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

Saturday, January 7, 2017

week ending Jan 7

Fed minutes show central bank uncertain about the pace of interest-rate hikes -- Federal Reserve officials saw the possibility that they might have to raise interest rates faster than the “gradual” pace that they have stressed for some time, according to minutes of the December meeting released Wednesday. The account of the meeting suggest the era of a predictable and boring U.S. central bank may be over. By a unanimous vote on Dec. 14, the Fed raised its federal-funds range by a quarter-percentage point to 0.50%-0.75%, its second rate increase in a decade. At the same time, Fed officials said economic conditions will warrant only “gradual increases” in the federal-funds rate. In the so-called dot plot, Fed officials penciled in three quarter-point rate increases in 2017 instead of two seen in September. Minutes of the meeting show many Fed officials thought this gradual policy path was under threat. “Fed officials pointed to a number of risks that, if realized, might call for a different path of policy than the currently expected,” the minutes said. The biggest risk was that the unemployment rate might drop sharply below the 4.5% jobless rate viewed as the “longer-run normal” level below which might spark inflation. The unemployment rate is almost at that level having dropped to 4.6% in November. “Many” Fed officials judged the risk of a “sizable undershooting” of the normal jobless rate “had increased somewhat and that the Federal Open Market Committee might need to raise the federal-funds rate more quickly than currently anticipated to limit the degree of undershooting and stem a potential buildup of inflationary pressures,” according to the minutes.

Fed minutes: Fed concerned more fiscal policy could raise demand above sustainable levels - Federal Reserve officials in December approved their first interest rate hike in a year based in large part on market reactions to the presidential election and the anticipation of aggressive fiscal policy ahead, according to minutes of the meeting released Wednesday. The summary showed that while the Federal Open Market Committee steers clear of political chatter, the fallout from Donald Trump's victory was on their minds. The FOMC unanimously approved a quarter-point hike that pushed the target range for its short-term lending rate to between 0.5 percent and 0.75 percent, and indicated a somewhat more aggressive path forward. Indeed, markets had reacted sharply to the election outcome, pushing up bond yields and stock prices, and increasing expectations that the Fed would hike at the meeting, the minutes showed. While there is no mention of Trump, the impact from the election on markets and the economy seemed to be discussed extensively. The committee in its summary of economic projections noted "substantial uncertainty" about fiscal policy ahead. However, members noted that "more expansionary fiscal policy" raised the possibility of "somewhat tighter monetary policy than currently anticipated." "Asset price movements as well as changes in the expected path for U.S. monetary policy beyond December appeared to be driven largely by expectations of more expansionary fiscal policy in the aftermath of U.S. elections," the minutes said at one point. In the period between the November and December meetings, "market participants saw a nearly 95 percent probability of a rate hike" as "most of the steepening of the expected policy path occurred following the U.S. elections, reportedly in part reflecting investors' perception that the incoming Congress and Administration would enact significant fiscal stimulus measures."

Wall Street Reacts To The FOMC Minutes: "It's All About Trump" - With the dust settling on the December FOMC Minutes, the one recurring theme, even though he wasn't explicitly named, was Donald Trump and specifically the still "uncertain" impact his fiscal policies will have on the economy.As a result, almost all Fed members saw increased upside risks to their growth forecasts as result of potential for expansionary fiscal policies under the Trump administration, with half explicitly including fiscal policy in their forecast. Furthermore, Fed staffers also noted the impact of Trump's impact already occurring in markets. Continuing the Trump theme, in its review of U.S. economic situation, Fed staffers said fiscal policy under Trump was seen as largely driving asset price changes in the future, as well as expectations for path of Fed policy. The minutes hinted that much of the steepening in the expected path of Fed policy reflected in part  investors’ perceptions that incoming Congress and Trump administration would enact significant fiscal stimulus measures Aside from Trump, FOMC members debated trends in inflation with a few noting that certain measures suggested risks to inflation outlook had become more balanced; while others pointed out that market-based measures of inflation compensation were still low or that downside risks remained. Meanwhile, many said that risk of “sizable” undershooting of long-run normal unemployment rate had “increased somewhat,” and FOMC might need to raise fed funds more quickly than expected to stem potential buildup of inflation. And since Trump was the unspoken message, it stems to reason that the Fed, unaccustomed to leaving policy matters in others' hands was especially "uncertain", and as Pantheon Macroeconomics economist Ian Shepherdson writes, “until the extent, structure and timing of fiscal easing is known, the Fed’s forecasts for both the economy and rates have to be considered tentative."

