoniously began supplying the city with improperly treated water from the Flint River.Although the ensuing water crisis has long since faded from national headlines, for Flint residents, the ramifications of this disastrous, short-sighted attempt at cost saving are still very much a daily reality.According to both both government officials and environmental researchers, there has been a steady decline in the overall levels of lead and other bacteria in Flint’s drinking water since it returned to Detroit’s system in October 2015. Still, the immense damage caused by pumping improperly treated river water through the city’s aged lead pipes is far from fixed.Since March, the city has replaced lead service lines for just 780 homes in Flint. At a town hall meeting last week, officials estimated that it will take approximately three years to completely replace all of the city’s lead water-service lines — a project for which they have not yet secured funding.In the meantime, Flint residents were encouraged to continue using filters and bottled water at home. This is a habit that few are likely to be able to shake even after they’ve been told it’s safe to do so. “Telling people the water was safe when it wasn’t created this disaster in the first place,” Pastor Allen Overton of the Flint-based Concerned Pastors for Social Action said in a recent statement. CPSA, along with the Natural Resource Defense Council, the ACLU of Michigan and Flint resident Melissa Mays, are currently suing the city of Flint and the state of Michigan under the federal Safe Drinking Water Act. “Given the history of the State’s deception about the water, I’d hope they’d be proceeding with more caution, rather than making statements that may worsen the community’s deep distrust of the government.”

Unlike Trump, Americans want strong environmental regulator -  Reuters - More than 60 percent of Americans would like to see the U.S. Environmental Protection Agency's powers preserved or strengthened under incoming President Donald Trump, and the drilling of oil on public lands to hold steady or drop, according to a Reuters/Ipsos opinion poll released on Tuesday. The results could foretell stronger-than-expected public opposition to Trump's plans to boost energy development by slashing environmental regulations, an agenda shared by some of his top Cabinet picks slated for Senate confirmation hearings later this week. Trump takes office on Friday. Some 39 percent of Americans would like to see the EPA, the nation's top environmental regulator, "strengthened or expanded," while another 22 percent hope for it to "remain the same," according to the poll. Just 19 percent said they would like to see the agency "weakened or eliminated" and the rest said they "don't know." Among Republicans, 47 percent wish for the EPA either to "remain the same" or be "strengthened or expanded," while 35 percent want it "weakened or eliminated". The online poll of 9,935 people was conducted Dec. 16 to Jan. 12 and has a credibility interval, a measure of accuracy, of 1.1 percentage points. "Trump is a businessman, and that's all he thinks about ... what will make money," said Terry Cox, a 61-year-old resident of Tennessee who voted for the New York real estate mogul in November's election. "But I'm hopeful there's a limit to what he can do when it comes to weakening protections for wildlife and the environment." A Trump transition team official declined to comment.

Video: NASA’s Dr Gavin Schmidt on 2016 as the hottest year on record - On Wednesday, the world’s three major meteorological organisations will reveal how global temperature in 2016 stacked up against previous years. Given exceptional warmth in most months, it is all but guaranteed that scientists will confirm 2016 as the hottest year on record.During his brief lecture tour of the UK last week, Carbon Brief caught up with Dr Gavin Schmidt, director of NASA’s Goddard Institute for Space Science. NASA is one of the three agencies due to release their findings this week. The others are the US National Oceanic and Atmospheric Administration (NOAA) and the UK Met Office/University of East Anglia.What’s behind the record warmth in 2016? Starting the year with a strong El Niño is worth about an extra 0.1 or 0.2C on top of the long-term trend from greenhouse gases, says Schmidt.He tells Carbon Brief: “Why did we have a record year? It’s 80-90% because of the long-term trend and 10% because of El Niño…We’re on a rising trend and when we have anomalously warm trends on top of a rising trend, those are going to be record years.” Looking forward, we shouldn’t expect each year in succession to be warmer than the last, Schmidt notes: “We don’t anticipate that 2017 will be a record year because we’re starting off with less of an El Niño signal and more of a neutral/La Niña signal.” While pinpointing whether one year is hotter than another is interesting from a scientific standpoint, it doesn’t alter the bottom line that the climate is warming, Schmidt says: “The difference between whether 2016 was the first or second warmest doesn’t make any difference to the impacts that we anticipate over time, and it doesn’t really make any difference to the predictions we’re making for the future. The bottom line is the planet is warming, we’re in a period of exceptional warmth historically.”

WMO confirms 2016 as hottest year on record -- The year 2016 has been confirmed as the hottest year on record, surpassing the exceptionally high temperatures of 2015, according to a consolidated analysis by the World Meteorological Organization (WMO). The globally averaged temperature in 2016 was about 1.1°C higher than the pre-industrial period. It was approximately 0.83° Celsius above the long term average (14°C) of the WMO 1961-1990 reference period, and about 0.07°C warmer than the previous record set in 2015.  WMO uses data from the US National Oceanic and Atmospheric Administration, NASA’s Goddard Institute for Space Studies and the UK’s Met Office Hadley Centre and the University of East Anglia’s Climatic Research Unit. WMO also draws on reanalysis data from the European Centre for Medium Range Weather Forecasts and the Copernicus Climate Change Service, which use a weather forecasting system to combine many sources of data to provide a more complete picture of global temperatures, including in Polar regions.  “2016 was an extreme year for the global climate and stands out as the hottest year on record,” said WMO Secretary-General Petteri Taalas. “But temperatures only tell part of the story.” « Long-term indicators of human-caused climate change reached new heights in 2016,” he said. « Carbon dioxide and methane concentrations surged to new records. Both contribute to climate change, » said Mr Taalas.   Carbon dioxide remains in the atmosphere for centuries and in the ocean, where it acidifies the water, for even longer. It is now above the symbolic and significant level of 400 parts per million concentration in the atmosphere.  « We have also broken sea ice minimum records in the Arctic and Antarctic, » said Mr Taalas. “Greenland glacier melt – one of the contributors to sea level rise _ started early and fast. Arctic sea ice was the lowest on record both at the start of the melt season in March and at the height of the normal refreezing period in October and November, » he said.

Confirmed: 2016 the Warmest Year in History of Global Recordkeeping - For the third year in a row, Earth has experienced the warmest surface temperatures in global data extending back to 1880. In its annual climate summary released on Wednesday, NOAA’s National Centers for Environmental Information (NCEI) calculated that the average global temperature across both land and ocean surfaces for 2015 was 1.69°F (0.94°C) above the 20th-century average of 13.9°C (57.0°F). This made 2016 the warmest calendar year on record, coming in 0.07°F (0.04°C) ahead of the record set just last year. Using a slightly different technique, NASA also confirmed that 2016 was the warmest year in this 136-year period.  Last year was also the warmest on record for satellite-based estimates of temperature through the lowest five miles of the atmosphere, as calculated by the University of Alabama in Huntsville (UAH). In the UAH dataset, 2016 came in just 0.02°C (0.04°F) ahead of 1998. Because these calculations are indirect, large-scale estimates of temperature well above ground level, derived from satellite data, they need not correspond to trends in direct ground-based measurements of surface temperature.  The second year of a major El Niño tends to warm the global atmosphere even more than the first, as the atmosphere gradually adjusts to the ocean-surface warming. This gave 2016 a very good shot at breaking the global temperature record that was just set by 2015, which in turn beat out 2014. The absence of a strong El Niño heading into 2017 tells us that the coming year, while expected to be very warm by 20th-century standards, is unlikely to continue the remarkable three-year string of consecutive global heat records set by 2014, 2015, and 2016. It’s worth noting that only about 0.2°C of last year’s departure from long-term average temperature can be explained by El Niño, especially given that the tropical Pacific transitioned to a weak La Nina by late 2016. The fact that 2016 was still the warmest year on record can mostly be attributed to the steady build-up of heat-trapping greenhouse gases due to human activities.

U.S. scientists officially declare 2016 the hottest year on record. That makes three in a row. - In a powerful testament to the warming of the planet, two leading U.S. science agencies Wednesday jointly declared 2016 the hottest year on record, surpassing the previous record set just last year — which itself had topped a record set in 2014. Average surface temperatures in 2016, according to the National Oceanic and Atmospheric Administration, were 0.07 degrees Fahrenheit warmer than 2015 and featured eight successive months (January through August) that were individually the warmest since the agency’s records began in 1880. The average temperature across the world’s land and ocean surfaces was 58.69 Fahrenheit, or 1.69 degrees above the 20th-century average of 57 degrees, NOAA declared. The agency also noted that the record for the global temperature has now successively been broken five times since the year 2000. The years 2005 and 2010 were also record warm years, according to the agency’s data set. [Scientists react to Earth’s warmest year: ‘We are heading into a new unknown’] NASA concurred with NOAA, also declaring 2016 the warmest year on record in its own data set that tracks the temperatures at the surface of the planet’s land and oceans, and expressing “greater than 95 percent certainty” in that conclusion. (In contrast, NOAA gave a 62 percent confidence in the broken record.) NASA found a bigger leap upward of temperatures in 2016, measuring the year as .22 degrees Fahrenheit higher than the prior record year of 2015. The agency also noted that since the year 2001, the planet has seen “16 of the 17 warmest years on record.” The last five years have been the hottest on record, according to scientists from the World Meteorological Organization, the United Nations weather agency. (Reuters) Last year “is remarkably the third record year in a row in this series,” said Gavin Schmidt, who directs NASA’s Goddard Institute of Space Studies, in a statement. “We don’t expect record years every year, but the ongoing long-term warming trend is clear.”

Earth Sets a Temperature Record for the Third Straight Year - Marking another milestone for a changing planet, scientists reported on Wednesday that the Earth reached its highest temperature on record in 2016, trouncing a record set only a year earlier, which beat one set in 2014. It is the first time in the modern era of global warming data that temperatures have blown past the previous record three years in a row.  The findings come two days before the inauguration of an American president who has called global warming a Chinese plot and vowed to roll back his predecessor’s efforts to cut emissions of heat-trapping gases.In reality, the Earth is heating up, a point long beyond serious scientific dispute, but one becoming more evident as the records keep falling. Temperatures are heading toward levels that many experts believe will pose a profound threat to both the natural world and to human civilization. In 2015 and 2016, the planetary warming was intensified by the weather pattern known as El Niño, in which the Pacific Ocean released a huge burst of energy and water vapor into the atmosphere. But the bigger factor in setting the records was the long-term trend of rising temperatures, which scientists say is being driven by increasing levels of carbon dioxide and other greenhouse gases. “A single warm year is something of a curiosity,” said Deke Arndt, chief of global climate monitoring for the National Oceanic and Atmospheric Administration. “It’s really the trend, and the fact that we’re punching at the ceiling every year now, that is the real indicator that we’re undergoing big changes.” Graphic - How 2016 Became Earth’s Hottest Year on Record (interactive graphic)

Parts of United States are heating faster than globe as a whole -- Global warming obviously refers to temperature increases across the entire globe. We know the Earth is warming, we know it is human-caused, we have a pretty good idea about how much the warming will be in the future and what some of the consequences are. In fact, when it comes to the Earth’s average climate, scientists have a pretty good understanding. On the other hand, no one lives in the average climate. We live spread out north, west, east, and south. On islands, large continents, inland or in coastal regions. Many of us want to know what’s going to happen to the climate where we live. How will my life be affected in the future?  This type of question is answered in a very recent study published by scientists from the University of Massachusetts at Amherst. The team, which includes Dr. Raymond Bradley and researcher Dr. Ambarish Karmalkar looked specifically at the Northeastern United States. They found that this area will warm much more rapidly than the globe as a whole. In fact, it will warm faster than any other United States region. The authors expect the Northeast US will warm 50% faster than the planet as a whole. They also find that the United States will reach a 2 degree Celsius warming 10–20 years before the globe as a whole. So why does this matter? Well first, it matters because some of the effects people will experience are directly tied to the temperature increase in their region. For instance, we know that warmer air leads to more intense precipitation. In fact, we are already observing increases in very heavy rainfall across the United States (especially in the Northeast). Based on this new research, that trend will only get worse. It means that winters in this region will get warmer and wetter – more winter precipitation will likely occur as rain rather than snow. This affects the availability of water into the spring months. It also means that summers will have more intense heat waves which will lead to more severe droughts.

We need a better word than 'anomaly' to describe rising temperatures: WTF? - At times scientists can be their own worst enemy.  In an attempt to be accurate, scientists sometimes forget the most basic rule of communicating: know your audience.  In the case of explaining climate change, and in particular, explaining rising global temperatures, scientists have chosen to use the phrase 'global average surface temperature anomaly.'  Here's an exchange between ' science editor Blythe Terrell and Gavin Schmidt, a climate scientist at the Earth Institute at Columbia University and director of the NASA Goddard Institute for Space Studies.'

    • blythe: So 2016 was officially the hottest year on record on Earth. Gavin, can you tell us what that means?
    • gavin: We have a dense enough network of weather stations and ocean records since about the mid-19th century to be able to estimate the global average surface temperature anomaly, and 2016 is the warmest we’ve seen in that entire period. That comes on top of records in 2015, and before that, 2014.

Scientists who already know what a 'global average surface temperature anomaly' is will nod in agreement at Schmidt's explanation.  But, the general readership of FiveThirtyEight will do one of two things: 1) Wonder what the hell a 'global average surface temperature anomaly' is, or 2) Stop reading because scientists use fancy language to try to cover up a bunch of magic and handwaving leading to the inevitable conclusion that scientists are making shit up to fool 'the deplorables.' 

The California Drought Is on Its Way Out, but Deeper Droughts Lie Ahead - After a week of being walloped by major storms that have dumped copious rain and snow on the state, California is finally emerging from a deep, years-long drought. Ski resorts in the Sierra Nevada mountains are flush with snow, while key reservoirs have filled back up. On Jan. 12, the U.S. Drought Monitor erased all drought in Northern California from the map and dialed back the severity over the southern half of the state. There are, of course, still major deficits in groundwater levels that could take decades to replace and lingering ecological impacts, several experts said, but they agreed the situation had much improved.  One key concern going forward is how global warming may alter California’s notoriously boom-or-bust climate: Does it mean more, and more intense, drought? Will it strengthen the storms that bring the state most of its water? The current view is that it could mean both, effectively amping up the already wild variation the state experiences, though there is still uncertainty about some of the potential impacts of warming.  Storms known as atmospheric rivers funneled moisture over California over the past week, bringing days of intense rain and snow. Rainfall totals reached more than 10 inches in some areas, while snows reached more than eight feet in parts of the Sierra Nevada mountain range (including a stunning 15-foot total at Mammoth Mountain). The statewide snowpack is 161 percent of normal levels for the date and nearly three-quarters of the way to the average for all of the winter season. That abundant snowpack is a stark contrast to the measly 6 percent of normal levels at the end of winter in 2015 — likely the smallest snowpack in 500 years. The mountain snowpack is crucial for the state because it supplies roughly 30 percent of its water, topping up reservoirs as it slowly melts during the dry spring and summer. It’s not unusual for California to have dry years followed by wet ones; in terms of its hydroclimate, “it’s one of the most variable places in the U.S.,” Ben Cook, a climate scientist with Columbia University’s Lamont-Doherty Earth Observatory and the NASA Goddard Institute for Space Studies, said.

Muted La Niña Follows Potent El Niño - One year ago, the central and eastern parts of the tropical Pacific Ocean were pulsing with heat, a result of one of the most intense El Niño events on record. One year later, La Niña has been relatively quiet, and she does not seem to be staying for long. La Niña is the cool sister pattern to El Niño. While El Niño knocks down the easterly trade winds and sloshes warm water from the western Pacific to the Americas, La Niña pulls up cool water from the depths of the eastern Pacific, energizes the easterlies, and pushes the warm water back toward Asia. Regions that often get drenched with rain and snow during El Niño often go dry during La Niña events, and vice versa, as atmospheric circulation and jet streams shift with the changing heat and moisture supply from the vast Pacific Ocean. The maps above compare sea surface height anomalies in the Pacific Ocean as observed by NASA scientists on November 4, 2016, near the peak of the current La Niña, and on January 18, 2016, near the peak of last winter’s El Niño. The measurements were made by altimeters on the Jason-2 and Jason-3 satellites, and show averaged sea surface height anomalies. Shades of red indicate areas where the ocean stood higher than the normal sea level; surface height is a good proxy for temperatures because warmer water expands to fill more volume. Shades of blue show where sea level and temperatures were lower than average (water contraction). Normal sea-level conditions appear in white. In a report issued in December 2016, the NOAA Climate Prediction Center described the latest La Niña as “weak” and likely changing to neutral conditions in early 2017. La Niña conditions—with surface water temperatures at least 0.5° Celsius below normal in the central and eastern Pacific (the Niño 3.4 region from 170° to 120° West longitude)—began to surface in July and August 2016. During last year’s El Niño, surface water temperatures were as much as 2.5°C above the 1981-2010 norm. During the current La Niña, temperatures have not dropped more than 1 degree below normal.

A wimpy La Niña is on the way toward La Nada status - La Niña typically cools the Pacific. But this time, large swathes of warmer-than-average sea temperatures have muted the cooling.The surface waters of the Pacific Ocean have been considerably warmer than average lately — with one exception: a small spear of coolness along the equator that’s characteristic of La Niña. Apparently, all that warmth has prevented the current La Niña — a cool phase in the Pacific that influences weather worldwide — from gaining much strength. In fact, as La Niña’s go, this one has indeed been wimpy ever since it got going in late summer last year. And now it is almost certainly on the way out, according to the latest analysis by NOAA’s Climate Prediction Center. The forecast is for La Niña to fully dissipate by February, and for neutral conditions — neither La Niña nor its warm opposite, El Niño — to remain in place through the first half of the year. (There are some hints that after that a new El Niño could blossom, but it is way too soon to say.) Our current wimpy and fading La Niña has been starkly different from a much stronger one that occurred in 1998 and 1999. You can see just how different they’ve been by watching the animation above. It depicts how sea surface temperatures varied from average in late December and early January during both episodes.

World's Reefs Caught Up in the Longest Global Coral Bleaching Event Ever Recorded - Some time this century, if humans go on burning fossil fuels at the present rate, severe bleaching will hit 99 percent of coral reefs every year . Coral bleaching happens when the organisms become uncomfortably hot, and reject the algae on which their lives ultimately depend.  Since it takes a reef five years to recover from any one bleaching event, the consequences for some of the world's richest ecosystems could be catastrophic. But catastrophe could be delayed. Drastic cuts in emissions reductions could give reefs an average of another 11 years before they start bleaching every year, according to new research. Right now, the world's reefs are caught up in the longest global coral bleaching event ever recorded. It began in 2014, and could go on well into 2017, according to the journal Scientific Reports . Corals are acutely sensitive to ocean temperatures and when the thermometer rises, their symbiotic relationship with a mutual beneficiary, the zooxanthellae , breaks down. Some 90 percent of the Great Barrier Reef off Australia has been affected by the latest episode, and 20 percent of the coral killed. "Bleaching that takes place every year will invariably cause major changes in the ecological function of coral reef ecosystems," said Ruben van Hooidonk of the U.S. National Oceanic and Atmospheric Administration and the University of Miami.  "Further, annual bleaching will greatly reduce the capacity of coral reefs to provide goods and services, such as fisheries and coastal protection, to human communities." The warning supports earlier studies that have already predicted problems for the world's reefs by the century's end . The reefs are being hit by changes in ocean chemistry, as carbon dioxide levels rise and as waters become more acidic.

Coral bleaching to hit reefs every year from mid-century, says UN - Three-quarters of the world’s coral reefs will be exposed to intolerable heat by 2070, even if international pledges on emissions reductions are exceeded, according to a UN-sponsored report. Under a scenario in which countries beat their national contributions to the Paris climate accord, but still fail to achieve the collective goal of keeping warming below 2C, coral bleaching would begin to occur every year by 2054 on average. Reefs close to the equator would see annual bleaching occurring even earlier. This would spread to more than 75% of reefs before 2070. Coral bleaching is caused by excessive heat. Annual bleaching of coral is a death sentence for reef ecosystems, which need a minimum of five years to recover. “Bleaching that takes place every year will invariably cause major changes in the ecological function of coral reef ecosystems,” said study leader Dr Ruben van Hooidonk from the US National Oceanic and Atmospheric Administration. “Further, annual bleaching will greatly reduce the capacity of coral reefs to provide goods and services, such as fisheries and coastal protection, to human communities.” Corals are formed by an interaction between small animals (corals) and very tiny plants called zooxanthellae. Interactions between the two generate a reef’s brilliant colours. For reasons not clearly understood, when water warms rapidly (even by a small amount like 1C) the zooxanthellae leave the corals, depriving them of their food source and colour. They turn bone white. If the heat persists for too long the coral will die. The report considered the heat stress levels on reefs under a scenario that beats the current pledges to the Paris climate accord, but the world still warmed by 2.4C. It compared this scenario to one under which emissions continue roughly as they are today. The difference to reefs was minimal, lengthening the average timeframe for annual bleaching by just 11 years.

Rising water is swallowing up the Louisiana coastline - The geography of the Louisiana coastline is quickly changing. A state-commissioned report predicts rising water could swallow more land along the Gulf of Mexico, if nothing is done to address damage caused by climate change and commercial activity. The landscape and history of Plaquemines Parish are becoming overrun by rising water, reports CBS News correspondent Jeff Glor. This area was hard-hit by Hurricane Katrina more than a decade ago, but the loss here continues to this day. That loss -- which on average amounts to a football field per hour -- affects just about every way of life:  business, tourism, cultural history, and perhaps most importantly, housing. Protecting much of it are the estuaries and islands, and they are rapidly disappearing.“We are not doing excavations out here; we’re doing like emergency documentation. Within the next two years, all these sites are going to be gone,” Ostahowski said. Time is running out. Rising sea levels and commercial development have led to massive erosion threatening not just Lemon Tree Island, but much of the coast.A new master plan released by the Coastal Protection and Restoration Authority shows what’s happened to Louisiana over the past 85 years. From 1932 to 2010, Louisiana lost 1,900 square miles -- an area the size of Delaware.Another map shows what may be lost over the next 50 years due to erosion, if nothing is done. It’s not just artifacts that will be washed away. “Coastal communities that are really important to the offshore or the gas industry essentially become islands out there in the middle of nowhere, in the Gulf of Mexico essentially,”  said Denise Reed, chief scientist of the Water Institute of the Gulf, an organization that consults with state agencies and private enterprise on where restoration is needed and how much that restoration will cost.

Methane may not last long in the atmosphere — but it drives sea level rise for centuries - It seems like just about every week, there’s more news on the rapid melting of glaciers in Greenland, Antarctica and elsewhere — and scientists’ growing concern about their potentially dramatic contributions to global sea level rise. But there’s another major element affecting global sea levels, and research suggests that it could be a factor for centuries to come. The process is called “thermal expansion,” and the science behind it is relatively simple: When greenhouse gases go into the atmosphere, they cause air temperatures to rise. Some of the heat ends up being absorbed into the oceans, causing the water to expand in volume.  Thermal expansion is a well-documented phenomenon that climate scientists generally take into account when making modeled projections about future sea level rise. But an issue that may have received less attention is just how long this process lasts. Even if humans stopped emitting greenhouse gases into the atmosphere tomorrow, the expansion effect would continue in the oceans for centuries more, making it effectively irreversible in our lifetimes. A new study in the journal Proceedings of the National Academy of Sciences underscores the fact that even greenhouse gases that don’t last long in the atmosphere — methane, for instance — can have centuries-long impacts on the expanding oceans. So although the atmospheric warming they cause may taper off comparatively quickly after their emissions are halted, their effects in the oceans are much longer-lived. . Compared with carbon dioxide, the other gases have relatively short atmospheric life spans — methane, for instance, stays in the atmosphere for only about a decade, compared to carbon dioxide’s potential 200 years or more. Even so, their effects persist in the ocean for hundreds of years. One hundred years after the emissions stop, the model suggests that 75 percent of the peak amount of thermal expansion caused by methane still persists — and 40 percent remains even after 500 years. Allowing the greenhouse gas emissions to continue unabated for longer periods of time produced even more severe effects.

Short-lived greenhouse gases cause centuries of sea-level rise -  NASA - Even if there comes a day when the world completely stops emitting greenhouse gases into the atmosphere, coastal regions and island nations will continue to experience rising sea levels for centuries afterward, according to a new study by researchers at MIT and Simon Fraser University. In a paper published this week in the Proceedings of the National Academy of Sciences, the researchers report that warming from short-lived compounds — greenhouse gases such as methane, chlorofluorocarbons, or hydrofluorocarbons, that linger in the atmosphere for just a year to a few decades — can cause sea levels to rise for hundreds of years after the pollutants have been cleared from the atmosphere. Solomon and her colleagues explored a number of climate scenarios using an Earth Systems Model of Intermediate Complexity, or EMIC, a computationally efficient climate model that simulates ocean and atmospheric circulation to project climate changes over decades, centuries and millenia. With the model, the team calculated both the average global temperature and sea-level rise, in response to anthropogenic emissions of carbon dioxide, methane, chlorofluorocarbons and hydrofluorocarbons. The researchers’ estimates for carbon dioxide agreed with others’ predictions and showed that, even if the world were to stop emitting carbon dioxide starting in 2050, up to 50 percent of the gas would remain in the atmosphere more than 750 years afterward. Even after carbon dioxide emissions cease, sea-level rise should continue to increase, measuring twice the level of 2050 estimates for 100 years, and four times that value for another 500 years. The reason, Solomon says, is due to “ocean inertia”: As the world warms due to greenhouse gases — carbon dioxide included — waters heat up and expand, causing sea levels to rise. Removing the extra ocean heat caused by even short-lived gases, and consequently lowering sea levels, is an extremely slow process. “As the heat goes into the ocean, it goes deeper and deeper, giving you continued thermal expansion,” Solomon explains. “Then it has to get transferred back to the atmosphere and emitted back into space to cool off, and that’s a very slow process of hundreds of years.”

As Earth Warms Up, The Sun Is Remarkably Quiet -- If you’re looking toward the sun to help explain this decade’s record global heat on Earth, look again. Solar activity has been below average for more than a decade, and the pattern appears set to continue, according to several top solar researchers. Solar Cycle 24, the one that will wrap up in the late 2010s, was the least active in more than a century. We now have outlooks for Cycle 25, the one that will prevail during the 2020s, and they’re calling for a cycle only about as strong as--and perhaps even less active than--Cycle 24. Weak solar cycles tend to produce fewer solar storms, those dramatic bursts of magnetized material from the sun that generate spectacular auroral displays and play havoc with satellite-based systems and power grids on Earth. However, solar storms that do emerge during weak cycles can be among the most potent, notes Scott McIntosh (National Center for Atmospheric Research). Just as a catastrophic hurricane can occur in an otherwise quiet season, a quiet solar cycle can still cause devastating space weather, McIntosh told me. “If you look at the record of extreme events from the sun, they most often occur in weak cycles, and they almost always occur in the deep, descending part of the cycle,” he said.  When scientists like McIntosh fret about the potential consequences of a solar storm, they often point to the Big One: the outburst from September 1-2, 1859, that’s been dubbed the Carrington Event. Occurring near the peak of a fairly quiet cycle, the Carrington Event was an extremely intense solar flare aimed directly at Earth. It produced stunning auroral displays around the globe, even in Cuba and Hawaii. The barrage of magnetized particles also knocked out telegraph communications across Europe and North America. A 2013 study from Lloyds of London (see PDF) found that a similar event today could cause up to $2.6 trillion in damage, with up to 40 million Americans losing power for anywhere from two weeks to two years. “While the probability of an extreme storm occurring is relatively low at any given time, it is almost inevitable that one will occur eventually,” noted the report. In fact, we dodged a major solar bullet in July 2012, when a flare roughly as strong as the one in 1859 happened to point away from Earth instead of toward it. See this 2009 post by Jeff Masters for more on how a solar storm can disable electric grids.

"Unprecedented" Polar Melting Unfolds as Climate Disruption Denial Goes Wild -- There was a moment in early January when it was colder in Seattle (27F) than it was on the North Slope of Alaska in the Arctic town of Barrow (30F).On the day that this occurred, Barrow, whose normal high temperature for that day was negative 5 degrees, saw a record high temperature of 33 degrees above zero.  This unprecedented phenomenon sums up the direction of this month's dispatch: a turn toward "global weirding" on all fronts.As Truthout reported in mid-December, scientists with the National Oceanic and Atmospheric Administration (NOAA) concluded in their annual Arctic climate report card, "The Arctic is unraveling." Record-breaking heat in the north has clearly pushed the region into uncharted climate territory.In late December, the heating trend continued, with temperatures at the North Pole spiking to near melting point, a stunning 50 degrees Fahrenheit above normal, despite being the darkest time of the year, with literally no sunlight.Antarctica saw equally shocking developments. Recent NASA photography revealed a 300-foot-wide rift along the Larsen C ice shelf, signaling the now imminent demise of the massive ice shelf, which will send an iceberg the size of Delaware into the southern ocean.Words like "unprecedented" and phrases like "we haven't seen anything like this yet" are no longer uncommon among scientists studying the ice in Antarctica, where a break in the Pine Island Glacier has now revealed yet another mechanism for collapse. (That glacier, along with so many other massive glaciers in the Antarctic, is melting due to warmer sea water from below.) Simultaneously, in East Antarctica, a region of the ice continent assumed to be relatively intact and, thus far, impervious to the impacts of anthropogenic climate disruption (ACD), two recent scientific reports have exposed some seriously troubling warning signs. The studies, each of which focused in on a different East Antarctic ice shelf, showed that major melting is already occurring both from above and below that could eventually release the ice shelves -- and thus release all the ice above them on the continent. Given that East Antarctica contains roughly two thirds of all the ice on the continent, this is troubling news indeed: The entire region's stability is now under threat.

Global sea ice is at lowest level ever recorded - The area of the world’s oceans covered by floating sea ice is the smallest recorded since satellite monitoring began in the 1970s. That means it is also probably the lowest it has been for thousands of years. The latest observations from the US National Snow & Ice Data Center in Boulder, Colorado, show how the ice extent has fallen to a new low this year (bright red trace in the graph below). In the Arctic, the low in sea ice coverage is a result of both global warming and unusual weather events probably influenced by global warming. But in the Antarctic, the current low in seasonal sea ice could just be a result of natural variability. The extent of Arctic sea ice should be growing rapidly during the northern hemisphere winter. But not only has the Arctic been warming rapidly, this winter repeated incursions of warm air have pushed temperatures even further above average. It has been so warm that on occasions this winter the sea ice coverage has actually temporarily shrunk, as shown by dips in the blue line in the graph below. As a result of the simultaneous lows at both poles, the total area of sea ice on the planet has fallen to a record low. Reconstructions of past levels of sea ice in the Arctic suggest it is likely the lowest it has been for thousands of years, says meteorologist Eric Holthaus.

Unrelenting Global Warming Sends Sea Ice to Record Low, As Scientists Feel Heat, Too - Unrelenting warmth during what should be the iciest time of year sent global sea ice extent to a record low last month, the National Snow and Ice Data Center said on Friday, with both polar ice caps at a record-low extent every single day of the month. Compared to the average from 1981 to 2010, the area of ice missing in the Arctic was about the size of Texas and Arizona combined; in the Antarctic, it was bigger than Alaska, according to the NSIDC.Temperatures in the Arctic were about 9 degrees Fahrenheit above average throughout November and December, with peak readings soaring to 50 degrees above the long-term average around Christmas, when the North Pole warmed above freezing, a mark rarely seen outside of summer."Some of the crazy weather patterns we've seen this winter could be, in part, due to the loss of sea ice," said NSIDC director Mark Serreze. "We've had very unusual weather patterns pumping warmth up into the Arctic...the changes are happening so fast that we can't keep up with them."Scientists measuring sea ice in a three-year run of record global heat feel the urgency of the data they are capturing, while the political climate around them changes even faster.The NSIDC is part of the National Oceanic and Atmospheric Administration, which is administered by the Department of Commerce. With many in President-elect Donald Trump's proposed cabinet on record either denying that global warming is caused by greenhouse gases or questioning the need for urgent action, many fear that future funding for government climate science could be at risk.  After Trump's election, a senior NASA official expressed concern in an internal email that the Earth Sciences division would have its funding cut, and Trump adviser Bob Walker, a former House Science Committee chair, has said he believed NASA should end its climate monitoring programs, which he calls "politically correct environmental monitoring." Those sentiments have led some scientists reportedly to begin to duplicate climate data to protect it from potential Trump administration tampering.

Hottest year ever and Arctic meltdown put the world on the brink of catastrophe --- NASA and NOAA reported Wednesday that 2016 beat the record for hottest year ever — a record set only in 2015, which itself had crushed the record set in 2014.“The fact that we’re punching at the ceiling every year now, that is the real indicator that we’re undergoing big changes,” said Deke Arndt, NOAA’s chief of global climate monitoring.Even the usually staid New York Times warned of significant risks. “Temperatures are heading toward levels that many experts believe will pose a profound threat to both the natural world and to human civilization,” the paper says. A staggering number of countries set their all-time record this past year, according to a reanalysis of world temperature data released this week by the Koch-backed Berkeley Earth.Especially worrisome is that carbon pollution has made the North Pole so warm that once-in-1,000-year heatwaves are becoming commonplace.Here’s a polar view of the warming from Berkeley Earth lead scientist Robert Rohde, showing that parts of the Arctic averaged as much as 12°C (21.6°F)— warmer than normal last year. It bears repeating that what happens in the Arctic does not stay in the Arctic. As Arctic warming speeds up sea ice loss, it causes more extreme weather in North America, while accelerating the melting of both the Greenland ice sheet (which speeds up sea level rise) and permafrost (which releases CO2 and methane that speed up warming).Only dramatic cuts in CO2 can avoid the Dust-Bowlification of America’s breadbasket and the inundation of our major coastal cities. Yet while human-caused warming is now as undeniable as the health dangers from smoking, and although the entire world desperately banded together in one last ditch effort to avoid catastrophe in 2015, we are hours away from the inauguration of the most science-denying administration in U.S. history, one dedicated to stopping U.S. and global action.

Warm air invades Arctic again, slowing sea ice growth A surge of warm air and stormy weather has once again invaded the Arctic, sending temperatures soaring and stagnating winter sea ice growth. These repeated incursions have helped keep sea ice area at record low levels for much of the freeze season, and have even contributed to an exceptional cold season retreat. Sea ice area during the winter freeze-up (in blue) as compared to the long-term average (in gray). Periodic incursions of warm, stormy weather, along with persistent winter warmth, have kept sea ice at record low levels for much of the winter. These recent record lows are part of a clear downward spiral of Arctic sea ice caused by regional temperature rise that is happening at twice the global pace, fueled by continued greenhouse gas emissions. 2016, the hottest year on record for the planet, was something of an exclamation point on that Arctic trend, with seven months of record low sea ice levels, as well as record high air temperatures in the region. “2016 is the most anomalous year we have seen yet and it appears to be continuing,” Julienne Stroeve, of the U.S. National Snow & Ice Data Center and the University College London, said in an email. “This is not going to look good going into the melt season.” This decades-long decline in sea ice has repercussions for native communities and for the Arctic ecosystem, of which the sea ice is a vital component. It is also exposing the fragile region to more shipping and other commercial activity and could be altering weather patterns over parts of the Northern Hemisphere.

British Antarctic station to shut down for winter due to crack in ice   -- A British research station on an ice shelf in Antarctica is being shut down over the southern hemisphere winter because of fears it could float off on an iceberg. The British Antarctic Survey (BAS) said in a statement on Monday that it had decided not to winter at the Halley VI research station on the Brunt ice shelf due to concerns for its staff’s safety amid changes to the ice. Preparations to relocate the station further inland due to the threat posed by a growing crack in the ice were under way last month, but it was to remain operational. The station will now be shut down between March and November 2017 and the 16 people who were due to stay there over the winter will move out.The BAS said changes to the ice – and particularly the growth of a new crack – presented a “complex glaciological picture” that meant scientists were unable to predict with certainty what would happen to the ice shelf in the forthcoming winter and beyond. Parts of the ice shelf periodically cleave off from the floating ice sheet, creating icebergs. Glaciologists have run computer models and created bathymetric maps to try to determine the likelihood and impact of this happening, but there was “sufficient uncertainty” for concern. There are 88 people on the station, most of whom are only there for the summer and are due to leave. Staff could be evacuated quickly if the ice were to fracture in the summer months, but not during winter with its 24-hour darkness, extremely low temperatures and frozen sea.

A big Antarctic ice crack is forcing scientists to evacuate research station - Scientists stationed in East Antarctica are being forced to evacuate after another big ice crack appeared near their base.  The British Antarctic Survey (BAS) said it was making a highly unusual move and closing its Halley VI Research Station during Antarctica's winter season, which runs from March to November 2017.  Scientists will evacuate in March, the BAS said, due to concerns about the consequences of an ice crack known as the "Halloween crack." About 90 people are now stationed on the research platform located on the floating Brunt ice shelf, including 16 people who were scheduled to stay over winter to monitor scientific experiments, the U.K. science office said Monday in a news release. While the scientists aren't immediately at risk, the BAS said there was "sufficient uncertainty" as to how safe the crew would be during the coming Antarctic winter. The office thus decided to shut down Halley VI as a "precautionary measure" and remove the crew before March.

Devastating global warming is inevitable due to inaction of international community, says leading economist - The world can no longer avoid dangerous global warming because countries have done little to tackle the problem apart from spout “rhetoric”, a leading economist has warned. Professor William Nordhaus, of Yale University in the US, said it was no longer practicably feasible to keep the level of warming to within two degrees Celsius above pre-industrial levels, the point at which climatologists believe the world will start to experience particularly dangerous climate change. This would see devastating storms, droughts, deadly heat waves and floods all become significantly more common, making some areas of the planet increasingly difficult for humans to inhabit. The US military, among others, has expressed concern about the security implications of the mass movements of people that such scenarios would likely bring about.Professor Nordhaus, a noted expert on the economics of climate change, wrote in a paper called Projections and Uncertainties About Climate Change in an Era of Minimal Climate Policies: “The international target for climate change with a limit of 2C appears to be infeasible with reasonably accessible technologies. “And this is the case even with very stringent and unrealistically ambitious abatement strategies. “This is so because of the inertia of the climate system, of rapid projected economic growth in the near term, and of revisions in several elements of the model. “A target of 2.5C is technically feasible but would require extreme virtually universal global policy measures.”

U.S. State Department nominee Tillerson fights climate deposition | Reuters: Rex Tillerson, the former oil executive under consideration for U.S. secretary of state, is trying to avoid giving testimony in a federal lawsuit over climate change, according to a lawyer for a group of teenagers who filed the suit. Lawyers for the teenagers, who sued the federal government claiming it violated their constitutional rights by causing global warming, were scheduled to depose Tillerson, the former chief executive of Exxon Mobil, in his capacity as a board member of the American Petroleum Institute, a trade group. The lawyers planned to ask Tillerson when he first learned of the impact the burning of fossil fuels was having on the Earth's atmosphere. His answers might then be used to prove the government, working with the energy and manufacturing industries, continued to allow activities harmful to the environment despite knowing the risks to future generations, said Julia Olson, a lawyer in Eugene, Oregon, who is executive director of Our Children's Trust and representing the teenagers. Tillerson's deposition was set for Jan. 19, a day before President-elect Donald Trump's inauguration. But Olson said the API's lawyers told her by telephone that Tillerson should not have to testify because he is no longer affiliated with the group. Her team has asked API to prove Tillerson had left the group on Dec. 28, when they sent notice of their intent to depose him. "If he was still on the board on the date of notice of deposition, he can still be deposed," Olson said. The lawsuit, brought in federal court in Oregon, says the U.S. government helped to cause climate change through its policies, thus denying a group of young people their constitutional right to life, liberty and property.