Fed Watch: Solid Employment Report Keeps Fed On Track --The labor market finished out the year on a solid note. Solid, not spectacular, and largely consistent with the Fed's expectations. Consequently, the final employment report for 2016 should not impact the Fed's median forecast for 75bp of rate hikes in 2017. Payrolls rose 156k in December and jobs gains the previous two months were revised upwards by 19k. While good numbers, job growth continues to slow: Since January 2015, the 12-month moving average of monthly job growth slowed from 262k to 180k. Still, that remains greater than the pace necessary to hold the unemployment rate constant once the demographic impacts again dominate the cyclical factors (Federal Reserve Vice Chair Stanley Fischer estimates that number to be 65k-115k). But the economy continues to trend toward that pace. Supported by an increase labor force participation, the unemployment rate ticked up to 4.7%, holding just below the Fed's estimate of the natural rate of unemployment: Measures of underemployment are now again showing signs of improvement, albeit the pace of improvement has slowed along with the pace of job growth: The pace of wage growth accelerated to 2.9%, the highest rates since 2009: Overall, the report should win hearts and minds on Constitution Ave. The economy looks to be tracking exactly where the Fed expects it to go, with job growth slowing sufficiently such that the unemployment rate holds steady just below full employment. Such a situation would allow for continued improvement in measures of underemployment while maintaining healthy but not excessive pressure on wage growth. In contrast, recall the concerns about about undershooting the natural rate of unemployment that surfaced during the December FOMC meeting. From the minutes: ...In discussing the possible implications of a more significant undershooting of the longer-run normal rate, many participants emphasized that, as the economic outlook evolved, timely adjustments to monetary policy could be required to achieve and maintain both the Committee's maximum-employment and inflation objectives. ...Several members noted that if the labor market appeared to be tightening significantly more than expected, it might become necessary to adjust the Committee's communications about the expected path of the federal funds rate, consistent with the possibility that a less gradual pace of increases could become appropriate... The economy is now at a point where a sudden boost in activity would prompt the Fed to accelerate the pace of rate increases. This employment report, however, suggests this isn't happening just yet.

 Rand Paul Reintroduces Legislation To "Audit The Fed" --Having been pursued, unsuccessfully, many times by his father in previous years, today Senator Rand Paul, together with Rep. Thomas Massie re-introduced legislation to “Audit the Fed", after a similar effort stalled in the last Congress.  While in the past such a proposal, which has been vocally opposed by Janet Yellen and Wall Street for obvious reasons, was quietly shut down it may face its best odds ever of becoming law in the current Congress according to the Hill. With both chambers controlled by Republicans long critical of Fed’s policies, the legislation could end up being a test of Donald Trump stated resolve to putting the Fed to heel. In the past, the president elect has heaped scorn on the central bank, and demanded accountability from the "independent" Fed. To that end, Paul specifically mentioned Trump in a statement about the bill Wednesday, making clear the measure’s proponents believe they have an ally in their cause coming to the White House.“The U.S. House has responded to the American people by passing Audit the Fed multiple times, and President-elect Trump has stated his support for an audit. Let’s send him the bill this Congress,” said Paul.Under the proposed bill, the Fed’s monetary policy deliberations could be subject to outside review by the Government Accountability Office. Proponents of the measure argue that the Fed is too powerful and lacks sufficient oversight for its interest rate decisions. But Fed officials from Yellen on down, as well as other critics, have warned that such a policy could subject the Fed to undue political pressure and discourage it from taking unpopular steps for the good of the overall economy. While in the past, the proposal garnered bipartisan support and has passed the House several times in past Congresses, it usually stalled in the Senate. Senate Democrats refused to bring up the bill for consideration when they controlled the chamber, and senators rejected the bill in 2016 after it was brought up by the new GOP majority. Two non-Republican senators — Bernie Sanders (I-Vt.) and Tammy Baldwin (D-Wis.) — voted for the measure then. Only one Republican, Sen. Bob Corker (Tenn.), opposed it. But the situation is different in 2017, as lawmakers who assumed President Obama would veto any “Audit the Fed” legislation in the past now are anticipating a White House with a vocal Fed critic at the helm. Furthermore, with Republicans controlling both chambers, any attempts to kill the bill will be more complicated.

Central Bank Independence: Growing Threats -- The median FOMC participant forecasts that the Committee will raise the target range for the federal funds rate three times this year. That is, by the end of 2017, the range will be 1.25 to 1.50 percent. Assuming the FOMC follows through, this will be the first time in a decade that the policy rate has risen by 75 basis points in a year (see chart). It is natural to ask what sort of criticism the central bank will face and whether its independence will be threatened.  Our concerns arise from statements made by President-elect Trump during the campaign, as well as from legislative proposals made by various Republican members of Congress and from Fed criticism from those likely to influence the incoming Administration’s policies. Recall that, during the campaign, candidate Trump attacked Federal Reserve Board Chair Yellen, saying that she and her colleagues were keeping interest rates low to support President Obama. President Trump is likely to have substantial latitude to remake the Federal Reserve Board in his image. While all five of the current members of the Federal Reserve Board have terms as Governors that extend at least until 2020, we expect that several incumbents will exit by 2018, leaving the new President to appoint a majority of the Board, including its Chair and two Vice Chairs. Will those appointed set policy to ensure “maximum employment, stable prices, and moderate long-term interest rates” as the Federal Reserve Act mandates? We hope so, but that is far from clear.

  Republicans Likely to Pass “Audit the Fed” -- Yves Smith - The Fed appears to be on its way to get some long-overdue payback. In response to the extraordinary, extra-legislative measures taken to rescue financial institutions in the wake of the financial crisis, which former IMF chief economist Simon Johnson called a “quiet coup,” Senator Ron Paul and Representative Alan Grayson sponsored an “Audit the Fed” bill, which was pared back to a Dodd-Frank amendment that provided for a one-time audit of the central bank’s emergency lending programs. The Hill reported today that Republicans in the Senate and House intend yet again to push for the passage of an “Audit the Fed” bill. With their control of both houses, past support by some Democrats, and Trump no fan of the central bank, the measure is likely to become law.One of the tired rejoinders of Fed defenders is that the central bank is already audited. And in fairness, the choice of the “Audit the Fed” monicker may not have been the best. However, the Fed is currently exempt from GAO audit for its monetary policy decision-making, transactions with foreign entities, and transactions directed by the Federal Open Market Committee. The idea that monetary policy sausage-making could be examined and second-guessed is what has the Fed and its allied up in arms.  The sorry fact is that the Fed has for far too long been able to shield its operations from democratic oversight and accountability by claiming it need to be independent. That is code for “democracies like to spend too freely and create too much inflation.” And the tacit assumption is that economic mandarins, in the form of central bankers, therefore need to be shielded from public pressure. But this tidy story neglects the fact that central bankers are already subject to political influence, that from the banks for whom they act as a bankers’ bank. Ironically, it was a member of the central banking club, Willem Buiter, who had the bad taste to call out the Fed for being a victim of “cognitive regulatory capture,” meaning intellectually hostage to the banks it nominally supervised.

Fed's Williams: Get Used to Sub 2% GDP Growth, Meaningless Fiscal Stimulus and Higher Interest Rates- In a CNBC interview today with San Fransicko's Fed Williams, we heard several things that have been repeated ad nauseam by the establishment elite.

  1. Get used to very weak GDP growth -- thanks to lack of investment and productivity.
  2. Trump's fiscal stimulus, although inspirational, won't move the needle all that much.
  3. We're at full employment, despite the fact that 94% of jobs created under Obama were part time.
  4. Due to the specter of inflation, rates need to go higher...much higher.

During Obama's entire term as Divider in Chief, the Federal Reserve doddered him with comfy rates and QE programs. Now that he's all but a bad memory, the policy has shifted, dramatically, in spite of the fact that, economically, nothing has changed. If anything, Trump's policies towards trade with China pose as a significant headwind and may disrupt the globalist apple cart to a very serious degree of magnitude. However, the newly courageous Yellen Fed is taking to their fanatical position of raising borrowing costs for America's $20 trillion debt load, with energetic inspiration.Fed's Williams discussing policy with Mr. Liesman (video)

 A New Year Brings New Recession Forecasts - The economic outlook is always uncertain, but one thing that doesn’t change is the constant stream of recession forecasts. Predicting a slump, in fact, has been a staple ever since the last downturn ended. Did the experience of being consistently wrong over the last seven years temper the obsession to see macro trouble at every turn? Apparently not. The business of assuming that a recession is lurking around the next corner for 2017 is in high gear. The folks at Maudlin Economics last week, for example, warned that “there is concern over the chance of a cyclical recession in the US in 2017.” Meanwhile, two economists at Ohio State University are anticipating the economy will soon slip over to the dark side. “My outlook for 2017 and beyond is that the US economy will likely see another recession,” Jay Zagorsky wrote on Monday. A colleague at Ohio State, Ian Sheldon, also sees trouble brewing via Donald Trump’s election, explaining that “he’s going to put the economy into recession.” The election of a Republican generally—any Republican–is enough to inspire recession chatter. Last month, for instance, an analyst found a degree of cause and effect between presidents who hail from a political party that begins with the letter “R” and economic downturns. Joachim Fels, global economic advisor at Pimco, recently observed that “each of the six Republican presidents since the Second World War presided over a recession, and some more than one – there were three under Trump’s self-declared idol, Dwight ‘Ike’ Eisenhower, and two each under Richard Nixon and George W. Bush.” Fels is hardly alone in worrying about a new recession because a new occupant of the Republican persuasion is set to move into the Oval Office. Johan Jooste, the Bank of Singapore’s chief investment officer, for instance, yesterday outlined his reasoning for thinking that US recession risk is on the rise due to President-elect Trump.