Tillerson Dodges Discussing Who Knew What When about ExxonMobil’s Efforts to Deceive the Public on Climate Change - Jerri-Lynn here:  The incoming Trump administration is dominated by climate change skeptics, such as Scott Pruitt, the nominee to head the Environmental Protection Agency. While serving in his former role as attorney general for the state of Oklahoma, Pruitt filed lawsuits to block various EPA policies such as the Clean Power Plan.This Real News Network interview with Kathy Mulvey, the accountability campaign manager and advocate for the Climate and Energy Team at the Union of Concerned Scientists, discusses the significance of recent developments in investigations launched by state attorneys general– in California, Massachusetts, and New York– into ExxonMobil’s efforts to deceive the public about its research on climate change. The  interview also covers Rex Tillerson’s successful dodge of a question during hearings to consider his nomination as Secretary of State about who at ExxonMobil knew what when concerning the company’s history of promoting and funding climate science denial, despite its internal awareness of the reality of climate change.  Watch the clip below.  (video interview & transcript)

Fact Check: Rex Tillerson on Climate Risks -- President-elect Donald Trump’s nominee for Secretary of State – and until recently the CEO of ExxonMobil – Rex Tillerson was given a confirmation hearing by the Senate Foreign Relations Committee last week. In his testimony, Tillerson accepted the reality of human-caused global warming and that “The risk of climate change does exist and the consequences of it could be serious enough that action should be taken.” While he accepted the problem exists, Tillerson nevertheless proceeded to downplay its risks, saying: The increase in the greenhouse gas concentrations in the atmosphere are having an effect, our ability to predict that effect is very limited.   Many climate scientists took issue with that statement, and for good reason. Climate models have been very accurate in their projections about many consequences of human carbon pollution. It’s true that there’s uncertainty in just how quickly some of those consequences will be triggered. The bad news is that recent studies have shown that many of those consequences are happening more quickly than climate scientists anticipated. Greater climate uncertainty translates into more urgency to tackle the problem, not less.

Interior Secretary nominee Rep. Ryan Zinke talks climate change at confirmation hearing -   Donald Trump's choice to head the Interior Department on Tuesday rejected the president-elect's claim that climate change is a hoax, saying it is indisputable that environmental changes are affecting the world's temperature and human activity is a major reason. "I don't believe it's a hoax," Rep. Ryan Zinke told the Senate Energy and Natural Resources Committee at his confirmation hearing. "The climate is changing; man is an influence," the Montana Republican said. "I think where there's debate is what that influence is and what can we do about it." Trump has suggested in recent weeks he's keeping an open mind on the issue and may reconsider a campaign pledge to back away from a 2015 Paris agreement that calls for global reductions in greenhouse gas emissions. In contradicting Trump, Representative Zinke cited Glacier National Park in his home state as a prime example of the effects of climate change, noting that glaciers there have receded in his lifetime and even from one visit to the next. Still, he told Sen. Bernie Sanders, I-Vt., that there is debate about how much humans have influenced the climate. Likely to win Senate confirmation, Zinke, 55, sketched out a variety of purposes for the nation's vast federal lands, from hiking, hunting, fishing and camping to harvesting timber and mining for coal and other energy sources. The Interior Department and other U.S. agencies control almost a third of land in the West and even more of the underground "mineral estate" that holds vast amounts of coal, oil and natural gas. An admirer of President Theodore Roosevelt, Zinke said management of federal lands should be done under a "multiple-use" model set forth by Gifford Pinchot, a longtime Roosevelt associate and the first chief of the U.S. Forest Service. Zinke also pledged to tackle an estimated $12 billion backlog in maintenance and repair at national parks, saying parks and other public lands should be a key part of Trump's infrastructure improvement plan. But the former Navy SEAL said his most important task at Interior will be to "restore trust" between the agency and the states and Indian tribes it serves. "One of the reasons why people want to sell or transfer public land is there's no trust, because they feel like they don't have a voice," Zinke said, referring to elected officials and residents of many Western states. "They feel like they don't matter. Well, they should matter."

The GOP's Favorite Climate Excuse Makes a Comeback in the Trump Administration -- It's been a while since "I'm not a scientist" was the go-to line for Republican politicians confronted with uncomfortable questions about climate change. But the infamous talking point made a big comeback at Tuesday's confirmation hearing for Rep. Ryan Zinke (R-Mont.), Donald Trump's nominee to head the Interior Department. During the hearing, Sen. Bernie Sanders (I-Vt.) asked Zinke whether he agrees with the president-elect's view that climate change is a "hoax."Zinke responded that he does believe the "climate is changing" and cited his own experience of watching glaciers in Montana's Glacier National Park recede. Zinke added that "man has had an influence—I think that is undisputable as well." Zinke said climate change isn't a hoax, but from there, his answer got muddier. He reverted to the classic not-a-scientist logic we've heard before from his colleagues. "I'm not a climate scientist expert, but I can tell you I will become a lot more familiar with it," he said. "And it will be based on objective science." Zinke insisted that "there's a debate" on what exactly man's influence on the climate is, as well as on "what we can do about it." As head of Interior, he noted he could turn to experts at the United States Geological Survey. "We have great scientists there," he said, adding, "There's a lot of debate on both sides of the aisle." Sanders cut him off there, saying, "Well, actually, there's not a whole lot of debate now. The scientific community is virtually unanimous that climate change is real and causing devastating problems. There is a debate on this committee but not within the scientific community."

What Trump's nominees said today about science and climate at their Senate hearings | Science | AAAS: This is the second week of U.S. Senate hearings on President-elect Donald Trump’s nominees to his Cabinet. Most, if not all, of the nominees are expected to win confirmation, which requires just 51 votes. ScienceInsider is keeping a watch to see whether scientific issues—such as climate change—get much discussion, and what kind of reaction any comments draw. Today, senators heard from four nominees, including: Oklahoma Attorney General Scott Pruitt, Trump's pick to lead the Environmental Protection Agency (EPA); Representative Tom Price (R–GA), the nominee to run the Department of Health and Human Services (parent agency of the National Institutes of Health [NIH]); and investor Wilbur Ross, the nominee to lead the Department of Commerce, home of the National Oceanic and Atmospheric Administration.Senators have previously questioned Representative Ryan Zinke (R–MT), Trump's nominee to head the Department of the Interior (DOI), and Betsy DeVos, his nominee for education secretary. Last week, they questioned Representative Mike Pompeo (R–KS), Trump's nominee to run the Central Intelligence Agency (CIA); retired Marine General James Mattis, nominated for secretary of defense; and former Exonn CEO Rex Tillerson, the nominee for secretary of state. We’ll be updating periodically as new hearings occur, with the most recent news at the top, so come back to see what’s happening.

Pruitt, testifying to lead EPA, criticizes environmental rules — Scott Pruitt, President-elect Donald Trump’s choice to lead the Environmental Protection Agency, went on the offensive in his Senate confirmation hearing Wednesday, criticizing federal rules protecting air and water and addressing climate change, and forcefully advocating a states’ rights approach to environmental regulation. In his opening statement, Pruitt, Oklahoma’s attorney general, offered his vision of a more restrained EPA. Advertisement “As attorney general of Oklahoma, I saw examples where the agency became dissatisfied with the tools Congress had given it to address certain issues, and bootstrapped its own powers and tools through rule-making,” he said. “This, unfortunately, has resulted in protracted litigation. The agency must be committed to using its expertise in environmental issues, not to end-run around Congress.” Democrats on the Senate Environment and Public Works Committee aggressively pressed Pruitt on his record, noting that he has sued the EPA 14 times in an effort to block federal air and water pollution regulations. In particular, they questioned Pruitt repeatedly about letters drafted by energy lobbyists that were sent on state stationery to federal agencies and even to President Obama, outlining the economic hardship threatened by the environmental rules.Speaking to critics who have said Pruitt has worked on behalf of the energy industry rather than the public good, he said, “We must reject as a nation the false paradigm that if you’re proenergy you’re antienvironment, and if you’re proenvironment you’re antienergy.” Pruitt was introduced by Senator James Inhofe, the Oklahoma Republican who is one of Congress’s most prominent denialists of the established science of human-caused climate change. Inhofe praised Pruitt as a “champion of state and individual rights” who has “fought against federal overreach.” “Yes, as attorney general, Scott fought the EPA, the Fish and Wildlife Service, and the outgoing administration on many fronts, but all of these suits were brought to protect state and local interests from overzealous and activist agencies,” Inhofe said.

Trump EPA pick expresses doubts on climate, defends oil industry funding | Reuters: President-elect Donald Trump's choice to lead the U.S. Environmental Protection Agency expressed doubt about the science behind global climate change during a contentious Senate confirmation hearing on Wednesday, but added he would be obliged for now to uphold the EPA's finding carbon dioxide poses a public danger. Oklahoma Attorney General Scott Pruitt, 48, sued the agency he intends to run more than a dozen times on behalf of his state. This earned him strong support from petroleum companies and convinced both his opponents and supporters that he would aggressively carry out Trump's campaign vows to slash EPA regulation to boost drilling and mining. "Science tells us that the climate is changing, and that human activity, in some manner, impacts that change," Pruitt said during the hearing in front of the Environment and Public Works Committee. "The ability to measure with precision the degree and extent of that impact, and what to do about it, are subject to continuing debate and dialogue." Responding to a question from Democratic Senator Ed Markey of Massachusetts, Pruitt said he would be obliged as administrator to initially abide by the EPA finding that carbon dioxide and other gases scientists believe contribute to climate change pose a risk to the public. That is a premise for many of the regulations limiting carbon emissions imposed during President Barack Obama's tenure. "There's nothing that I know of that would cause a review at this point," he said. Trump has called climate change a hoax and has promised to refocus the EPA on protecting air and water quality, while scrapping many of Obama's initiatives to curb carbon dioxide emissions.That stance has triggered an international diplomatic backlash and cast a cloud of doubt over the future of a global pact to fight global warming, signed in Paris last year by nearly 200 countries. U.S. government agencies said on Wednesday that world temperatures in 2016 hit a record high for the third year in a row.

Trump's EPA Pick Hides Pro-Polluter Record Behind Process Jargon -- Scott Pruitt , Trump 's nominee for U.S. Environmental Protection Agency ( EPA ) administrator, had his confirmation hearing Wednesday. What follows is a blow-by-blow account of the event. In the morning, there were reports of people paid to stand in line to keep protesters out and as the hearing started, Standing Rock protesters were arrested outside the room. We hoped senators would be just as willing to stand up to #PollutingPruitt . Sen. Barrasso, introducing Pruitt, praised his supposed efforts to fight polluters. But the only specific action Barrasso could name was the oil clean-up "double dipping" issue . He didn't list other environmental protection actions from Pruitt because … well, of 700 press releases from Pruitt's time as Oklahoma AG, zero involved actions to protect the environment . Delaware's Sen. Tom Carper gave a quick history lesson about the importance of the EPA, the old "burning rivers, smoggy cities" bit about how bad pollution was in the days before the EPA.  In addition to sea level rise already flooding parking lots in Delaware, how fishing now comes with a mercury warning and the lead-laden troubles of Flint, Michigan, Carper focused on cross-state pollution. It's a not-so-subtle warning of things to come under Pruitt, whose states-first approach wouldn't be sufficient to handle interstate pollution. Carper concluded with a "damning statement" from former EPA Administrator Christine Todd Whitman, hoping that today's event can prove her wrong. Sen. Inhofe was next to speak and Barrasso praised him. (No mention of the infamous snowball ). With his mild drawl and heavy rasp, Inhofe followed Barrasso's lead and heaped praise on Pruitt's protection of polluter profits. "He's a hero of the scenic rivers," Inhofe ( falsely ) said before being interrupted by a protester shouting as she was removed. According to MoJo's Rebecca Leber, the protesters were " unlike anything I saw at Tillerson's " hearing. Inhofe took a moment to attack the outgoing administration as radical—one that at least 60 percent of Americans agree with . In the same breath, he praised the fossil fuel industry as protectors of the environment.  Now on to the questions….

Pruitt’s EPA Lawsuits Are Worse Than You Think - One well-reported thing about Scott Pruitt , President-elect Trump 's nominee for the U.S. Environmental Protection Agency ( EPA ) Administrator, is his penchant for filing lawsuits to block the EPA from enforcing clean air, clean water and climate regulations, rather than suing polluters in his own state of Oklahoma.  This alone ought to provide ample grounds for rejecting his nomination. But a closer look at these lawsuits and the legal arguments Pruitt has advanced (or signed onto) tells an even more disturbing story. The legal arguments are disingenuous, often unprincipled and extreme, and display an unfortunate strategy of saying just about anything to win a case.  Consider these three examples.  In 2009, the EPA made a long overdue, and wholly unremarkable finding that greenhouse gas emissions from the combustion of fossil fuels may endanger public health and welfare. In this finding, the EPA acknowledged the overwhelming consensus of the scientific community and the multiple lines of independent evidence supporting this conclusion.  While the finding broke no new ground scientifically, it was important legally: when the EPA finds that a pollutant endangers public health or welfare, the Clean Air Act requires the EPA to regulate sources of that pollutant. In this case, that meant power plants, cars, trucks and other sources that combust coal , oil and natural gas.  To stop such regulation in its tracks, Scott Pruitt filed a lawsuit to overturn the endangerment finding, which he and his fellow litigants characterized as "arbitrary and capricious." Believe it or not, Pruitt's primary argument was that the EPA should not have relied upon the multiple reports on climate change issued by the Intergovernmental Panel on Climate Change (IPCC) (established by the United Nations which synthesizes the work of thousands of scientists), the U.S. Climate Change Science Program (CCSP) (a Bush administration body of 13 federal agencies that issued 21 reports on climate change)vand the National Research Council (NRC) (the research arm of the National Academy of Sciences).  Pruitt's legal brief never quite explains what is wrong with relying upon the world's most prominent experts, but it claimed that the EPA in effect wrongly delegated its decision-making to these bodies.

Reject Scott Pruitt for the E.P.A. - The president-elect’s pick to run the Environmental Protection Agency is the antithesis of what the nation should expect in the next administrator of the agency responsible for protecting human health and the environment. Attorney General Scott Pruitt of Oklahoma has built his career suing the agency he would oversee to roll back its protection of the nation’s air and water, and challenging the very idea of federal action to control pollution. At the same time, while Mr. Pruitt preaches the gospel of states’ rights, his record suggests he has been far from aggressive in enforcing environmental laws in his own state. Given his anti-regulatory mind-set, skepticism about global warming and support from the industries he would regulate, the Senate, which is set to begin to consider his nomination on Wednesday, should reject him. His tenure in Oklahoma is instructive. Mr. Pruitt disbanded the environmental protection unit in the attorney general’s office and created a “federalism unit” to litigate against “overreach by the federal government.” Much of that overreach, in Mr. Pruitt’s view, was by the E.P.A.   A spokesman for Mr. Pruitt told The New York Times recently that environmental “bad actors” were still being held accountable by his office. But the paper noted that many of the actions cited by his office were initiated by his predecessor. And The Times reported that Mark Derichsweiler, a state environmental official who oversaw a major water pollution case, retired in 2015 because, in his own words, he was frustrated with Mr. Pruitt’s approach of standing up for business “at the expense of people who have to drink the water or breathe the air.”

David Gelernter, fiercely anti-intellectual computer scientist, is being eyed for Trump’s science adviser   - Computer scientist David Gelernter, a Yale University professor who has decried the influence of liberal intellectuals on college campuses, is being considered for the role of the Donald Trump's science adviser. Gelernter met with the president-elect at Trump Tower in New York City on Tuesday, according to press secretary Sean Spicer. Gelernter is a pioneer in the field of parallel computation, a type of computing in which many calculations are carried out simultaneously. The programming language he developed in the 1980s, Linda, made it possible to link together several small computers into a supercomputer, significantly increasing the amount and complexity of data that computers can process. Since then he has written extensively about artificial intelligence, critiquing the field's slow progress and warning of AI's potential dangers.In 1993, Gelernter was seriously injured by a letter bomb sent by Ted Kaczynski, the anti-technology terrorist known as the Unabomber. Beyond computer science circles, Gelernter has made a name for himself as a vehement critic of modern academia. In his 2013 book, “America-Lite: How Imperial Academia Dismantled Our Culture (and Ushered in the Obamacrats),” he condemned “belligerent leftists” and blamed intellectualism for the disintegration of patriotism and traditional family values. He attributed the decline in American culture to “an increasing Jewish presence at top colleges.” (Gelernter himself is Jewish.)

Trump's energy pick Perry softens stance on climate change | Reuters - Rick Perry, President-elect Donald Trump's pick to run the U.S. Energy Department, said during a Senate confirmation hearing on Thursday that global warming caused by humans is real, but that efforts to combat it should not cost American jobs. The comment marks a shift for the former Texas governor, who had previously called the science behind climate change "unsettled" and a "contrived, phony mess." It also clashes with Trump's statements during his campaign for the White House that global warming is a hoax meant to weaken U.S. business. "I believe the climate is changing. I believe some of it is naturally occurring, but some of it is also caused by man-made activity. The question is how do we address it in a thoughtful way that doesn’t compromise economic growth, the affordability of energy or American jobs," Perry said. Perry's 3-1/2-hour hearing before the Senate Committee on Energy and Natural Resources was one of the shortest and least contentious in a long list of sessions to vet Trump Cabinet nominees since last week. The committee has not yet scheduled its vote on Perry's nomination. As energy secretary, Perry, 66, would oversee a substantial chunk of Trump's energy portfolio. He would lead a vast scientific research operation credited with helping trigger a U.S. drilling boom and advancements in energy efficiency and renewable energy technology, and would also be in charge of maintaining the United States' nuclear weapons arsenal. Trump, who will be sworn in as president on Friday, has promised to bolster the U.S. oil, gas and coal industries, in part by undoing federal regulations curbing carbon dioxide emissions. He has also suggested pulling America out of a global climate change pact signed in Paris in 2015, calling it expensive for U.S. industry. He sees Perry, who was governor of Texas from 2000 to 2015 and whose nomination has the support of the energy sector, as someone who can help usher in jobs growth.

Rick Perry expresses ‘regret’ for pledging to abolish Energy Department - Former Texas governor Rick Perry, President-elect Donald Trump’s nominee to run the Energy Department, parried questions about climate change at his confirmation hearing Thursday morning, reversing his earlier skeptical stance but still balking when pressed to declare it a crisis. Perry also expressed contrition for campaigning for the presidency in 2012 on the promise of abolishing the agency. “My past statements made over five years ago about abolishing the Department of Energy do not reflect my current thinking,” Perry said in his opening statement to the Senate Committee on Energy and Natural Resources. “In fact, after being briefed on so many of the vital functions of the Department of Energy, I regret recommending its elimination.”Perry brought up the politically sensitive topic of climate change, saying he believes the climate is changing and “some of it” is caused by “man-made activity.” He added: “The question is how we address it in a thoughtful way that doesn’t compromise economic growth.”Like other Trump nominees who have professed differences with the president-elect over climate change, Perry framed the issue in a way that went beyond what Trump has said. But Democrats probed to figure out whether Perry’s new stance marked an incremental or fundamental change in outlook. (Reuters) One day after U.S. scientists declared 2016 the hottest year on record, Perry went further than Trump did in a television interview broadcast late last year. The president-elect told “Fox News Sunday” in December that “nobody really knows” whether climate change is real.Perry’s comment was also at odds with his own earlier public posture. During a 2014 Christian Science Monitor luncheon, Perry said the science showing that humans are contributing to climate change was unsettled and argued that calling carbon dioxide “a pollutant is doing a disservice” to the country.

Trump fills his final cabinet post with another climate change denier -- Despite running on a platform of revitalizing rural America, President-elect Trump waited until the day before his inauguration to name his secretary of agriculture, reportedly choosing former Georgia Gov. Sonny Perdue (R) just hours before he is sworn in as president.As secretary of agriculture, Perdue would oversee a department with about 100,000 employees and a budget of roughly $140 million. Unlike some of Trump’s cabinet nominees, Perdue would come to the department familiar with the issues he would oversee — Perdue was raised on a Georgia farm and has his doctorate in veterinary medicine.But like nearly all of Trump’s cabinet nominees, Perdue breaks markedly from the scientific community on the issue of climate change.In 2014, Perdue mocked “the left” and “mainstream media” for its coverage of climate change. Writing in an op-ed published in the National Review, Perdue challenged the connection between climate change and drought, extreme precipitation, and other weather events. He also wrote that climate change has “become a running joke among the public” and “liberals have lost all credibility when it comes to climate science because their arguments have become so ridiculous and so obviously disconnected from reality.”In 2007, in the midst of an epic drought, Perdue implored residents to pray for rain, holding a prayer vigil outside of the Georgia state Capitol. His track record on environmental issues is not much better. As governor, he championed the expansion of factory farms, and pushed against gas taxes and EPA efforts to enforce the Clean Air Act.

Wisconsin state agencies are deleting talk of human-caused climate change from their websites - Information on the science of human-caused climate change has begun to disappear from Wisconsin state government websites. According to local news reports, both the Wisconsin Department of Natural Resources and the Public Service Commission have either altered or removed web pages devoted to global warming in recent months. And some of these changes suggest the existence of a scientific debate about the causes of climate change.   In late December, blogger James Rowen pointed out a change in the wording of a state DNR web page devoted to climate change and the Great Lakes. The current version of the page reads, “As it has done throughout the centuries, the earth is going through a change. The reasons for this change at this particular time in the earth’s long history are being debated and researched by academic entities outside the Wisconsin Department of Natural Resources.” The wording suggests that, although climate change exists, there’s still a scientific debate surrounding its causes. In fact, repeated studies indicate that there’s a near-universal scientific consensus on the idea that human activity — namely, the emissions of carbon dioxide and other greenhouse gases into the atmosphere — are the primary driver behind modern climate change.  But as the Milwaukee Journal Sentinel pointed out, archived versions of the website from earlier in 2016 show that the page previously supported the scientific consensus. A previous wording reads, “Earth’s climate is changing. Human activities that increase heat-trapping (“green house”) gases are the main cause.”

Minutes after Trump becomes president, White House website deletes all mention of climate change - On January 20, Donald Trump was sworn in as the 45th president of the United States. Minutes later, the White House website switched hands — and previous pages detailing President Obama’s climate change plans went dark. The new website features, instead, a page dedicated to “An American First Energy Plan,” which details the new administration’s stance towards energy and (a lack of) climate policy. The plan tracks almost exactly with promises made by Trump during the campaign — to unleash more fossil fuel extraction, especially on federal lands, cancel Obama-era climate policies like the Climate Action Plan and the Waters of the United States rule, and invest in “clean coal” technology.Trump has yet to explain how his plan would succeed in both supporting the natural gas fracking boom and bringing back coal jobs. Energy policy experts largely agree that the increased availability of cheap natural gas has contributed to much of the recent downturn in coal’s prospects — which would make Trump’s promise to “embrace the shale oil and gas revolution” antithetical to its promise to revive America’s coal industry. Noticeably absent from the energy plan, however, is any mention of the Paris climate agreement, which Trump previously promised to withdraw from if elected president. Trump has since indicated a reluctance to follow through on that promise, however, and his nominee for secretary of state, former Exxon CEO Rex Tillerson, told lawmakers during his confirmation hearing that he felt the United States should remain “at the table” regarding the Paris agreement.

Federal Policy Will Shift. Not All States Will Shift With It. - Bitter divisions about the proper role of government in the United States have always been with us. Within broad limits, our Constitution’s response to this reality has been to empower states to adopt policies tailored to their own constituents’ beliefs and values. So in the wake of an unusually divisive presidential election, vigorous state-level actions to offset specific changes in federal policy are already underway.A case in point is the response of Gov. Jerry Brown of California to President Trump’s skepticism about the threat posed by climate change.  Mr. Brown, a Democrat, has doubled down on California’s efforts to negotiate carbon-reduction agreements with other states and countries. That strategy, he explained, can serve two ends: to demonstrate that such agreements not only do not destroy jobs, but actually increase employment, and to show that the agreements work, leading to significant reductions in emissions even as the struggle for broader action continues. Blue-state voters, who by definition tend to favor Democrats, are more likely than others to oppose the Trump agenda. Yet those states are also likely to find themselves in an intriguing financial position as a result of Mr. Trump’s policies. Consider that blue states send much more money to Washington than they receive, while the reverse is true for red states, which tend to favor Republicans. Blue states also enjoy significantly higher per capita income than red states and are home to a disproportionate share of the nation’s highest earners. The upshot is that if the Trump administration cuts taxes on top earners as expected, the federal tax burden on blue states will fall especially sharply. Those states will thus have new fiscal flexibility, should they choose to offset other aspects of the Trump agenda. Blue states, for example, are more likely to favor a generous social safety net. For the better part of a century in many states, that safety net has included the services of Planned Parenthood, which include the diagnosis and treatment of sexually transmitted infections, contraception and cancer screening. For every dollar spent on those services, the organization saves society many more dollars in future social costs, not to mention untold human heartache.

The Paris Agreement under Trump and the Merits of an Economy-Wide Carbon Tax - The election of Donald Trump has cast significant uncertainty over the future of the Paris Agreement to combat global climate change, as the president-elect actively campaigned to pull the United States from the international accord. Under this agreement, which officially went into force in November 2016, the United States (under President Obama’s leadership) pledged to reduce greenhouse gas emissions by 26–28 percent relative to 2005 levels by 2025. Despite his assertion that climate change is a “hoax” created by China, however, Trump has moderated his hardline approach since the election by stating that he would keep an open mind on the agreement. Should the president-elect choose to pursue policies to meet the US pledge, as urged by over 600 US companies, what options exist to reduce greenhouse gas emissions below projected business-as-usual levels? A regulatory approach through the Clean Air Act is likely out of the question, given Trump’s nomination of Scott Pruitt (a vocal critic of the Clean Power Plan) to lead the US Environmental Protection Agency (EPA). Still, if we assume that EPA’s Clean Power Plan is upheld in the court system or not dismantled by the incoming Trump administration, US emissions in 2025 are projected to be only 14 percent below 2005 levels under current law. Even with additional regulatory measures that have been proposed by the Obama administration ... US emissions levels in 2025 are projected to be only 19 percent below 2005 levels, still well short of the 26–28 percent target. Yet Trump’s nomination of Rex Tillerson for secretary of state suggests a possible alternative policy approach—a revenue-neutral, economy-wide carbon tax.  As CEO of ExxonMobil, Tillerson has publicly backed the idea since 2009. Using the Goulder-Hafstead E3 model, we investigated how such a tax on carbon dioxide emissions from combustion (representing about 75 percent of US greenhouse gas emissions) could be designed to meet the US target at a relatively minimal cost. ...

The gulf between the Paris Climate Agreement and energy projections - According to the Paris Climate Agreement a rapid decrease in the world’s consumption of fossil fuels is now mandatory if the Earth is to be saved from climate disaster. Projections of future energy use, however, are unanimous in predicting an increase in the world’s consumption of fossil fuels in coming decades. Either the energy consumption projections are wrong or the Paris goal is unachievable. This post reviews the basic provisions of the Paris Agreement, compares them with six independent estimates of future energy consumption and concludes that while the energy consumption estimates are subject to uncertainty the goals of the Paris Agreement are indeed unachievable.  The magnitude of the task facing the Paris signatories is illustrated in Figure 1. A “no action scenario” supposedly leads to a disastrous 4.5C of warming by 2100 (there is no compelling scentific evidence that it will, but the Paris signatories have decreed that it will). A scenario under which all of the countries that have filed Intended Nationally Determined Contributions meet their targets (which is unlikely) leads to 3.5C of warming. The 2C pathway considered necessary to stave off the worst impacts of climate change is nowhere near being met. (The 2C “safe” threshold has no scientific basis either, as discussed in this post, but we will pass that over too):Six recent projections of future world energy consumption are summarized – two from oil companies (BP and Exxon), two from government or government-sponsored entities (EIA and IEA), one from academia (MIT) and one from a “think tank” (IEEJ). All are presented in the same graphical format with the data taken from spreadsheets or tables or scaled off graphs. We begin with the oil companies:

Obama Pays $500 Million to UN Fund That Trump Vows to Cut Off - Three days before leaving office, President Barack Obama made a $500 million contribution to a United Nations climate fund, part of a commitment under the Paris climate accord that Donald Trump has vowed to rescind.The U.S. has now contributed $1 billion to the Green Climate Fund to help poor nations develop clean energy and cope with the impact of global warming, according to a statement Tuesday from the U.S. State Department.The U.S. pledged to donate a total of $3 billion over four years to the fund when it helped broker the landmark Paris agreement in 2015. Trump has vowed to cancel future payments to the fund and redirect them toward projects in the U.S. The funding was approved last year through the 2016 Economic Support Fund appropriation. Trump’s transition team didn’t immediately respond to a request for comment.

Rogue scientists race to save climate data from Trump - At 10 AM the Saturday before inauguration day, on the sixth floor of the Van Pelt Library at the University of Pennsylvania, roughly 60 hackers, scientists, archivists, and librarians were hunched over laptops, drawing flow charts on whiteboards, and shouting opinions on computer scripts across the room. They had hundreds of government web pages and data sets to get through before the end of the day—all strategically chosen from the pages of the Environmental Protection Agency and the National Oceanic and Atmospheric Administration—any of which, they felt, might be deleted, altered, or removed from the public domain by the incoming Trump administration. Their undertaking, at the time, was purely speculative, based on travails of Canadian government scientists under the Stephen Harper administration, which muzzled them from speaking about climate change. Researchers watched as Harper officials threw thousands of books of aquatic data into dumpsters as federal environmental research libraries closed. But three days later, speculation became reality as news broke that the incoming Trump administration’s EPA transition team does indeed intend to remove some climate data from the agency’s website. That will include references to President Barack Obama’s June 2013 Climate Action Plan and the strategies for 2014 and 2015 to cut methane, according to an unnamed source who spoke with Inside EPA. “It’s entirely unsurprising,” said Bethany Wiggin, director of the environmental humanities program at Penn and one of the organizers of the data-rescuing event. The group was split in two. One half was setting web crawlers upon NOAA web pages that could be easily copied and sent to the Internet Archive. The other was working their way through the harder-to-crack data sets—the ones that fuel pages like the EPA’s incredibly detailed interactive map of greenhouse gas emissions, zoomable down to each high-emitting factory and power plant. “In that case, you have to find a back door,” said Michelle Murphy, a technoscience scholar at the University of Toronto.

The Discount Rate for the Social Cost of Carbon –  When we perform cost-benefit analysis of regulations, and when the benefits of those regulations accrue in the future, we discount our estimates of the benefits so that we can quantify what should be spent today in order to avoid future damage. Regulation of carbon dioxide is a prime example. It persists in the atmosphere over many decades and causes global warming, which is itself a slow process with many effects having time lags of decades. A recent article in Science warned that the incoming Trump Administration will try to revise the Social Cost of Carbon (SCC) that is used for cost-benefit analysis of a variety of regulations concerning global warming. The SCC is measured using a discount rate that purports to estimate the current value of future impacts, thereby allowing regulators to compare today’s costs more directly to tomorrow’s benefits. The Trump Administration’s likely increase in the discount rate from 2.5 percent to 5 percent could reduce the 2020 SCC from $62 to $12 per metric ton of carbon dioxide. A lower SCC, which suggests a lower value placed on preventing future damages, would imply that many current regulations appear to have costs that exceed their benefits.  What is the correct discount rate? I cannot answer that, but I can comment on the implications of some proposed reasons for discounting that are suggested by the large literature on this question in economics and philosophy. Further analysis of the arguments could lead to a more justified estimate of what the rate should be. One reason that has been offered for discounting is that people in the future will be richer than we are now. Because money has “declining marginal utility,” people in the future, being richer, will value money less than we do. We must spend a larger proportion of our money on “necessities” that make a big difference in our lives, like food and shelter, while people in the future will spend more of it on “luxuries” that improve their well-being only a little.  But this assumption of increasing wealth could be incorrect. We cannot assume that the trend of only the last few centuries will always continue, and we have some reasons to think it will not, due to increasing population, a reduction in land area for farming, over-fishing, reduced supply of fresh water, sharply declining biodiversity, and global warming itself, which will lead to reduced land area for everything, among other problems. The argument from increasing wealth is thus weak, and the same line of reasoning could lead to the opposite conclusion if we are more pessimistic about the future.

Neoliberals know the price of everything and the value of nothing - The neoliberal agenda is one of deregulation, unfettered trade, fiscal austerity (with the attendant reduction in social programs), privatization and tax reduction. Fundamental to the neoliberal ideology is that government regulation and planning of economic activity are inherently flawed and cannot bring about the desired ends of efficiency, prosperity and social harmony. Instead, price is the great and sufficient transmitter of information across the economy and across society at large. Price is the best barometer for all decisions.  Hence, the emphasis on privatizing almost everything in society including education and health care. Neoliberals believe that voting with your money is at least, if not more important, than voting in elections in a free society. The freer the market, the more choices consumers will have, and the more competitive the market, the better the quality will be.  There are several problems, of course, with the price mechanism. First, it only takes into account costs which are directly borne by the provider of a product or service. So-called externalities such as pollution and climate change are not tallied in the price. In order for those costs to be included, say, by the imposition of a carbon tax, the government would have to intervene, something not consistent with neoliberal ideas.  Second, such a monomaniacal focus on price alone pre-empts a broader view of social goals, reducing them merely to price signals. But not every social good can be reduced to a price signal in a nominally "free" market.Here we have a case of knowing the price of everything and the value of nothing.   The neoliberal who ignores climate change sacrifices a habitable climate for his or her children and grandchildren in favor of cheap prices for goods and services now. This is the supposed "economic rationality" which the neoliberal espouses because he or she does not seem to know the VALUE of a habitable climate. What the neoliberals would like you to believe is that a neoliberal world is inevitable--which translates into a suicide-by-climate-change pact among peoples.

Trump Meets With Professor Who Thinks Global Warming Is Positive - Physicist William Happer believes there is global warming but unlike most, he believes it is good for us. The Princeton physicist questions whether we should have any concerns about it at all. “Increased agricultural yields and modest warming far outweigh any harm.” Even a doubling of  carbon dioxide would not cause much real warming, he says, perhaps 0.5 and 1.5 degrees of warming. The UN believes the figures are more like 1.5 degrees – 4.5 degrees C.Trees, plants and various farm-products are currently handicapped by too little carbon dioxide, not too much. More CO2 will help the world not hurt it, he thinks. E&E News reported on the meeting but said it wasn’t certain whether the prof was under consideration for a post with the administration. Various science and energy positions remain open.  Happer is an eminent physicist who held prominent positions at the Department of Energy, as well as at his university, and has 200 scientific publications to his name.  But in 2009 testimony, he went even further in countering the scientific consensus on climate change, asserting that “the current warming also seems to be due mostly to natural causes, not to increasing levels of carbon dioxide.” Most scientists have been plain and very clear that carbon dioxide is indeed the cause of most of the current warming. In 2011, Happer wrote a paper for First Things that characterized global warming as a “climate crusade.” He said it was based on distorted science and involved money hungry governments and other manipulators. Trump could certainly be considering him for a post given his recent interest in Robert Kennedy Jr.   Kennedy has been an outspoken critic of vaccines, which he believes are laced with thimerosal, a chemical that may be causing autism in some who receive them.

Billionaire Steyer says there’s ‘no limit’ on his spending against Trump  (Bloomberg Tom Steyer, the billionaire environmental activist who spent at least $87 million on the 2016 election, said he can’t begin to estimate how much of his fortune he’ll put toward fighting Donald Trump’s presidency. “If you ask me can I put a limit on how much I value the health, the safety, the employment and the civil liberties of Americans, there’s no limit to what I think that’s worth,” Steyer, a Democrat, said in an interview Tuesday.Steyer, the biggest individual political donor in last year’s election, channels most of his money through a network of groups known as NextGen Climate. He’s already combating the president-elect’s cabinet picks and trying to pressure the incoming administration not to roll back environmental regulations. Trump, who has called climate change a hoax invented by the Chinese to weaken the U.S. economy, has raised concerns among conservationists that he’d roll back environmental protections. He walked back some of his campaign rhetoric, including a promise to abandon the international climate accord reached in 2015 in Paris, in a November interview with The New York Times. “We don’t know how much of their campaign rhetoric they’re going to try to put into action,” said Steyer. “But this is the most broad-based and dangerous attack on American values certainly that I have ever experienced in my lifetime and much more than I have ever imagined would happen while I’m alive.” Concerns deepened when Trump announced his picks of Rex Tillerson, the former chief executive of Exxon Mobil Corp., to be his secretary of state, and Scott Pruitt, a longtime opponent of environmental regulations, to head the Environmental Protection Agency. Pruitt, who has led lawsuits against the agency he’s been tapped to head, is an “extreme and dangerous choice,” Steyer said.

Congress moves to give away national lands, discounting billions in revenue - Republican lawmakers have quietly laid the foundation to give away a large portion of America’s 640m acres of national land. These may include areas around the Grand Canyon that feed the Colorado River. Arizona Republicans would like to open up surrounding mineral-rich areas for mining, while conservationists see this move as disastrous. In the midst of highly publicized steps to dismantle insurance coverage for 32 million people and defund women’s healthcare facilities, Republican lawmakers have quietly laid the foundation to give away Americans’ birthright: 640m acres of national land. In a single line of changes to the rules for the House of Representatives, Republicans have overwritten the value of federal lands, easing the path to disposing of federal property even if doing so loses money for the government and provides no demonstrable compensation to American citizens. At stake are areas managed by the Bureau of Land Management (BLM), National Forests and Federal Wildlife Refuges, which contribute to an estimated $646bn each year in economic stimulus from recreation on public lands and 6.1m jobs. Transferring these lands to the states, critics fear, could decimate those numbers by eliminating mixed-use requirements, limiting public access and turning over large portions for energy or property development. In addition to economic stimulus from outdoor activities, federal land creates revenue through oil and gas production, logging and other industrial uses. According to the BLM, in 2016, it made $2bn in royalty revenue from federal leases. The Outdoor Industry Association estimates federal tax revenue from the recreation economy at almost $40bn.  Ignoring those figures, the new language for the House budget, authored by Utah Republican representative Rob Bishop, who has a history of fighting to transfer public land to the states, says that federal land is effectively worthless. Transferring public land to “state, local government or tribal entity shall not be considered as providing new budget authority, decreasing revenues, increasing mandatory spending or increasing outlays.” Essentially, the revised budget rules deny that federal land has any value at all, allowing the new Congress to sidestep requirements that a bill giving away a piece of federal land does not decrease federal revenue or contribute to the federal debt.