US Ends 2016 With $19.98 Trillion In Federal Debt; Up $1,054,647,941,626.91 --On the last day of calendar 2016, total US public debt jumped by $98 billion, mostly as a result of end of quarter Social Security debt allocation, which accounted for $70.4 billion of the daily increase. As a result, total US government debt on December 30, 2016 was $19,976,826,951,047.80.This compares to $18,922,179,009,420.89 on the last day of 2015 and means that the increase in US federal debt in 2016 was just over $1 trillion, or $1,054,647,941,626.91 to be specific.Putting this increase in context, during Barack Obama’s time in office, federal debt has increased by $9,349,949,902,134.72, or 88%, rising from $10,626,877,048,913.08 on Jan. 20, 2009, the day of Obama’s inauguration to $19,976,826,951,047.80 on the last day of 2016.That equals $78,553.84 for each of the 119,026,000 households in the country as of September. Our condolences to anyone who doubted that Obama would be able to hit $20 trillion in Federal debt before leaving the White House.

US national debt soars by $100 billion. . . in just 8 hours -  According to the latest statement issued yesterday afternoon by the Department of Treasury, the US national debt has reached $19,976,826,951,047.80. That’s $19.976 trillion, as of the close of business on Friday December 30, 2016. (The government is typically a day or two behind when it sends out these reports.) That number itself is obviously remarkable, just shy of $20 trillion. But what’s even more astounding is that, according to the Treasury Department’s own figures, they STARTED the day with a debt level of ‘just’ $19.879 trillion. So literally in the span of a single 8-hour workday, the US government amassed an astonishing $97 billion in debt. That’s simply incredible– $97 billion is larger than the entire GDP of New Mexico or Luxembourg. In 8 hours. I review these reports every single day. Needless to say, an increase of this magnitude occurs… almost never. And when I saw it yesterday afternoon, the “Holy Shit!” that came out of my mouth caused a rush of staff into my office asking “What happened?!?” As I recovered from my shock, I explained that the US federal government had increased its debt by nearly $100 billion in a single day, to which one of them asked, “What did they buy?” I thought it a brilliant question, almost child-like in its simplicity. Indeed. What did they buy?

 Lew: Eliminate the 'dangerous' debt limit - Treasury Secretary Jack Lew is urging Congress to effectively kill the national debt limit, arguing it now poses too great a risk to remain a policy tool. Writing in the Harvard Journal on Legislation, Lew argued that the debt limit has become a dangerous tool, allowing lawmakers to risk global economic catastrophe to gain political leverage. “What once was a deadline that drove debates on the budget has transformed into a nihilistic platform for some in Congress to promote the very real risk of a default to advance narrow partisan agendas,” he wrote. “We have a broken, outdated system that no longer meets our country’s needs,” he added. “We must change course.”With the nation’s debt cap set to again take effect in March, Lew is making the case that Congress should do away with the decades-old way the nation authorizes new borrowing. He contended that in prior decades, debates over raising the nation’s debt limit spurred some fierce negotiations over the budget, but the threat of actually defaulting debt were still considered “extreme.” By his telling, that all changed in 2011, when an influx of conservative lawmakers began pushing an “unprecedented and dangerous” approach of actually suggesting the nation’s borrowing cap should not be raised unless it came with major policy concessions. “The willingness of Congress, in recent years, to create a real risk of default has helped demonstrate the actual and potential harm that comes from debt limit brinksmanship,” he contended. “An unprecedented default on our obligations could precipitate a financial crisis, wreak havoc on our economy, and, in turn, damage our standing as a nation.”

Foreign sales of US government debt are largely irrelevant - Billy Mitchell -- There was an article in Bloomberg media – Beware the Foreign Exodus From Treasuries – stirring up fear about the recent sales of foreign-held US government debt.  The fact is that the foreign sales of US government debt are largely irrelevant for the US government’s capacity to maintain its net spending program. The sales are in US dollars and only the US government itself issues those dollars. To think that a foreign purchaser of a US Treasury debt liability are ‘providing dollars’ to the US government is to completely misunderstand the nature of the transaction.  The question that financial commentators really should be asking is why should the US government extend that corporate welfare (risk-free bonds with income flow) to domestic bond-buyers and foreign governments/private investors. There is no financial reason (in terms of facilitating fiscal policy) for the bond issuance. It is just a form of welfare spending which helps the top-end-of-town. The gist of the Bloomberg article is as follows:

  • 1. “The biggest foreign buyers of U.S. government bonds are quickly retreating after years of absorbing record amounts of the securities”.
  • 2. “This is an important dynamic to understand when looking at the potential fate of the $13.6 trillion Treasury market in 2017.”
  • 3. “It’s hard to see how these bonds can significantly rally, even in the face of bad news, given the exodus of foreign central banks from the U.S. government-debt market”.
  • 4. “it’s not just the big governments that are selling. Private foreign investors have been net sellers recently, too”.
  • 5. “This foreign withdrawal will most likely continue for the foreseeable future”.
  • 6. “there’s a solid argument to be made that the latest selloff has gone too far and will correct soon enough”.
  • 7. “But this backdrop of foreign selling is important. Yields on 10-year Treasuries may not quickly shoot up, but they most likely won’t plunge back to the lows of 1.36 percent seen in July.”

The point to understand is that while the trends described in the article are actually happening the importance of those trends is close to zero when assessing the capacity of the US government to run its fiscal policy program, which, might include a large increase in public infrastructure spending under the new administration. As we see below, the foreign purchases of US government cannot be construed as funding the US government. If that government chooses it can keep spending with zero foreign government debt purchases.

Is US Fiscal Policy About to Go Procyclical, Again? How Can We Tell? – Ed Dolan - As 2017 begins, the US economy is in the middle of a boom, or at least a boomlet. The official unemployment rate is at or below its target level, stock market indicators are hitting all-time highs, and the Fed is starting to get serious about raising interest rates. All this is reflects the expectation of an orgy of tax cutting and infrastructure spending by the incoming Trump administration and a new Republican Congress. If such a turn in policy comes to pass, will it be a good thing, or too much of a good thing? Too much, in my opinion. Republicans like to portray themselves as the party of fiscal responsibility, but their record says otherwise. In practice, GOP budget policy so far this century has been consistently procyclical—expansionary when it should show constraint, contractionary when it should support a weak economy. All signs point to another procyclical episode in the making. To set the stage, here is a little background on patterns of fiscal policythe good, the bad, and the ugly. Economists of all political views show surprisingly broad agreement on the general principles. Good fiscal policy should moderate the business cycle (or at least not make it worse) and should do so in a way that avoids unsustainable increases in public debt. Bad policy amplifies booms and busts. Ugly policy can lead to major crises.  The structural balance is useful because it isolates changes in policy, such as tax cuts or new spending programs. Changes in the actual balance, on the other hand, represent the combined effect of changes in policy and changes in the state of the economy. Even if there are no changes in policy at all, automatic stabilizers cause the actual balance to move toward surplus when the economy expands and toward deficit when it contracts.  We can use these concepts to identify three patterns of fiscal policy. The simplest is a “cyclically neutral” policy that holds the structural balance at zero throughout the business cycle. Holding the structural balance constant does not prohibit all policy changes. Rather, it requires that any spending changes be financed by equal changes in revenue, or equal but opposite changes in spending elsewhere in the budget.  Under a cyclically neutral policy, the relationship of our three key variables over the business cycle would look like this:

Rand Paul Goes Off On Republican Party Over New Budget Resolution - On Wednesday afternoon, one day after reintroducing his Federal Reserve Transparency Act, Senator Rand Paul (R-KY) took to the Senate floor to slam his fellow Republicans for the $9.7 trillion of debt that a newly introduced budget resolution will tack on to the country's already out of control debt total. Senate Budget Committee Chair Michael Enzi (R-WY) introduced a budget resolution on Tuesday that is being touted as the first step the newly sworn in congress is taking to repealing Obamacare. The legislation includes “reconciliation instructions” that would allow congress to dismantle the health care law as part of reconciling taxes and spending with the budget blueprint. According to Paul, “there is a time and a place to debate Obamacare” but this new piece of legislation is a budget and he is unwilling to support the debt it will accumulate. What will the first order of business be for the new Republican majority? To pass a budget that never balances. — Senator Rand Paul (@RandPaul) January 4, 2017 “Republicans won the White House. Republicans control the Senate. Republicans control the House. And what will the first order of business be for the new Republican majority?” Paul asked.  “To pass a budget that never balances,” the Kentucky Senator answered his own question. “To pass a budget that will add $9.7 trillion dollars of new debt in tens years.” “Is that really what we campaigned on?” Paul asked on. “Is that really what the Republican party represents?”

 President Trump Likely Will Deliver A More Robust Economy In 2017: An incoming USA President is given an economy. Certain elements in an economy (such as employment) lag around six months. Some economic improvement can be almost immediate - like those triggered by lowering taxes (especially when withholding or other payments are reduced). Economic improvement triggered by regulatory relief can be swift or can lag by years - depending on the relief.President-elect Trump is more than likely to be handed an economy where the underlying dynamics are already accelerating. Two leading indicators ECRI Weekly Leading Index and RecessionAlert's Weekly leading Index are both accelerating and their values are at levels consistent with strong economic growth.Ok, I would not take any forecasting indicator as gospel - but since 2000 there has been reasonable correlation between GDP and these leading indicators. But by now everyone should know that GDP is not a good indicator of what the median person is experiencing. After accelerating growth in median family income for five years, beginning in September 2015 median family income growth rate has been decelerating. In the case of median family income, we can partially blame Congress and President Obama for delivering a slow growing family income situation - of course much of the economy is outside the control of government. It seems President-elect Trump will be lucky on the economy as measured by GDP - but will the average Joe and Jane see an improvement in their financial situation? When you tinker with the economy, there will be unwelcome side affects. In addition, there will be unanticipated international and domestic events. I wish President-elect Trump luck.

 Forecast 2017: The Wheels Finally Come Off – Kunstler - Apart from all the ill-feeling about the election, one constant ‘out there’ since November 8 is the Ayn Randian rapture that infects the money scene. Wall Street and big business believe that the country has passed through a magic portal into a new age of heroic businessmen-warriors (Trump, Rex T, Mnuchin, Wilbur Ross, et. al.) who will go forth creating untold wealth from super-savvy deal-making that un-does all the self-defeating malarkey of the detested Deep State technocratic regulation regime of recent years. The main signs in the sky, they say, are the virile near-penetration of the Dow Jones 20,000-point maidenhead and the rocket ride of Ole King Dollar to supremacy of the global currency-space. I hate to pound sleet on this manic parade, but, to put it gently, mob psychology is outrunning both experience and reality. Let’s offer a few hypotheses regarding this supposed coming Trumptopian nirvana. The current narrative weaves an expectation that manufacturing industry will return to the USA complete with all the 1962-vintage societal benefits of great-paying blue collar jobs, plus an orgy of infrastructure-building. I think both ideas are flawed, even allowing for good intentions. For one thing, most of the factories are either standing in ruin or scraped off the landscape. So, it’s not like we’re going to reactivate some mothballed sleeping giant of productive capacity. New state-of-the-art factories would require an Everest of private capital investment that is simply impossible to manifest in a system that is already leveraged up to its eyeballs. If by some magic any new industrial capacity were built, much of the work in it would be performed by robotics, not brawny men in blue shirts, and certainly not at the equivalent of the old United Auto Workers $35-an-hour assembly line wage. We have not faced the fact that the manufacturing fiesta based on fossil fuels was a one-time thing due to special historical circumstances and will not be repeated. Similarly for “infrastructure” spending touted by the forces of Trump as the coming panacea for economic malaise. I suspect most people assume this means a trillion-dollar stimulus spend on highways and their accessories. Well, that also assumes that we expect another fifty years of Happy Motoring and suburban living. Fuggeddabowdit. We’re in the twilight of motoring anyway you cut it, despite all the chatter about electric cars and “driverless” cars. We won’t have the electric capacity to switch over the Happy Motoring fleet from gasoline. The oil industry itself is already headed for collapse on its sinking energy-return-on-investment. We could have applied our post-WW2 treasure to building beautiful walkable towns and cities with some capacity for adaptive re-use, but we blew it in order to enjoy life in a one-time demolition derby. Life is tragic. Societies make poor choices sometimes, and then there are consequences.

 It’s here: CBPP’s top graphs of last year! - Jared Bernstein - Happy new year and welcome to the Center on Budget and Policy Priorities top graphs of 2016 special! This year’s theme is a somber one: the fragility of the gains we’ve made.  First, the GOP appears poised to engage in a War on Poverty Programs. In order to help finance their highly regressive tax cuts, they’re likely to target programs like Medicaid and SNAP (food stamps), e.g., by turning them into block grants to states. This robs these programs of their vital countercyclical impact, as shown in the figure below. Back in 2010, as the Great Recession was pummeling low-income households, the safety net did what it’s designed to do: catch people when the market fails. What’s that? You’re skeptical that block grants would truly undermine the effectiveness of our anti-poverty programs. Well, observe this next figure, showing the growing failure of cash assistance to reach needy families since it was turned into a block grant back in the mid-1990s. Here’s another huge gain to low- and middle-income households that’s at risk of being lost: the decline in the share without health coverage. It seems increasing clear that president-elect Trump and the GOP Congress are firmly united in repealing the Affordable Care Act. When it comes to replacing it to stave off the lost coverage that will then beset millions of households…well, that they’re not so sure about. I’ve got a theory: Team Trump jams through a big, wasteful supply-side tax cut based on trumped-up growth assumptions. When offsetting growth fails to appear of the scene, they throw up their hands in despair and insist that Social Security and Medicare must be cut to stave off the rising debt. Of the many figures we’ve published showing the importance of social insurance programs, this one showing Social Security’s poverty-reduction impact on seniors is particularly intuitive. Absent Social Security income, there’d be about 4.5 times more elderly poverty than there is today. But aren’t Social Security and Medicare unsustainable? It’s a titled question. If we’re cutting taxes and running deficits than why not ask if anything that depends of public resources is sustainable. Defense? A trillion a year in tax credits, exemptions, and preferences? The correct questions are: a) do a majority of Americans want amply funded Mcare and Soc Sec, b) are we willing to pay for them? A is definitely ‘yes.’ Regarding B, the National Academy of Social Insurance reports: “About 8 in 10 (77%) say it is critical to preserve Social Security even if it means increasing the Social Security taxes paid by working Americans. An even higher percentage (83%) say it is critical to preserve Social Security even if it means increasing the Social Security taxes paid by wealthy Americans. These findings hold true across party lines, age groups, race and ethnicity, and income levels.”