Global Clean Energy Investment Fell 18% in 2016 With Slowdown in China -Last year marked a setback for global investment in renewables and low-carbon technologies.New investment in clean energy worldwide fell to $287.5 billion in 2016, down 18 percent from a record high of $348.5 billion in 2015, according to new research from Bloomberg New Energy Finance (BNEF). But while it’s preferable to see numbers rise, the decline was expected and isn’t all bad, say BNEF experts.The primary cause of the investment drop was a slowdown in China and Japan. In China, clean energy investment totaled $87.8 billion in 2016, down 26 percent from an all-time high of $119.1 billion in 2015. In Japan, clean energy investment totaled $22.6 billion, dropping 43 percent over the previous year.  Both countries have seen their renewable energy markets boom in recent years, thanks to some of the world’s most generous feed-in tariff policies, according to Justin Wu, head of Asia research for BNEF. After years of record-breaking investment, China and Japan are now cutting back on large-scale renewable projects and turning their attention to utilizing the capacity they already have."China is facing slowing power demand and growing wind and solar curtailment,” said Wu, in a statement. “The government is now focused on investing in grids and reforming the power market so that the renewables in place can generate to their full potential.” Through the first six months of 2016, 21 percent of wind power in China went to waste and 12.1 percent of solar power in northern China was curtailed, according to the World Resources Institute. In response to the extra capacity, China’s National Energy Administration reduced the country’s five-year wind target by 16 percent to 210 gigawatts by 2020, and cut the country’s solar target by 27 percent to 110 gigawatts by 2020.

China is cementing its global dominance of renewable energy and supporting technologies, aggressively investing in them both at home and around the globe, leaving countries including the US, UK and Australia at risk of missing the growing market. A report by the Institute for Energy Economics and Financial Analysis (Ieefa) found China’s dominance in renewables is rapidly spreading overseas, with the country accelerating its foreign investment in renewable energy and supporting technologies. Analysing Chinese foreign investments over US$1bn, Ieefa found 13 in 2016, worth a combined $32bn. That represented a 60% jump over similar investments in 2015. China was already widely recognised as the largest investor in domestic renewable energy, investing $102bn in 2015, according to Bloomberg New Energy Finance – more than twice that invested domestically by the US and about five times that of the UK. The big foreign investments in 2016 included two in Australia, two in Germany and two in Brazil, as well as deals in Chile, Indonesia, Egypt, Pakistan and Vietnam. The report noted the global expansion cements China’s total domination of renewable energy growth globally. China now owned:

  • Five of the world’s six largest solar-module manufacturing firms
  • The largest wind-turbine manufacturer
  • The world’s largest lithium ion manufacturer
  • The world’s largest electricity utility

Tim Buckley, director of Ieefa and author of the report, said the election of Donald Trump in the US and lack of supportive policy in Australia left those countries at risk of missing a huge opportunity. “At the moment China is leaving everyone behind and has a real first-mover and scale advantage, which will be exacerbated if countries such as the US, UK and Australia continue to apply the brakes to clean energy,” he said. “The US is already slipping well behind China in the race to secure a larger share of the booming clean energy market. With the incoming administration talking up coal and gas, prospective domestic policy changes don’t bode well,” Buckley said.

What Is Holding Renewable Energy Back? - Bloomberg is now reporting that solar energy is cheaper than coal, and could become the lowest form of energy within a decade. Economies of scale are causing solar to drop from an average of $1.14 a watt all the way to 0.73 cents per watt by 2025. Several agencies, from the U.S. Department of Energy’s National Renewable Energy Lab to the International Energy Agency, all confirm this rapid decline in costs. Capacity for solar is doubling, causing the supply chain to be lower for bank loan premiums and manufacturing capacity in the solar energy space. Now with Tesla's gigafactory opening the cost of batteries is also expected to drop for electric vehicles and home battery systems. China also plans to invest over $360 billion on renewable energy and fuels to help decrease the smog issues the country is currently experiencing. Unsafe, coal-fired power plants are currently suffocating the country’s air supply. We could be entering a new era in energy, and an era renewable investors and environmental advocates have been touting this century. Unfortunately, there are glaring weaknesses being over looked. For renewables to truly breakthrough into a low-cost, scalable energy along the lines of coal, oil, and natural gas numerous obstacles such as costs, back-up generation power, storage, and grid modernization will need to be solved. While costs for manufacturing and kilowatts per hour are dropping, the final costs when it comes to large-scale renewables are more nuanced. For this reason, despite the need for clean fuel in both emerging and developed economies, renewable market share remains well below that of conventional forms of energy. The BP Statistical Review of Global Energy in 2015 showed renewables provided only 2.4 percent of total worldwide energy needs, hydroelectric power generated 6.8 percent and nuclear came in at 4.4 percent.  Hydroelectric is actually the most reliable renewable, but it still has tremendous issues. Once natural waterways are diverted for energy, whole towns, valleys and mountain ranges can be significantly impacted. In this way, hydroelectric and nuclear are similar, because they are two clean sources of energy with the potential for large social and environmental impacts.

As Trump takes office, job growth is pushing GOP governors to embrace renewables -- Three Republican governors recently strengthened the renewable portfolio standards in their states in a sign that the link between job growth and renewable energy incentives may be trumping traditional partisan affiliations. That connection could be tested in the coming months as more states re-examine their RPS targets and federal clean energy policies come under scrutiny in the Trump administration. “We expect several states to consider and possibly strengthen their RPS programs this year,” Timothy Fox, a vice president at Clearview Energy Partners told Utility Dive. He says Maryland legislators may override the governor's veto of a bill to modestly raise the state's existing RPS program as early as this month. In Arizona regulators are considering changes to their RPS programs and, Fox notes, the chairman of the Arizona Corporation Commission has argued that the state's utilities could achieve a 30% mandate "without undue impacts on ratepayers."Fox also says that Massachusetts lawmakers may propose an energy package that, among other things, could raise the state's existing renewable power mandate.If those states do strengthen their targets, it would add to a string of recent wins for RPS programs.In Ohio Gov. John Kasich (R) went against Republican opponents of the state’s RPS – Sen. Bill Seitz and Rep. Ron Amstutz – when he vetoed a bill that would have effectively extended a freeze on the state’s RPS.Ohio is a state hard hit by the loss of jobs from closed coal plants, but, as Kasich noted when signing the veto, the state has also benefited from the job growth associated with renewable energy. Kasich said extending the freeze on the RPS would “undermine the progress” renewable energy companies have made in creating jobs in Ohio. He also said that extending the RPS freeze would be the equivalent of “arbitrarily limiting Ohio’s energy generation options” and amount to “self-inflicted damage to both our state’s near- and long-term economic competitiveness.”

Wyoming Bill Would Outlaw Renewable Energy - Republican lawmakers in Wyoming have introduced a bill that would block the use of renewable energy in the state. If passed, utilities that use wind or solar to produce power for Wyoming residents would be penalized with a costly fine of $10-per-megawatt-hour.  Under Senate File 71 , only six resources—coal, hydroelectric, nuclear, oil, natural gas, and net metering systems such as rooftop solar or backyard wind projects—are considered "eligible" generating resources. Electric utilities will have one year to be 95 percent compliant with the approved resources and 100 percent compliant by 2019. As InsideClimate News pointed out, the bill was filed last Tuesday on the first day of the Wyoming's 2017 legislative session. Its sponsors, who largely come from top coal counties, include climate change deniers such as Rep. Scott Clem who once said, "I don't believe that CO2 is a pollutant, and am furious of the EPA's overreach."   Wyoming is by far the nation's largest coal producer and a major producer of natural gas and crude oil. But the state also has some of the best on-shore wind resources the U.S., with wind power constituting 8 percent of the state's energy.  Still, Wyoming has waged a quasi-war on wind. Wyoming is the only state in the country that taxes wind energy production, and a proposed tax increase has effectively stalled a Wyoming power company's plans to build the largest wind farm in the country. "Wyoming is a great wind state and we produce a lot of wind energy," bill co-sponsor Rep. David Miller explained to InsideClimate News about the motivation behind the bill. "We also produce a lot of conventional energy, many times our needs. The electricity generated by coal is amongst the least expensive in the country. We want Wyoming residences to benefit from this inexpensive electrical generation."  "We do not want to be averaged into the other states that require a certain [percentage] of more expensive renewable energy," Miller continued.

Solar Could Be A Cheaper Power Source Than Coal Within A Decade | Coal already faces tremendous competition in the U.S. from low cost natural gas, and pressure from environmentalists concerned about its pollution. The last thing the coal industry needs are more problems. But when it rains it pours… or in this case when it’s sunny the solar industry looks to rain on coal. Coal cost an average of roughly $0.06 per kWh globally which makes it the cheapest power source on average around the world. (Natural gas is much more expensive outside the U.S.) Solar is looking to usurp the title of cheapest power source though. In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of coal power. This year Saudi Arabia, Jordan, and Mexico are poised to hold auctions and tenders which could see solar generation prices fall even further. The solar industry is operating more and more efficiently each year with solar prices down an average of 62 percent since 2009, and every part of the solar supply chain becoming more efficient and lowering costs. Economies of scale, increasing manufacturing expertise, and new technology like diamond wire cutting tools have all helped make solar’s progress the envy of the energy complex.Coal producers are not taking the threat to their price advantage lying down though. The coal industry correctly points out that it has a consistency unavailable with solar (even in Saudi Arabia the sun still sets at night). Solar’s pricing advantage doses not take into account the cost of maintaining backup energy supply (either through battery storage or through alternative generation means). The industry has a point of course, but it’s getting harder and harder to lean on that argument as solar keeps getting cheaper, and new technologies like perovskite emerge on the horizon.

EPA locks in 2025 fuel efficiency rules | Reuters: U.S. Environmental Protection Agency chief Gina McCarthy on Friday finalized a determination that the landmark fuel efficiency rules instituted by President Barack Obama should be locked in through 2025, a bid to maintain a key part of his administration's climate legacy. Major U.S. and foreign automakers have appealed to President-elect Donald Trump, who has been critical of Obama's climate policies, to review the rules requiring them to nearly double fleet-wide fuel efficiency by 2025, saying they impose significant costs and are out of step with consumer preferences. As part of a 2012 regulation, EPA had to decide by April 2018 whether to modify the 2022-2025 model year vehicle emission rules requiring average fleet-wide efficiency of more than 50 miles per gallon. In November, the agency moved up the timetable for proposing that automakers can meet the 2025 standards. McCarthy said in a statement her determination, a legally binding decision to maintain the fuel efficiency rules, rests on an extensive technical record. McCarthy said in her determination the rules are "feasible, practical and appropriate" and in "the best interests of the auto industry." She told automakers the EPA could consider adopting new rules "to provide additional incentives for very clean technologies or flexibilities that could assist manufacturers with longer term planning." In 2011, Obama announced agreement with major automakers to raise fuel efficiency standards to 54.5 miles per gallon. This, the administration said, would save motorists $1.7 trillion in fuel costs over the life of the vehicles, but cost the auto industry about $200 billion over 13 years.

Fuel Efficiency Standards: EPA Finalizes Rules, Making It More Difficult For Trump Administration To Undo Them - The United States Environmental Protection Agency announced on Friday it will finalize rules regulating fuel efficiency standards for vehicles through 2025, keeping in place a policy that was believed to be at risk of repeal under the incoming Donald Trump administration. The policy will mandate automakers produce cars that offer at least 51.4 miles per gallon equivalent (mpg-e) by 2025. The mpg-e measurement is used by the EPA to compare the energy consumption of alternative fuel vehicles like electric cars to vehicles with the fuel economy of conventional vehicles. Translated, the goal of 51.4 mpg-e works out to about 36 miles per gallon in real world fuel consumption. Reaching that level would raise the industry average for fuel economy by 10 degrees per mile over the next eight years. Finalizing the rules on Friday doesn’t guarantee the Trump administration won’t be able to overturn the policy, but it does make the task considerably more challenging. The EPA first drafted the recommendations in December, and auto manufacturers attempted to argue the agency should hold off on setting the rules in stone. They argue the standards will raise vehicle costs and accused the EPA of rushing its process—which wasn’t required to be finalized until 2018—in order to preempt any changes planned under the Trump administration.

US ethanol exports up 85% in first quarter of 2016/2017 MY - Biofuels International - US ethanol exports were off to a strong start for the first quarter of the 2016/2017 marketing year and were at their highest levels over the past five years. Exports totaled 353.2 million gallons for the months of September, October, and November 2016, according to data recently released by the US Department of Agriculture’s Global Agricultural Trade System (GATS). Brazil, Canada, and China were the top customers for US ethanol, respectively, while India, Peru, South Korea, and Mexico were the next largest markets with exports totalling 62.4 million gallons over the same time period. These top seven markets accounted for 88% of US ethanol exports in the first quarter. Exports of US ethanol to Brazil have increased substantially to 111.6 million gallons in the first three months of the current marketing year, representing nearly a third of total US ethanol exports. This is the second highest volume of US ethanol exports to Brazil over the last decade. Enforceable government ethanol mandates are driving the increases in Brazilian imports of US ethanol, as Brazilian sugarcane has been diverted to sugar production to capture a price premium.

It’s time to wake up to the devastating impact flying has on the environment - Ready to get over your post-festive comedown by booking an escape to the sun? For many of you, that will involve flying. And while I’m sorry to put a downer on your holiday plans, there are several problems with this from a climate perspective. The first is that aviation is essentially a fossil fuel industry, one which guzzles an eye-watering 5m barrels of oil every day. Burning that fuel currently contributes around 2.5% to total carbon emissions, a proportion which could rise to 22% by 2050 as other sectors emit less.The second problem is, as Air Asia puts it, “Now everyone can fly”. And in “generation easyJet”, those who already fly, fly more than ever. This increasing demand from new and existing travellers means the number of passenger aircraft in our skies is set to double by 2035. The third problem is that unlike other sectors where there might be a greener alternative (solar not coal, LEDs not lightbulbs etc), there is currently no way to fly 8m people every day without burning lots of dirty kerosene. Aircraft are becoming more fuel-efficient, but not quickly enough to offset the huge demand in growth. Electric planes remain decades away, weighed down by batteries that can’t deliver nearly as much power per kilo as jet fuel. But here’s the peculiar thing: although no other human activity pushes individual emission levels as fast and as high as air travel, most of us don’t stop to think about its carbon impact.  While in many countries new cars, domestic appliances, and even houses now have mandatory energy efficiency disclosures, air travel’s carbon footprint is largely invisible, despite it being relatively much bigger. For instance, a return trip from Europe to Australia creates about 4.5 tonnes of carbon. You could drive a car for 2,000 kilometres and still emit less than that.

In EPA rebuke, judge orders quick evaluation on coal jobs -- A judge has ordered federal regulators to quickly evaluate how many power plant and coal mining jobs are lost because of air pollution regulations. U.S. District Judge John Preston Bailey in Wheeling made the ruling after reviewing a response from outgoing U.S. Environmental Protection Agency Administrator Gina McCarthy. The judge said the EPA is required by law to analyze the economic impact on a continuing basis when enforcing the Clean Air Act and McCarthy’s response “evidences the continued hostility on the part of the EPA to acceptance of the mission established by Congress.” Bailey ordered the EPA to identify facilities harmed by the regulations during the Obama presidency by July 1. That includes identifying facilities at risk of closure or reductions in employment. The EPA had contended that analyzing job loss won’t change global energy trends.

Texas, 12 Other States Sue to Block Obama Coal Mining Rule - Texas and 12 other states have asked a federal court to block final rules from President Barack Obama's administration designed to reduce coal mining's impact on streams. Texas Attorney General Ken Paxton petitioned a Washington-based appeals court for an injunction Tuesday. Paxton said in a statement that the "Stream Protection Rule" imposes "mandatory, one-size-fits-all" regulations that violate states' rights. Joining Texas are Alabama, Alaska, Arkansas, Colorado, Indiana, Kentucky, Missouri, Montana, Ohio, Utah, West Virginia and Wyoming. Last month, North Dakota Attorney General Wayne Stenehjem filed a separate lawsuit challenging the rule there. The U.S. Interior Department argues that the rule will protect 6,000 miles of streams by preventing coal mining debris from being dumped into nearby waters. Republicans have vowed to overturn it under President-elect Donald Trump.

Victoria’s plans for hydrogen exports to Japan are ‘way of making brown coal look green’ -- The Victorian government plans to work with a Japanese company to produce hydrogen from brown coal in the Latrobe Valley are “a way of making brown coal look green”, according to one expert. The proposed plant, which would be run by Kawasaki Heavy Industries as part of their Kawasaki Hydrogen Road project, would produce liquid hydrogen that would then be exported to Japan to be used in hydrogen-powered vehicles. Maritime authorities from both Australia and Japan signed a world-first deal to ship liquid hydrogen in Canberra on Wednesday, but Victoria’s acting resources minister, Philip Dalidakis, said the project was still “in the very early stages”.  Dalidakis said the Victorian government has been working with Kawasaki Heavy Industries and the commonwealth on an engineering study to investigate the feasibility of producing hydrogen from brown coal. He told Guardian Australia the state government was “keen to explore all serious investments that have the potential to create much needed jobs in the Latrobe Valley”.  Latrobe’s Hazelwood power station will close on 31 March, with a loss of up to 1,000 jobs. It was considered to be the dirtiest power station in Australia. Brown coal is converted to hydrogen by being partly combusted to produce carbon monoxide and hydrogen. The carbon monoxide is then mixed with steam to produce more hydrogen, and carbon dioxide.

Another Coal Barge Sinks in the Sundarbans World Heritage Site - On Jan. 13, the MV Aichgati, a large bulk cargo vessel carrying 1,000 tons of coal , sank in the estuary of the Pashur River in the Sundarbans World Heritage Site. In addition to the large amount of coal, hundreds of gallons of fuel oil, batteries and other toxic contaminants may now be polluting the Sundarbans.  The is the fifth time a vessel has sunk in the Sundarbans over the past two years. In December 2014, an oil tanker capsized in the Chandpai Dolphin Sanctuary on the Shela River, spilling and spreading 350 m3 of fuel oil across at least 40 km of the waterway. Five months later in May 2015, a cargo vessel sank, polluting the Bhola River with 200 tons of potash. In October 2015, a barge transporting 570 tons of coal capsized near the Dhangmari Dolphin Sanctuary in the Pashur River. In March 2016 , a cargo vessel transporting 1,245 tons of coal sank in the Shela River. The waterways flowing through the Sundarbans are home to the Dhangmari and Chandpai dolphin sanctuaries, created to protect the rare Irawaddy and Ganges dolphins.  "Five recent episodes of ships capsizing have created a cumulative impact that endangers the rare aquatic ecology of the Sundarbans," Donna Lisenby, clean and safe energy campaign manager for Waterkeeper Alliance , said. "The Rampal coal plant must be stopped before it further imperils the World Heritage Site." The governments of India and Bangladesh are aggressively moving forward with the construction of the proposed Rampal coal-fired power plant which will dramatically increase the shipping of coal, coal ash and gypsum pollutants through the Sundarbans. "If the Rampal coal plant is built, it will require hundreds more coal ships and barges to travel through the Sundarbans," Sharif Jamil, coordinator of Waterkeepers Bangladesh , said. "This is one of the many reasons why the World Heritage Centre (WHC) and International Union for the Conservation of Nature (IUCN) concluded that the proposed Rampal power plant poses a serious threat to the Sundarbans and should be canceled."

China Orders Local Weather Bureaus To Stop Issuing Smog Alerts -- Nearly three years into a "war on pollution", in which large swathes of northern China are periodically engulfed in thick, toxic smog, with dangerous air quality readings in major cities like Beijing, Tianjin and Xian forcing many people to stay in doors and shutting down industries, causing ship traffic jams in local ports, and even adversely impacting the local economy, China has realizing that it needs to take more "innovative" measure to make sure it does not lose this particular war. Which explains why local media reported on Tuesday that China is suspending local meteorological bureaus from issuing smog alerts, raising suspicions the government is attempting to suppress information about the country’s air pollution as public anger over the issue grows.  China’s Meteorological Administration notified local bureaus Tuesday to “immediately stop issuing smog alerts”, according to a photo of a notice posted on China’s Twitter-like social media platform Weibo, AFP reports. Instead, of smog, local departments can issue alerts for “fog” when visibility is less than 10 km, according to the notice. The notice was issued because local “meteorological bureaus and the environmental protection administration often disagree when they issue smog-related information,” a representative from the China Meteorological Administration told the Chinese website The Paper. “A joint alerting mechanism will be formulated to consult how to and who should issue alerts for smog,” the representative said.

In latest move, China halts over 100 coal power projects | Reuters: China's energy regulator has ordered 11 provinces to stop more than 100 coal-fired power projects, with a combined installed capacity of more than 100 gigawatts, its latest dramatic step to curb the use of fossil fuels in the world's top energy market. In a document issued on Jan. 14, financial media group Caixin reported, the National Energy Administration (NEA) suspended the coal projects, some of which were already under construction. The projects worth some 430 billion yuan ($62 billion) were to have been spread across provinces and autonomous regions including Xinjiang, Inner Mongolia, Shanxi, Gansu, Ningxia, Qinghai, Shaanxi and other northwestern areas. Putting the power projects on hold is a major step towards the government's effort to produce power from renewable sources such as solar and wind, and wean the country off coal, which accounts for the majority of the nation's power supply. "Stopping under-construction projects seems wasteful and costly, but spending money and resources to finish these completely unneeded plants would be even more wasteful," said Greenpeace in a statement. The move follows similar initiatives last year and comes after the government said in November it would eliminate or delay at least 150 GW of coal-fired power projects between 2016 and 2020 and cap coal power generation at 1,100 GW.To put it in perspective, some 130 GW of additional solar and wind power will be installed by 2020, equal to France's total renewable power generation capacity, said Frank Yu, principal consultant at Wood Mackenzie.

Scots could get twice as much electricity for same spend as nuclear - A report from a distinguished energy expert suggests that spending on renewable energy rather than nuclear power would result in around twice as much low carbon electricity being generated in Scotland. The report by Dr David Toke, reader in energy politics in the Department of Politics and International Relations at the University of Aberdeen, argues that the cost of delivering the UK’s low carbon programme could be reduced substantially if the Scottish government was given powers to fund its own renewable energy programme. This could be done by giving the Scottish government control to spend money that would otherwise be added to Scottish electricity consumer bills to fund the Hinkley Point C (HPC) nuclear power plant (and any other new nuclear plant). Dr Toke says UK electricity consumers will each have to spend around £16 a year extra for 35 years to pay for HPC. If Scottish consumers’ money was spent on supporting renewable energy rather than paying for their share of Hinkley Point C nuclear power plant then, even on conservative calculations, nearly double the amount of electricity would be generated from wind power as from HPC. Under such a programme organised by the Scottish government the cheapest onshore windfarms could start generating in 2020 and offshore windfarms organised under a new, Danish-style framework, could be online in 2026. The Scottish government’s own preference for renewable energy over nuclear power lends support to the suggestion that the Scottish government should be able to use Scottish consumers’ money to pay for new renewable energy rather than new nuclear power.

Trump’s nuclear wake-up call - By the time he is sworn in tomorrow, Donald Trump will have undergone a haunting rite of passage: the classified briefing given to every incoming president that explains how he can order a nuclear attack.  While neither U.S. nor Trump officials would confirm the exact time or location of Trump’s briefing, several past presidents have been briefed on the nuclear codes at the historic Blair House, on Pennsylvania Avenue near the White House, hours before their inauguration.“It's a sobering moment. It defines the ultimate obligation that you might have,” said Andrew Card, who served as chief of staff to George W. Bush and was with Bush just before and after his first nuclear briefing in January 2001.It is also likely a sobering for millions of the Americans who heard a series of Trump rivals warn last year that the New York mogul must never gain access to America’s massive nuclear arsenal."How can you trust him with the nuclear codes?" Obama said at one October rally. "You can't do it." But America will do it on Friday. From the moment Donald Trump is inaugurated, he will be trailed everywhere he goes by a military aide carrying a 45-pound black satchel colloquially known as the nuclear “football.” Inside will be the codes, war plans and communication tools needed to start a nuclear war.

MVSD engineer says dam cracks not serious; Niles officials point to injection well: The outgoing Mahoning Valley Sanitary District chief engineer says cracks detected in the Meander Reservoir dam do not appear to be serious, based on a consultant’s report. “There are no serious cracks in the dam … and there is nothing alarming in the report,” Thomas Holloway told city council during a roundtable meeting today. MVSD provides water from the Meander Reservoir to Niles, Youngstown and McDonald. Reconstruction of the reservoir dam, which was built in 1932, is expected to cost the district $28 million. Niles council members, however, appeared to be more concerned with the court-ordered reopening of an injection well in Weathersfield Township. The Ohio Department of Natural Resources concluded the well was responsible for setting off several earthquakes in 2014. Several council members said they think the quakes may have caused cracks in the dam and in some of MVSD’s 15 buildings. The quakes ceased after the state ordered the well shut down, but earlier this month, a judge in Franklin County ruled the well could resume operations. District officials, including Holloway, who has resigned from the chief engineer position effective Jan. 22, have been reluctant to point fingers at the well and the earthquakes for causing the cracks. They point out a number of the buildings were constructed in the 1930s and 1940s, so other causes for the cracks, such as land that is settling, is possible.

Citizens have a right to know about fracking chemicals - Virginians have a right to know what chemicals are being pumped into our communities. Just as important, first responders need this information to ensure public safety. This modern drilling combination has not come to Virginia, yet. But after about 86,000 acres were leased in the Northern Neck and Middle Peninsula — including in King George County — we knew we needed to examine fracking and address the risks. Nearby states and localities that embraced the industry without taking a hard look serve as a cautionary tale. Earlier this year an oil and gas company operating in Pennsylvania was ordered to pay more than $4 million to two families for contaminating their groundwater through fracking operations. After a three-year process, the commonwealth is now putting new fracking regulations in place, thanks to approval from Gov. Terry McAuliffe. One critical requirement in these regulations, which went into effect on Dec. 28, is that oil and gas companies must publicly disclose which fracking chemicals they are pumping into our neighborhoods. But before this requirement was even on the books, the oil and gas industry was hard at work on a new bill to put in front of the General Assembly in 2017 that could effectively gut the new disclosure requirement.It’s likely the industry will push bills that provide a “trade secrets” exemption under the state’s Freedom of Information Act (FOIA). In plain English, this FOIA exemption would mean that companies would have the power to pick and choose which “trade secret” chemicals they would disclose and which they would keep secret from the public, regardless of risks to public health or the environment.This could cripple the ability of our emergency responders to plan how they would respond to an emergency at a drilling site in the community. Without FOIA, they have no way to learn which “trade secret” chemicals are being used. Instead, they must wait until an emergency is occurring — a fire, leaking well, or overflowing waste pit — before they can ask the drilling operator or Virginia Department of Mines, Minerals and Energy (DMME) which chemicals are in use.

King George supervisors lobby for disclosure of fracking chemicals - Members of the King George County Board of Supervisors have added their voices to concerns about a proposed General Assembly bill that hides from the public record what chemicals are used in hydraulic fracturing, or fracking. Because King George “has been at the forefront of recent public discussions” about possible gas and oil drilling, the supervisors agreed Tuesday to lobby their legislators to oppose House Bill 1678. It is sponsored by Del. Roxann Robinson, R–Midlothian, and is designed to protect trade secrets of the companies involved in fracking, the process of injecting water and chemicals deep into the ground to loosen trapped gas and oil. The King George County board is among several advocates of open government, as well as environmentalists and the Virginia Association of Counties, who oppose the measure. Supervisors agreed to send a letter to legislators Ryan McDougle, Richard Stuart and Margaret Ransone, asking them to oppose Robinson’s bill and a similar one in the Senate. The letter says that residents have a right to know what chemicals are being introduced into the environment, just as first responders need to know what they’re dealing with in the case of a fire, leaking well or overflowing waste pit. And, they need to know the particular properties of chemicals before something happens, said Eric Gregory, King George’s county attorney. He spoke in opposition of the bill, and House Bill 1679, which would allow information to be released after an accident happens. DMME officials also reported that the majority of comments from the public about drilling regulations suggested the gas and oil industry should be more forthcoming about what chemicals are used. But Robinson, as well as members of the industry, maintain that first responders could get the needed information from the DMME, which would have access to the list of chemicals under her proposed legislation.

The Dakota Access fight is moving to Louisiana - Energy Transfer Partners, the company that’s trying to build the embattled Dakota Access Pipeline (DAPL), is also currently attempting to construct a stretch of pipeline in Louisiana that would ultimately carry oil from DAPL to refineries on the Gulf Coast.If approved, the Bayou Bridge pipeline extension would transport up to 480,000 barrels of crude a day across 600 acres of wetlands and 700 bodies of water, including wells that reportedly supply 300,000 households with drinking water. It would also permanently destroy 77 acres of wetlands in the watershed of Atchafalaya Basin, the largest natural swamp in the U.S.Energy Transfer Partners argues that the pipeline is the safest way to transport the oil, and that it would bring jobs to the area. But while it would create about 2,500 temporary jobs, it would only bring in 12 permanent ones. Locals are understandably concerned about the impact on wetlands, water supplies, and fishing grounds. Hundreds packed into a public hearing on the proposed pipeline last Thursday in Baton Rogue, including members of indigenous communities, climate activists, fishermen, and rice farmers. A number of them said that if the Army Corps of Engineers grants a permit for the project, activists will fight back aggressively, turning the Atchafalaya Basin into the next Standing Rock.

Protests escalate over Louisiana pipeline by company behind Dakota Access   - Scott Eustis. a coastal wetland specialist with the Gulf Restoration Network, was attending a public hearing in Baton Rouge. Its subject was a pipeline extension that would run directly through the Atchafalaya Basin, the world’s largest natural swamp. Eustis was surprised to be joined by more than 400 others.“This is like 50 times the amount of people we have at most of these meetings,” said Eustis, adding that the proposed pipeline was “the biggest and baddest I’ve seen in my career”.The company behind the pipeline, Energy Transfer Partners (ETP), had seemed to turn its attention to Louisiana just one day after Native American protesters thwarted the company’s Dakota Access project last month. A spokeswoman for ETP, Vicki Granado, said the Bayou Bridge pipeline extension was announced in June 2015. If approved, the project will run though 11 parishes and cross around 600 acres of wetlands and 700 bodies of water, including wells that reportedly provide drinking water for some 300,000 families.At the public hearing in Baton Rouge on Thursday, the first speaker, Cory Farber, project manager of the Bayou Bridge pipeline, said it was expected to create 2,500 temporary jobs. When Farber then said the project would produce 12 permanent jobs, the crowd laughed heartily.“Those who have airboat companies and equipment companies that specialize in putting in equipment, they’re not opposed to pipelines because of the short-term jobs,” said Jody Meche, president of the state Crawfish Producers’ Association, one of dozens who spoke at the hearing.  “But once that pipe is in there, the jobs are gone.” Other attendees applauded in favor of the pipeline, and former US senator Mary Landrieu of Louisiana, a supporter, was in attendance. But Native Americans also dotted the crowd, many of them fresh from Standing Rock.

Plains increases Permian crude takeaway with expansion of Cactus Pipeline - Plains All American is expanding its Cactus Pipeline to 390,000 b/d, increasing takeaway capacity for Permian Basin crude into the port of Corpus Christi, Texas, the midstream company said Wednesday. Rising production of light, sweet Permian crude is at odds with the needs of US Gulf Coast refineries, which prefer heavier crude, making it a candidate for export. Increased takeaway capacity of Cactus also expands the crude's reach to local refineries. The expansion is expected to be completed by the third quarter of 2017, the company said in a statement. The 310-mile Cactus line currently carries 250,000 b/d of crude from McCamey, Texas, southeast to Gardendale, where it connects with the Eagle Ford Joint Venture pipeline. That pipeline is jointly owned by Plains and Enterprise Product Partners.Crude output from the Permian Basin is forecast to rise by 53,000 b/d in February to 2.18 million b/d, Energy Information Administration data shows. Platts Analytics Bentek Energy projects volumes to rise by 244,000 b/d in 2017 to reach 2.27 million b/d, assuming a the rig activity stays constant. Current pipeline takeaway capacity from the Permian to the Gulf Coast is 750,000 b/d. The expansion of the Cactus combined with the startup of Enterprise's Midland-to-Sealy pipeline in mid-2018 will increase the region's pipeline away capacity by 440,000 b/d to 1.19 million b/d at that time. Besides access to the Eagle Ford pipeline, crude oil delivered on the Cactus has access to dock facilities in Corpus Christi and neighboring Ingleside, facilitating export of the crude if the economics work to ship the crude out of the country. Access to joint venture's dock facility in Corpus Christi and Ingleside, as well as dock capacity at other regional export facilities is available, including two 200,000 b/d Ingleside facilities owned by Occidental and Flint Hills, respectively.

Exxon Mobil joins Permian land rush - Exxon Mobil announced Tuesday it will sell $5.6 billion in stock to acquire companies that control prime areas of oil and gas real estate in the Permian Basin. The company estimates that 60 billion barrels of oil reside under the land included in the oil and gas interests soon acquired from Fort Worth’s Bass family. About 3.4 billion barrels is currently recoverable, according to Forbes reporter Christopher Helman, but he also reminds us that better technology and higher oil prices may make the region even more valuable. It’s possible the rest of the oil reserves, down the road, may become recoverable. CNBC reports the Exxon Mobil deal is the largest oil and gas acquisition in the United States since the 2014 price crash. The deal also exceeds the last record-setting purchase of Memorial Resources by Ranges Resources for $.4 billion in May. The Permian Basin has been the hottest area for oil and gas exploration, with the greatest number of rigs currently exploring for oil and gas by far. Last week, Baker Hughes reported that out of the 659 rigs in the United States, 268 of them were exploring for oil and gas in the Permian. The next highest number of rigs in any one basin is in the Eagle Ford region in South Texas with 47 rigs, and the Cana Woodford in Oklahoma numbering 37.

Trump's EPA nominee “unsure” if big oil gave him hundreds of thousands of dollars - Donald Trump’s nominee to lead the Environmental Protection Agency has received hundreds of thousands of dollars in political contributions from some of America’s biggest oil companies — and on Wednesday, Senate Democrats seized the spotlight to point it out. At the confirmation hearing for EPA nominee Scott Pruitt, Rhode Island Sen. Sheldon Whitehouse pointed to a large blue cardboard sign held by a staffer. It illustrated the ties between fossil fuel companies and political organizations run by Pruitt, who is currently the attorney general of Oklahoma. As the  Washington Post reported in December, the energy sector donated nearly half of the contributions received by Liberty 2.0, a Super PAC run by Pruitt. The fossil fuel companies Pruitt will soon be responsible for regulating also gave more than $318,000 to his reelection campaign for attorney general, according to pressed these points at Wednesday’s Senate Environment and Public Works committee hearing. Initially, Pruitt, who plans to be an ally of oil and gas by dismantling much of Obama’s environmental legacy, deflected Whitehouse’s questions, before acknowledging that he had been at fundraisers with Exxon Mobil and Koch Industries.Here’s their exchange: […] There’s something a little rich about Democrats complaining so loudly about the role of money in the political system. After all, Hillary Clinton took more than $300,000 from those in the oil and gas industry — and the Democratic Party has taken millions from lobbyists and corporate interests. But Clinton lost. Could that liberate Democratic lawmakers to more pointedly make the case that corporate campaign contributions can warp the decisions of those in government? Judging by Whitehouse’s line of questioning, it certainly seems possible.

EPA nominee Scott Pruitt won't say if he would recuse himself from his own lawsuits against the agency - Scott Pruitt, who repeatedly has sued the Environmental Protection Agency during his tenure as Oklahoma attorney general, declined to say Wednesday whether he would recuse himself from those ongoing cases if confirmed as the agency’s new leader. Questioned by Sen. Edward J. Markey (D-Mass.) about whether he would avoid involvement in a series of ongoing cases against the EPA that he has been party to while in Oklahoma, Pruitt said he would rely on the advice of agency ethics lawyers. “If directed to do so, I will do so,” he said. “If you don’t agree to recuse yourself,” Markey said, “then you become plaintiff, defendant, judge and jury on the cases you are bringing right now as attorney general of Oklahoma against the EPA.” The exchange was among several tense moments Pruitt encountered Wednesday about his fitness to run the agency, his close ties to the oil and gas industry, his views on climate change and even the water crisis in Flint, Mich. Democrats on the Senate Environment and Public Works Committee grilled the 48-year-old former state lawmaker about his financial support from fossil fuel companies, which have given hundreds of thousands of dollars to Pruitt and political action committees associated with him. Sen. Jeff Merkley (D-Ore.) displayed a 2011 letter Pruitt sent to the EPA saying it had overestimated air pollution from natural gas drilling — a letter largely written by lawyers for Devon Energy, one of Oklahoma’s largest oil and gas companies. He accused Pruitt of acting as “a direct extension of an oil company” rather than on behalf of ordinary Oklahomans. Pruitt countered that he was not representing any one company but, rather, expressing the concerns of an entire industry in the state.

Dakota Access pipeline activists say police have used 'excessive' force -- North Dakota law enforcement and the national guard have responded to the latest Standing Rock demonstrations with an aggressive show of force, according to indigenous activists who fear that police violence will escalate after Donald Trump’s inauguration. Firsthand accounts from Native Americans fighting the Dakota Access pipeline – a large number of whom remain at Standing Rock – along with live footage from the clashes on Martin Luther King Jr Day, suggest that police in riot gear deployed pepper spray, tear gas and other “less than lethal” weapons against unarmed people, in some cases leading to serious injuries.Some fear that the harsh police tactics at two demonstrations – which activists insist were peaceful – are a sign that law enforcement may be gearing up to clamp down on the massive protests that are likely to emerge if Trump, as expected, moves to approve the oil pipeline.“It’s gratuitous. It’s just so excessive,” said Irina Lukban, a 22-year-old who said she was hit in the head by the shield of a national guard soldier and likely suffered a concussion. “It’s incredible to see that amount of force.”The standoffs with heavily armed officers – broadcast for hours on numerous Facebook live streams – offered a reminder that the fight is far from over and that law enforcement is still closely monitoring and impeding the activities of demonstrators camped near the construction site. Police, who arrested 16 people in the last two days, have continued to defend their actions, claiming that activists were trespassing and rioting.The Standing Rock Sioux tribe, which has long claimed that the $3.7bn pipeline threatens its water supply and sacred sites, won a major victory last month when the Obama administration denied a key permit for the pipeline corporation.  But Trump, who will be inaugurated on Friday, is an investor in Energy Transfer Partners (ETP), the pipeline operator, and a vocal supporter of the project. He also selected an ETP board member as his energy secretary.

North Dakota Bill Would Protect Motorists Who 'Unintentionally Cause Injury or Death' to Protesters -- As Donald Trump takes office, pushing a wave of explicitly authoritarian federal policies and practices, Republican leaders at every level are following suit. The latest example is North Dakota lawmaker Keith Kempenich , who has introduced a bill that says a driver "who unintentionally causes injury or death to an individual obstructing vehicular traffic on a public road, street, or highway, is not guilty of an offense."   Kempenich, who spoke to the Bismark Tribune , was completely candid in expressing that he created the legislation in response to protests against the Dakota Access Pipeline . The $3.8 billion project, which would span 1,100 miles and include Sioux land at the Standing Rock reservation, was halted in December after months of high-profile protests.   "It's shifting the burden of proof from the motor vehicle driver to the pedestrian," Kempenich told the newspaper. The state Rep. went on to justify his bill, which would allow motorists to potentially maim or kill protesters using a vehicle—thousands of pounds of fast-moving metal—but complaining that protesters are "intentionally putting themselves in danger."   Kempenich's said his opposition to the U.S. Constitution and its First Amendment-granted rights of free speech, is the result of his mother-in-law being inconvenienced while driving through protests. The lawmaker cited an instance when he said, as she drove past a long line of cars parked along shoulder of the road, a protester jumped in front of her car waving a sign.

North Dakota Bill Would Protect Drivers Who ‘Accidentally’ Hit And Kill Protesters - Republican lawmakers in North Dakota are taking aim at protesters with a handful of bills that would make another pipeline protest far more dangerous. The oil-friendly legislature argues that its constituents are frustrated over the protests, which led federal authorities to halt construction of the $3.8-billion Dakota Access Pipeline as thousands of protesters braved cold weather and violence for months.A bill that state GOP Rep. Keith Kempenich introduced would exempt drivers from liability if they accidentally hit a pedestrian, according to the Bismarck Tribune. House Bill 1203 was written up in direct response to groups of protesters blocking roadways, Kempenich told the paper. He claims protesters were seen jumping out in front of vehicles.“It’s shifting the burden of proof from the motor vehicle driver to the pedestrian,” Kempenich said. “They’re intentionally putting themselves in danger.”He admits that the law might be used in cases that don’t involve protests. But a few casualties of justice are apparently worth it; his bill would mitigate instances when panicked drivers might have accidentally “punched the accelerator rather than the brakes” as protesters blocked the roads. Other new bills would be a thorn in the side of protesters and the federal government. One measure would make it a crime for adults to wear masks nearly across the board, while another would allow the state to sue the federal government over millions in extra police costs, according to ABC News.

5 Disturbing DAPL Developments You Need to Know -  The fight to stop the Dakota Access Pipeline (DAPL) wages on. Just this week law enforcement used tear gas and fired bean-bag rounds to disperse crowds and arrested nearly 40 people since Monday, the Billings Gazette reported. One Water Protector appears to have suffered a nasty wound in his leg after an alleged confrontation with an officer on Thursday (warning, the photo is graphic).  But that's not the only concerning news story developing around the controversial project.

  • 1.  On Tuesday, reports emerged that the North Dakota National Guard had sent two Avenger missile launchers near a critical work site near the pipeline. National Guard spokesman William Prokopyk told the Daily Beast the missiles were unloaded and had no authorization to be loaded. The Morton County Sheriff's Department also confirmed these missiles in a Facebook post, saying they were "strictly for observation of ungoverned encampments to help protect private property and maintain public safety." The Daily Beast notes that the Avenger is "foremost a weapon of war" that "combines a Humvee truck chassis with a rotating turret that can be armed with eight Stinger missiles and a .50-caliber machine gun."
  • 2. North Dakota Bill Would Protect Motorists Who "Unintentionally Cause Injury or Death" to Protestors  State Rep. Keith Kempenich has introduced a bill that says a driver "who unintentionally causes injury or death to an individual obstructing vehicular traffic on a public road, street, or highway, is not guilty of an offense."
  • 3. DAPL Company Tried to Block Environmental Study  While the U.S. Army Corps of Engineers denied a key easement in December for the pipeline to travel under Lake Oahe and recently announced plans to prepare a full environmental impact study on the Oahe crossing that could take two years to complete, the company building the $3.8 billion project is determined to finish it. On Jan. 17, Texas-based Energy Transfer Partners asked U.S. District Judge James Boasberg to stop the corps from publishing a notice announcing the study in the Federal Register.
  • 4. Company Engaged in Deceit and Fraud in Acquiring Land Easements, Lawsuit Claims  "Dakota Access's representations to the Morton County landowners were false representations and deceptive," the lawsuit states. The company has until about the end of the month to file its response in court.
  • 5. DAPL Likely Rolling Full Speed Ahead Under President Trump  Donald Trump , who has personal investments in the DAPL, has formally announced his support of the project. Some of his main priorities after being sworn in on Jan. 20 are, according to Bloomberg , "nullifying President Barack Obama's guidelines that federal agencies weigh climate change when approving pipelines, deciding what areas to open for drilling or taking other major actions, two people familiar with Trump's transition planning say."

Rule to require oil and gas producers to curb venting, burn-off on public land takes effect – Federal land managers’ rule aimed at reducing burn-off, venting and leaks by oil and gas companies that gain the right to operate on public lands took effect Tuesday after a federal judge rejected an industry challenge. Oil and gas companies that obtain leases to extract oil and gas from federal public land now must take steps to control their emissions into the atmosphere. For years, companies have disposed of methane gas they could not process by opening valves and venting it and by partially burning off or “flaring” gas because they did not put systems in place to capture the gas for sale or use it on-site. Bureau of Land Management data show that companies between 2009 and 2014 wasted enough gas to power 5.1 million homes for a year. They wasted gas on which they otherwise would have had to pay royalties to state, tribal and federal governments. U.S. District Judge Scott Skavdahl in Wyoming on Monday rejected an industry effort to prevent the rule from taking effect. Skavdahl concluded it was within the authority of the BLM to set this rule, but his decision left open avenues for the oil and gas industry to continue to fight it. He has set an expedited hearing schedule to resolve the issue fully in the coming months.Federal BLM officials issued the rule in November 2016 and industry leaders immediately challenged it seeking a preliminary injunction. “It’s difficult to get a preliminary injunction, and while we’re disappointed the judge was not willing to stop the rule now, we feel that our chances are very good once the full merits of the case are heard,” Western Energy Alliance president Kathleen Sgamma said. “There were several statements in his ruling that show he’s extremely skeptical of BLM’s authority to regulate air quality. We’ll be driving those points forward in more detail in our brief due in March.”

Cheap crude and captive market boost Pacific Northwest refineries. The five refineries in the U.S. Pacific Northwest (PNW) performed better in 2016 than rivals on the East Coast for two main reasons. First, the changing pattern of North American crude supply has worked to their advantage. Faced with the threat of dwindling mainstay crude supplies from Alaska, refiners in Washington State replaced 22% of their slate with North Dakota Bakken crude moved in by rail. They have also enjoyed advantaged access to discounted crude supplies from Western Canada. Second, PNW refiners face less competition for refined product customers than rivals on the East and Gulf coasts, meaning they have a captive market that often translates to higher margins. Today we review performance and prospects for PNW refineries. This blog is based on Morningstar Commodities and Energy’s recently published Pacific Northwest Refining Outlook. See contact information at the end of this blog to request a copy of the report.

California regulators propose slashing Aliso Canyon gas storage capacity -  California regulators are proposing to allow the Aliso Canyon natural gas storage facility to reopen, but at about one-third its capacity. The facility, near Los Angeles, can hold 83 Bcf of natural gas, but would be limited to 29.7 Bcf and have at least 15.4 Bcf under the proposal and safety findings released Tuesday. "Managing the facility in this manner is estimated to address safety and reliability needs and will provide flexibility to respond to gas market conditions to support just and reasonable rates," the California Public Utilities Commission said in a report released Tuesday. The proposed inventory limit is needed to meet one-in-10 peak-day demand, maintain a balance across the Southern California Gas system during the winter season and provide a "reasonable" level of system-wide storage at the start of the summer season, the PUC said.

The long reach of the Aliso Canyon gas leak - When a geyser of gas began spewing from the ground in October 2015, it was just the beginning of an energy and environmental crisis in Southern California with far-reaching repercussions. In nearby communities, like Porter Ranch, the disaster upended lives: Schools relocated. Thousands of people moved to motels and temporary housing. The leak at an Aliso Canyon gas storage facility not only sent vast amounts of methane — a heat-trapping greenhouse gas — into the atmosphere, it also ended up spraying other chemicals, including some that were being used in the effort to plug the leak. The catastrophe led officials to shutter the facility, at least until investigations and testing could determine the cause of the leak and demonstrate the safety of the wells. The Southern California Gas Company has had other, smaller leaks in the year since — one as recently as last month — but it says that 34 of its 115 wells are now certified to be in good working order and it is pressing to reopen the facility. Many residents, however, as well as environmentalists and some officials, are fighting to keep it shut.Even before the leak, there were complaints about an odor of gas and symptoms like headaches and fatigue, said Matt Pakucko, who relocated for months along with Kyoko Hibino and their five cats. A group he helped found, Save Porter Ranch, had arranged for an area health study, but it was pre-empted by the catastrophe. The couple, who wore their gas masks while outside during the height of the leak, are among those pressing for a study to be completed and for the depot to remain shut down.The effects of the fumes on residents varied widely — even on opposite sides of the street or within households — a result, residents said, of different sensitivities and dispersal patterns from the strong winds that whip down and around the hilly, winding streets. Some at the edge of the canyon felt nothing, while others miles away complained of rashes.

Re-Posting A Most Spectacular Graphic -- Gasoline Demand -- January 18, 2017 I posted this earlier but did not spend much time on it: Some important data points about the graphic:

  • the individual green bars represent year-over-year growth; left hand axis is 4 - 6% for the 2014 - 2016 surge
  • this graphic goes back all the way to January, 2008, the last year of George W Bush's presidency
  • the graphic encompasses the years of the entire Obama presidency; this is not political; this has nothing to do with Obama; it just puts the timeline i perspective for me
  • the Saudis opened the crude oil spigots on/about October, 2014 -- their $1 trillion mistake
  • by January, 2015, only three months later, gasoline demand (proxy for miles traveled) surged to highest year-over-year growth  in almost a decade, and possibly the greatest surge in modern history
  • and then it spiked even higher in early 2016
  • the year-over-year growth continued to surge throughout the next two years of the Saudi crude oil surge
  • some pundits have suggested that gasoline is like crack cocaine: bring the price down, get more people hooked, demand will persist even as the price is brought back up 
  • Saudis are now suggesting that they may be able to open the spigots again, as soon as five months from now

The Low-Cost Oil & Gas Producers to Focus on Amidst a Production Rebound –  This week, Barclays came out with a report that forecasted 2017 to be much brighter for U.S. oil and gas. On this episode of Industry Focus: Energy , Motley Fool analysts Sean O'Reilly and Taylor Muckerman go over the most important points from the report -- how much spending and production is projected to increase by, which micro-sectors will see the most change, why the E.U. is seeing a drilling decline amid this growth, and more.Also, the hosts talk about a report from the U.S. Department of Energy, which happily reports that U.S. oil declines are finally over for the first time in several years. Listen in to find out how nervous companies are going to be about ramping up production in light of the last few years, and a few companies that investors might want to look into that could benefit from this upside. A full transcript follows the video.

US shale oil update – More rigs, higher productivity and net production about to break higher -- The US EIA yesterday released its monthly Drilling productivity report. It adjusted both historical and current US shale oil drilling higher with current productivity up by 2.7%. The annualized mth/mth volume productivity growth was still close to a 20% pa rate. This is higher than our assumed 5% pa from here to end of 2019. Together it lifted the volume productivity in our US shale oil production model up by 4.5% for the forecast period to December 2019. The shale oil rig count for December also came in at 454 rigs which were 10 rigs higher than we had in our model. The higher productivity and rig count lifted our total US crude oil production forecast as follows:
2017: 9.29 mb/d (+109 kb/d)
2018: 10.48 mb/d (+221 kb/d)
2019: 11.58 mb/d (+303 kb/d)
Our forecast for US crude oil production will naturally be changing along with constant updates in actual rig counts versus projected once as well as revisions to volume productivity. Besides the still continued solid 20% pa rise in volume productivity what also became very clear from the report is that US shale oil production is on the verge of breaking higher. When US shale oil production peaked in Mar 2015 at 5.46 mb/d it started to head downwards as if the line had been broken off. It was no soft turnaround. The turnaround was abrupt as new production each month broke below the running losses in already existing US shale oil production. To some degree this is now likely to happen in reverse. As shown in the graph below: “New US shale oil crossing above losses in old prd.”, the rise in newly initiated US shale oil production is now about to break straight up through the level of gradually declining legacy losses. As such the net increase in US shale oil production which has headed downwards in a pretty straight line since Mar 2015 is now likely going to head upwards in a pretty straight line instead. If we extrapolate monthly rig additions seen this autumn (about +30 rigs per month) for January and February we’ll have a US shale oil rig count standing at 514 rigs at the end of February. If we then productivity adjust the historical rig count we see that the rig count at the end of February this year will only be 122 rigs shy of the prior peak of 636 rigs (in real terms versus today’s rig productivity).

Rising U.S. shale-oil output threatens OPEC’s production pact -- The oil market got a stark reminder Tuesday that rising oil production in the U.S. could upend efforts by major producers to bring global supply and demand for crude back in to balance.Just ahead of the settlement for oil futures prices CLG7, +0.23%  on the New York Mercantile Exchange on Tuesday, the Energy Information Administration released a report on drilling productivity—forecasting a monthly rise of 41,000 barrels a day in February oil production to 4.748 million barrels a day.  “That is bearish for oil and a concern for [the Organization of the Petroleum Exporting Countries,” said James Williams, energy economist at WTRG Economics, pointing out that the volume of new oil per rig has climbed because of gains in efficiency. “If maintained, the expected February production gain means production from the shale plays will be up at least a half million barrels per day by the end of the year,” said Williams. Prices for February West Texas Intermediate crude lost the bulk of the day’s gain on Tuesday to settle with a modest 11-cent climb at $52.48 a barrel.“Since rigs are higher now than in December and should continue to increase, that means a half million [barrel-per-day] gain in production by year-end is a conservative estimate,” Williams said.“Most OPEC members expected this, but U.S. shale production will be the closest monitored data after OPEC’s own compliance with quotas,” he said.

Warm Weather Weighs on Natural Gas: Natural gas prices followed through on Tuesday’s pullback, with the contract for February settlement on the New York Mercantile Exchange closing today’s session at $3.29/MMBtu, down 3.5%. This week’s decline is coming on the heels of last week’s gain of nearly 5% in natural gas prices. Forecasts for warmer winter weather continue to weigh on natural gas. Forecasts had called for colder weather, thereby driving last week’s advance. However, forecasts have turned warmer, particularly over the remainder of January, resulting in a reduction in demand for natural gas. Prices have been volatile in recent weeks due to changing weather forecasts. As a result of today’s move to the downside, first support at the highs established January 4-6, which corresponded to the contract’s 50-day moving average, was broken. The contract is now testing the 50% retracement level of the advance from the January corrective bottom. A drop below this level would leave the target at the 61.8% Fibonacci retracement at $3.255. Failing to hold this level would increase the probabilities of a retest of the January low at $3.098. Open interest was not supportive during the advance from the January low, as the number of outstanding natural gas futures contracts declined 3.6% from the December 9th closing low through last Friday’s close. Thus, it appears the move is vulnerable to a complete retracement. On the upside, resistance above the current rally high at $3.513 is at large gap which resulted from the weak open at the start of 2017. The upside of this gap is at the $3.690 level. Filling the gap would leave the target at the December peak at $3.902. At present, with the Stochastic still above an oversold level, the path of least resistance heading into tomorrow’s session is to the downside.

Natural Gas Price Dips on Larger-Than-Expected Inventory Decline - The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 243 billion cubic feet for the week ending January 13. Analysts were expecting a storage decline of between 220 billion and 230 billion cubic feet. The five-year average for the week is a withdrawal of around 170 billion cubic feet, and last year's storage decline for the week totaled 178 billion cubic feet. Natural gas inventories fell by 151 billion cubic feet in the week ending December 30.Natural gas futures for February delivery traded down by about 1% in advance of the EIA's report, at around $3.26 per million BTUs, and traded around $3.32 immediately after the data release. Natural gas closed at $3.30 per million BTUs on Wednesday, after falling from a high of $3.51 on Tuesday. The 52-week range for natural gas is $2.49 to $3.90. One year ago the price for a million BTUs was around $2.83. Natural gas prices are expected to remain depressed as the most recent forecasts for the last two weeks of January have turned warmer than previously expected, dampening expected demand for heating fuel. Winter weather is still in the forecast, but the very cold Arctic air flowing south from Canada will be missing. Daytime temperatures could reach the 40s through the 60s in the northern part of the country and top out at around 80 in the south. Stockpiles have now dropped to 12.9% below their levels of a year ago and 2.6% below the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 2.917 trillion cubic feet, around 77 billion cubic feet below the five-year average of 2.994 trillion cubic feet and 431 billion cubic feet below last year's total for the same period. Working gas in storage totaled 3.348 trillion cubic feet for the same period a year ago.

Gas generation squeezed by coal in US winter power markets: (podcast) Wholesale electric power prices in the US are starting 2017 by ticking upward, lifted by firmer natural gas prices, which overall has caused coal generation to take some of gas generation’s share in the overall fuel mix. Kassia Micek and Eric Wieser of the North American power pricing team look at how power prices and generating fuels have shifted thus far this winter in key regions like ERCOT, the Southwest Power Pool and the Midcontinent ISO.

Shale Break-Even Level Could Rise $10 In 2017 | The joy for shale producers stemming from rising oil prices following the OPEC production cut agreement may soon be over as oilfield service providers join the party, raising the prices for their services. According to  an analysis from Tudor, Pickering, Holt &Co., the costs of drilling and fracking new wells in the shale patch could grow by 20 percent by the end of this year. In real terms, this means that the breakeven level for new shale wells could rise by U.S.$10 a barrel. This would be problematic for many shale producers who are already having trouble generating sufficient cash flows to repay their debts, which swelled considerably over the last two years. For drillers and other oilfield service providers, however, the cost increase is a logical move: after all, the crisis has been particularly harsh on this segment of the industry. A December report from Wood Mac warned that they are still not out of the woods, cautioning service providers that 2017 will be another tough year. Beginning in 2018, however, things should start looking up. In such an environment, it’s perfectly understandable that service businesses would take advantage of rising prices to regain some of the revenue lost when they were forced to offer huge discounts on their services just to remain in business. According to another analyst, this service price increase won’t be sufficient to make ends meet for many service providers. Bill Herbert from investment bank Simmons & Co., as quoted by FuelFix, said that some providers of fracking equipment have already raised their prices by 20-40 percent, and even this hasn’t been enough to help them get back in black.

2017 Another Year Of Excessive Volatility For Oil Prices - This year will see further volatility in oil prices despite international efforts to restore the market to balance and improve prices more consistently. This push may, however, rebalance the market in the first half of 2017, according to the chief of the International Energy Agency, Fatih Birol, who spoke to Reuters. Birol said that the prospects of rising global output as a result of the market rebalancing work of OPEC and 11 other producers will be one of the factors to contribute to this more intense volatility. Another will be the very fact of higher prices, which are bound to affect demand trends. A third factor could be rising production in China: oil production in the world’s second-biggest consumer has been declining because of the low oil price environment, so now that prices are improving, Chinese E&Ps may get the motivation they need to revert to production growth. U.S. oil output is already rising, and it has been for much of the second half of 2016, reaching 8.95 million barrels per day in the week to January 6, 2017. The active rig count across the country stood at 659 as of January 13, of which 522 were oil rigs. Although the total number marked a weekly decline, the short-term trend is upward, according to analysts, as shale producers take advantage of the higher oil prices. Related: U.S. Shale To Kill Off Oil Price Rally The OPEC members that were exempt from the production cut are also pumping more, and are unlikely to suddenly stop doing it even if prices fall back to US$50 a barrel. There is also the bearish sentiment among investors to consider, caused in large part by OPEC’s history of cheating in market-rebalancing endeavors and a lack of definitive evidence that everyone that is party to the deal is indeed cutting production. This sentiment was last week reinforced by growing uncertainty about the direction in which the global economy is heading, thanks to the latest economic data from China. The country’s December 2016 statistics revealed that overall exports for 2016 declined by the most since 2009.

$25 Trillion Investment Needed To Meet Future Oil Demand - The world needs to invest US$25 trillion in new oil-producing capacity over the next 25 years to meet growing demand, Saudi Aramco’s chief executive Amin Nasser said at the World Economic Forum in Davos on Tuesday.According to the CEO of Saudi Arabia’s giant state-held oil company, global demand for oil and gas will still grow in the coming decades, so if capital investment drops, it could create “spikes” in prices and hurt the global economy, CNBC reports. Demand is still healthy and oil “will be with us for decades”, CNBC quoted Nasser as telling a Wall Street Journal panel at the Davos forum.The global oil and gas industry needs to expand and requires more investment, Nasser said.After two years of significantly lowered capital investment by the industry, a recent report by Wood Mackenzie suggests that “the global investment cycle will show the first signs of growth in 2017, bringing the crushing two-year investment slump to a close”.WoodMac sees E&P global spend rise with about 3 percent in 2017 to around $450 billion. According to WoodMac’s Malcolm Dickson, ‘’companies will get more bang for their buck,” as internal rates of return jump from 9 to 16 percent, comparing 2014 to 2017. The chart below from WoodMac shows that the amount of final investment decisions (FID’s) are expected to double in 2017, compared to 2016.

Schlumberger projects global oil and gas drilling recovery - During 2016, the “oil glut” that helped drive global oil prices down was the impetus for cutbacks by OPEC and other oil-producing nations. But oilfield services company Schlumberger chairman and CEO Paul Kibsgaard mentioned a shortage, not oversupply, of oil in years to come, reports Fuelfix. In a conference call with investors, Kibsgaard said drillers will need to begin putting money back into the oilfields in order to prevent a shortage as the industry sits on the cusp of recover in all markets.The main challenge is going to be to reverse the effects of several years of global E&P under-investment and then mitigate the impending supply shortage we see unfolding. Kibsgaard predicts production will steadily increase with the price of crude as 2016 unfolds, reversing the trend that prevented big projects from being approved by many companies around the globe. As the industry sees recover, Schlumberger and other oilfield services companies are beginning to renegotiate contracts that included deep discounts that allowed drillers to operate at break even prices. Increasing the price for its own services would allow Schlumberger, like other companies, to operate at sustainable rates as well. Schlumberger’s 2016 fourth quarter loss of $204 million was significantly higher than the previous year. The company cannot continue to operate with such significant losses despite a recent increase in its steerable rotary system used in unconventional drilling. Kibsgaard said:

New drilling technology will create an explosion of oil -- Energy stocks have been tearing higher since the election on bets that the Trump administration will relax environmental restrictions and open more federal lands to oil and gas drilling. Crude oil’s staying north of $50 hasn’t hurt, either.   It is up there in part because OPEC threw in the towel and agreed to production limits. Unfortunately for OPEC, those limits don’t apply to US and Canadian shale producers. And the history of OPEC is that they all cheat like crazy, anyway. I think it is entirely possible that we will see oil prices climb somewhat further by mid-year, possibly approaching $60, and then pull back as capped US production comes back online. I also think that this year, we’ll start to see a new pattern: Production could keep rising even as prices fall. Conventional wisdom says that producers stop pumping at some point when it becomes unprofitable, but I think that is about to change.  If you are an oil producer—or really, any commodity producer—two things can improve your profit margin: higher selling prices for the resource you produce or lower production costs. Some combination of both works as well.   Now, selling prices are mostly outside the producer’s control, though adept hedging can help. Cost reduction is, therefore, the place to concentrate your attention. Back in 2015, I wrote about new drilling techniques and other technology that promised to bring oil and gas production costs significantly lower.  Now, in the last few weeks, people in the business have told me these technologies are moving rapidly toward deployment. They foresee considerably lower drilling and production costs by the end of this year.  I had a confidential briefing recently about some new energy production processes that are coming online in the oil patch. Let me just say that production from an oil well drilled with these new techniques is getting ready to increase substantially.  In some cases, the amount of oil produced per dollar spent on drilling is going to more than double. There are significant chunks of the petroleum-producing parts of the United States where $40 oil will not be a barrier to drilling and new production.  Eventually—in a few years—these techniques will begin to show up in wells around the world, and there will be an explosion of oil. Even as many oilfields dry up, there will be new fields developed from previously unprofitable sources.

GOP tax reform and what’s at stake for the oil industry - The Barrel Blog: The U.S. still imports a lot of crude oil. It also now exports crude oil. It’s also the world’s biggest exporter of petroleum products. So any change in the country’s corporate tax system that has an enormous shift in the tax treatment of imports and exports is going to have the potential to impact oil flows, and by extension, oil markets. It’s a realization that is starting to spread through the nation’s oil industry as the inauguration of Donald Trump draws closer and the possibility of DBCFT becomes more possible. DBCFT is the abbreviation for Destination Based Cash Flow Tax, and it’s the general term for the type of tax that is at the heart of the Republicans’ corporate tax proposal, spearheaded primarily by Speaker Paul Ryan (R-WI) and Ways and Means chairman Kevin Brady (R-CA). The analyses of the tax plans are coming out fast and furious in the last few weeks. The short version of what you need to know is this: The DBCFT has been likened to having many of the same fundamental characteristics as a European VAT. As the Ways and Means blueprint on the proposal states: “The focus on business cash flow…(is) a move toward a consumption-based approach to taxation.”• The US version of the DBCFT would lower the top corporate tax rate to 20%. But its provisions that have gotten the most attention — because they are such a radical departure from current policy — are that companies would not need to count revenue from exports in their tax base, but would not be allowed to deduct the cost of imports. • The economics 101 analysis of the impact of these changes is that the value of the dollar would increase significantly, offsetting the higher prices for imports (like low-cost apparel to be sold at Walmart), thereby negating price increases for the US buyers of that product. This part of the equation is much in dispute, but it does seem clear that a further strengthening of an already healthy dollar would occur, as imports decrease (putting fewer dollars into global markets) and now tax-favored exports increase (necessitating dollars for the goods’ purchase). The potential areas of impact to the global oil industry are clear. The US oil industry will be incentivized to export more crude and products, import less of the same, and the always-present correlation between the dollar and the price of oil will be a significantly bearish factor. Just how much of an impact remains a significant question.

Trump Interior pick considering reversing Obama designations - President-elect Donald Trump's pick as interior secretary Tuesday said he will review President Barack Obama's decision to block oil and natural gas drilling in most US Arctic waters and suggested a reversal of recent national monument designations may be in the works. During his confirmation hearing before the Senate Energy and Natural Resources Committee, Ryan Zinke said the incoming Trump administration would likely wade into the legally murky areas of trying to reverse land and water designations done by a previous president under the Antiquities Act. "Legally, it's untested," said Zinke, currently Montana's lone member of the US House of Representatives. Even if the Trump administration decided to reverse an Obama designation it would face a certain legal challenge, Zinke added. In December, Obama ordered 125 million acres in the Chukchi and Beaufort seas to be permanently protected, blocking oil and gas drilling in much of offshore Alaska. In November, Interior announced that no Arctic lease sales were included in its 2017-2022 plan and in early December the administration closed more than 40,000 square miles of Bering Strait-area waters to future oil leases. Zinke, who in November won his first re-election campaign to the House, said Alaska needs to be handled differently by the federal government and committed to a formal review of these decisions. In addition, he rebuffed a request by Senator Bernie Sanders, a Vermont Independent, to block fossil fuel development on federal lands. "We need an economy and jobs too," Zinke said.

Trump Interior Nominee Would Review Obama's Limits on Oil Drilling - — President-elect Donald Trump's pick to run the Department of the Interior, Representative Ryan Zinke of Montana, said on Tuesday he would consider scrapping some of President Barack Obama’s environment initiatives if confirmed, including reviewing curbs on oil drilling on federal lands. "Yes," he said in response to a question from Republican Senator Lisa Murkowski of Alaska during his confirmation hearing about whether he would review drilling curbs imposed by Obama's administration in her state. "The president-elect has said that we want to be energy independent. I can guarantee you it is better to produce energy domestically under reasonable regulation than overseas with no regulation," he said. "We need an economy." The Interior Department oversees territories covering a fifth of the United States' surface from the Arctic to the Gulf of Mexico, including sensitive wildlife habitats, iconic landscapes, rich deposits of oil, gas and coal and important pasturelands for ranchers. Zinke, a former Navy SEAL commander and an avid hunter and angler, emerged as a surprise pick to head the department in part because he has embraced federal stewardship of national parks, forests and refuges. This diverges from the Republican Party's official position to sell off acreage to states that might prioritize development.

Rex Tillerson Says Oil Companies Don’t Take Handouts - Rex Tillerson, President-elect Donald Trump’s nominee for secretary of state, denied that tax breaks to fossil fuel companies amount to subsidies during his Senate confirmation hearing on Wednesday. Yet Exxon Mobil Corp., the oil giant Tillerson worked at for 41 years and led for 10, receives between $700 million and $1 billion per year in government giveaways, according to a new analysis by Oil Change International, a nonprofit research firm that tracks the fossil fuel industry.  During the hearing, Sen. Jeanne Shaheen (D-N.H.) asked Tillerson if he would pursue a 2009 pledge ― led by the United States and backed by Russia, China, India and 16 other nations ― to scale back subsidies for oil and other carbon dioxide-spewing fuels. Tillerson argued that he would have little influence over incentives baked into the tax code, and said he was “not aware of anything that the fossil fuel industry gets that I would characterize as a subsidy.” “The industry’s long-time argument is that liability loopholes and sweetheart tax breaks like the Intangible Drilling Costs are not a form of special treatment for the oil and gas industry,” Janet Redman, U.S. policy director at Oil Change International, wrote in the group’s analysis. “In reality, the IDC is specifically designed to make drilling, survey work, clearing ground, workers’ wages, drilling supplies — basically anything you need to produce oil and gas (aka ExxonMobil’s products) — less expensive for oil and gas companies.”

European Lawmakers Vote to Pursue Tar Sands Oil Friendly Trade Deal with Canada - EU lawmakers today voted for the European Parliament to push ahead with a trade deal that could encourage Canadian tar sand oil imports and make it easier for energy companies to sue governments when environmental policies threaten their profits. The UK’s international trade minister, Liam Fox, last year circumvented parliament to approve the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada. The deal now has to be approved by European policymakers. MEPs in the committee charged with overseeing environmental regulation today voted 40 to 24 for the European Parliament to back the deal, Reuters reports. A final decision is expected in February.Writing in The Ecologist ahead of the vote, Mark Dearn from campaign group War on Want said the deal had already “put rocket boosters under runaway climate change by bringing high-polluting tar sands oil into Europe”. Reacting to the vote, he told DeSmog UK:“The committee's decision on CETA is an utter disgrace. It flies in the face of a wealth of evidence showing CETA to be bad news for the environment, food and health - not least that the EU sacrificed its own climate change legislation to appease the tar sands demands of Big Oil companies and the Canadian and US governments.”Campaigners are also concerned that the deal will make it easier for companies to sue governments that use environmental regulations to try and move their economies away from fossil fuels.A mechanism called investor-state dispute settlements is included in the deal, and could allow companies to sue countries that ban tar sands oil. Companies have used the mechanism in Canada to oppose fracking moratoriums, and in Germany to protest the closure of nuclear power plants. The Canadian government has also objected to EU chemical regulations on over 20 occasions between 2003 and 2011, EnergyDesk has previously revealed, leading to concerns that companies could use CETA to undermine those rules.

New Tar Sands Pipelines Are Incompatible With Paris Climate Goals - New research released Thursday reveals disturbing new evidence on how locking-into new long-lived tar sands production undermines global efforts to address the global climate crisis far beyond Canada's borders. "Trudeau's pipeline decisions will lead directly to suffering, displacement and even death for vulnerable people around the world due to impacts of a warming world," said Saleemul Huq , senior fellow of the International Institute for Environment and Development in Bangladesh. "People who have contributed least to this global crisis will pay the highest price for Canada's efforts to dig up and export more oil in the midst of a global crisis." The analysis from Oil Change International finds that Canada will be the world's second highest contributor of new oil production globally over the next 20 years if action isn't taken to halt new tar sands pipelines and production growth. Once extracted, much of this oil will be burned, pushing global temperature limits over the brink. Cumulative emissions from producing and burning Canadian oil would use up 16 percent of the world's carbon budget to keep temperatures below 1.5 degrees or 7 percent of the budget for 2 degrees. Canada has less than 0.5 percent of the world's population.  These revelations have provoked international climate vulnerability experts to call out Prime Minister Trudeau for failing to understand what's required to protect the most vulnerable from climate change .

Trump’s New Border Conflict of Interest - As President-elect Donald Trump promises to push ahead with a border wall and threatens to penalize companies that move production to Mexico, the final touches are being put on two pipelines that snake from Texas shale fields across the southern U.S. border. The projects, which have a combined value of $1.4 billion, will supply the Comisión Federal de Electricidad, Mexico’s state-owned electric utility, with U.S. natural gas that will lower power costs in Mexico—including those at factories churning out everything from car parts to flatscreen TVs for American consumers. The utility contracted in 2015 with a transnational consortium that includes Mexican-based Carso Energy, to develop and operate the Comanche Trail Pipeline and the Trans-Pecos Pipeline.  The consortium brings together an unlikely cast of characters: Carlos Slim, the billionaire who controls Carso Group; Texas billionaire Kelcy Warren, chief executive officer of Dallas-based Energy Transfer Partners, who donated more than $100,000 to Trump’s campaign; and Trump himself, who owned as much as $1 million worth of shares in Energy Transfer Partners according to his federal candidate disclosures in 2015 and still had as much as $50,000 worth as recently as May, according to his most recent disclosure. (Trump spokeswoman Hope Hicks says the president-elect sold his shares in the company last year.) In October, the U.S. government sued to stop construction of the Comanche Pipeline to give federal agencies time to assess its impact on irrigation canals and a section of border fence. A judge ordered a halt on Nov. 8, the day before Trump was elected. Trump said during his campaign that Slim, a top shareholder in the New York Times and a Clinton Foundation donor, was working alongside Hillary Clinton’s campaign to help generate negative coverage. At the time, a Slim spokesperson said the billionaire had never met Trump and wasn’t interested in U.S. politics. On Dec. 17, Slim joined Trump for dinner at Mar-a-Lago, his Florida resort. Two days later the consortium reached a settlement, allowing construction to resume on the Comanche Trail Pipeline in exchange for paying $5.4 million to protect the irrigation canals. The U.S. government determined there was “no immediate damage” to the border fence, according to a spokesman for the U.S. Attorney’s Office for the Western District of Texas.

Indonesia's Pertamina eyes US LPG to replace some Mid East supply - Indonesia's state-owned oil and gas company Pertamina is eyeing more LPG imports from the US to replace part of its Middle Eastern supply as US cargoes are currently cheaper, a senior company official said Tuesday. "Currently more than 90% of LPG supply comes from the Middle East and the rest from the spot market. We would like to import more from the US into Indonesia. We expect to get a more competitive price from US," said the senior vice president of Pertamina's integrated supply chain, Daniel Purba, on the sidelines of the LPG Indonesia 2017 conference in Jakarta. The expansion of the Panama Canal enables US LPG cargoes to reach the Asia Pacific, including Indonesia, faster than the Cape of Good Hope passage. With that, Pertamina expects its LPG imports from the Persian Gulf to decline, although it estimates overall US LPG imports will remain lower than Middle Eastern supplies, according to Purba. US cargoes currently make up 3% of Pertamina's overall imports.

Blockbuster Oil Deal In Argentina Could Trigger Drilling Boom | A blockbuster deal between the oil and gas industry, labor unions, and the Argentine government could pave the way for a flood of new investment in shale oil and gas in the South American nation. The deal involves a determination by the state to shoulder the cost of new drilling, but it could lead to the spread of the shale revolution beyond North America. Argentina’s government has agreed to extend regulated natural gas prices at elevated levels, in effect a public subsidy to entice major oil and gas companies to flock to Argentina’s prolific Vaca Muerta shale basin. Prices for gas will be set at $7.50 per million Btu (MMBtu), vastly higher than market places in most parts of the world. The fixed prices were scheduled to expire this year. By way of comparison, natural gas prices in the U.S., home of the original shale gas revolution and still the largest natural gas producer in the world, are currently trading for $3.33/MMBtu, or less than half that price. For years, Argentina has been cited as the most likely place to replicate North America’s shale revolution. While international oil and gas companies have invested capital and drilled wells in places like China, Argentina, Mexico and a handful of European countries, a new major source of shale production has not been achieved anywhere outside of the U.S. and Canada.  Argentina is thought to hold 27 billion barrels of oil and 802 trillion cubic feet of natural gas in its shale formations, according to the EIA. In terms of gas, those reserves are nearly 30 percent larger than the estimated reserves in the U.S., and are second only to what is thought to be located in China. If the shale revolution is to truly spread beyond North America, the Neuquén Basin – where the Vaca Muerta is found – is where it will unfold.

Venezuela’s PDVSA sees 2017 oil output stuck near historic lows - Venezuelan state energy company PDVSA projects oil production will remain near 23-year lows in 2017, an internal document shows, suggesting more hardship ahead for the crisis-wrought OPEC member country. Cash-squeezed PDVSA, which accounts for nearly all of Venezuela’s export revenues and is the socialist government’s financial motor, saw production tumble by nearly 10 percent in 2016 due to an unraveling economy and low oil prices. The company’s weak finances are causing operational disruptions, and are both affected by and contributing to Venezuela’s economic downturn. Three years of recession and soaring prices have pummeled Venezuelans, with many skipping meals and lootings of supermarkets commonplace. Some economists have estimated that gross domestic product contracted by 10 percent or more in 2016. This year, PDVSA sees production at 2.501 million barrels per day (bpd), an increase of just 5,000 from the 2.496 million bpd for the first 11 months of 2016, according to a nine-year strategic plan presented in December. That is broadly on par with output levels in 1993, as the struggle to pay providers has led some services companies to halt work and oil suppliers to delay or halt deliveries of fuel and crude.

Total sees average gas price realization up in Q4, OMV price slips - France's Total said Monday its average global gas price realization in the fourth quarter was $3.89/MMBtu, up from $3.45/MMBtu in the previous quarter as prices continued to recover from their multi-year lows earlier in 2016. While Total saw its Q4 realized price rise, fellow European oil and gas company, Austria's OMV, failed to increase its average realized price. In Q4, OMV saw its average price drop to Eur12.10/MWh -- the equivalent of around $3.76/MMBtu using current exchange rates -- down from Eur13.10/MWh in the previous quarter. Both companies' realized prices are down on Q4 2015, however, Total by 12.6% year-on-year and OMV by 17.6%. OMV also said its sales volumes in Q4 rose to 29.8 TWh from 28.7 TWh in Q4 2015 and from 22.2 TWh the previous quarter. Total's quarter-on-quarter rise in the realized gas price in Q4 came as global oil and gas prices were boosted from the early-year lows. Benchmark Brent crude averaged $49.30/b in Q4 compared with an average of just $33.90/b in Q1. US gas prices have also rallied, with the Henry Hub price currently running at around $3.40/MMBtu. European prices are currently higher still, with the Dutch TTF day-ahead price trading at the equivalent of $6.62/MMBtu, according to Platts' assessments.