  A few more comments on the Republicans’ Corporate Tax Plan –Jared Bernstein - I didn’t want to jam too much into my piece last week on the interesting Border Adjustment Tax—come on peeps, you know that BAT is a much better acronym than DBCFT (destination-based-cash-flow tax)—that House R’s want to use to replace the current corporate tax. Like I said, it’s a complicated bit of work about which we know little, particularly regarding its impact on consumer prices (and thus, it’s distributional impact) and on exchange rates. That said, it’s hard to imagine a scenario in which a tax that clearly favors net exports would not lead to some degree of dollar appreciation. Ed Kleinbard, a guy who thinks deeply about such things, makes the intuitive point out that a multi-trillion-dollar side effect of the dollar appreciation is a transfer of wealth from US investors with foreign holdings to foreign investors holding US assets. He explains here using Freedonia to symbolize not-the-US: It also follows from this that the transition to a destination based profits tax, and with it the appreciation in the U.S. dollar, will work a one-time very large wealth transfer from U.S. investors to foreign investors. Foreign investments held by U.S. investors overnight will be worth less in dollar terms, and U.S. investments held by Freedonian investors overnight will be worth more in Freedonian pfennig terms. Carroll and Viard have estimated that at the end of 2010 the wealth transfer attributable to the introduction of border adjustments without any transition relief would have amounted to a $7.88 trillion loss to American investors and an $8.85 trillion pickup in wealth for foreign investors. As of the time of this writing, I am reasonably confident that policymakers have not weighed the implications of this. Those are many more trillions than I would have guessed, but note that the analysts Ed’s citing are strong proponents of the tax, so I don’t think their thumb would be on the scale. I’m not saying this is or should be a deal killer—any transition to a better corporate tax system will create winners and losers. But I share Ed’s “reasonable confidence” that policy makers haven’t thought much about this, and you can add US investors holding foreign assets to the retailers and other producers that depend on imported inputs to the list of those who will fight hard against the BAT.

The Same Idiots Who Pushed the Iraq War Are Now Stirring Up Hysteria About Russia -- The propaganda about Iraq having weapons of mass destruction was one of the most blatant examples of “fake news” in American history. Now, many of the same idiots who pushed the Iraq war lies are stirring up hysteria about Russia. For example, the Washington Post’s editorial page editor Fred Hiatt cheerleaded for the Iraq war.  Now, the Washington Post under Hiatt’s leadership has been the main source of the mostbreathless anti-Russian hysteria. ABC News political analyst Matthew Dowd – chief strategist for the Bush-Cheney ’04 presidential campaign – was a big booster for the Iraq war. Now, Dowd Tweets that you’re only a patriot if you blindly accept what President Obama and the intelligence services claim without any proof. George W. Bush’s speechwriter David Frum – who pushed many of the biggest lies about the Iraq war – is now trying to ridicule anyone who doesn’t accept the evidence-less claims that Russia hacked the Democratic party as a Kremlin stooge. Similarly, Jonathan Chait championed the Iraq war. And now he’s ridiculing those asking for evidence before jumping headlong into anti-Russia hysteria. These guys all have a track record of pushing false stories which get us into disastrous wars … why should we listen to them now?