Argentina, Bolivia's state oil companies push ahead on gas project - Argentina and Bolivia's state oil companies are to push forward on plans to explore and produce natural gas together in eastern Bolivia, helping to boost supplies for exporting to Argentina. Argentina's YPF and Bolivia's YPFB plan to explore Charagua, a 99,250 hectare block with an estimated 2.7 Tcf of gas resources in the department of Santa Cruz, the companies said. YPF chairman Miguel Gutierrez and his YPFB counterpart, Guillermo Acha, signed a 40-year oil services contract for the project in La Paz. If a commercial find is made, the companies will form a consortium to invest more than $1.1 billion developing the block, with expectations of reaching production of 10.2 million cu m/d, YPFB said.YPF said the production would help meet demand in Argentina, which ran a 30% deficit in 2016. "For YPF, exploration is strategic and fundamental for creating new investment projects to sustain the supply of natural gas to Argentina," Gutierrez said. Argentina imported an average 30.8 million cu m/d in the first 11 months of 2016, split between deliveries from Bolivia and the global LNG market, plus five million cu m/d in regasified supplies from LNG terminals in Chile, between May and August, according to data from Argentina's energy ministry. Argentina could not import more because of a lack of regasification capacity, and because of slower-than-expected production growth in Bolivia. Argentina plans to reduce gas imports as soon as 2021, starting with LNG, as it puts into development is huge unconventional resources in plays like Vaca Muerta. Even so, Argentina's energy minister, Juan Jose Aranguren, has said imports from Bolivia would likely continue for longer, given the lower price compared with LNG and the ease of supplying its northern provinces from Bolivia instead of Vaca Muerta, in southwestern Argentina.

Norway raises oil and gas production forecasts -- Oil and gas output from Western Europe’s top producer Norway will be higher than previously expected in 2017 and 2018 following above-forecast output last year, the Norwegian Petroleum Directorate (NPD) predicted on Thursday. At the same time the regulator cut its forecast for the industry’s investments in 2017 and said it would continue to decline in 2018 before a predicted rebound the following year. Oil production for 2017 is now expected to hit 93.9 million cubic metres, corresponding to 1.62 million barrels per day and in line with 2016, against a year-ago forecast that output would fall to 87.3 million cubic metres in the current year. Gas production for 2017 is seen at 114.5 billion cubic metres (bcm), down from 116.8 bcm in 2016, but much higher than the forecast a year ago of 107.9 bcm.NPD said forecasts were revised up because the fields, through efficiency measures, particularly within drilling of wells and regularity on the facilities, produced more than previously presumed.

Russian gas flows to Europe, Turkey surge 25% on year in H1 Jan - Russian gas flows to Europe and Turkey were already 25.5% higher year on year in the first 15 days of January, according to the latest Gazprom data, having hit an all-time high daily level on January 8. The continued high flows in 2017 -- following record-breaking volumes last year -- come as cold weather across Europe, especially in the east, triggers increased demand for Gazprom gas. Russian gas prices also remain competitive compared with European hubs -- the oil price rally of end-2016 will only filter through to oil-indexed gas contracts in the coming months -- so European buyers are thought to be maxing out their Russian gas purchases. In a statement Monday, Gazprom said gas flows to what it calls the Far Abroad -- Europe and Turkey but not the ex-Soviet states -- were 25.5% higher than in the same period of 2016."In absolute terms, the increase amounted to about 1.9 Bcm of gas," Gazprom said. Flows to Germany were 20.7% higher in January 1-15, it said, without giving absolute volumes. "We are reaching record levels through the Nord Stream pipeline," CEO Alexei Miller said. Russian gas flows via the Nord Stream pipeline to Europe continue to run at maximum capacity, with flows to Germany at 158 million cu m on Monday, according to data from Platts Analytics' Eclipse Energy. Of that, 76 million cu m was delivered into the OPAL pipeline to the Czech Republic, up on the average 44 million cu m/d in 2016 before Gazprom was granted additional capacity in OPAL in October by the European Commission.

Europe misses out on global LNG surge as Russian gas pumps at record rate -- With the United States finally breaking the seal on LNG exports last year, analysts envisaged the ocean-going tankers challenging Russia’s land-locked pipelines supplying Europe in a race that would send gas prices ever lower. But with attacks on Nigerian pipelines that would have sold supplies into Latin America, new consumers and nuclear outages in Asia, major U.S. gas shippers and other exporters took advantage of the shortages to plug those gaps. The United States sent only two shipments to Europe, analysts said. Industry consultants expect LNG to stay scarce in Europe for at least the next six months, giving Russia’s Gazprom – already supplying a third of Europe’s gas needs – free rein to capture more market share. Concern in Europe over relying on Russia for gas since pricing spats between Moscow and Kiev disrupted supplies has grown in the wake of Russia’s seizure of the Crimea region from Ukraine in March 2014. While the EU has succeeded in increasing renewables and the use of reverse-flow pipelines to maximise available supplies, some countries are still 100 percent dependent on Russian gas.

Russia acknowledges threat from Trump's energy policy on EU gas market | Reuters: Russia's Gazprom has acknowledged for the first time a threat to its dominant position in European gas market from an expected influx of liquefied natural (LNG) gas produced in the United States under Donald Trump's administration. Gazprom, which supplies a third of Europe's needs, had previously dismissed possible rivalry from the LNG exports from the United States, saying the costs of transportation via the Atlantic Ocean make it unfeasible. Trump has picked former Texas Governor Rick Perry to head the Department of Energy. The country's oil and gas industry welcomed his appointment and called on him to make increasing exports of U.S. natural gas a "top priority". Trump, who takes office on Jan. 20, has made energy a central part of his agenda, has promised to revive oil and gas drilling and coal mining as president by cutting back on federal regulation. "We see the main source of rivalry from the United States, this is obvious. We don't know what the first steps of the new American administration will be, be judging from its previous statements, it is possible that they will boost their production," Gazprom's Deputy Chief Executive Valery Golubev told a conference in Moscow. Analysts have speculated the Kremlin-controlled company could retain its dominance in Europe as U.S. gas shippers take advantage of shortages in Asia and Latin America to plug those gaps, but Golubev conceded U.S. plans may have an impact. "New LNG production capacities (in the U.S.) may have implications for the European market," Golubev said.

Analysis: China buys 70% of Russian ESPO cargoes from Kozmino in 2016 -  China became the dominant purchaser of Russian eastern crude grade ESPO in 2016, having bought over two-thirds of all cargoes loaded from the Kozmino port in Russia's Far East last year, and significantly outstripping other buyers, data from national oil pipeline operator Transneft showed Tuesday. Russia exported a total of 31.8 million mt (or 636,868 million b/d on average) of ESPO crude from Kozmino in 2016, up 4.6% year on year and estimates the deliveries to remain roughly flat this year as the volumes have been exceeding the port's installed capacity. Of the total, China bought 22.2 million mt, up 51% year on year, taking its share of total ESPO cargoes delivered from Kozmino to 69.8% in 2016, compared to just over 48% in 2015, when it was competing with Japan as the biggest purchaser of ESPO cargoes from Kozmino. The increase in Chinese imports was due to a significant boost in purchases by independent refineries, which received the right to import crude in 2015. In addition to Rosneft's term buyers CNPC and ChemChina, independent refineries, including Luqing Petrochemical, Kenli Petrochemical, and Hongrun Petrochemical, Haiyou Petrochemical, as well as trading companies Kunyang and Yijia, took delivery of the barrels. Russia, which also pumped around 23.5 million mt of pipeline crude to China, competing with Saudi Arabia as the main crude supplier to China through the year. Apart from China, Malaysia was the other country which significantly increased purchases by ESPO blend, becoming the fourth-biggest buyer of the Russian crude. The imports rose eightfold to 1.6 million mt, although from a low basis of just two cargoes, each 100,000 mt, bought in 2015, Transneft data showed.

Oil production in Asia declining at record levels: Wood Mackenzie -  Oil production in Asia-Pacific is declining at a rate not seen elsewhere in the world, with around half of losses coming from China alone, Wood Mackenzie has warned. "We estimate 2016 production of 7.5 million barrels per day will fall by over a million barrels per day by 2020," said Angus Rodger, the energy consultancy's Asia-Pacific upstream research director. China, Indonesia, Malaysia and Thailand are among the biggest producers in Asia but the near having of crude oil prices since 2014 has hit the industry and resulted in an annual average base decline rate of around 7 percent within existing oil fields, Rodger pointed out. "Lower oil prices and the severe cuts to upstream capex (capital expenditure) to mature assets has increased decline rates," he explained in a new video published on Wood Mackenzie's site. Recently, global prices have staged a rebound as the Organization of the Petroleum Exporting Countries (OPEC) and other producers move to implement a supply cut of nearly 1.8 million barrels per day for the first half of 2017. "Regional oil production will be underpinned by giant fields in Indonesia, Malaysia and China but these fields are super mature and will require expensive techniques, high break-evens and capex cuts," Rodger said. Moreover, the bulk of exploration in the region is on gas so there are far too few new oil projects to make up for dwindling production, he continued, pointing out there are only a handful of undeveloped fields that can be online by 2020."The scarcity of new oil discoveries over the last two decades combined with lower prices and hefty capex cuts, particularly to legacy fields, will see decline rates spiral across the region."

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 overcapacity will remain a significant problem. [O/R] Total crude oil consumption will hit 594 million tonnes, or 11.88 million bpd, state-owned China National Petroleum Corporation (CNPC) [CNPET.UL] 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. 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.

India's oil demand hits record high -- According to oil ministry data, India’s oil consumption soared 11% to the record high in 2016. India’s oil consumption increased to 196.5 million tons last year from 177.5 million tons in 2015. Meanwhile, Saudi’s Aramco cut February term crude oil loadings to some buyers in India and Southeast Asia.

Strong Asian demand props up cash differentials for Mideast medium heavy sour crude - Strong demand from Asian refiners amid healthy distillate cracks and expected implementations of OPEC production cuts have propped up cash differentials of Middle Eastern medium heavy sour crude for March loading, traders said late last week. Spot cargoes of March-loading Qatar Marine crude were heard sold at premiums ranging between 10 cents/b and 20 cents/b to the grade's official selling price, traders said. They added that all spot cargoes for March loading could have been sold. "All [Qatar Marine] cargoes [for March loading] are gone," said a North Asian crude trader. Apart from Qatar Marine, March-loading Upper Zakum crude cargoes were heard to have changed hands at premiums of between 20 cents/b and 25 cents/b to the grade's OSP. Inpex and ExxonMobil were heard to have sold a cargo each to Shell, while some cargoes could have been placed to Japanese end-users, traders said. Two March-loading Dubai crude cargoes were also heard to have been placed at premiums of around 20 cents/b to Dubai crude, traders said. Further information on the trades remained unclear. Traders indicated that strong cracks for heavy and middle distillates and expected cuts to supply are supporting sentiment for the medium, heavy grades. Second-month 180 CST and 380 CST high sulfur fuel oil to Dubai crude swap cracks averaged minus $2.15/b and minus $3.02/b respectively in January to date, the highest since July and June 2012 when they averaged at minus $1.83/b and minus $2.25/b respectively, S&P Global Platts data showed.

Analysis: Asia's unquenchable thirst for oil to outpace 2017 refining growth - Asia is gearing up to witness new refining capacity growth in at least four countries in 2017, but capacity reductions in some top consuming nations will pull down the net addition to a level that would be lower than the anticipated demand growth the region is likely to see this year. While China, India, Taiwan and Vietnam are expected to add to their refining capacities this year, Japan will witness closures, while some independent refiners in China might be forced to give up capacity, analysts and market participants told S&P Global Platts. "Oil demand growth in the Asian region is expected to exceed the net refining additions this year," said Sri Paravaikkarasu, Head of Oil, East of Suez, at Facts Global Energy. "And looking at the next five-year horizon, oil products demand growth should exceed net refining additions every single year, helping to clear product surplus somewhat." Growth in India is set to be one of the strongest, with the rise in oil demand expected to outpace that of China's for the third year in a row this year, according to Platts Analytics. Indian demand is expected to grow by 7% year on year to 4.13 million b/d in 2017, while China's oil consumption is expected to rise by only 3% to 11.5 million b/d in the same period.Looking at the overall oil products demand, FGE expects Asia's oil products demand to grow by 950,000 b/d in 2017, while Wood Mackenzie expects demand to grow by about 660,000 b/d in the same period. "We expect a net capacity addition of 430,000 b/d in Asia Pacific for 2017. Oil products demand is expected to grow by 660,000 b/d in 2017. So demand growth will outpace capacity growth in Asia in 2017,"

Platts launches LNG assessment for Middle East: video - Shelley Kerr, global director, LNG, and Desmond Wong, managing editor, European and Atlantic Basin LNG, discuss Platts new Middle East Marker (MEM) price assessment which reflects the growing importance of the Middle East as an LNG import destination rather than just exporter of cargoes.

Feature: South Sudan's fragile oil industry faces uphill struggle -  The future of South Sudan's oil industry, Sub-Saharan Africa's third-largest, looks grim, at least in the short term, as armed conflict and falling international oil prices have combined to undermine the country's fledgling oil industry. Unless these trends are reversed, analysts fear the fall in production to 130,000 b/d in 2016 from 245,000 b/d in 2013 may continue well into 2017 or even beyond. This is because, they say, it will be impossible to explore new oilfields and restart the Unity and Tharjath oilfields due to problems surrounding security. Both the Unity oilfields in Block 1, run by the Greater Nile Petroleum Operating Company, or GNPOC, and Tharjath in Block 5A, operated by SUDD Petroleum Operating Co. Ltd, or SPOC, have been at the epicenter of the conflict since violence erupted in Africa's newest country in 2013.Rebels loyal to former Vice-President Riek Machar are still threatening any plan to restart the oilfields they shut in in January 2014. As a result, key player ONGC Videsh, the overseas arm of India's Oil and Natural Gas Corp., is said to be insisting on a new security protocol before its workers could return to the troubled region to resume production. A November meeting between India's ambassador to South Sudan, Srikumar Menon, and South Sudan's oil minister, Ezekiel Lol Gatkuoth, in Juba set the tone for the resumption of the oil production by Indian companies. But security problems remain unresolved. Although details are sketchy at the moment, discussions are continuing between Juba and New Delhi. ONGC Videsh has a 25% in the Greater Pioneer Operating Co., or GPOC, and a 25% stake in Tharjath oilfields. It remains to be seen whether South Sudan's cabinet would approve the implementation of OPEC's December deal to cut production.

For Israel, Energy Boom Could Make Friends Out of Enemies - Once a barren energy island in a part of the planet otherwise awash in resources, Israel is, after years of delay, finally pushing ahead with an ambitious strategy to tap offshore reserves that could transform its economy and, it hopes, its place in a historically hostile region.If all goes according to plan, Israel will not only become largely energy-independent, it will also supply neighbors that will have new reason to be friends. There is no guarantee that all will go according to plan, of course. Israel struggled for years to develop regulations to manage its newfound wealth. The international energy firms that Israel is now courting have other options in an evolving global market. And the politics of a new era, as President-elect Donald J. Trump encourages assertive Israeli action in Jerusalem and the West Bank, could kindle fresh conflicts with Arab neighbors that make energy partnerships problematic. But optimists see cause for confidence as once-stalled drilling in the Mediterranean resumes, additional tenders are issued and new customers sign up — or at least talk about it. The government in Jerusalem envisions building pipelines that could transport Israeli gas as far away as Europe. The potential for enhancing Israel’s relations with its neighbors is alluring. Mr. Steinitz credited energy for a recent reconciliation with Turkey. This development came years after diplomatic relations had broken down over a violent confrontation at sea that resulted in the deaths of 10 Turkish activists who were trying to break through Israel’s naval blockade of Gaza.

OPEC Commitments Push Iraq Towards Oil Export Deal With Kurds - Amid the ongoing struggle over oil control between the Iraqi Kurds and the Iraqi central government in Baghdad, the Iraqi central authorities have halted exports of oil from Kirkuk via the state’s marketing authority, SOMO—agreeing to let the oil all go to the Kurds. Crude exports had only been resumed in September after the two sides reached a revenue-sharing agreement to jointly export crude from the giant Kirkuk field, with the intention of splitting the oil between Baghdad and Erbil. Instead, the oil produced in Kirkuk will now be transferred to refineries in Kurdistan, according to Kurdish news agencies. The export and sale of oil produced in Kirkuk has been a complicated issue between Baghdad and the Iraqi Kurds. This oil is produced by the Iraqi federal government in northern Iraq, but exported via a pipeline system owned by the Kurdistan Regional Government (KRG). At the height of the squabble, Baghdad was considering attempting to bypass the Kurdish pipeline and trucking the Kirkuk oil to Iran. The September agreement came after five months of haggling, and only after a change in regime at the Iraqi Oil Ministry. It remains unclear why Baghdad has now agreed to send all the Kirkuk oil via the Kurdish pipeline to Kurdistan to be refined, and Kurdish news agencies have offered no additional details of this deal. The move comes as a surprise as Baghdad has long insisted that only SOMO could market Iraqi crude, while the Kurds have continually accused Baghdad of reneging on an earlier revenue-sharing agreement. The September deal for a 50/50 split had appeased both sides for the first time in almost half a year.

Is A Full Recovery Possible For Iranian Oil And Gas? - In January 2016, the Islamic Republic of Iran (IR) agreed to scale back its nuclear facilities in exchange for the lifting of economic sanctions. During the sanction years, it had dreamed of a stampede of international oil companies returning to Iran and injecting substantial investment of capital into the waning Iranian energy industry. The IR was therefore expecting a quick rejuvenation of its oil and gas industries and an economic bonanza following the end of international sanctions. It is a fact that Iranian oil output has been at a plateau for some time now, and production has been on the wane year after year. Dropping reservoir pressure and a continuous decline in crude production appear to have been triggered by long periods of technical constraints on operation and by natural aging of the major Iranian oil fields. The lack of regular maintenance and application of new technology and particularly the extensive neglect of the reservoirs in the last several years under sanctions have resulted in further damage to the Iranian oil-producing fields. Oil production after the Islamic revolution 38 years ago never returned to its previous peak, not because the IR did not want to have production over 6 million barrels per day, but because experienced, well-educated, and properly trained oil workers from all levels in every industry sector were arrested or terminated, and many fled the country. Further, the eight-year war with its neighbor Iraq and naturally poor management with roots in bribery and corruption inevitably caused a drastic drop in oil production.

Deepest Oil Cuts in World’s Top Market Didn’t Need OPEC deal - Malaysia and Brunei are doing their bit for the global pact to rebalance oil markets, but the biggest production cuts in Asia are coming from a country that didn’t sign up.  China, the world’s fifth-biggest producer last year, has reduced output by about 300,000 barrels a day this year, more than the combined cuts announced Saturday by non-OPEC countries, excluding Russia, as part of a deal coordinated with the producer group. The decline is expected to continue next year, with Chinese production shrinking as much as 200,000 barrels a day, according to consultant Energy Aspects Ltd.  “We’re seeing a natural decline in China oil production as fields are very mature and depletion rates are high,” said Virendra Chauhan, a Singapore-based oil analyst at industry consultant Energy Aspects Ltd. “The price level we had in last 12 to 18 months has incentivized imports over spending on domestic production.”China’s output slumped as state-owned firms shut wells at mature fields that are too expensive to operate amid last year’s price crash. Production during the first 10 months of the year averaged about 4 million barrels a day, down about 7 percent from the same period last year, according to Bloomberg calculations based on National Bureau of Statistics data.  Malaysia and Brunei were the only Asian nations in the group of producers outside the Organization of Petroleum Exporting Countries that agreed to cut output by a combined 558,000 barrels a day starting Jan. 1. The region will use 32.88 million barrels a day of oil this year, accounting for more than a third of global consumption, according to data from the International Energy Agency. Daily demand is forecast to expand to 33.7 million barrels in 2017.  Morgan Stanley estimates Malaysia will reduce output by 20,000 barrels a day, while Brunei will lose 4,000 barrels a day. Both countries were celebrating holidays Monday and nobody responded to e-mails seeking comment sent to Brunei’s Energy and Industry Department, as well as Malaysia’s Ministry of Energy and state-run oil and gas company, Petroliam Nasional Bhd.

What does it take to keep oil prices stable? -- Capitol Crude podcast -- Robert McNally, author of the new book 'Crude Volatility: The History and the Future of Boom-Bust Oil Prices' joins senior oil editors Meghan Gordon and Brian Scheid to talk about the history — and future — of crude oil prices.  McNally, a former White House energy advisor and president of the Rapidan Group, discusses the new era of market volatility, OPEC's relevance to the crude market and what impact the incoming Trump administration will have on world oil supply and demand. His book argues that swing producers since the US Civil War have kept oil prices relatively stable, but the current absence of such a swing producer now has prices in a period of accelerating volatility and instability.

Saudi Minister Talks Up Oil Prices - The production cuts only just started but Saudi Arabia believes they will be able to declare “Mission Accomplished” in June after the terms of the six-month deal expire. Saudi energy minister Khalid al-Falih said that the oil market will already reach a balance by that point, with inventories drawn down to reasonable levels. As such, he sees little chance of an extension of the deal that will see 1.2 million barrels per day (mb/d) plus 0.6 mb/d from non-OPEC countries taken off the market. But it is an open question whether or not inventories will merely resume their upward trajectory if OPEC members go back to producing full-tilt – some analysts think that the supply surplus would return if OPEC opens the taps again. Every utterance from the Saudi energy minister seems to be moving the market these days. Oil was down on al-Falih’s comments regarding the extension of the OPEC deal, but turned positive on Tuesday after he said that OPEC as a whole – and not just Saudi Arabia – would adhere to its deal. Meanwhile, the U.S. dollar fell after president-elect Donald Trump said that dollar strength was hurting U.S. competitiveness. The weaker dollar helped crude oil prices. "The market genuinely seems quite happy here (around $55) ... but people are watching with caution as the slightest hint of this OPEC/non-OPEC agreement going wrong is going to drive the market down," Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai, told Reuters.  The uncertainty surrounding OPEC production cuts coupled with the rebound in U.S. shale, which could push oil prices down again, will ultimately lead to much more volatility this year. That comes from the IEA’s executive director Fatih Birol. “I would expect that we will see a rebalancing of the markets within the first half of this year,” he said over the weekend, according to Reuters. “But what I want to say (is) that we are entering a period of much more volatility in the market ... the name of the game is volatility.” He also warned about a supply shortfall towards the end of the decade if the oil industry does not substantially increase upstream investments from multi-year lows seen last year. “This year, if there are no major investments coming we may well see in a few years from now significant supply-demand gap with serious implications on the market,” he warned.

Oil Slides After Saudis Suggest Early End To OPEC Deal -- Following a brief spike overnight (as China intervened in its equity market), crude prices slipped lower, testing towards a $51 handle after Saudi Arabia says OPEC is on track to wrap up its production curbs by the middle of the year, potentially leaving its aim of clearing a global oil glut unfinished.As Bloomberg reports, OPEC and Russia won’t need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets, Saudi Minister of Energy and Industry Khalid Al-Falih said in Abu Dhabi on Monday. However, ending the deal by mid-year and restoring production would mean the surplus just starts building again, thwarting OPEC’s ambition of whittling down bloated oil inventories.The Organization of Petroleum Exporting Countries said that draining off a stockpile “overhang” of more than 300 million barrels -- enough to supply China for almost a month -- was the main aim of supply curbs agreed with Russia and other producers. Twenty-four nations signed up to a joint cutback of 1.8 million barrels a day on Dec. 10.If they extend the deal for six months beyond its scheduled expiry in June, that surplus will be entirely eliminated by the end of the year, according to Bloomberg calculations based on data from the International Energy Agency. If they don’t extend the deal, and restore output to previous levels, about two-thirds of that glut will remain in place. “If the reduction is of such short duration, this will hardly be sufficient to balance the oil market,” said analysts at Commerzbank AG led by Eugen Weinberg in Frankfurt. “In this case the market participants who bet on rising prices will probably withdraw from the market, putting corresponding pressure on prices.”

Oil steady as weak dollar offsets U.S., Russia output forecasts | Reuters: Oil prices were little changed on Tuesday as a decline in the U.S. dollar and comments by Saudi Arabia that it would adhere to OPEC's commitment to cut output. That offset forecasts that U.S. and Russian producers would boost crude output later this year. The dollar fell to a near six-week low against a basket of currencies after U.S. President-elect Donald Trump said that the strong greenback was hurting U.S. competitiveness. A weaker greenback makes dollar-denominated crude less expensive for users of other currencies. "The oil market is actually weaker than it looks because it is being propped up by the weak dollar," said Phil Davis, managing partner at PSW Investments in Woodland Park, New Jersey. Brent futures lost 39 cents, or 0.7 percent to settle at $55.47 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 11 cents, or 0.2 percent to settle at $52.48 per barrel. Both contracts were up by $1 earlier Tuesday. Oil drew some support earlier Tuesday from top crude exporter Saudi Arabia, which said it would adhere strictly to its commitment to cut output under the agreement between OPEC and other producers, such as Russia.Under the agreement, the Organization of the Petroleum Exporting Countries (OPEC), Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption. Oil exports from Iraq's southern terminals, meanwhile, were down so far in January, according to loading data and an industry source, a sign that OPEC's second-largest producer is following through on the group's decision to cut output. /p>

Oil Slides After Brazil Denies Saudi Production Cut Request --With US Shale production surging, and now Brazil declining Saudi Arabia's request to cut production, doubts are continuing to rise over OPEC's deal and the hopes for balance in the energy markets.As Bloomberg reporets, Brazil Energy Minister Fernando Coelho Filho said during an in interview in Davos...

  • Petrobras can’t reduce output after corruption scandal and drop in international oil prices.
  • The company had already cut 2020 output target to 2.7 million b/d from more than 4 million b/d.
  • “Petrobras is coming now from a very difficult period. They can’t reduce production now. We’re trying to put the company back on its feet”
  • The Brazilian governmentt “has a lot of power on Petrobras,” but president Michel Temergave Petrobras CEO Pedro Parente independence.
  • “Petrobras will do what they think is necessary to be done”

And oil prices are tumbling...

Declining Chinese Oil Production Could Help Boost Oil Prices -- While all eyes are on OPEC to see whether or not they will follow through on production cuts, there is another major source of oil supply that will have a substantial impact on prices this year, and very few people are talking about it. China is often a central player in oil market analysis, but usually in terms of oil demand. But even as China is the world’s second largest crude oil consumer, and the largest importer, it is also no slouch in terms of production. Crude oil output climbed steadily over the past three decades, rising from 2 million barrels per day in the 1980s to a peak of about 4.4 mb/d in 2015, enough to rank it as the fourth largest producer in the world after the U.S., Russia and Saudi Arabia, and roughly on par with Canada. However, the collapse of crude oil prices has forced Chinese oil production into a state of decline. Many of China’s oil fields are old, mature and require heavy investment to stave of depletion. The market meltdown for crude oil beginning in 2014 forced China’s state-owned companies to take a hard look at whether or not pumping money into their older fields was still a worthy investment. In May 2016, we wrote about forecasts for Chinese oil output, projecting a decline of roughly 5 percent for the year. Those estimates turned out to be too conservative – some older and costly fields were shut down, forcing the country’s output to decline by 335,000 bpd in 2016, or about 6.9 percent. But even as oil prices have climbed back above $50 per barrel, the declines are expected to continue. Output could fall by an additional 7 percent this year, taking another 240,000 bpd off the market, according to several oil watchers interviewed by Bloomberg, including Bernstein & Co., Nomura Holdings Inc., and CLSA Ltd.Some of China’s oil fields are just too costly in today’s pricing environment. “China’s domestic crude output decline will certainly help OPEC’s plan to reduce global supply,” Nelson Wang, an oil and gas analyst at CLSA, told Bloomberg. ”Even if that isn’t China’s intention, it’s just the reality that China can’t produce more under the current circumstances.”

Saudi Plans for Early End to OPEC Pact May Leave Job Undone - Saudi Arabia says OPEC is on track to wrap up its production curbs by the middle of the year. That would leave its aim of clearing a global oil glut unfinished.  OPEC and Russia won’t need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets, Saudi Minister of Energy and Industry Khalid Al-Falih said in Abu Dhabi on Monday. However, ending the deal by mid-year and restoring production would mean the surplus just starts building again, thwarting OPEC’s ambition of whittling down bloated oil inventories.  The Organization of Petroleum Exporting Countries said that draining off a stockpile “overhang” of more than 300 million barrels -- enough to supply China for almost a month -- was the main aim of supply curbs agreed with Russia and other producers. Twenty four nations signed up to a joint cutback of 1.8 million barrels a day on Dec. 10.If they extend the deal for six months beyond its scheduled expiry in June, that surplus will be entirely eliminated by the end of the year, according to Bloomberg calculations based on data from the International Energy Agency. If they don’t prolong the cuts and instead restore output to previous levels, about two-thirds of that glut will remain in place.“If the reduction is of such short duration, this will hardly be sufficient to balance the oil market,” said analysts at Commerzbank AG led by Eugen Weinberg in Frankfurt. “In this case the market participants who bet on rising prices will probably withdraw from the market, putting corresponding pressure on prices.”

Crude Chaotic As Inventory Data Shows Huge Gasoline Build But Crude Draw - Following last week's surge in crude and product inventories, API reported a much bigger than expected drawdown in crude inventories ( versus -1mm expectations). While this spiked WTO prices, they fell back amid massive builds in gasoline (9.75mm) and distillates. API:

  • Crude -5.042mm (-1mm exp)
  • Cushing -1.01mm (-500k exp)
  • Gasoline +9.75mm
  • Distillates +1.17mm

Another massive build in gasoline inventories offsets the exuberant price action from a big draw in crude and Cushing...

Oil price slides on prospect of rising U.S. production | Reuters: Oil prices fell on Wednesday on expectations that U.S. producers would boost output, while OPEC signaled a drop in the global oil supply surplus this year as the producer group's output fell back from a record high. Brent crude futures, the international benchmark for oil prices, were down $1.05 at $54.42 a barrel at 1455 GMT. U.S. West Texas Intermediate (WTI) crude oil futures were trading down $1 at $51.48 per barrel. U.S. shale production is set to snap a three-month decline in February, the U.S. Energy Information Administration said on Tuesday, as energy firms boost drilling activity with crude prices hovering near 18-month highs. February production will edge up 40,750 barrels per day (bpd) to 4.748 million bpd, the EIA said. In January, it was expected to drop by 5,900 bpd. The Organization of the Petroleum Exporting Countries, excluding Indonesia, pumped 33.085 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, down 221,000 bpd from November, OPEC said in a monthly report on Wednesday. The figures showed the biggest reduction came from Saudi Arabia, which told OPEC it cut output to 10.47 million bpd. OPEC cut its forecast of supply in 2017 from non-member countries following pledges by Russia and other non-members to join OPEC in limiting output. OPEC now expects non-OPEC supply to rise by 120,000 bpd this year, down from growth of 300,000 bpd forecast last month, despite an upwardly revised forecast of U.S. supply. Under the agreement, OPEC, Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.

Oil trims loss as OPEC's Barkindo says he sees 'tremendous effort' to cut output -- Oil futures fell by nearly 3% on Wednesday as concerns about climbing U.S. shale production pushed prices to their lowest in about a week, offsetting some earlier support from signs that major crude producers have kept output in check as promised. A monthly report from the Organization of the Petroleum Exporting Countries released Wednesday said that “initial reports show positive signs of compliance” with pledged production cuts, but also noted that its forecast for oil supplies from non-OPEC countries depends on how much U.S. tight oil production improves in the coming months. So-called light, tight oil refers to crude produced by shale producers.  On the New York Mercantile Exchange, February West Texas Intermediate crude CLG7, -2.10%  fell $1.40, or 2.7%, to settle at $51.08 a barrel. Brent crude LCOH7, -2.16% fell $1.55, or 2.8%, to $53.92 a barrel on London’s ICE Futures exchange.WTI and Brent both logged their lowest finish since Jan. 10, according to FactSet data.Speculation that “higher oil prices will translate into additional U.S. shale-oil production as a counter- balance to OPEC efforts to trim supply and reduce excess inventories,” pressured prices, said Tim Evans, energy analyst at Citi Futures, in a note Wednesday. Higher prices for oil “may lead to a resurgence in U.S. tight oil production from the most prolific shale regions,” OPEC said in its report. The Energy Information Administration released a report Tuesday that showed a forecast for an increase in U.S. shale oil production in February, with the largest rise likely to come from the Permian Basin, which covers parts of western Texas and southeastern New Mexico.

OPEC sees weaker appetite for its crude as cut deal kicks in -  OPEC expects demand for its own crude to fall this year but is mindful that the return of US shale could dent positive early signs on non-OPEC compliance with the landmark production restraint deal to rebalance the market, the exporters group said in its monthly oil market report Wednesday. In a sign that OPEC is serious about sticking to its recently instated output agreement, the producer group said it produced 33.085 million b/d in December, down 220,900 b/d from November, with Saudi Arabia leading the way by posting a sizeable fall. . In its monthly oil market report, OPEC projected that the call on its crude for 2017 would be 32.10 million b/d, just below the target of 32.5 million b/d that the organization is aiming to hold production to under the deal, though exemptions for Libya and Nigeria could complicate the picture.Noting that non-OPEC supply cuts were "somewhat challenging," OPEC said it had seen "positive signs" of compliance with the pledged production cuts. But it remains wary that US oil production could start "improving" as higher oil prices start to feed through to stronger rig counts and cash flows. "The number of drilling rigs and reactivation of companies' spending are the two most important factors leading to an output surge in the coming months," it said. Its US oil production forecast for 2017 was revised up by 230,000 b/d, as a move "towards higher prices may lead to a resurgence in US tight oil production from the most prolific shale regions." Non-OPEC oil supply will grow to average 57.26 million b/d in 2017, up from 57.14 million b/d in 2016, OPEC said in the monthly report, an 180,000 b/d smaller increase than previously forecast because of reduced expectations for output from Russia, Kazakhstan, China, Congo and Norway

OPEC sees 2017 call on its crude at 32.10 MIL B/D, below agreed output ceiling - OPEC said Wednesday its 13 members collectively pumped 33.085 million b/d in December, a sharp fall of 220,900 b/d from November, paving the way for its output deal to kick in. On November 30, OPEC agreed to cut 1.2 million b/d from its October output for six months from January 1 and to freeze production at around 32.5 million b/d, with the total including Indonesia. A total of 11 non-OPEC countries have also agreed to cut output by 558,000 b/d in the first half of 2017, with Russia accounting for the bulk of the reduction at 300,000 b/d. Output from top producer Saudi Arabia is estimated to have fallen to 10.474 million b/d in December from 10.623 million b/d in November, according to figures published by the oil producer group in its monthly oil market report. The Vienna-headquartered group officially uses secondary sources to monitor its crude production, but also publishes a table of production figures submitted directly by member countries. But Saudi Arabia told OPEC it produced 10.465 million b/d in December a seven-month low, and a fall of 254,700 b/d from the previous month, a sign it is leading the way in compliance with the agreed output deal. Under the recent deal, Saudi Arabia has agreed to bring its output down to 10.06 million b/d between January and June. Saudi Arabia, the world's largest exporter of crude, saw its oil output rise to record levels last year, with reported production above 10.6 million b/d for five successive months. In 2015, Saudi oil output averaged 10.193 million b/d, according to official data.In its monthly oil market report, OPEC projected that the call on its crude for 2017 would be 32.10 million b/d, just below the target of 32.5 million b/d that the organization is aiming to hold production to, under the deal, though exemptions for Libya and Nigeria could complicate the picture. OPEC's second largest producer Iraq said its average oil production in December jumped to a record high 4.83 million b/d, up 30,000 b/d from November, it told OPEC. Iraq's output in December, according to OPEC's secondary sources, was 4.632 million b/d, which is a difference of 198,000 b/d from Baghdad's number.

Oil Tumbles After Unexpected Crude Inventory Build  --A mixed bag of crude draw and gasoline builds from API combined with IEA comments on rising US Shale output offset by Saudi jawboning about more production cuts possible has pushedoil green before today's DOE data. However, oil prices tumbled when DOE printed an unexpected 2.347mm barrel crude build (1mm draw expected) and another major build in gasoline inventories. US crude production remains at 9-month highs. As Bloomberg's Julian Lee notes, Crude inventories rose in contrast to the draw reported yesterday by the API, combined with another big jump in gasoline, is going to undo all the good work done by Saudi Arabia's oil minister in Davos trying to talk up prices. DOE:

  • Crude +2.347mm (-1mm exp)
  • Cushing -1.274mm (+300k exp)
  • Gasoline +5.951mm (+2mm exp)
  • Distillates -968k (+1.5mm exp)

Following DOE's big builds last week, this week's data snubbed API's draw with a surprising build of 2.347mm barrels in crude and another large build in gasoline inventories...

US crude settles at $51.37, up 29 cents as IEA sees oil market tightening - Oil prices edged higher on Thursday, but swelling U.S. crude stockpiles limited the rebound from a one-week low after the International Energy Agency said oil markets had been tightening even before cuts agreed by OPEC and other producers took effect. The IEA said that while it was "far too soon" to gauge OPEC members' compliance with promised cuts, commercial oil inventories in the developed world fell for a fourth consecutive month in November, with another decline projected for December. U.S. West Texas Intermediate crude oil settled up 29 cents at $51.37 per barrel, having dropped to a one-week low on Wednesday at $50.91 a barrel. International benchmark Brent crude was up 34 cents at $54.26 a barrel by 2:33 p.m. ET (1933 GMT), after closing down 2.8 percent in the previous session. A strong U.S. dollar limited oil's advance. Prices tumbled to session lows after U.S. Energy Information Administration (EIA) data showed crude inventories rose unexpectedly last week as refineries sharply cut production. U.S. commercial crude inventories rose by 2.3 million barrels in the week through Jan. 13 to 485.5 million barrels, well above the expectations of a 342,000-barrel decline. The data also showed much larger-than-expected increases in stocks of gasoline and a surprise drop distillates inventories. Stockpiles of gasoline in the U.S. East Coast swelled to the highest weekly levels on record for this time of year, when refiners typically begin storing barrels ahead of summer driving season.

Texas increases lead huge rig count jump - It’s definitely not a little hop, or even a skip. This week’s rig count jump might even be classified as a huge leap of faith as reports across the industry indicate a the oil and gas industry is on the road to recovery. This week, large acquisitions – one by Exxon Mobil and another by Noble Energy–indicate further optimism that activity will continue to increase. CEO Paul Hibsgaard of Schlumberger also said that recovery is “on its way in all markets.” Of the 35 total new rigs this week, 29 of the new rigs are exploring for oil while 5 are exploring for gas. Texas led the increases with 17 new rigs, but a surprising increase of 7 rigs in Oklahoma warrants attention. The Woodford Cana Basin now has 46 total rigs, only 3 fewer than the prolific Eagle Ford. A year ago, the Cana Woodford only had 39 rigs whereas most other basins had more rigs last year. Other statewide rig count increases this week include the following: New Mexico 1, North Dakota 3, Ohio 2, Oklahoma 7, Pennsylvania 1, Texas 17, Utah 1, & West Virginia 1. The price of WTI crude is currently up at $52.53 while Brent Crude sits at $55.46 (12:55 CST). However, indicates that the price could dip as the U.S. production increases “may very well undo whatever measures OPEC is undertaking to lift prices out of the early 2016 doldrums.”

Oil Slides After Massive Rig Count Gain | The number of active oil and gas rigs in the United States increased on Friday by 35 for a total of 694 active rigs, according to oilfield services provider Baker Hughes, which is 57 rigs above the rig count a year ago. Not surprisingly, most of this week’s gains were in the form of oil rigs, which were up 29, from 522 last week to 551 this week. The number of active oil rigs in the United States is now 41 more than the same week last year. Gas rigs also saw a bump of 6, from 136 last week to 142 this week, which is 15 above the count for the same week last year. This marks 11 straight increases to the gas rig count. Last week marked the first decrease in active oil rigs in 12 weeks. The upward trajectory to the number of active oil rigs follows closely that of higher oil prices, particularly in the Permian basin, which now boasts 281 oil and gas rigs—82 rigs more than the same week last year. The huge increase in oil rigs this week may lend credence to the fear that U.S. shale may very well undo whatever measures OPEC is undertaking to lift prices out of the early 2016 doldrums.Last week we looked at a snapshot of the number of active oil and gas rigs by basin a year ago compared to the current week, which showed 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.This week, the shift is even more pronounced as the Permian continues to gain traction, threatening the Eagle Ford’s prominence.

Rig count leaps by 35, largest jump in 5 years | Fuel Fix: The number of oil and gas rigs in U.S. fields skyrocketed this week, up 35 over last week — the largest increase in five years, since the U.S. shale revolution was booming. After a dip last week, this week’s count marks the ninth increase in the last 10 weeks, and brings to almost 300 the number of rigs added since the count fell to its most recent low last spring. U.S. oil drillers collectively sent 29 more rigs into the patch this week, the Houston oilfield services company Baker Hughes reported Friday. Gas drillers added six rigs. Texas led the rise, with 17 more rigs. West Texas’ Permian Basin added 13. Oklahoma added seven. The total rig count rose to 694, up from a low of 404 in May. The number of rigs has now surpassed the count from this time last year, when 637 were operating in U.S. oil and gas fields. The number of active oil rigs jumped to 551 this week. Gas rigs ticked up to 142. The number of offshore rigs dipped by one to 24, down 5 rigs year over year. Total rig counts incrased by 17 in Texas, seven in Oklahoma, three in North Dakota, two in Ohio, and one each in New Mexico, Pennsylvania, Utah and West Virginia. Not a single state lost a rig this week. The Permian has now added almost 150 rigs, doubling its total since the May low. Drilling activity has continued to rise despite stagnating oil prices. Since February’s low of about $26 a barrel, prices have hovered above $50 for several weeks now. U.S. oil prices Thursday settled at $51.37, up 29 cents, or about half a percent, and were rising again in midday trading Friday, following news that global oil demand was up and supplies down.

OilPrice Intelligence Report: U.S. Drillers Open The Spigots - Oil was flat this week as rising U.S. shale production and a bearish inventory report continued to put pressure on WTI and Brent. Crude oil inventories rose by another 2.4 million barrels, gasoline stocks jumped by nearly 6 million barrels, and upstream production figures provided further evidence that U.S. shale output is coming back, supported by today's huge rig count increase. A new CNBC survey of energy forecasters finds that experts believe that oil prices will fall from today’s levels if the OPEC cuts do not materialize. Many analysts have pegged the expected compliance rate of OPEC members at about 80 percent, which translates to roughly 1 million barrels of oil per day taken off the market. Others argue that the oil market has become unduly optimistic. "The recent rally in oil prices above $50 rests more on faith than fact: no hard data on compliance around pledged supply cuts by OPEC and non-OPEC countries will emerge until February" Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told CNBC. He forecasts Brent to average just $47 per barrel in the first quarter. And he isn’t the only one. "I'm convinced that prices will fall through the year as the market recognizes that OPEC is not complying, Russia does not comply at all, U.S. shale recovers massively thanks to some steps of the Trump administration," Eugen Weinberg, head of commodities research at Commerzbank, said.  The IEA upgraded its estimate for rising U.S. shale production this year, projecting output will increase by 500,000 bpd by the end of 2017, which will translate to an increase of 170,000 bpd averaged over the year. In addition, Brazil and Canada will chip in another 415,000 bpd, mainly from large projects planned years ago. The Paris-based energy agency says that OPEC cuts could lead to significant inventory drawdowns of about 0.7 mb/d, tightening the market in the first half of the year and leading to increases in crude prices. But beyond that, rising non-OPEC production could cause oil prices to fall back again towards the second half of the year. At a minimum, greater price volatility is set to return, the IEA says.

OPEC December Production Data » (graphs) The new January OPEC Monthly Oil Market Report is out with crude only production numbers for December 2016. All charts are in thousand barrels per day. Indonesia has left OPEC so they are now down to 13 nations. The Indonesia historical data has been removed from the entire OPEC data. Therefore the December data does not reflect any drop due to Indonesia leaving OPEC.OPEC crude oil production dropped to 33,085,000 bpd in December. That was a drop of 220,900 bpd. However that was after the November production numbers were revised upward by 175,000 bpd. Therefore the drop was only 46,000 bpd from what was reported last month.Officially, the OPEC agreed to cut production by 1.2 million barrels per day. Those cuts are supposed to kick in in January. But I would not count on their January production numbers being down that much. OPEC’s December production represents an all time high for the cartel.

Despite OPEC Deal Oil Prices Could Fall Sharply From Here - The impact of the OPEC production cuts could be much more muted than many had hoped for as non-OPEC output comes roaring back in 2017. And it isn’t just from U.S. shale. The IEA predicts that non-OPEC countries on the whole will add 380,000 bpd of net capacity this year, and crucially, that figure includes the promised 558,000 bpd reductions that 11 countries promised in conjunction with the OPEC cuts. Of course, U.S. shale will be a major factor in this output rebound. In its latest Oil Market Report, the IEA revised up its forecast for U.S. production this year, expecting gains of 170,000 bpd. Drilling activity is rising quickly – in December, the U.S. saw the largest monthly increase in the rig count in more than two years. Capex is rising, employment is positive, and the industry is becoming more efficient at drilling. “Whether it be shorter drilling times or larger amounts of oil produced per well, there is no doubt that the U.S. shale industry has emerged from the $30/bbl oil world we lived in a year ago much leaner and fitter,” the IEA said in its report. Elsewhere, the gains could be even more substantial. For example, Brazil and Canada, home to major offshore drilling and oil sands, respectively, have long-term projects planned years ago when oil prices were much higher set to come online. Together, Brazil and Canada could add a hefty 415,000 bpd this year. As such, the resurgence of oil production from different parts of the world will take the wind out of the sails of the OPEC deal. But as the U.S. and other non-OPEC countries bring production back to the market, the OPEC deal will help tighten global supplies, even if only modestly. While it is still too early to tell whether or not OPEC will adhere to the promised cuts that it laid out in November, the latest data is encouraging – OPEC output fell by 320,000 bpd in December, largely because Saudi Arabia moved quickly to lower output, while unplanned outages in Nigeria added to the reductions. The “early indications suggest a deeper OPEC reduction may be under way for January, as Saudi Arabia and its neighbors enforce supply cuts,” the IEA said. The Paris-based energy agency says that if OPEC were to comply with the deal, it would imply a drawdown in global inventories on the order of 0.7 mb/d for the first six months of 2017.

Middle East debt issuance jumps 145% to $77.8 billion - Khaleej Times: Debt issuance in Middle East jumped to a record $77.8 billion in 2016 compared to 2015 as major economies in the region resorted to bond and sukuk market to tide over the challenges posed by the drop in oil revenue. "Bolstered by Saudi Arabia's $17.2 billion bond sale in October, Middle Eastern debt issuance reached $77.8 billion during 2016, a 145 per cent increase compared to the value raised during 2015 and by far the highest annual total in the region since records began in 1980," said Nadim Najjar, managing director, Mena, Thomson Reuters. Saudi Arabia was the most active nation in the Middle East accounting for 29 per cent of overall activity, followed by the UAE and Qatar, according to Thomson Reuters annual investment banking analysis International Islamic debt issuance increased 24 per cent year-on-year to reach $37.9 billion during 2016. HSBC took the top spot in the Middle Eastern bond ranking during 2016 with 13.3 per cent share of the market, while CIMB Group took the top spot for Islamic DCM issuance with a 13.5 per cent share. In the backdrop of a steep fall in oil revenues, the combined deficit of the six GCC states is estimated to be $153 billion in 2016, up from $119 billion in 2015. Saudi Arabia accounted for 55 per cent, or more than $84 billion. The GCC countries, which together pump more than 18 million barrels per day of crude oil, suffered significant revenue shortfall in 2016. In 2015, total GCC total revenue, mainly from hydrocarbons, dropped to $443 billion, the lowest in five years, from a peak of $735 billion in 2013. In 2016, combined GCC revenue is estimated to have dropped further to $365 billion. According to forecast by Kuwait's investment firm Kamco, the six-nation group is set to post an average annual shortfall of $100 billion until 2021

Saudi Arabia suggests another production cut possible in 2017.  Saudi Arabia's energy minister says there's a chance of another production cut from OPEC countries this year. Speaking at the World Economic Forum at the Swiss ski resort of Davos, Khalid Al-Falih says he "would not exclude" another cut to follow last year's December agreement if higher prices don't stick. He noted that in the past the OPEC oil cartel has often had to cut production more than once to stabilize the market. Another option, he says, is that the recently agreed on production cut could be extended further. However, he says oil ministers don't want to create a shortage too early. Oil prices are trading over $50 a barrel, nearly double the level they were a year ago. Earlier Thursday, the International Energy Agency said global oil output is dropping for the first time in months, as Saudi Arabia and other oil-producing countries follow through on pledged cuts aimed at lifting oil prices. The IEA's monthly report says Thursday that OPEC production dropped to 33.09 million barrels a day in December from 34.2 million the previous month.

IMF Slashes Saudi Arabia Growth Forecast on Lower Oil Output - The International Monetary Fund cut its growth outlook for Saudi Arabia on lower oil production, underscoring the challenges facing the kingdom as it seeks to overhaul its economy. Gross domestic product will expand 0.4 percent in 2017, the lender said in its World Economic Outlook report update on Monday, citing the impact of the recent deal by the Organization of the Petroleum Exporting Countries to reduce output. It compares with the fund’s October prediction of 2 percent, and a median estimate of 0.9 percent in a Bloomberg survey. The forecast reflects cuts in government spending as well as the impact of lower oil production, Gian Maria Milesi-Ferretti, deputy director of the IMF’s research department, told reporters on Monday. “There is a big adjustment in spending downwards,” he said. “There is an adjustment in taxes upwards, and as a result non-oil growth is not going to be as good as it was during periods of strong oil prices.” Saudi Arabia is seeking to build investor confidence in its long-term strategy to reduce dependence on crude and boost non-oil sectors of its economy, while trying to plug one of the Middle East’s biggest budget deficits. The kingdom is planning to borrow as much as $15 billion this year on international debt markets to help fund its spending plans, following last year’s $17.5 billion sovereign bond sale. Saudi Arabia’s so-called Vision 2030 strategy derives from the global slump in oil prices since 2014, which severely dented revenue. Led by Deputy Crown Prince Mohammed bin Salman, it includes a plan to set up the world’s biggest sovereign wealth fund and to sell a stake of less than 5 percent in state-run Saudi Arabian Oil Co. by 2018. Saudi Arabia estimates growth fell to 1.4 percent in 2016, the lowest since the recession in 2009, as it cut spending by suspending bonuses for public employees and reducing ministers’ salaries. The government has also raised the cost of fuel, and plans to introduce value-added taxes and fees on expatriate workers.

Saudi Arabia’s Flawed ‘Vision 2030’ – Analysis – The dramatic drop in oil prices has depleted Saudi Arabia’s cash reserves by a whopping US$150 billion and driven the ruling family to contrive hastily a financial rescue plan.[1] On April 25, 2016, Deputy Crown Prince Muhammad bin Salman announced the “Vision 2030” plan to revolutionize the Saudi economy by ending its dependency on oil.[2] Based on a report by the consulting firm McKinsey, the plan seeks to reinvigorate a Saudi economy that yielded an annual gross domestic product (GDP) growth of only 0.8 percent between 2003 and 2013, less than most emerging economies.[3] The plan seeks to reduce the role of the public sector and bureaucracy while simultaneously empowering the private sector to become the main employer and vehicle for economic growth. The plan calls for the creation of a huge sovereign wealth fund to be funded by an unprecedented initial public offering (IPO) of a 5 percent stake in Aramco. The International Monetary Fund (IMF) reservedly endorsed the Saudi intention to address its alarming monetary deficit but voiced subtle doubts about Vision 2030, specifically because its 14-year time frame “sets a bold and far-reaching transformation of the economy to diversify growth, reduce dependence on oil, and increase the role of the private sector.”[4] Another more critical assessment by John Edwards, a member of the board of the Reserve Bank of Australia, warned that, in order for the plan to be successful, it must “profoundly change Saudi society and politics.”[5] And selling 5 percent of Aramco cannot reverse the kingdom’s gloomy economic outlook unless revenues are generated as soon as possible from non-oil sources since the proceeds from the IPO equal the annual depletion rate of cash assets. Riyadh has already wasted precious time, having spent trillions of dollars in 1970-2014 on nine 5-year development plans that left 90 percent of the annual Saudi budget dependent on oil revenues.[6] Vision 2030 is, therefore, bound to fail for four reasons: It is an overblown mega-project scheme; it focuses on economics and discards political development; it superficially approaches the challenge of instilling values of achievement; and it takes the generation of non-oil revenues as its ultimate goal.

Can Saudi Arabia Survive With Oil Below $60? - With the OPEC production deal holding, at least for the moment, questions have now arisen over how prospects look for the cartel’s biggest producer. It’s been a strange few years for the Kingdom of Saudi Arabia, as its endured budget deficits for the first time in its modern history, stagnation in oil prices and rising competition from other OPEC members and the American shale boom. Recently, talk has centered on the Saudi monarchy’s glimpse of the future: the Vision 2030 plan, whereby it hopes to diversify its economy and end its dependence on the mercurial oil and gas market. But can the world’s biggest oil producer and OPEC’s de facto leader pull it off? In the short term, Riyadh will continue to feel the pain of lower-than-normal oil prices.The growth outlook for Saudi Arabia has been slashed, as the International Monetary Fund (IMF) announced on January 16 that the world’s largest oil producer would see its GDP grow by only 0.4 percent in 2017. The estimate comes on the basis of the continued low price of oil, but more importantly on the country’s slashed oil production: as a result of the recent OPEC production deal, Saudi Arabia has agreed to keep its production level at or below 10 million bpd. This has resulted in a cut in its growth outlook, down from 2 percent in October, according to Bloomberg.This comes after anemic growth in 2016, where GDP expanded by only 1.4 percent. If oil prices stabilize, and the country’s economic forecast improves, GDP will likely expand by 2.3 percent in 2018. The official Saudi response decried the IMF’s results as overly conservative. A government spokesman declared that Saudi growth would be “north of 1 percent,” citing the anticipated investment in renewable energy and a stimulus packaged the Saudi government was planning for the private sector, according to Bloomberg. The Saudi leadership had been pivotal in the campaign to bring about an OPEC cut, after resisting production deals for years. The stakes were raised this year, as draining cash reserves and a resistant American energy sector convinced Riyadh that cuts were needed to boost prices. The cuts have come, surprising many analysts, and the OPEC deal looks set to hold at least for the time being.

UN Reports Death Toll In US-Sponsored Yemen War Reaches 10,000 -- A UN envoy held talks with Yemen’s President Abd Rabbuh Hadi on Monday as the United Nations said the death toll from the war had reached 10,000.The envoy, Ismail Ould Cheikh Ahmed, was in Aden for the meeting that focused on a return to a ceasefire and to political talks to end the nearly two-year war.The talks came as fighting in the southern Shabwa area on Monday reportedly killed 34 people and wounded 16 others during clashes between Houthi fighters and pro-government forces.The United Nations said the civilian death toll in fighting since a Saudi-led force intervened in March 2015 had reached 10,000, up from the previous figure of 7,000.The Saudi-led coalition has been blamed for most of the civilian casualties. The devastation has also  drawn attention to the role of western powers who have continued to provide Riyadh with weapons, logistical support and intelligence. The Houthis have also been accused of human rights violations. The higher toll “underscores the need to resolve the situation in Yemen without any further delay”, said UN spokesman Farhan Haq in New York. “There is a huge humanitarian cost.” Jamie McGoldrick, humanitarian coordinator of the UN Development Programme, said the latest death toll is based on lists of victims gathered by hospitals and the true figure could be higher. McGoldrick said up to 10 million Yemenis were also in urgent need of humanitarian assistance.

Over Two Million Yemenis Displaced by Conflict - The humanitarian crisis in Yemen caused by the ongoing conflict over the past 22 months has led to the internal displacement of over 2.1 million Yemenis. It is also complicating an already difficult situation for thousands of migrants from the Horn of Africa attempting to cross the country on the way to Saudi Arabia. A high-ranking delegation from IOM earlier this month visited Sana’a, Yemen to assess and support IOM Yemen’s efforts to aid displaced Yemenis and migrants in the country. Carmela Godeau, IOM’s Regional Director for Middle East and North Africa based in Cairo, and Mohammed Abdiker, Director of IOM’s Department of Operations and Emergencies, visited a settlement of displaced Yemenis in Sana’a and met local partners working with IOM to provide health care and non-food items to help displaced families cope with winter weather. The delegation also visited one of the 31 Child Friendly Spaces that IOM has opened in Yemen. These provide direct assistance to displaced children. They aim to ease the stress and effects of the conflict on children, in addition to providing awareness-raising sessions and psychosocial support for traumatized children. Other visits allowed the IOM delegation to see the work of an IOM health clinic, which provides primary health care to displaced Yemenis and migrants, including psychosocial support to those suffering from displacement and war traumas.

Mosul battle: Iraqi army prepares offensive on west of city - BBC News: The Iraqi army says it is preparing military operations to retake western Mosul, the last urban stronghold in Iraq of so-called Islamic State. The preparations follow a recent offensive which officials said on Wednesday had recaptured nearly all of the city's east. Counter-terror chief Talib Shaghati said special forces had retaken all eastern districts assigned to them. Some IS fighters remain holed up in north-eastern districts, he added. Earlier reports suggested the army had retaken all of the city's east. The jihadists remain in control of all of Mosul west of the Tigris river, including the warren-like streets of the old city, which present a challenge to government forces.The army has made swift advances through eastern Mosul since re-launching its operation to retake the city last month. The operation began in October, more than two years after the jihadists overran the city, but stalled amid heavy IS resistance. It is the Iraqi military's largest operation in years, involving domestic security forces, Kurdish Peshmerga fighters, Sunni Arab tribesmen and Shia militiamen, and assisted by US-led coalition warplanes and military advisers. More than 100,000 people have fled their homes in and around Mosul and UN officials have warned that the figure is likely to rise as pro-government forces press further into the city.

As caliphate crumbles, Islamic State lashes out in Iraq | Reuters: Two days after Iraqi forces launched a new push against Islamic State in Mosul, bomb blasts ripped through a marketplace in central Baghdad - the start of a spate of attacks that appear to signal a shift in tactics by the Islamist group. The Sunni jihadists have targeted Shi'ite Muslim civilians. Raids on police and army posts in other cities, also claimed by Islamic State, have accompanied the bombings. The attacks show that even if Islamic State loses the Iraqi side of its self-styled caliphate, the threat from the group may not subside. It will likely switch from ruling territory to pursuing insurgency tactics, seeking to reignite the sectarian tensions that fueled its rise, diplomats and security analysts say. In addition to operations in and around Baghdad, IS has carried out attacks in the region and Europe as it has come under pressure in Syria and Iraq. In Iraq, U.S.-backed Iraqi forces are driving IS out of Mosul, its largest urban center in the vast territories it seized 2-1/2 years ago there and in neighboring Syria. Iraq's government is aware of the challenge it faces in stemming the IS threat after Mosul. "Terrorism uses the weapon of sectarianism in Iraq and Syria ... in order to drive people and communities apart and take control of them,"

The US Dropped Bombs Every Three Hours In 2016 - Few people would claim that 2016 was a particularly peaceful year for the world. Being the globe’s foremost military power, the United States was a major player in a number of conflicts. The United States military was so active, in fact, that public data recently analyzed by the Council on Foreign Relations found that over the past year 26,171 airstrikes were conducted. Compared to 2015, just over 3,000 more bombings were carried out in 2016. Doing the math shows that in 2016, on average, the U.S. military conducted an airstrike every three hours.It is worth pointing out that the Department of Defense data does not necessarily tally every bomb dropped, instead tracking strikes which can often encompass a large number of bombings. What’s more, the U.S. does not always disclose military operations to the public. Considering these two factors, it could be argued that bombing every three hours may be a rather conservative number. Though the American media and public last year focused primarily on the U.S.’ role in fighting the Islamic State in Syria and Iraq – where, indeed, the majority of 2016 airstrikes were carried out – five other countries were also bombed: Afghanistan, Libya, Yemen, Somalia and Pakistan. After the disastrous wars in Afghanistan and Iraq begun under the Bush administration, Barack Obama ran on a platform of finally putting an end to both drawn out conflicts. American voters were beyond exasperated with what they rightly viewed as military ventures that had been costly in taxpayer dollars and uniformed lives with few tangible results. Such was the world’s faith in President Obama’s pledges that he was awarded the Nobel Peace Prize.With Obama’s two-term presidency drawing to a close, it might be difficult to say he has made good on these promises. Though he has done much to wind down t he use of ground troops in these nations, Obama has replaced them with bombing raids and drone strikes.

On His Way Out the Door, Obama Bombs Libya One Last Time - U.S. B-2 war planes bombed two camps in Libya overnight that Pentagon officials claim were housing Islamic State (ISIS) militants, concluding President Barack Obama's time as commander in chief with another slew of deaths. More than 80 people were killed at the camps about 25 miles southeast of Sirte, where ISIS fighters fled from last year after attacks by Libyan fighters backed with American air power. The bombing, which was reportedly requested by Libya's Government of National Accord, comes a month after the U.S. claimed a "successful conclusion to a months-long air campaign against the militant group," the Guardian notes. Obama reportedly authorized the strikes earlier this week, without congressional approval. The president committed to giving Libya air support after the U.S.-backed toppling of former Libyan leader Muammar Gaddafi in 2011. He later said the military's lack of an action plan for the day after Gaddafi's ouster was his "worst mistake" as a president. The strikes appear to underscore that ISIS remains a threat in Libya, regardless of U.S. military claims. For a Pentagon that erroneously claimed it "doesn't do body counts," some more body counts on the way out the door.

The U.S. flew stealth bombers across the globe to strike ISIS camps in Libya -- Two Air Force B-2 stealth bombers struck Islamic State camps southwest of the Libyan city of Sirte on Wednesday night, less than a month after the Pentagon declared an end to an extended air campaign there. Pentagon press secretary Peter Cook said that the aircraft, known for their distinctive bat-like appearance, dropped more than 100 bombs and hit two Islamic State encampments about 30 miles outside Sirte. The outposts were inhabited at least in part by fighters who had fled the city in the fall, and the operation was approved by President Obama, Cook said. Defense Secretary Ashton B. Carter told reporters Thursday that the camps contained militants “actively plotting” attacks in Europe and that the strikes were “critically important.” “As always, external operations are a very important part of the reason to destroy ISIL, as well as to wipe them out of Libya itself,” Carter said, using an acronym for the Islamic State. MQ-9 armed drones also participated in the strikes, using Hellfire missiles to hit targets that remained after the initial bombardment, Col. Patrick Ryder, an Air Force spokesman, told reporters. The operation took 34 hours, and the two B-2s, named the Spirit of Pennsylvania and the Spirit of Georgia, flew from Whiteman Air Force Base in Missouri to carry out the strikes, Ryder said. The camps were in remote desert locations, and no civilians were believed to have been hit in the bombardment, officials said.

Russia Invites Incoming Trump Administration To Syria Peace Talks After Snubbing Obama -- Three weeks after John Kerry's State Department was humiliated one last time when Russia, Turkey and Syria sat down alone, demonstratively without inviting the US, to discuss the terms of a proposed Syrian ceasefire, Russia has already offered a diplomatic fig leaf to the incoming Trump administration when Russian Foreign Minister Sergey Lavrov told the press Russia has invited the United States to take part in the upcoming talks on Syria,  "As I said yesterday, we have already invited the US," Lavrov told journalists in Moscow on Thursday. And since the meeting on the Syrian settlement is scheduled to take place in the Kazakh capital of Astana on January 23, three days after Trump takes over, the implication is clear: the invite is for the Trump administration only. Lavrov confirmed: “We think it would be the right thing to invite the representatives of the UN and the new US administration to the meeting,” Lavrov had said on Wednesday, at a press conference summing up the results of Russian foreign policy in 2016. Quoted by RT, a spokesman for UN Secretary-General Farhan Haq told RIA Novosti on Wednesday that the UN “has received an invitation to take part” and will attend. He added that the UN representatives will “try to give maximum support” to the negotiations.

US spies 'warned Israel not to share intelligence with Trump' - US spies warned their Israeli counterparts that Russia may have “levers of pressure” over Donald Trump and told them to be careful about sharing intelligence with the White House in case it was passed on to the Kremlin, according to Israeli media reports.  The American intelligence officials reportedly told the Israelis not to share sensitive information with Mr Trump’s aides until the incoming president’s relationship with Russia had been fully investigated. The claim was made in the Israeli newspaper Yedioth Ahronoth and cannot be confirmed.  A spokesman for Benjamin Netanyahu did not respond to a request for comment, and the CIA also declined to comment. But if true it underscores the extraordinary state of relations between Mr Trump and US intelligence, with American spies openly warning foreign allies that the new president may be compromised by Russia. The Yedioth Ahronoth story, written by the investigative journalist Ronen Bergman, claimed to have details about a recent meeting between American and Israeli intelligence officials. “Israeli officials who attended that meeting said that their American counterparts spoke despairingly about the election of Trump, who has repeatedly lashed out at the American intelligence community,” Mr Bergman wrote. He continued: “The American officials went on to say that they believed that Putin has ‘levers of pressure’ over Trump—but refrained from going into any detail.” The potential leverage referred to is believed to be a dossier of unverified but potentially explosive allegations against Mr Trump which was compiled by Christopher Steele, a former MI6 agent. The dossier was known to US intelligence for months before it erupted into the public sphere this week. Mr Trump has strongly denied that Russia has any leverage over him. On Friday, he tweeted that the “phony allegations against me were put together by my political opponents and a failed spy afraid of being sued”.

2017: The Year When the World Economy Starts Coming Apart - Gail Tveberg - Some people would argue that 2016 was the year that the world economy started to come apart, with the passage of Brexit and the election of Donald Trump. Whether or not the “coming apart” process started in 2016, in my opinion we are going to see many more steps in this direction in 2017. Let me explain a few of the things I see.  Many economies have collapsed in the past. The world economy is very close to the turning point where collapse starts in earnest.  The history of previous civilizations rising and eventually collapsing is well documented.(See, for example, Secular Cycles.)To start a new cycle, a group of people would find a new way of doing things that allowed more food and energy production (for instance, they might add irrigation, or cut down trees for more land for agriculture). For a while, the economy would expand, but eventually a mismatch would arise between resources and population. Either resources would fall too low (perhaps because of erosion or salt deposits in the soil), or population would rise too high relative to resources, or both. Even as resources per capita began falling, economies would continue to have overhead expenses, such as the need to pay high-level officials and to fund armies. These overhead costs could not easily be reduced, and might, in fact, grow as the government attempted to work around problems. Collapse occurred because, as resources per capita fell (for example, farms shrank in size), the earnings of workers tended to fall. At the same time, the need for taxes to cover what I am calling overhead expenses tended to grow. Our current economy seems to be following a similar pattern. We first used fossil fuels to allow the population to expand, starting about 1800. Things went fairly well until the 1970s, when oil prices started to spike. Several workarounds (globalization, lower interest rates, and more use of debt) allowed the economy to continue to grow. The period since 1970 might be considered a period of “stagflation.” Now the world economy is growing especially slowly. Historically, economies have taken many years to collapse; I show a range of 20 to 50 years in Figure 1. We really don’t know if collapse would take that long now. Today, we are dependent on an international financial system, an international trade system, electricity, and the availability of oil to make our vehicles operate. It would seem as if this time collapse could come much more quickly.

China’s housing boom ends as prices fall in top cities --- House prices have fallen across most of China’s hottest property markets for the first time in almost two years, marking an end to the enormous growth that saw prices rise as much as 40 per cent last year. The end of the housing boom will also mean the end to an important source of economic growth that could have helped China hit its economic growth targets this year. “We are seeing a peak in the property market . . . Last year was an incredible surge,” said Shen Jianguang, chief economist at Mizuho Securities Asia. Prices of newly built residential properties dropped between 0.1 and 0.4 per cent in December from the previous month in 12 out of 15 “hotspot” cities, according to data released by the National Bureau of Statistics on Wednesday.Price rises in cities such as Shanghai and Beijing reached 5 per cent a month in August. Investors had piled into the housing market, especially after a dramatic stock rout in 2015, seeing property as one of a few options left for high returns on the mainland.However, their hopes were dashed when the government decided to quash potential asset bubbles last autumn. More than 20 city governments passed restrictions on house purchases and increased the minimum downpayment required for a mortgage.  Financial regulators also stopped property developers from borrowing to finance land acquisitions in an attempt to keep land prices down. Last month, Beijing’s mayor promised that house prices would not rise this year. Although many analysts expect property prices to fall at most 5 per cent year on year in the current downturn, local governments are ready to move to avoid sharper crashes.“Local governments do not want prices to decrease too much,” said Mr Shen, explaining that governments restrict land supply to prop up property prices if they fall too quickly.“The local government cannot endure less construction because then they will have no revenue,” he added. Many Chinese local governments are dependent on land sales to meet their budget requirements.  China’s real estate and construction sectors made up a fifth of GDP growth in the first half of last year, according to Liang Hong, chief economist at China International Capital Corporation. GDP data to be released on Friday will show how reliant China’s economy was on property and related sectors in 2016.

Shenzhen built more skyscrapers in 2016 than the US and Australia Combined  China’s skyscraper craze reached another new high last year. In 2016 the world saw the completion of 128 skyscrapers, up from 114 in 2015, according to the US-based Council on Tall Buildings and Urban Habitat (it defines a skyscraper as being higher than 200 m, or 656 ft). Of those, 84 came from China, a new record for the nation. China has topped the council’s completions list every year for nearly a decade (pdf, p. 2). In 2015 it notched 68 such buildings, also a record in China at the time. Shenzhen, a city in southern China known for electronics manufacturing, stood out last year, completing 11 such skyscrapers. That’s more than the US and Australia combined. The city was also China’s hottest real estate market last year. Next was Chongqing, noted for its fast GDP growth (link in Chinese), and Guangzhou, which completed a new finance center with 111 stories and especially fast elevators.  Meanwhile many cities in China have seen growing office vacancy rates. In Shanghai’s central business district—home to the Shanghai Tower, the nation’s tallest building—the rate jumped from 7.3% in the third quarter last year to 10.5% in the fourth, according to a Cushman and Wakefield report.  China’s building boom is likely to slow down, notes the CTBUH, thanks to a “still-cooling national economy” and an uptick in capital outflows (p. 6). But with 328 skyscrapers under construction in 2017, it might take a while.

China’s bitcoin market: another ticking time bomb? | South China Morning Post: Speculation, supported by leveraged betting and program trading, has left the virtual currency market in urgent need of regulation, say analysts. Many analysts and investors fear China’s bitcoin market is quickly turning into another time bomb like the scandal-hit peer-to-peer (P2P) lending sector. A series of P2P lending platform frauds rocked the country last year and washed away tens of billions of yuan of investment from small investors, creating a headache for local and central governments, which feared social unrest. Now speculation, derivative products, leveraged betting and program trading appear to be spreading in the largely unregulated bitcoin market. Such practices are thought to be responsible for pushing up the price of bitcoin by more than 260 per cent since early 2016.Most of the transactions are happening on three privately owned platforms or through P2P trading. Data provider Bitcoinity shows trading volume in China accounted for more than 98 per cent of the global total during the past 30 days amid more pronounced price fluctuations. Until now, no regulator has overseen this market, which sees daily turnover worth tens of billions of yuan.

China’s Reserves Fell by Around $45 Billion in December (Using the PBOC Data) -  Brad Setser - The pace of decline in China’s foreign reserves matters. Not because China is about to run out. But rather because China will at some point decide that it doesn’t want to continue to prioritize “stability” (against a basket) and will instead prioritize the preservation of its reserves, and let the yuan adjust down. Significant voices inside China are already making that argument. And I fear that if the yuan floats down, it will stay down. China will want to rebuild reserves, and—if exports respond to the weak yuan—(re)discover the joys of export-led growth. Relying on exports is easier than fighting the finance ministry’s opposition to a more expansive (on-budget) fiscal policy, or seriously expanding the provision of social insurance to bring down China’s savings. I thus disagree with those who argue that the “China” shock is over. It depends a bit on the exchange rate. China’s exports of apparel and shoes have probably peaked. But China’s exports of a range of machinery and capital goods continue to remain strong—and at a weaker exchange rate, China could supply more of the components that go into our electronic devices, and export far more auto parts, construction equipment parts, engines, generators, and even finished autos than it does now.   “Mechanical” engineering writ large continues to be a significant part of the U.S. economy, and even more so the European economy.  One of the main indicators—PBOC balance sheet reserves—that I follow for tracking China’s reserve sales is now out for December, and it points to around $45 billion in sales. I prefer to look at all the foreign assets the PBOC reports on its balance sheet rather than just its reported foreign exchange reserves. That variable was down $43 billion in December, and $133 billion for q4. Actual foreign exchange reserves fell by a bit more—$46 billion in December and $141 billion in q4.  The loss of reserves in December was a bit smaller than in November. But only just. The average monthly fall in q4 was over $40 billion. That is a pace that is ultimately unsustainable. I think China would be fine with $2 trillion in reserves, given how little foreign debt it holds. Others say $2.5 trillion. If reserves are falling by a steady $40 billion a month/$500 billion year, it is only a matter of time before China hits its limit. With China, it may be a long time though…

China's Central Bank Pumps Out a Record $60 Billion Before Holidays -- China’s benchmark money-market rate jumped the most in two years, with record central bank cash injections being overwhelmed by demand before the Lunar New Year holidays. The People’s Bank of China put in a net 410 billion yuan ($60 billion) through open-market operations on Wednesday, the biggest daily addition since Bloomberg began compiling the data in 2004. That brings the total injections so far this week to 845 billion yuan. The interbank seven-day repurchase rate jumped 35 basis points, the most since December 2014, to 2.76 percent, according to weighted average prices. Demand for cash tends to increase before the Lunar New Year holidays, when households withdraw money to pay for gifts and get-togethers. Month-end corporate tax payments are adding to the pressure this time, with the break running from Jan. 27 through Feb. 2. The PBOC offered 200 billion yuan of seven-day reverse repos and 260 billion yuan of 28-day contracts, compared with 50 billion yuan of loans maturing on Wednesday. “The PBOC aims to ensure that the liquidity situation remains adequate, while the 28-day reverse repo is apparently targeted at covering the holidays,” said Frances Cheung, head of rates strategy for Asia ex-Japan at Societe Generale SA. “There could also be preparation for any indirect tightening impact from potential outflows.”

China’s Xi Jinping Seizes Role as Leader on Globalization - WSJ: Chinese President Xi Jinping issued a full-throated defense of international trade and economic integration before a packed hall here, as doubts about the merits of globalization mount in the U.S. and elsewhere in the West. “No one will emerge as a winner in a trade war,” Mr. Xi, the leader of the world’s second-biggest economy, said in an hourlong speech on Tuesday to members of the world elite gathered for the annual World Economic Forum. “Pursuing protectionism is just like locking one’s self in a dark room. Wind and rain may be kept outside, but so are light and air.” The Chinese leader’s message comes as the U.S. prepares to inaugurate President-elect Donald Trump, who has voiced skepticism about the benefits of free trade to the U.S.  Mr. Xi sought to portray Beijing as a benevolent power intent on upholding an international order that has boosted common prosperity. He exhorted world leaders to “join hands and rise to the challenge.” The speech was portrayed by some who heard it as a response to politicians in the U.S. and Europe who are turning their focus inward. “There is a vacuum in global leadership. Xi sees it and he seizes it,” said Carl Bildt, a former prime minister of Sweden, who was in the audience. “If the U.S. does take a more mercantilist route, overall the Asians and Europeans will have to combine to preserve global free trade.” China has been one of the biggest beneficiaries of globalization, which opened the way for the country, with its vast and relatively low-wage workforce, to become the world’s factory floor. Inexpensive goods manufactured in China have flooded the planet. That shift helped lift hundreds of millions of Chinese from poverty. But it was also a factor that contributed in costing millions of workers in the West their jobs, fueling mounting suspicion of transnational economic integration and the current antiestablishment backlash in politics in much of the developed world.

Xi Jinping rebuked Donald Trump, positioning himself as champion of globalization - Xi Jinping, China’s president, offered a robust defense of the Davos world order, positioning himself as globalization’s most vocal champion, and suggesting the system needed reform, not rebuke. While never addressing US president-elect Donald Trump by name, Xi directly and negatively responded to many of the policies Trump has espoused: closing the borders, curbing free trade, backing away from globalization. “Pursuing protection is just like locking oneself in a dark room. While wind and rain may be kept outside, so are light and air,” Xi said at the 2017 World Economic Forum meeting in Davos. “No one will emerge as a winner in a trade war.” In the speech, the first ever by a Chinese president at the annual gathering of the global elite, Xi said there was no turning back the tide of globalization: it was not invented by someone, but is the natural outcome of forces propelling humanity forward. He also said globalization should not be blamed for the world’s woes. The refugee crisis was the result of war and regional conflict: the solution to that is the pursuit of peace and reconciliation. He said you could not even blame the financial crisis on globalization: it was the “excessive chase of profit by financial capital” and too little regulation. “There’s no point in blaming economic globalization; it is simply not the case, and it will not solve the problems.” Xi’s pep talk was in stark contrast to the deep criticism of the Davos globalization agenda, and the self-questioning evident at the forum itself. “When countering difficulties, we should not complain about ourselves, blame others, lose confidence, or run away from responsibilities. Instead we should join hands and rise to the challenges.”

Not Mentioned In Davos: China Already Has Aggressive Import Tariffs On Nearly Every Form Of Steel - In light of Xi Jinping's spirited defense of free trade in Davos yestrday, which implicitly blamed rising protectionism on Donald Trump, here are some revelant facts courtesy of Axiom's Gordon Johnson. China has been hit with a number of steep, and at times draconian, steel import tariffs from the US in 2015 (when imports into the US from China fell -25.1% YoY) and 2016. Exhibit 1: China Steel Imports into the US In fact, underpinning this dynamic, in 2016, or the most recent year on record, steel imports into the US from China dropped -63.4% YoY, or the second largest annual decline ever, and the lowest percentage for China steel imports into the US as a percent of total US imports EVER (Exhibit 2). Exhibit 2: China Steel Imports into US as % of Total US Steel Imports – Lowest EVER in 2016. Thus, in our view, while there is a strong view that President Elec Trump’s “getting hard on China” stance will be a huge positive for the steel industry, BASED ON THE NUMBERS, we would argue that this was accomplished during Obama’s two-term presidency. Given the acute reversal higher in steel stocks today on comments on overcapacity in China from Mr. Trump’s incoming US Commerce Secretary Wilder Ross, we do not believe this dynamic is well understood by the lion’s share of market prognosticators at present. To wit, unless more tariffs on Chinese imports are going to drive them into negative territory (at risk of stating the obvious, this is impossible), we see the market’s reaction today as misplaced.

White Paper on Asia-Pacific Security Reveals China’s Regional Ambitions - China’s policy white paper on Asia-Pacific security cooperation, its first ever dealing with the region, signals the country’s desire to put its own stamp on the region’s security order. The central thrust of the document, issued on Wednesday, January 11, is security cooperation. The document mentions, but does not dwell, on “hotspot” issues like the Korean nuclear crisis, the Afghan reconciliation process, the South China Sea dispute or, as it is often called, the Senkaku-Diaoyu issue. Nevertheless, the paper provides a clear outline of the realist basis of Chinese security policy. For instance, it explicitly warns  that “small and medium-sized countries need not and should not take side among big countries.” India will be happy that it is listed among the “major countries”, along with the US, Russia and Japan, who are, in turn enjoined to “treat the strategic intentions of others in an objective and rational manner, reject the Cold War mentality [and] respect each other’s legitimate interests and concerns.” This peculiar formulation – coming from a country that has long espoused equality of nations big and small – is eminently practical advice in some ways, with echoes from China’s past.

Trump would win trade war with China, says aide  -- One of Donald Trump's closest advisers has told the BBC that the US would win a trade war with China.Anthony Scaramucci warned that if China chose to retaliate when the Trump administration imposed tariffs on imports, it would cost them "way more" than it would cost the US.He added the current trade relationship was "more favourable to China than us".The comments came just as China's President Xi warned that no-one would "emerge as a winner in a trade war". In the first address to the World Economic Forum by a Chinese president, Mr Xi gave a staunch defence of globalisation and attacked protectionism."Pursuing protectionism is just like locking oneself in a dark room. While wind and rain may be kept outside, so are light and air. No-one will emerge as a winner in a trade war," he told the audience. "China will keep its door wide open and not close it," he added. During his election campaign, Mr Trump floated the idea of a 45% tariff on goods from China.Mr Scaramucci, who will enter the White House on Friday as a senior adviser to the president, called the relationship with China "asymmetrical", and downplayed the nation's ability to exact revenge on the US.  "What are they going to do, [are] they going to move against our move for fairness? "That's going to cost them way more than it is ever going to cost us, and I think they know that." Mr Scaramucci, a Goldman Sachs alumnus who spent three decades on Wall Street, insisted Donald Trump is a fan of free trade, and that his policies, including the renegotiation of longstanding trade agreements, do not amount to protectionism. "If you are running eight or nine hundred billion dollar trade deficits, some of that is based on demand, but some of that is systemic related to the trade deals. "There's an unfairness in the system," he added. "That has borne a deleterious outcome for working-class families and middle-class people that Mr Trump identified."

Taiwan Holds Military Drills Simulating Naval Invasion By China -- Taiwan today sent the clearest message to China that it is taking deteriorating diplomatic relations with its estranged mainland cousin seriously, when the island nation began two days of military drills simulating an attack by China, in the wake of Beijing's sailing of an aircraft carrier through the Taiwan Strait, as the government sought to reassure the public. The island's armed forces gathered in central Taiwan for annual drills that saw troops practice combat skills with tanks, attack helicopters and artillery. The drill was conducted in Taichung by the 10th Army Command and the Army Aviation and Special Forces Command. It simulated a scenario in which a Chinese naval fleet comprising destroyers, corvettes and amphibious assault ships was conducting training off China's southeastern coast. The Taiwan drill is likely in response to a recent show of force by Beijing when China sailed its only aircraft carrier through the strait last week.  The Liaoning did not enter Taiwanese waters but went into an area covered by its air defence zone. Chinese military aircraft also passed near Taiwan on December 10 for the second time in less than a month.

Modi Government Can't Get Away With Demonetisation by Claiming 'Good Intent' - Demonetisation has crushed all the government’s previous pet projects, from the Swachh Bharat Abhiyan to Make in India, while still using patriotic emotions to advertise their importance. The waste-workers of Delhi, also called ragpickers, constitute the bedrock of the Swachha Bharat Abhiyan. They undertake the most difficult tasks needed to keep a city clean. They go door-to-door to collect garbage and then manually segregate the often toxic and hazardous waste to make a living by selling the recyclable paper, plastic and metal. They live and raise their children in rented plots that combine as a home and a warehouse for the garbage they sell. Their colonies are infested with refuse and vermin. Their economic position is perennially precarious. They have no guaranteed source of income, little in terms of savings and are exploited in all their dealings. In short, this is a community that struggles through a sub-human existence to provide the services that make the Swachha Bharat dream possible. The prime minister himself declared their work to be divine at the launch of the abhiyan.   Seen from the eyes of this community, demonetisation was less ‘monumental mismanagement’ as Manmohan Singh put it and more premeditated punishment. One day the prime minister pronounced their lives savings to be equivalent to the raddi they collect and sell. Then they were told that they would have to trade their notes at a bank, an institution that has always treated them with systematic contempt. Then a few days later, they were told that the deadline to convert old notes was not the end of the year but within a few hours. The promise to the bearer of the Indian currency was the only aspect of the Indian state they have thus far had reason to trust. Now that trust too stands broken.Unavailability of liquidity has dried up demand for recyclables. By mid-December, desperation had set in as feeding the family became a daily challenge. Most abandoned hope and headed back to ancestral homes in Bihar and Uttar Pradesh. There are estimated to be 1.5 lakh waste-pickers in Delhi. That’s tens of thousands of families hungry, pauperised and uprooted, with kids pulled out of school and taken back to the first step of the ladder of poverty they have been climbing all their lives. Apart from the inhumanity of this outcome, large parts of Delhi’s waste collection and segregation ecosystem lie in tatters. Demonetisation has wrecked both the process by which our cities are kept clean and the lives of those who clean them.

If I Were at RBI, I’d Have Withdrawn From Demonetisation Implementation: Y.V. Reddy - Former RBI governor Y. Venugopal Reddy, who has earned a global reputation for his acumen as a central banker, has admitted that if he were still head of the central bank, he would have quietly conveyed to the Centre his inability to carry out demonetisation on the scale announced by Prime Minister Narendra Modi. In an interview with The Wire on Saturday, Reddy readily conceded that it is the Centre’s prerogative, as a sovereign, to take the decision to demonetise. However, he would have told the prime minister that it was impossible to effect a quick replacement of currency on such a massive scale. “First I would have tried to impress upon the government that it should withdraw only Rs 1000 notes so as to minimise the disruption. If the government still wanted to go ahead with removing 86% of currency in circulation I would have conveyed my inability to execute it,” he said. Reddy also pointed out that he would not have publicly protested or resigned immediately because the Centre has “every right” to take a decision on demonetisation. The former RBI governor said he would have simply expressed his professional disagreement over the feasibility of the move and probably would have proceeded to go on sick leave thereafter, paving the way for some other senior central banker to preside over the RBI board meeting that would pass the resolution for withdrawal of old currency notes. The former governor was, however, clear he wouldn’t have resigned because he cannot per se question the decision of the sovereign. “That would not be in order. However, I have every right as a professional to withdraw from its implementation,” said Reddy. The former governor broke his silence a week ago when he told TV channel CNBC that the “institutional identity of the RBI has been damaged. It is not about individuals but about the credibility and reputation of the central bank.”

Press releases you hope you never have to issue, Indian central bank independence edition - From the Ministry of Finance on Saturday as former governors, media, opposition politicians and rating agencies pile criticism on the Reserve Bank of India’s handling of demonetisation and question its independence:There has been a report in sections of the Press that some unions have alleged infringement of the autonomy of the Reserve Bank of India. It is categorically stated that the Government fully respects the independence and autonomy of the Reserve Bank of India. Consultations between the Government and the RBI are undertaken on various matters of public importance wherever such consultation is mandated by law or has evolved as a practice. Consultations mandated by law or as evolved by practice should not be taken as infringement of autonomy of RBI.It’s almost as if the shocking execution of India’s November decision to withdraw 86 per cent of its currency overnight has made people wonder under what conditions the RBI gave the government the go-ahead.More so since it seems it gave that go-ahead rather quickly.According to a briefing document sent by the central bank to a government panel in December, the RBI was “advised” by the government that it “may consider withdrawal of the legal tender status of the notes.” That was on November 7. The RBI board considered the matter on November 8 and apparently liked what it saw, so recommended the move to the government — a necessary step based on the demonetisation provision in the RBI ACT. The government announced the decision that evening. Oh, and part of the reasoning for the RBI’s recommendation was that the “decision to withdraw the legal tender could be made” as a “critical minimum” of new notes had been printed. Considering the withdrawal limits, the massive queues at ATMs and the myriad stories of liquidity shortages throughout the country — with the poorest areas hit hardest — we remain deeply confused about that concept of “critical minimum”.

The shrinking rupee - Earlier this month I criticized the architects of India's recent note demonetization for not using the traditional overstamping technique for replacing large quantities of banknotes.  This week I want to examine another feature of Modi's demonetization: the concurrent change in note sizing. The new series of ₹500 and ₹2000 notes are smaller in size than the ₹500 and ₹1000 series that they have since replaced. This has caused huge logistical problems. Since each cartridge in an ATM must be manually configured to handle a certain note size, ATMs were not equipped hold the newly issued ₹500s, ₹2000s, or additional ₹100s for that matter. Instead, they were forced to operate at a fraction of their capacity. Indians, desperate to replace their demonetized notes with good cash, were left on the lurch.   Let's explore the reduction in banknotes size. I'd argue that independent of the decision to crack down on black money, the decision to go smaller makes a lot of sense. But twinning a banknote size reduction with a demonetization was a recipe for disaster.  Consider that the length of the current issue of rupee banknotes grows as the denomination increases, like this: To Americans and Canadians, this may seem odd since all our money is the same size. However, a pattern of progressively longer notes is quite common in other countries. Euro banknotes, for instance, also increase in size as denomination rises as do Swiss francs and Japanese yen. Presumably this format is chosen to to make manual sorting easier.  Now if the Reserve Bank of India, the nation's central bank, had continued to follow its traditional size progression, the newly issued 2000 rupee note would have been an awfully big note, one of the largest in the world by surface area. It would have clocked in 32% larger than a US$20 bill, for instance, and 43% larger than a 20 euro note. Not only would a note of this size have been expensive to print, but the combined costs of storage and handling incurred by hundreds of millions of Indians over time would have been quite large. Reducing the size would cut down on both expenses.*

You should not reply to that query, Manmohan Singh saves Urjit Patel from grilling by House panel - Former prime minister Manmohan Singh came to Reserve Bank of India Governor Urjit Patel’s rescue when the latter was being questioned by the Parliament Standing Committee on Finance on Wednesday over the demonetisation drive. In the past, Manmohan Singh has been very vocal with his criticism of the Centre’s decision to demonetise Rs 500 and Rs 1,000 currency notes. Patel, who appeared before the committee with other RBI officials, was unable to answer questions, such as, when would normalcy return in the banking system, or how much of the banned currency was deposited with the central bank since Rs 500 and Rs 1,000 notes were scrapped on November 8, PTI reported. Committee member and senior Congress leader, Digvijay Singh, asked Patel whether chaos would break out if the existing withdrawal caps were removed, reported NDTV. “You should not reply to that query,” Manmohan Singh reportedly advised Patel. The RBI on Tuesday had announced that the daily limit for withdrawing cash from ATMs was raised to Rs 10,000 from Rs 4,500. Before the questioning began, Manmohan Singh, a former RBI governor and finance minister, is believed to have told the committee members, including some of his Congress colleagues, to respect the prestige of the RBI and its governor’s position, PTI reported. Patel is also expected to appear before the Public Accounts Committee on January 20 where he will once again be grilled over demonetisation. The session went on for four hours on Wednesday where Patel, other RBI officials, and a few finance ministry officials were questioned. When Patel was asked about the emphasis been given by the Centre on cashless economy, he replied, “The demand will be met with the supply and this is the prerogative of the Reserve Bank of India,” reported DNA. Patel could be summoned again during the Budget Session or after it because a number of questions remained unasked, the English daily reported.

There's an Unexplained $9 Billion Gap in India's Cash Supply - India’s unprecedented ban on high-denomination currency bills has led to a mismatch in cash supply that has flummoxed some economists and data crunchers. Indians withdrew about 600 billion rupees ($9 billion) more than the 9.1 trillion rupees of currency in circulation as of Jan. 13, according to a report submitted by the Reserve Bank of India to a parliamentary panel on Wednesday. A copy of the document was seen by Bloomberg News."This is usually not the case," said Sujan Hajra, chief economist at Anand Rathi Securities Ltd. in Mumbai, who was a director at the RBI from 1993-2006. He added that cash with public should be lower than currency in circulation "but then you don’t have demonetization usually."Clarity will emerge only once the central bank reconciles and publishes final figures, he said. The RBI’s spokeswoman declined to comment. The central bank has refused to share the amount of invalidated bills that have been deposited and said on Jan. 5 that it is still counting the notes to eliminate errors. Data published Jan. 20 show that notes in circulation as of Jan. 13 was 9.3 trillion rupees and currency with public on Dec. 23 was 7.8 trillion rupees.

Death of a cashless woman in India | Reuters: Razia Begum’s house lies just beyond the main graveyard in Aligarh’s old city. The sun’s rays barely reach the narrow, brick-lined lane. Open sewage drains flow past her house. The 35-year-old mother of four set herself on fire on Nov. 20 last year. She died two weeks later. She told reporters she did it because her children hadn’t eaten for three days. Razia’s was one of the scores of deaths reported in the days following Prime Minister Narendra Modi’s decision to scrap high-value bank notes in a crackdown on India’s “black economy”. While some collapsed waiting in queues outside banks and cash machines, others couldn’t bear the shock of discovering that their savings were no longer legal tender thanks to “demonetisation.” Razia told reporters she took the step because of her “helplessness”. Razia’s husband Akbar Hussain and brother-in-law Ashraf make locks for a living. Akbar tried exchanging old currency notes at a local money lender, but the going rate for an old 500 rupee ($7) note was 300 rupees ($4.50) in legal tender. Razia took the family savings of 3,000 rupees ($44) -- six 500 rupee notes -- and queued at the bank. On the third day, she went early in the morning, skipping breakfast to beat the crowd, and lost consciousness after standing in line for more than six hours. Back home, when the children started pestering her for food, Razia thrashed them. Then she set herself on fire.“She was a little stubborn, someone who always had to have her way,” Razia’s mother Raisa Begum told India Insight. “It was her temperament that led to her end”. “The entire day was spent cooking for them, teaching them, fulfilling their little wishes and trying to save them from falling into bad company,” said Razia’s sister-in-law Rizwana.

Trump in Latin America - The 2016 US election results provoked shock and horror in many parts of the world but probably in no place more than Latin America. All along the campaign trail the election winner vilified Latin American immigrants and promised to build a wall along the US southern border (paid for by Mexico) to keep the “rapists and drug traffickers” out. While campaigning in Florida he talked of fighting “oppression” in Venezuela and of reversing President Obama’s tentative diplomatic opening toward Cuba, an opening that had been universally applauded by Latin American governments. Yet not everyone in Latin America forecast gloom and doom with the election of Donald Trump. Asked which US presidential candidate would be better for the region, Ecuadorean president Rafael Correa didn’t hesitate: Trump . . . because he is so crude that he will generate a reaction in Latin America which will build more support for progressive governments. . . . We have a US government that has changed little in its policies and has done practically the same as it always has, but has a charming president in Obama. Notwithstanding the recent effort to normalize relations with Cuba (limited by the continuing embargo against the island), there is little evidence that the US administration’s Latin American agenda has evolved much since the George W. Bush years. The question is whether or not the erratic and unpredictable next president will in fact carry on with business as usual in Latin America, and what his presidency will mean for a region presently rocked by economic and political disruptions, with some observers considering that a “progressive cycle” of left governments has run its course.

Venezuela 2016 inflation hits 800 percent, GDP shrinks 19 percent: document | Reuters: Venezuelan consumer prices rose 800 percent in 2016 while the economy contracted by 18.6 percent, according to preliminary central bank figures seen by Reuters, the sharpest contraction in 13 years and the worst inflation reading on record. The extended slump in oil prices has turned the OPEC nation's once-prosperous oil-boom economy into a mirror of the latter day Soviet Union, with rampant product shortages leading leaving to skip meals and wait hours in food lines. President Nicolas Maduro's government blames the situation on an "economic war" led by political adversaries with the help of the United States. As problems mounted, the central bank has stopped releasing quarterly and monthly economic indicators. The oil sector, which provides nearly all of Venezuela's hard currency, in 2016 shrank 12.7 percent, according to an excerpt of a document containing the figures that was shown to Reuters. The non-oil sector shrank by 19.5 percent, according to the document. The figures could be changed in the process of approval by the central bank's board of directors, according to a source with firsthand knowledge of the situation. In 2015, the economy contracted 5.7 percent while inflation reached 180.9 percent, the central bank said last year. Maduro accuses opposition-linked businesses of artificially creating economic problems. He says inflation is the result of speculative price-gouging by unscrupulous capitalists, and insists workers are better off as a result of minimum wage increases in 2016 that totaled 454 percent.

Jubilant Ruble And Declining Peso After Trump Election: Donald Trump’s election last November has had its financial impact around the world. While the incoming U.S. President has already left his mark on markets before even being inaugurated, he certainly isn’t the only reason for currency changes. However, the two countries whose currencies have won or lost quite a bit in value against the dollar both have a stake in how U.S. politics will play out in the next four years. Check out this post on the Visual Capitalist. This chart shows the change in value of foreign currencies against the U.S. Dollar since Trump's election on Nov. 8, 2016 to Jan 2017.

Living Standards Better Growth Gauge Than GDP, Davos Forum Says - Developed and developing countries alike should emphasize living standards over absolute growth as the best measure of economic performance, according to the organizers of the annual World Economic Forum. Per-capita median incomes declined by 2.4 percent between 2008 and 2013 across 26 advanced economies, the forum said in a report released Monday, highlighting the "insecurity and inequality accompanying technological change and globalization." Countries should gauge their economic progress based on "inclusive development" and increase spending on programs like job training to ease the burden of inequality, the report said."Most countries are missing important opportunities to raise economic growth and reduce inequality at the same time," the WEF said, saying that measurements such as life expectancy, productivity and poverty rates should be the priorities for economic policy making to prevent further declines.Inequality and the frustrations of those who feel left behind by globalization will be one of the main topics of discussion at the forum’s annual meeting in Davos, Switzerland, which begins on Tuesday. The gathering of political leaders, corporate executives, investors and academics has been at the forefront of advancing the economic integration opposed by U.S. president-elect Donald Trump as well as European populist parties, a tension that will be obvious at this year’s event. In the WEF’s ranking of 29 advanced economies’ performance on inclusive development, Norway, Luxembourg and Switzerland took top honors, with the U.K. coming in 21st and the U.S. 23rd. More than half of the 103 countries measured saw their scores decline over the last five years.

Davos elites struggle for answers as Trump era dawns | Reuters: - The global economy is in better shape than it's been in years. Stock markets are booming, oil prices are on the rise again and the risks of a rapid economic slowdown in China, a major source of concern a year ago, have eased. And yet, as political leaders, CEOs and top bankers make their annual trek up the Swiss Alps to the World Economic Forum in Davos, the mood is anything but celebratory. Beneath the veneer of optimism over the economic outlook lurks acute anxiety about an increasingly toxic political climate and a deep sense of uncertainty surrounding the U.S. presidency of Donald Trump, who will be inaugurated on the final day of the forum. Last year, the consensus here was that Trump had no chance of being elected. His victory, less than half a year after Britain voted to leave the European Union, was a slap at the principles that elites in Davos have long held dear, from globalization and free trade to multilateralism. Trump is the poster child for a new strain of populism that is spreading across the developed world and threatening the post-war liberal democratic order. With elections looming in the Netherlands, France, Germany, and possibly Italy, this year, the nervousness among Davos attendees is palpable. "Regardless of how you view Trump and his positions, his election has led to a deep, deep sense of uncertainty and that will cast a long shadow over Davos,"

In Davos, Xi makes case for Chinese leadership role | Reuters: Chinese President Xi Jinping offered a vigorous defense of free trade at the World Economic Forum in Davos on Tuesday in a speech that underscored Beijing's desire to play a greater global role as the United States turns inward. In the first appearance by a Chinese leader at the annual meeting of political leaders, CEOs and bankers in the Swiss Alps, Xi also cautioned other countries against blindly pursuing their national interests, in an apparent reference to the "America first" policies of Donald Trump.Real estate mogul and former reality TV star Trump, who will be inaugurated as U.S. president on Friday, campaigned on a promise to confront China more aggressively on trade. He has vowed to renegotiate or ditch multilateral trade agreements and protect U.S. industries from foreign competition by levying new tariffs on goods from abroad. Xi likened protectionism to "locking oneself in a dark room" in the hopes of protecting oneself from danger, but in so doing, cutting off all "light and air". "No one will emerge as a winner in a trade war," Xi said in a nearly hour-long speech in a large conference hall as U.S. Vice President Joe Biden looked on. He said Beijing would not boost its trade competitiveness by devaluing its currency, something Trump has repeatedly said China has done in the past, and urged all signatories of a landmark climate deal in Paris last year to stick to the agreement. Trump has criticized the deal and indicated he may pull the United States out of it.

Alibaba'a Jack Ma Drops a Redpill in Davos: The U.S. Wasted $14 Trillion on Wars Over the Past 30 Years --And there it is, the unvarnished, raw, truth about how everything went wrong for middle class America. Since the Vietnam war, more than 45 years ago, the US has embarked on a neocon strategy of war in an effort to build a global empire. The result of that strategy has left American infrastructure second rate, its school system in shambles, and its healthcare system a complete and utter joke. Just imagine what America could've done with $14t of investable dollars, instead of waging wars. Aside from the wars, America spends more than 50% of its discretionary budget on the military, per annum, 16% of its overall budget. That's the main issue, the sordid topic that is rarely discussed in American politics, for fears of crossing the military-industrial complex. Jack Ma from Alibaba doesn't share those same fears, being a Chinese national worth $27b of zero fucks In a very rare glimpse into what the Chinese really think about American imperialism and how it shaped the global economy, all the better for China might I add, Jack Ma spoke candidly today in an interview with CNBC's Andrew Ross Sorkin. "It's not that other countries steal jobs from you guys," Ma said. "It's your strategy. Distribute the money and things in a proper way."   He said the U.S. has wasted over $14 trillion in fighting wars over the past 30 years rather than investing in infrastructure at home.  To be sure, Ma is not the only critic of the costly U.S. policies of waging war against terrorism and other enemies outside the homeland. Still, Ma said this was the reason America's economic growth had weakened, not China's supposed theft of jobs. In fact, Ma called outsourcing a "wonderful" and "perfect" strategy.  "The American multinational companies made millions and millions of dollars from globalization," Ma said. "The past 30 years, IBM, Cisco, Microsoft, they've made tens of millions — the profits they've made are much more than the four Chinese banks put together. ... But where did the money go?" He said the U.S. is not distributing, or investing, its money properly, and that's why many people in the country feel wracked with economic anxiety. He said too much money flows to Wall Street and Silicon Valley. Instead, the country should be helping the Midwest, and Americans "not good in schooling," too. "You're supposed to spend money on your own people," Ma said.

Disillusioned in Davos -- Larry Summers - Edmund Burke famously cautioned that “the only thing necessary for the triumph of evil is for good men to do nothing.” I have been reminded of Burke’s words as I have observed the behavior of US business leaders in Davos over the last few days. They know better but in their public rhetoric they have embraced and enabled our new President and his policies. I understand and sympathize with the pressures they feel. ... Businesses who get on the wrong side of the new President have lost billions of dollars of value in sixty seconds because of a tweet. ...Yet I am disturbed by (i) the spectacle of financiers who three months ago were telling anyone who would listen that they would never do business with a Trump company rushing to praise the new Administration (ii) the unwillingness of business leaders who rightly take pride in their corporate efforts to promote women and minorities to say anything about Presidentially sanctioned intolerance (iii) the failure of the leaders of global companies to say a critical word about US efforts to encourage the breakup of European unity and more generally to step away from underwriting an open global system (iv) the reluctance of business leaders who have a huge stake in the current global order to criticize provocative rhetoric with regard to China, Mexico or the Middle East (v) the willingness of too many to praise Trump nominees who advocate blatant protection merely because they have a business background.I have my differences with the new Administration’s economic policies and suspect the recent market rally and run of economic statistics is a sugar high. Reasonable people who I respect differ and time will tell. My objection is not to disagreements over economic policy. It is to enabling if not encouraging immoral and reckless policies in other spheres that ultimately bear on our prosperity. Burke was right. It is a lesson of human experience whether the issue is playground bullying, Enron or Europe in the 1930s that the worst outcomes occur when good people find reasons to accommodate themselves to what they know is wrong. That is what I think happened much too often in Davos this week.

Oil and Trump: Russians full of optimism in Davos - Twelve months ago, the mood of the Russian delegation at the World Economic Forum in Davos was distinctly gloomy, with oil prices near 12-year lows below $30 per barrel and Western sanctions depressing their economy and financial markets. Since then, however, Russian stock and bond markets have risen about 50 percent, boosted by rebounding oil and - more recently - expectations the new U.S. presidency of Donald Trump will ease the sanctions imposed over Moscow's actions in Ukraine. Russian officials and company executives at the forum attended by the world's political and business elites in the Swiss Alps this week were far more bullish, with many predicting the markets rally would continue this year. "This is one of the most positive forums in the last few years. Today our Western counterparties - bankers and investors - can talk freely again about investments in Russia," Andrei Guryev, chief executive of fertilizer giant PhosAgro, told Reuters on the sidelines of the forum. Russia's economy is still in the early stages of a recovery. There are however promising signs after more than two years of pain. Oil - a crucial source of revenue - has bounced back above $50 and Russian manufacturing expanded at its fastest pace since 2011 in December, a sign the economy is starting to grow again. And then there's the Trump factor. The U.S. real estate mogul won the U.S. election on Nov. 8 after a campaign that included pledges to improve ties with Russia, and this week - days before his inauguration as president - he proposed offering to end sanctions imposed on Russia over its annexation of Crimea in return for a nuclear arms reduction deal with Moscow."The easing of sanctions will reopen cheap foreign capital markets again for Russian companies," Guryev said. "It will stimulate local business, allow the central bank to cut interest rates and as a result spur Russia's GDP growth."

Central Bank Normalization Isn’t as We Know It, Davos Panel Says - Central banks globally may not be pumping in quite so much monetary stimulus as inflation picks up, but they’re a long way from returning to normality. That’s the view of commentators including Swiss National Bank President Thomas Jordan, UBS AG Chairman Axel Weber and Anthony Scaramucci, an aide to President-elect Donald Trump, at the World Economic Forum in Davos, Switzerland.  “If anybody in this room thinks that we are in an interest-rate normalization, we are frankly not,” Scaramucci, the founder of hedge fund Skybridge Capital, said in the panel discussion on Tuesday. Jordan said that while it is a “very positive sign” that the U.S. Federal Reserve has started to raise interest rates, “I would expect that at all central banks, and especially in the U.S., the movement will be gradual.” The global financial crisis almost a decade ago and the slow recovery of major economies since then has taken monetary-policy makers into uncharted territory, including negative rates and massive bond purchases, that will likely take years to unwind. A stronger dollar as the U.S. outperforms its peers is further reducing the need for officials at central banks in Europe and Asia to rein in their stimulus.  “The expansionary policies of Japan and the ECB more than outweigh the reluctant tightening of the Fed,” said Weber, a former European Central Bank official. “Monetary-policy normalization is not going to happen. You’re going to more likely see the Fed at some point smooth the pace out and move less on interest rates.” The Fed increased rates last month for the first time in a year and indicated that they expect to raise them three times in 2017. The pace of tightening is “the slowest of any normalization” since the U.S. central bank was founded in 1913, Harvard Kennedy School Professor Carmen Reinhart said on the panel. The strong dollar suggests a “more moderate pace of normalization,” she said. At the same time, the ECB has extended its bond-buying program and the Bank of Japan has reaffirmed its intention to keep 10-year bond yields at about zero. The Bank of England, facing higher inflation and slower growth as the country prepares to leave the European Union, says its next rate move could be up or down.

A surging dollar under Trump poses biggest threat to global economy, BlackRock boss warns -- The surging dollar poses the biggest single threat to the global economy and will be extremely difficult to manage under the incoming Trump presidency, the world's largest investment fund has warned.  Larry Fink, head of the $4 trillion giant BlackRock, said sweeping plans for tax cuts and fiscal stimulus in the US were already causing markets to price in a monetary squeeze by the Federal Reserve, potentially driving an upward spiral in the dollar. "It's going to be very hard to navigate," he told the World Economic Forum in Davos.  One worry is that the stronger dollar undermines the competitiveness of core US manufacturers, the very sector that Donald Trump has vowed to promote. This will make it even more likely that he will turn to trade warfare, or seek to pressure the Fed into weakening the dollar by delaying rate rises. "There is going to be great tension with the Fed over these issues," he said.The other is that ballooning fiscal deficits could draw in a flood of foreign capital and yet more US dependence on powerful creditors in Asia, leading to a combustible situation if diplomatic relations deteriorate.    "Our biggest lender is Japan and our second biggest is China, and I think we need to be paying quite a bit of attention to this. You should always be nice to your lenders," he said. While the world can handle a strong dollar for a while, the effect is to drain liquidity from an international financial system that is more dollarised than ever before, and to force banks in Europe and the Far East to contract dollar lending through the effects of complex hedging derivatives.Christine Lagarde, the head of the International Monetary Fund, said in Davos that concerns are mounting over the ability of some countries in Africa to meet payments on their dollar debts. Much the same applies to Latin America, and parts of Eastern Europe, and Asia. 

Davos Attendees Pause Poor People Simulations To Ponder How They Got It All So Wrong - Secluded in Davos, Switzerland this week for the annual World Economic Forum, the world’s rich and powerful have been unusually pensive. When they’re not hobnobbing with Bono, enjoying “refugee simulations” and after-hours parties at the local piano bar, the global elite are reportedly staring into the void that is Brexit, the slow disintegration of the European Union, and the presidency of Donald J. Trump—and trying to figure out where it all went wrong. Is the world order they helped build really so terrible that a man with no political experience and a bad Twitter habit will soon lead the free world? Is the notion of being an E.U. member so hideous that Britain would prefer to exit the single market just to keep immigrants out?  Clearly, for the people who voted for these things, the answer is yes. And obviously, it came as a shock to many. But now that we’re here, what can be done to stop mere citizens from sending the enlightened world on a path straight to hell?  According to Davos attendees, many of whom are still reeling from the political events of June and November, the first thing to do is acknowledge how we got here—the answer starts with a “p” and ends with an “opulism”—and how dire the consequences may be. Billionaire hedge-fund manager Ray Dalio for one, is scared as hell, telling Bloomberg Television’s Francine Lacqua that “we may be at a point where globalization is ending, and provincialization and nationalization is taking hold.” “I want to be loud and clear: populism scares me,” Dalio said. “The No. 1 issue economically as a market participant is how populism manifests itself over the next year or two.” JPMorgan C.E.O. Jamie Dimon told Bloomberg in a separate interview at Davos that “the euro zone may not survive,” warning that the Western world can expect “the same political things about immigration, the laws of the country, how much power goes to Brussels” to continue unless leaders start taking the underlying issues seriously. International Monetary Fund chief Christine Lagarde, meanwhile, is also scared of populism, but she was talking about it in 2013 and no one was listening then—not that she’s saying “I told you so” or anything:“It did not get much traction,” she said. “Well, I hope people will listen now,” she quipped.

What the Davos crowd needs to understand: Mark Thoma - One of the themes of this year’s World Economic Forum in Davos this year is “Preparing for the Fourth Industrial Revolution.” How will digital technology and the rise of robots affect job opportunities in the future? Also on the agenda are discussions about globalization -- how it has altered the political and economic landscape, and fueled resentment among workers who feel overlooked and cast aside while those at the top get immensely rich.This is reminiscent of a debate within economics: Are wage stagnation, high levels of displacement and unemployment in areas like the industrial Midwest and the bleak outlook for the future many people have due to globalization or technological change? ...What’s important is not what caused so many people to lose their jobs or to find a job (if they could at all) that’s not as good as the one they lost. It’s that the “global elite” begin to fully comprehend how much resentment people feel over what has happened to their lives, to their communities and to their children’s futures. ...So far, those who have benefited so much from globalization and technological change -- the type of people who attend Davos -- have managed to find scapegoats that deflect blame from themselves. ...The working class is told, for example, that immigration is to blame and a wall is the answer, or that their troubles arise from a government that devotes all of its attention to the “undeserving” poor while ignoring them -- and with Donald Trump in power all that will change. Workers are told it’s because of taxes or regulation: Take care of those and the economy will boom -- America will be great again! But take a look at what has happened to the share of income since the 1970s. ...

Eight Men Have the Same Wealth As Poorest Half: Oxfam -- Just eight men hold the same amount of wealth as the poorest half of humanity, according to new data compiled by Oxfam. Released to coincide with the annual World Economic Forum meeting of political and business leaders in Davos, Switzerland, and the impending inauguration of U.S. President-elect Donald Trump, Oxfam said that new and better data on global wealth distribution indicates that the poorest half of the world’s population—more than 3.6 billion people—has less wealth than previously thought. Better data has improved numbers from India and China in particular, it said. Oxfam based its calculations on global wealth distribution data from the Credit Suisse 2016 Global Wealth Databook, while the Forbes billionaires list, last published in March 2016, provided data on the world’s wealthiest people. Paul O’Brien, vice president for policy and campaigns, called the numbers “mind-boggling” and the “sobering reality of 2017” in a statement on Sunday.The eight richest men in the world—Bill Gates, Amancio Ortega, Warren Buffett, Carlos Slim Helu, Jeff Bezos, Mark Zuckerberg, Larry Ellison and Michael Bloomberg—have a combined net worth of more than $426 billion, according to Forbes data. The report shows “that the gap between rich and poor is far greater than had previously been estimated and details how big business and the super-rich are fueling the inequality crisis by dodging taxes, driving down wages and using their power to influence politics,” Oxfam said in a statement.

What Oxfam’s misleading stat gets wrong about inequality - Felix Salmon - Every year, Oxfam adds up the wealth of the world’s poor, compares it to the wealth of the world’s ultra-rich, and comes out with some shocking statistic. This year, it’s that the eight richest men in the world, between them, have the same amount of wealth as the bottom 50% of the population combined.  If you look at the numbers that the statistic is based on, from Forbes and Credit Suisse, you’ll see that the equality here is that the eight richest people in the world have a combined net worth of roughly $426 billion, or 0.16% of all the world’s wealth.  Is it really true that the bottom 50% of the world’s population accounts for only 0.16% of the wealth on the planet? Well, not really. The bottom 50% comprises five different deciles. Of those deciles, the fourth has 0.17% of the world’s wealth, and the fifth has 0.32%. Those are both very small numbers—but they’re both bigger than 0.16%.  So something funny is going on here—and that something funny is debt. When Oxfam looks at net worth, it adds up your assets, and then subtracts your liabilities. And when your liabilities are bigger than your assets, that means you have negative net worth. According to Oxfam’s methodology, the bottom 10% of the world’s population has a net worth of one trillion negative dollars—an almost inconceivably large sum. Oxfam does attempt to address this issue in its report:  The total net debt of the bottom 50% of the global population is also just 0.4% of overall global wealth, or $1.1 trillion. If you ignore the net debt, the wealth of the bottom 50% is $1.5 trillion. It still takes just 56 of the wealthiest individuals to equal the wealth of this group. This, however, is disingenuous.  They’re ignoring the debts in the second and third and fourth and fifth deciles of the global population, which are even larger than the debts in the bottom decile. As your wealth goes up, after all, your assets rise (by definition), but so do your liabilities. The result is that if you use Oxfam’s methodology, my niece, with 50 cents in pocket money, has more wealth than the bottom 40% of the world’s population combined. As do I, and as do you, most likely, assuming your net worth is positive. You don’t need to find eight super-wealthy billionaires to arrive at a shocking wealth statistic; you can take just about anybody.

Net Migration and Economic Growth Around the World – 1958 to the Present - Mike Kimel - In my last post, I used World Bank data to look at the effect of net migration on economic growth. Net migration is defined by the World Bank as the number of immigrants (coming into a country) less the number of emigrants (leaving the country). I showed that net migration as a share of the population in 2012 (the last year with for which this data has been reported so far) is negatively correlated with growth of PPP GDP per capita from 2012 to 2015. In other words, countries where the share of immigrants as a percent of the population was larger grew more slowly than countries with a smaller proportion of immigrants. The natural question is… does this relationship hold over a longer period of time? In this post, I will show that the answer is yes. As to data… I will use three series compiled by the World Bank: net migration, population, and PPP GDP per capita. Net migration data is reported every fifth year beginning in 1962, and it covers five years of activity. In other words, the net migration figure for 1962 is the sum total net migration for the years 1958 through 1962. Similarly, the net migration figure for 1967 is the total for the years from 1963 through 1967. Population is available annually going back to 1960. PPP GDP per capita is available annually, but only begins in 1990. To maximize the use of the available data, and still avoid situations where growth could be leading immigration, I looked at total migration from 1958 to 1992 as a share of the population in 1992, and compared it to growth in PPP GDP per capita from 1993 to 2015.In other words, I took a look at (roughly) the percentage of the population that had migrated over 34 years, and compared that to the growth rate from the following year to 2015, which is a period of 22 years. There are 155 countries for which the full sample of data is available. Here’s what that graph looks like:

Turkey asks to be immediately admitted in the EU -- Speaking in the Turkish parliament, the country’s Prime Minister Binali Yildirim said, referring to the ongoing International Conference on Cyprus, that “we are talking about a united Cyprus. Once this agreement is secured, Turkey should be treated as if it is a member of the EU” The International Conference on Cyprus is an illegal operation, in which unfortunately cooperates the European Commission and the General Secretariat of the UN, in complete breach of the Treaties of the EU and of the Constitution of the Republic of Cyprus. Three foreign countries, Britain, Greece and Turkey, two of them involved in the past in bloody wars against Cypriots, are now discussing in Geneva the ethnic conflicts in a fourth country, member of the European Union. In the discussions are present representatives of the Greek Cypriot majority of the population (82%) and of the Turkish Cypriot minority (18%), but not the Cypriot state. It is a post-modern, still very real coup d’ etat, organized by the most extremist forces inside the international establishment, aiming at circumventing the verdict of Cypriots themselves during the 2004 referendum. A second aim of this operation is to realize the decades old US and British strategy of bringing Turkey inside the EU, in spite of the objections of many European nations. The settlement they want to impose on Cypriots, provide for 50-50% sharing of the decisions among majority and minority, thus providing Ankara with a veto and also with a dominating influence on Cyprus vote inside the EU and Eurozone.

Terror suspects could be forced to wear electronic tags under radical proposal from German justice minister: Suspected Islamic extremists could be forced to wear electronic tags without trial in Germany, under radical new proposals put forward by the country’s justice minister. Heiko Maas said he wanted to extend the use of electronic ankle tags to those deemed a potential terror threat even if they have not been convicted of any crime. The proposals come as senior ministers in Angela Merkel’s government prepare to meet on Tuesday to discuss security reforms in the wake of last month’s Christmas market terror attack in Berlin, in which 12 people died. Anis Amri, the attacker, was able to move freely around Germany despite being identified as a terror threat because police could not secure enough evidence to arrest him. Mr Maas called for a “preventive offensive” against the threat from Islamic extremism. “The use of ankle tags should not be only available for convicted criminals after release from prison, but for those identified as a general threat as well,” he said. Under current German law, electronic tags are only possible for convicted sex offenders after their release from prison, but Mr Maas called for their use to be expanded.

Facebook Launches 'Fake News' Filtering Service Ahead Of German Elections --Because the rise in popularity of alternative and populist candidates in Germany and elsewhere around the world can't possibly by a legitimate rejection of politicians who simply skewed policies too far to the left over the past decade, Germany and Facebook have announced an accelerated effort to crack down on "Fake News" (i.e. anything that is deemed critical of Angela Merkel) ahead the country's elections in September.   Just like in the U.S., Facebook's crackdown in Germany will enlist the support of 3rd-party "fact checkers" who will flag stories as "disputed" if they're found to include "fake" or "misleading" content.  The Financial Times:German users of the social network will now be able to report a story as fake and it will be sent to Correctiv, a third-party fact checker. If the fact checker discovers it is fake, the story will be flagged as “disputed”, with an explanation. Disputed stories will not be prioritised by the news feed algorithm and people will receive a warning if they decide to share it.Facebook said it had been in discussions with German media and publishing groups and was working to get more partners on board. “Our focus is on Germany right now but we’re certainly thinking through what countries will unveil next,” he said.

Trump broadside stuns Europe - Angela Merkel is pressing for a meeting with Donald Trump after he caused “astonishment and agitation” among European leaders with broadsides at Nato, the EU and the German chancellor herself. Mrs Merkel has been unable to arrange an appointment with Mr Trump in New York or Washington and has spoken to him only once. In an interview with The Times published yesterday the president-elect praised Brexit and predicted that other nations would follow suit. He criticised Mrs Merkel for the “catastrophic mistake” of letting in more than a million “illegals” over the past two years. He singled out the German car giant BMW, which is building a plant in Mexico, with a threat of 35 per cent tariffs on imports to the United States. BMW shares fell 1.5 per cent yesterday. The president-elect also called Nato obsolete in a statement that was applauded by Moscow. He said that he wanted to reduce economic sanctions on Russia in exchange for a reduction in nuclear weapons. Taken together, his remarks have deepened concerns in Berlin that his presidency threatens Europe’s postwar bond with the US.Mrs Merkel, who in the Times interview earned Mr Trump’s praise in the past tense — “I’ve had great respect for her, I felt she was a great, great leader” — has offered to meet Mr Trump in her capacity as chairwoman of the G20 leading economies, according to sources in Berlin. However, they suggested that a meeting was unlikely before spring, perhaps weeks after Theresa May makes her debut at the White House. The German chancellor responded to Mr Trump’s criticisms yesterday by warning that Europe would have to fend more for itself during the new era in Washington. “We Europeans have our fate in our own hands,” she said. President Hollande of France dismissed the criticism of Germany’s liberal migrant policy. “[Europe] has no need for outside advice to tell it what it has to do,” he said. Frank-Walter Steinmeier, the German foreign minister, said on a visit to Brussels that Europe was shocked by Mr Trump’s words on Nato. “The interview statements of the American president-elect caused, indeed here in Brussels, astonishment and agitation,” Mr Steinmeier said. “I have just come from a conversation with the secretary-general of Nato, [Jens] Stoltenberg. The comment by President-elect Trump, that he thinks Nato is obsolete, has been met with concern.”

Trump attack on Merkel rebuffed by French president - French President Francois Hollande has brushed off stinging criticism of Germany's liberal migrant policy by US President-elect Donald Trump."[Europe] has no need for outside advice to tell it what it has to do," Mr Hollande said.Mr Trump had accused German Chancellor Angela Merkel of "a catastrophic mistake" in allowing mass migration.Mrs Merkel said the EU should decide for itself and US State Secretary John Kerry questioned Mr Trump's remark."I thought, frankly, it was inappropriate for a president-elect of the United States to be stepping into the politics of other countries in a quite direct manner," he told CNN."He'll have to speak for that. As of Friday [when Mr Trump is inaugurated as president] he's responsible for that relationship."  Mr Trump also caused alarm among Nato leaders by saying the alliance was "obsolete", and he threatened German car makers with high import tariffs if they moved production to Mexico. In an interview for UK and German press, Mr Trump said the EU had become "basically a vehicle for Germany".Referring to the German chancellor's response to an influx of refugees and other irregular migrants in 2015, when more than a million people were accepted, he said: "I think she made one very catastrophic mistake and that was taking all of these illegals..."Mrs Merkel responded by saying the EU had to take responsibility for itself. "We Europeans have our fate in our own hands," she said in Berlin.

Le Pen Moves Into Lead in French Race, Le Monde Poll Shows - Marine Le Pen is gaining support in France and has taken the lead in a major survey of voters’ intentions for the first round of the presidential election. The populist leader of the National Front had between 25 percent and 26 percent support compared with 23 percent to 25 percent for Republican candidate Francois Fillon, according to an Ipsos Sopra Steria poll for Cevipof and Le Monde. In mid December, Fillon led with about 28 percent and Le Pen around 25 percent.  Since the election of Donald Trump as U.S. president on Nov. 8, the French race has been closely-watched as another crucial battle between populist and establishment forces. Under the French electoral system, the two leading candidates face each other in a run-off vote on May 7, presenting a significant hurdle to Le Pen. The poll didn’t include data for the second-round vote. European Commissioner Pierre Moscovici, a French Socialist, said in Davos Thursday that there’s little chance of Le Pen securing the broad support needed for victory. “I’m not worried about Madame Le Pen being president,” Moscovici said in a Bloomberg Television interview. “I don’t want Madame Le Pen in power. Never, ever in my country.” Le Pen has pledged to take France out of the euro if she wins. Independent candidate Emmanuel Macron is in third position and gaining, the poll showed. His support would exceed 20 percent if Arnaud Montebourg becomes the presidential candidate for the ruling Socialist Party, according to Le Monde. Communist-backed candidate Jean-Luc Melenchon would win between 14 and 15 percent support. With 15,921 people interviewed, the Ipsos Sopra Steria poll is roughly 16 times the size of typical French political surveys.

George Soros, Mastercard to partner to aid migrants, refugees | Reuters: Billionaire investor George Soros will partner with Mastercard Inc on a venture they said could help migrants, refugees and others struggling within their communities worldwide to improve their economic and social status. The partnership, Humanity Ventures, stems from a pledge Soros made in September to earmark up to $500 million for investments to address challenges facing migrants and refugees. In a joint statement on Thursday, Mastercard and Soros said that despite billions of dollars of humanitarian and development assistance, millions of people remain marginalized, a situation the private sector can help rectify. “Migrants are often forced into lives of despair in their host communities because they cannot gain access to financial, healthcare and government services," Soros said. "Our potential investment in this social enterprise, coupled with Mastercard's ability to create products that serve vulnerable communities, can show how private capital can play a constructive role in solving social problems," he added. Humanity Ventures intends to focus initially on healthcare and education, with a goal of fostering local economic development and entrepreneurship. With the creation of Humanity Ventures, Soros could invest up to $50 million to make these solutions more scalable and sustainable, and perhaps encourage smaller projects committed to mitigating the migration crisis.

A Greek tragedy: how much can one nation take? -  The remote Greek village of Efyra was named by Homer himself as a place that Odysseus once visited. Today, Efyra draws no such strangers on heroic quests. It is lucky if the local bus, which strains to climb the twisting path to the town, stops more than once a day. For those who live here, it is not just its mythical past that prompts them to look back: many locals say it has no future. “We are in danger,” says Aggelos Petropoulos, a local baker and the village’s mayor. “Everything is getting worse. Next year will be more so. Old people will die. Young people will not stay. We need help.” This is a plea increasingly heard across Greece, after more than eight years of financial catastrophe. Today the country has become a byword for the brutal economic, political and social fallout that followed the 2008 crisis. The economy shrunk almost a third in the ensuing years, and the government is effectively bankrupt without outside support: it owes about €320bn — not far from double its gross domestic product of €181bn. The effects of such economic hardship are now being felt across the country. Unemployment is at 23 per cent and 44 per cent of those aged 15-24 are out of work. More than a fifth of Greeks get by without basics such as heating or a telephone connection. In 2015, 15 per cent of the population lived in extreme poverty compared with 2 per cent in 2009, according to a recent study by Dianeosis, a Greek NGO. “There are families that do not have anything to eat,” says Petropoulos, a squat man in his mid-forties. “I give bread away for nothing. I know everybody here and I know who needs it the most.” Eighteen months on, the Greek crisis has disappeared from the minds of many in Europe, replaced by new difficulties such as Brexit, a wave of terror attacks in capital cities and looming elections in countries such as France and Germany. But in Greece, the crisis rages on. While the country is arguably in better shape financially than it was two years ago, the social crisis has intensified. In return for the bailout, officials demanded more austerity measures. Spending on hospitals, schools and social safety nets has been slashed, leaving increasing numbers of Greece’s most vulnerable without support.

Inflation picks up across the eurozone - Only one of the eurozone's 19 members experienced a decline in consumer prices during December, a sign the threat of deflation that once loomed over the currency area has abated. The European Union's statistics agency said Wednesday that consumer prices were 0.5% higher than in November, and up 1.1% on the final month of 2015. That marked a pickup in the annual rate of inflation from 0.6% in November, and was in line with an earlier estimate. As recently as May 2016, consumer prices were lower than a year earlier across the eurozone. But a combination of rising energy prices and steady, if modest, economic growth has stoked inflationary pressures. That pickup in inflation has spread throughout the currency area, and to countries that have suffered most from the eurozone's government debt and banking crises. In December, only Ireland reported consumer prices that were lower than a year earlier, making it the smallest number of countries in deflation since February 2013, when all members experienced inflation. And Ireland is a special case, since its consumer prices have been pushed down by the British pound's weakness against the euro in the wake of the U.K.'s decision last summer to leave the European Union. Because Ireland imports a large share of its goods and services from the U.K., sterling's weakness has had a larger effect than elsewhere. Among other countries that received an international bailout at the height of the eurozone's troubles, Greece and Cyprus each reported rises in consumer prices after long periods of deflation, while Spain reported a third straight month of inflation. Slovakia also emerged from a long period of price declines.

ECB keeps stimulus on high even as economy picks up | The Seattle Times: (AP) — The head of the European Central Bank has warned there is still little sign of an enduring pick-up in shop prices and workers’ wages in the eurozone — a symptom of economic weakness that means the bank will leave its stimulus programs running nearly full blast at least until year-end. The bank’s 25-member governing council led by President Mario Draghi made no changes in its interest rates or bond-buying stimulus program at a meeting Thursday. Attention was focused on his news conference, where he stressed that the bank is determined to keep pumping newly printed money into the economy through bond purchases despite criticism from stimulus skeptics. The purchases are aimed at boosting inflation from dangerously low levels and supporting an economy that’s slowly gathering steam.Draghi said there’s no convincing sign yet of an upturn in inflation toward the bank’s goal of just under 2 percent annually. That inflation rate is deemed best for a consistently strong economy — not too high and not too low. A recent uptick in inflation in the eurozone, he said, was caused by higher oil prices — and not by a fundamental improvement in demand for goods in the economy.

ECB prints money at record pace amid bank bonds bonanza - The European Central Bank bought a record-breaking €24.7 billion worth of debt last week, taking advantage of a bumper supply of bank bonds to boost its economic stimulus programme. Last week’s figure is the highest since the ECB started flooding the euro zone with cash in 2014, in a bid to revive inflation and growth by lowering the cost of borrowing. The jump in purchases, which partly compensates for thin ECB buying in December, was partly driven by covered bonds, a form of bank debt backed by mortgages or public-sector loans. Central bank sources said the ECB was taking advantage of ample supply of these bonds, which lenders tend to issue at the start of the year, before they release results and when buyers are flush with cash. “There is a very simple reason: there are finally enough bonds in the market for the ECB to buy ... the scheme relies on activity in the primary market,” said Guenther Scheppler, a senior covered bond strategist at DZ Bank. About €13 billion worth of corporate bonds were issued last week, compared to just €500 million in the last week of December, according to data by IFR, a Thomson Reuters market information service.

Italians’ Public-Debt Load Up 2,617 Euros Each on Renzi Miss -- Under Matteo Renzi, Italy’s public debt load rose by 2,617 euros ($2,775) per person, despite his promise to cut the amount for the sake of future generations. In his first speech as premier to parliament in February 2014, Renzi said the government needed to slash its mountain of bills to pay. Yet, as his chapter closed last month, he had overseen a percentage increase even greater than during the last government led by Silvio Berlusconi from 2008 to 2011. The country’s public debt is the euro region’s largest in absolute terms and the second-biggest after Greece as a percentage of gross domestic product. Pier Carlo Padoan, Renzi’s finance minister who has stayed on in the new government, will take part in a panel discussion on Wednesday at the World Economic Forum in Davos, where he is likely to face questions on Italy’s finances. To be sure, under Renzi and Padoan, Italy emerged from its longest post-war recession, with the economy growing 0.3 percent in the third quarter of 2016. Renzi also oversaw an increase in public debt per capita of 7.6 percent between his 2014 inaugural speech to parliament and November 2016, his last full month in power. That is even more than during the 42 months of Berlusconi’s last government, when it rose 7 percent as the euro region’s financial crisis hit the country, forcing the premier to resign in November 2011.

EU asks Italy to cut its budget deficit - - The European Commission has asked Italy to reduce its 2017 budget deficit by about EUR3.4 billon ($3.64 billion), an Italian Treasury official said, to avoid an excessive-deficit procedure that could include fines. The request, included in a letter delivered Tuesday and published on the Italian Treasury's website, is being evaluated, a Treasury official said. "The Italian government is in talks with the Commission and in the next few days will decide whether and how to intervene," he added. European Commission spokesman Margaritis Schinas said the letter is "part of the ongoing dialogue between the commission and the Italian authorities." The commission asked Italy to respond with a list of specific commitments by Feb. 1, when it publishes its 2017 winter economic forecasts. Rome and the commission, the European Union's executive arm, have often clashed over Italy's expansive budget policies. A new disagreement with the commission would be an additional headache for the new government led by Prime Minister Paolo Gentiloni, who faces some tough challenges. In October, the Italian government approved a budget of about EUR27 billion, which included a higher than-expected 2017 deficit target of 2.3% of gross domestic product, due to extraordinary spending related to a summer earthquake and the migrant crisis. In November, the Commission warned Italy that its budget measures risked violating the bloc's spending rules and urged Rome to ensure that it meets EU's debt reduction targets. The EU introduced stricter fiscal rules for countries using the euro in 2013 as a response to the sovereign-debt crisis, which had put the future of the Euro Zone at risk. The main goal of these rules is to keep public debt in check. Italy has the second largest debt in the eurozone, at more than EUR2.2 trillion.

Rolls-Royce to pay £671m over bribery claims -- Rolls-Royce, Britain’s leading multinational manufacturer, is to pay £671m in penalties after long-running investigations into claims it paid bribes to land export contracts.The settlement means the engineering giant will avoid being prosecuted by anti-corruption investigators in the UK, US and Brazil, though individual executives may still be charged. It comes five years after investigators across three continents first began examining claims that the £13bn multinational had paid bribes to secure contracts in countries around the world.  Last year a joint Guardian and BBC Panorama investigation identified 12 countries in which Rolls-Royce had hired “commercial agents” or advisers to help it secure high-value contracts. Anti-corruption campaigners said the deal showed the British government was not serious about tackling bribery, despite years of rhetoric promising to make the UK a hostile environment for the corrupt. Susan Hawley, the policy director of Corruption Watch, described the settlement as “proof the UK is not willing to prosecute a large, politically connected company”.  Robert Barrington, the executive director of Transparency International, said “there must be a prosecution of individuals” in addition to the settlement.

Those inflation figures… * - Rate rise speculation has returned. Which is one reason sterling was up sharply on Tuesday, in spite of the “clean brexit” speech from Ms May. Here’s a quick take from ING’s James Knightley: UK consumer Price inflation has spiked to a 2 and a half year high of 1.6%YoY in December from 1.2% in November. This was above the 1.4% consensus. Sterling’s plunge is the key factor driving this move given the rise in import prices. So far it is most evident in the energy component, which is rising 4.3%YoY, but food is also starting to put in a big swing given 40% of the food in the UK is imported. Food prices are falling 0.1%YoY having been falling 1%YoY for the past few months. Clothing prices have also been picking up.With retailers warning of higher shop prices in coming months we expect other categories to experience sharply higher prices. Note that pipeline price pressures are accelerating with producer input price inflation jumping to 15.8%YoY from 13.3% while output prices rose 2.7%YoY.Households are prepared for this with the You/Gov Citi inflation expectations series jumping to 2.5% from 1.7% in the space of a month last year. It looks as though inflation will break above 3% in the second half of this year, but we doubt that the Bank of England will respond with higher interest rates. Inflation has risen above 5% on two occasions since the Global Financial Crisis and the BoE has “looked through” this on both occasions.The 2008 and 2011 inflation spikes were primarily caused by currency depreciation, commodity price rises and VAT hikes. However we don’t expect surging commodity prices or any other VAT hikes this time round, so the inflation peak should be lower. Instead, the risks to growth relating to Brexit uncertainty is likely to heavily influence the BoE’s thinking, while a squeeze on spending power from higher inflation may also weaken consumer spending. Rates are unlikely to be changed this year.

Is Europe Disintegrating? - NYRB - Had I been cryogenically frozen in January 2005, I would have gone to my provisional rest as a happy European. With the enlargement of the European Union to include many post-Communist democracies, the 1989 “return to Europe” dream of my Central European friends was coming true. EU member states had agreed on a constitutional treaty, loosely referred to as the European constitution. The unprecedented project of European monetary union seemed to be confounding the deep skepticism that I and many others had earlier expressed.1 It was amazing to travel without hindrance from one end of the continent to another, with no border controls inside the expanding zone of states adhering to the Schengen Agreement and with a single currency in your pocket for use throughout the eurozone. Cryogenically reanimated in January 2017, I would immediately have died again from shock. For now there is crisis and disintegration wherever I look: the eurozone is chronically dysfunctional, sunlit Athens is plunged into misery, young Spaniards with doctorates are reduced to serving as waiters in London or Berlin, the children of Portuguese friends seek work in Brazil and Angola, and the periphery of Europe is diverging from its core. There is no European constitution, since that was rejected in referendums in France and the Netherlands later in 2005. The glorious freedom of movement for young Poles and other Central and Eastern Europeans has now contributed substantially to a shocking referendum vote by my own country, Britain, to leave the EU altogether. And Brexit brings with it the prospect of being stripped of my European citizenship on the thirtieth anniversary of 1989. A young liberal hero of 1989, Viktor Orbán, is now a nationalist populist leading Hungary toward authoritarianism and explicitly praising the “illiberal” example of Xi Jinping’s China and Vladimir Putin’s Russia. Border controls have been reimposed between Schengen countries (“temporarily,” of course), in response to the flood of refugees from Syria, Iraq, and Afghanistan—areas where our so-called European foreign policy has proved little more than waffle. To cap it all, a brave attempt to complete the unfinished business of the Orange Revolution in Ukraine has been rewarded with Russia’s unilateral armed seizure of Crimea and ongoing violent intervention in eastern Ukraine—actions recalling Europe in 1939 rather than 1989. Ichabod! Ichabod! The glory has departed from our common European home.

Dear Europe, Trump's Just Not That Into You - Ilargi - I’m trying, I swear, to get into the fold, but I just can’t NOT find this hilarious. On the eve of his presidency, Donald Trump tells European leaders, by not telling them diddly-squat, that he doesn’t think they matter all that much. It’s not just that his vision of the EU, and its importance, is very different from theirs, he also remembers very well what many of them have said about him in the run-up to his election for the presidency. Europe’s leaders, with the exception of Nigel Farage and Marine Le Pen, have been ridiculing and outright demonizing Trump ever since he declared his candidacy. They’ve said similar things about him that they say about Vladimir Putin, and in the 2016 fake news avalanche they’ve thrown the two together in various ways and for reasons they claim are obvious, with quite a few Hitler quips thrown in for good measure. Now, for some reason they all seem to think it’s important to meet with Trump before he meets with Putin, as if his view of the world, and that of his entire government, is so unbalanced it could be decided at the toss of a coin. Trump is having none of it. After having been compared to anything that’s considered worst under the sun, who’s going to blame him?Donald Trump feels, and largely rightly so, that the principle of innocence before being proven guilty was abandoned with much fervor by many, and certainly across the EU. The result is that now he’s simply not that into them. He’s been shown no respect at all, and he has not forgotten that. And it leads to a situation that’s brilliantly entertaining.The EU, like the Obama/Clinton cabal, have dug in their heels and then dug some more when it comes to Putin, and by -their, not his- association also to Trump. They never thought he’d be elected, and now that he has been they don’t know what to do with themselves (how about an apology for starters?).AP reports, even if once again you have to read between all the innuendo and opinionated humbug (grow up, AP!): Anxious European Leaders Seek An Early Audience With Trump

The Brexit Select Committee flexes its muscles for the first time -- Today the Exiting the European Union Select Committee (otherwise known as the Brexit Select Committee) publishes its first report. Chaired by Labour’s Hilary Benn, it is worth remembering that the cross-party committee – including MPs from all four nations of the UK – does nevertheless have a majority of former Remain supporters among its membership.Today’s report, The process for exiting the European Union and the Government’s negotiating objectives, calls on the Government to publish its Brexit negotiation plan as a White Paper by the middle of February, including clarity over whether it is aiming to remain in the single market and customs union.The report also seeks an outline framework of the UK’s future trading relationship with the EU as part of the Article 50 negotiations, and calls for transitional arrangements if it is not possible to reach a final agreement by the time the UK leaves the EU. The MPs also want the Government to commit to Parliament having a vote on the final Treaty.One Leave-supporting committee member – Lincoln’s MP, Karl McCartney – has already sounded concerns about some of the recommendations. He said the report was “flawed” in its call for transitional arrangements on trade and tariffs, which he said would “merely prolong the uncertainty for businesses and everyone else”, while he railed at the “emotive and negative language from the Remain side” which had seeped into the report.The committee should have taken a more “collegiate” approach, he said, expressing his fear that Remain supporters on the committee are “seeking to thwart the democratic will of the 17.5 million people who voted to leave the European Union by taking part in the largest democratic vote our country has had.” You can read the report for yourself at the committee’s website, but here are excerpts of its key recommendations:

Theresa May 'stands ready' to turn Britain into a tax haven after Brexit — Theresa May is ready to turn the UK into a low-tax, low-regulation haven after Brexit, her spokesperson confirmed today. Asked whether the prime minister backed comments made by the Chancellor Philip Hammond that the UK could be forced to abandon it's "European economy with European style taxation" her spokesperson said she "stands ready to do so." Hammond was asked at the weekend by the German newspaper Welt am Sonntag whether he was willing to turn the UK into "the tax haven of Europe". He replied that while he "personally [hopes] we will be able to remain in the mainstream of European economic and social thinking," EU threats to cut off single market access for the UK meant we may "become something different." "Most of us who had voted Remain would like the UK to remain a recognisably European-style economy with European-style taxation systems, European-style regulation systems etc," Hammond said. "I personally hope we will be able to remain in the mainstream of European economic and social thinking. But if we are forced to be something different, then we will have to become something different." Downing Street's comments are likely to add to accusations from Jeremy Corbyn at the weekend that the government intends to turn Britain into a "bargain basement" economy. "She appears to be heading us in the direction of a bargain basement economy on the shores of Europe," the Labour leader told the Andrew Marr show on Sunday. "We will lose access to half of our export market. It seems to me an extremely risky strategy."  Downing Street also responded to an interview by Donald Trump in which he suggested that a new free trade deal between the UK and US could be "done very quickly."

Europe’s message to Theresa May: Play by the rules — or else — As British Prime Minister Theresa May prepared to unveil her Brexit vision Tuesday, Europe had these words of warning: play by the rules in leaving the EU, and forget about striking any backdoor trade deals. One more thing: No threats about turning Britain into a corporate tax haven, please. Head down that path and things could turn nasty.Of course, few officials will spell out their views so clearly when May takes the stage Wednesday. In Berlin and Paris, the default position on Brexit remains one of icy, wait-and-see aloofness. There is nothing to discuss, the refrain goes, until Britain triggers official divorce proceedings. And even when Article 50 is activated, Britain will have to abide by all four EU “fundamental freedoms” if London wants continued access to the European single market.“It’s not clear [May] has understood that the four freedoms aren’t up for negotiation,” said a senior German government official. “The question is how she’s going to pull off this balancing act.”The same no-compromise message could be heard in France. “It’s not up to Europe to figure out Brexit for Britain,” said Christophe Caresche, a Socialist MP who sits on the National Assembly’s commission for European affairs. “They need to present a clear framework, and we will respond within the negotiation process.” But while Europe maintains its see-no-evil front, officials are following the progress of Britain’s internal Brexit debate with trepidation. To say that they find it worrying would be an understatement.Last week, they took careful note of leaked parts of May’s speech in which the prime minister laid out a vision for a “clean” Brexit. According to briefings given to British newspapers, Britain will seek to wrest back full control of immigration and exit Europe’s single market, signaling an abrupt break with the Continent.   Even more worrying are reports that Britain, working with President-elect Donald Trump, could seek to strike a bilateral trade deal with the United States long before Brexit talks are completed. “There cannot be any free trade deal for the United Kingdom until negotiations are over,” Pierre Moscovici, European commissioner for economic and financial affairs, taxation and customs, told reporters in Paris. “Even in the case of hard Brexit this [negotiating process] will take a long time.”

Theresa May to Seek Clean Brexit From EU — Prime Minister Theresa May is set to declare Tuesday that the U.K. wants a clean break from the European Union, in a closely watched speech in which she is expected to lay out her plans for the divorce.Mrs. May is expected to say that Britain doesn’t want “partial membership” in the EU “or anything that leaves us half-in, half-out,” according to excerpts of a speech released by her office on Monday. Previous such comments, interpreted to mean that Britain is heading toward a looser relationship with the EU and could lose access to the bloc’s common market, sent the pound tumbling. The currency dropped to three-month lows against the dollar in European markets Monday.“We do not seek to hold on to bits of membership as we leave,” Mrs. May’s prepared remarks said. Instead, Britain will seek a new type of relationship with the EU, according to the remarks. The prime minister is to deliver the address to a group of diplomats and other officials in London on Tuesday.The prime minister has repeatedly said London wants to control immigration. EU leaders have said the U.K. can’t impose restrictions on EU citizens’ ability to live and work in the U.K. and retain its existing economic relationship, which includes unfettered access to the EU’s market of 440 million consumers.   The speech excerpts released by her office made no reference to the single market.  Politicians who campaigned for Brexit said the U.K. will be better off once it is outside the single market and can negotiate its own trade deals with countries elsewhere. They say the U.K. will thrive if it is no longer bound to EU regulations and required to abide by the bloc’s free movement of people principle.Tim Farron, leader of the pro-EU Liberal Democrats, said that Mrs. May is delivering “a destructive, hard Brexit and the consequences will be felt by millions of people through higher prices, greater instability and rising fuel costs.”

Theresa May to set out 12-point plan for Brexit as she vows a clean break that does not leave the UK ‘half-in, half-out’ - Theresa May will set out a 12-point plan for Brexit as she vows that the UK will not have “partial” membership of the EU “that leaves us half-in, half-out”.Mrs May will make her most significant speech since becoming Prime Minister in July last year and confirm that Britain will leave the single market and customs union after Brexit.In remarks that will delight Conservative  Eurosceptics, Mrs May will pledge that Britain outside the European Union will be a “great, global trading nation” that is “respected around the world and strong, confident and united at home”.The Prime Minister will make regaining control of Britain’s borders one of the central themes of her Brexit strategy and will also make clear that the rights of UK expats will be protected.She will make clear for the first time that Britain will not seek a watered down version of Brexit, something that Remain campaigners are still pushing for. The Prime Minister will say that Britain is quitting the single market and although she will be less explicit on the issue of the customs union, her remarks will make clear that after Brexit the UK will no longer be a member.Her remarks will be seen as a direct rebuke to European leaders who have repeatedly claimed that Britain will have to compromise on freedom of movement if it wants membership of the single market or customs union.“We seek a new and equal partnership – between an independent, self-governing, Global Britain and our friends and allies in the EU,” the Prime Minister will say in the speech in Lancaster House in London.“Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave. “The United Kingdom is leaving the European Union. My job is to get the right deal for Britain as we do.”

May Pledges Vote on Brexit Taking U.K. Out Of EU’s Single Market -- Prime Minister Theresa May offered her most explicit vision of Britain’s future relationship with its European Union neighbors, pledging to quit the single market and instead seek a customs agreement with the bloc to deliver “a smooth and orderly Brexit.” The pound surged after May’s speech, in which she set out for the first time that her government is determined to make a clean break from the EU and said she would give Parliament a vote on the final Brexit deal. While saying that she wanted the U.K. to be “a good friend and neighbor in every way” to its former partners, she also warned them not to reject the model she was proposing. “I know there are some voices calling for a punitive deal that punishes Britain and discourages other countries from taking the same path,” May said in her speech to diplomats in London on Tuesday. “That would be an act of calamitous self-harm for the countries of Europe. And it would not be the act of a friend.” Laying out the government’s Brexit plans with 12 core objectives, May said that she was confident a deal can be reached with the European Union once the trigger to leave is pulled by the end of March. She called for a “phased approach” to implementing the new rules to ensure Brexit is “smooth.” May offered a series of other aims for the coming talks:

  • She wants to recast membership of Europe’s customs union by maintaining tariff-free, friction-less trade with the EU, but without having to impose the same duties on non-EU countries
  • The ability to negotiate new trade deals with countries outside the bloc
  • She wants transitional arrangements for financial services and other companies so new rules are phased in over time
  • No more “huge” U.K. contributions to the EU budget

Pound Soars Most Since 2008 After UK's May Calls For Parliamentary Vote On Brexit - Having plunged to flash-crash lows on Sunday night following leaks of UK PM Theresa May's Brexit speech, cable is soaring this morning as she delivered the speech confirming that both houses of Parliament will vote on the final Brexit deal. As Bloomberg notes, U.K. PM May’s announcement that both houses of Parliament will vote on the final Brexit deal is positive for the pound as the process should ensure that extreme outcomes are avoided, analysts say.

  • “The deal has to be good” to be approved, BofAML strategist Athanasios Vamvakidis says in e-mailed comments
  • “Final take on this speech is that May has come across very well. This, in addition to the economic fundamentals, are good arguments for not being aggressively short GBP/USD below 1.20. The way she has come across today almost puts the EU in an out-of-touch position,” Stephen Gallo, analyst at BMO Capital Markets, says in e-mailed comments
  • The announcement on the Parliament vote fueled the initial extension of the GBP rally, partly because it raises expectations that MPs less in favor of Brexit could have more influence, according to Josh O’Byrne, strategist at Citigroup; still, big picture hasn’t changed much after this speech
  • May didn’t add to “hard-Brexit” fears, and hence the “sell-the-fact” reaction in the market, Manuel Oliveri, strategist at Credit Agricole, says in e-mailed comments

And the result is a chaotic spike in cable - the biggest move sine 2008...

Jeremy Corbyn tells Theresa May her Brexit plans would damage UK  -- Jeremy Corbyn has condemned the government’s threat to turn the UK into a low-tax economy if it cannot get a satisfactory Brexit deal, telling Theresa May that it would damage the UK and demeaned her office.  During a bad-tempered prime minister’s questions, the Labour leader repeatedly questioned May over the EU exit plan she set out in a speech on Tuesday. May responded by insisting she aimed to negotiate a strong deal and accusing Corbyn of having no vision of his own.  “There is indeed a difference between us,” the prime minister told him near the end of their exchange. “It’s very simple: when I look at the issue of Brexit, or indeed at any other issue, like the National Health Service or social care, I consider the issue, I set out my plan and I stick to it. It’s called leadership. He should try it some time.” Corbyn began the session by asking why May had outlined her plan at Lancaster House, rather than informing MPs in parliament. “Yesterday, the prime minister snubbed parliament and snubbed the Brexit committee recommendations to bring forward a white paper, while at the same time describing the referendum as a vote to restore our parliamentary democracy,” he said on Wednesday. Referring to some newspapers’ comparisons between May and Margaret Thatcher, Corbyn said the prime minister was “not so much the Iron Lady as the Irony Lady”. May responded by sidestepping the question to say she had set out “a vision for a stronger, fairer, more united, more outward-looking, prosperous, tolerant and independent Britain”. It was, she added, “a plan that will put the divisions of last year behind us”. Corbyn condemned May for the section of her speech in which she warned the EU that if the UK did not get a sufficiently good deal it could reshape its economy to have lower tax and fewer regulations to attract investment. May was dismissive of Corbyn’s comments, returning to the issue of his party’s occasionally confused stance over Brexit. “I’ve got a plan, he doesn’t have a clue,” she said. The prime minister gave no new details of what her Brexit plan might involve, even when questioned by Corbyn several times about whether a deal to keep access to EU markets might include making payments.

How Europe's newspapers reacted to Theresa May's Brexit speech - Germany's Die Welt newspaper has accused Theresa May of "leading Great Britain into isolation" with her plan for a hard Brexit, as newspapers across continental Europe reacted very differently to those in the UK.Splashing an image of Ms May across its front page with the headline "Little Britain", Die Welt ran an article online comparing Ms May's tone in Tuesday's speech to that of the last female Tory Prime Minister - Margaret Thatcher - who extolled the virtues of the single market. Italian daily La Repubblica led with the headline, "Brexit, London gets its wall, 'away from the EU and the common market"'. Theresa May warns EU over 'punitive' Brexit dealThe Spanish newspaper El País did not lead with Brexit, but there was mention of Mrs May's speech in the top right of the title page that called the announcement her "most important speech" since coming to Downing Street.  And while Le Monde splashed on "Trump against Europe", a bullet point added: "Trump's support for Brexit is welcomed by Theresa May, who looks to tighten links with her favoured ally".  Die Welt's tone was in stark contrast centre-right newspapers in the UK. The Daily Mail praised the "steel of the new Iron Lady" following the PM's ultimatum that she would walk away from a bad deal, while the Daily Express said she had "laid out the UK's path to becoming truly independent again".   British and German newspapers - compare and contrast The Sun's editorial called Tuesday's speech "historic and a game changer" and said Ms May's "Brexit vision ... is so close to ours we couldn't have written it any better".

On Brexit over-optimism - Theresa May today said she wanted a “bolder embrace of free trade” so that the UK can “rediscover its role as a great trading nation.” This echoes Gerard Lyons and Liam Halligan’s view (pdf) that Brexit is an opportunity for the UK to “trade more freely with nations far more populous and fast-growing [than the EU].” For me, there are two problems here.One is simply that free trade deals might not be so easy to arrange. Trump has promised us a “fair” deal – but “fair” is often a euphemism for “not free”. And as George Magnus has tweeted: “C'mon Twitter, you think Xi JinPing is the new champion of free trade and a liberal trading order?”That issue will get lots of attention in coming months.I fear, though, that it effaces another problem – that even if the UK does strike great trade deals, exports might not increase very much. Just because we have the opportunity to do something does not mean we will. I would have thought that Gerard, being a lifelong Fulham fan, would know there can be a distance between opportunity and achievement.My table gives us a clue about this. It shows goods exports per person to some non-EU countries, taken from World Bank data. You can see from this that Germany exports much more than the UK – more than twice as much person to Japan and China, and more to India and Australia, despite the UK’s historic links with those nations.This alerts us to an important fact – that it is not membership of the EU that is holding back UK exports. Germany faces the same trade rules that we do, and is doing much better.Exactly why this should be is of course a big question. It ’s not just that UK businesses are “fat and lazy” (to use Liam Fox’s expression). It’s because the UK has for decades lagged behind in skills and investment in some key exporting industries.

Theresa May’s hard Brexit hinges on a dated vision of global trade - A landmark speech by Theresa May, the prime minister of the UK, setting the direction of the country for its foreseeable future appears to place Britain firmly outside of the EU. May has finally made it clear that Brexit means leaving the European single market – and the customs union – ensuring that Britain has complete control of its trade and borders. However, what seems clear at first sight is perhaps more complex. The prime minister has left a number of core issues very open. She seems to want to a form of customs union with the EU, even if only on a sector-by-sector basis, and she seems to be prepared to pay something to the EU for that relationship. In addition, there is an acknowledgement of the need for EU citizens living in the UK to have their situation protected, but there’s a lack of clarity on future migration to the UK from the EU. Underpinning all of this is a different model of Britain’s economic development. When May says she wants “Britain to be what we have the potential and ambition to be: a great, global trading nation that is respected around the world and strong, confident and united at home”, she is fundamentally changing the political and economic model that has governed the country for the past 40 years. What May seems to be overlooking is that Britain’s position in the world is not what it was. As the 19th-century German economist, Fredrich List, recognised, only the strongest economies have an interest in free trade as they have the competitive advantage. In the 19th century, when Britain was promulgating free trade, it was the most powerful nation in the world. It was the home of technological innovation.  Now, Britain has the lowest level of productivity in the G7. In a free and open market, it is likely to be flooded by imports or see a real crash in the value of the pound, with the inflationary consequences that will produce.

The fights that will shape Brexit outcome – FT - Theresa May’s Brexit speech this week laid out in stark terms what she wants from Britain’s separation from the EU. European leaders, meanwhile, have stuck doggedly to their own demands. The two sides will soon collide. When they do, their opening confrontations may answer a vital question: is there a basis for a viable deal? The answer depends as much on the order on which key issues are negotiated as on the substance. “We only have 18 months of talks to agree the exit deal, and we could spend five months arguing about what to argue about,” said one senior diplomat involved in the process. Since the days after the June 23 referendum, the EU-27 have shown remarkable unity around their negotiating principles, which make access to the single market conditional on acceptance of the EU’s four freedoms, rule out ch