Obama boosted White House technology; Trump sees risks (AP) — As Barack Obama began preparing to leave office, the first smartphone-toting U.S. president ordered his team to upgrade the White House's aging technology for his successor. New computers were purchased and faster internet was installed. Not included in the modernization plans? A courier service. But that delivery method of a bygone era may be in for a comeback under Donald Trump. Despite his voracious use of Twitter, the president-elect appears to be leaning toward old tech to ensure the security of sensitive messages. "It's very important, if you have something really important, write it out and have it delivered by courier, the old-fashioned way because I'll tell you what, no computer is safe," Trump told reporters Saturday in response to questions about Russia's alleged hacking of Democrats during the presidential election. Trump, who doesn't email or surf the internet, said days earlier that computers "have complicated lives very greatly." Trump's skepticism of some technology marks a sharp contrast from the president he'll replace on Jan. 20. Obama, who was a youthful 47 years old when he took office, carries a specially outfitted Blackberry, emails with a small number of friends and aides, and has received some of his daily security briefings on an iPad. He celebrated technological innovations at an annual science fair, created the job of chief technology officer in the White House and viewed technology as key to making the sprawling federal government more efficient and responsive to the public.

Trump to Continue "Freaking Mainstream Media Out", Will "Boldly Use" Twitter For Policy Announcements --Having drawn the ire of the mainstream press for his extensive use of Twitter in announcing major developments and policy shifts, President-elect Donald Trump will not end the "onslaught" of posts on Twitter that fed his unconventional campaign, even after taking on the formalized duties of the Oval Office later this month, as Bloomberg notes following an announcement by incoming White House press secretary Sean Spicer who said he expects Trump "will boldly use" Twitter to make major policy announcements. Shortly after his victory on November 8, Trump said in an interview on CBS’s “60 Minutes” that he was rethinking his use of social media: “I’m going to be very restrained, if I use it at all, I’m going to be very restrained,” Trump said. That, however, has not happened and since then, during the countdown to Inauguration Day on Jan. 20, he’s shown little sign that he intends to follow that pledge.In fact, making news and issuing statements on social media sites that also include Facebook and Instagram will “absolutely” continue, despite any prior promises to the contrary, incoming White House press secretary Sean Spicer said Sunday on ABC’s “This Week.” You know what? The fact of the matter is that when he tweets, he gets results,”Spicer said.

Trump Puts Auto Makers, Trade Policy in Spotlight  - WSJ--Ford Motor Co. on Tuesday scrapped a plan to build a $1.6 billion small-car factory in Mexico that Donald Trump had slammed, a move announced just hours after the president-elect knocked General Motors Co. on Twitter for importing compact cars from Mexico to sell in the U.S.The developments escalate the tension over trade policy between Mr. Trump and U.S. corporations. Analysts say the auto industry has the most at stake over Mr. Trump’s vow to renegotiate the North American Free Trade Agreement, which has allowed car makers and suppliers to move production to Mexico in recent years without facing tariffs. Shortly after his election, Mr. Trump took credit for saving jobs at an Indiana factory that air conditioning maker Carrier Corp. had planned to move to Mexico.  While Mr. Trump has won concessions from individual companies—resulting in limited job retention and perhaps scoring political points—he would have to enact a broader policy on trade or offshoring to prevent major shifts in employment across borders, trade experts say. And such measures could hurt other parts of the U.S. economy. House Republicans have developed a border tax proposal to disadvantage imports, and Mr. Trump has proposed a tax or tariff of 35% on goods made by companies that shift production abroad, without providing details.Major U.S. manufacturers are updating contingency plans for a host of corporate strategies—from factory relocation to tax planning—that could be affected by policies Mr. Trump has said he wants to see enacted, saidSteven Winoker, an industrial sector analyst with Bernstein Research. In the process, executives are trying to keep a low profile and learn from the experience of companies with which Mr. Trump has tangled, including Carrier parent United Technologies Corp. and Ford. “They don’t want to be managed by tweet,” Mr. Winoker said.

Trump Tweeter Onslaught Continues; Slams GOP For Weakening Ethics Watchdog  --Since we live in a world in which every Trump tweet is breaking news (just check the main story on Reuters or any other news website), it is worth noting that in his latest Twitter lashing, having already taken aim at GM earlier in the day, moments ago Donald Trump lashed out at Congress, and specifically House Republicans. The reason is that as we reported earlier, the House GOP, in a "secret" vote on January 2, voted to strip the Independent Ethics Watchdog of its Independence, limiting its power. The vote has displeased Trump, who tweeted that "With all that Congress has to work on, do they really have to make the weakening of the Independent Ethics Watchdog, as unfair as it may be, their number one act and priority. Focus on tax reform, healthcare and so many other things of far greater importance!" He concluded with the hashtag for "Draing the Swamp"   “With all that Congress has to work on, do they really have to make the weakening of the Independent Ethics Watchdog, as unfair as it......may be, their number one act and priority. Focus on tax reform, healthcare and so many other things of far greater importance! #DTS— Donald J. Trump (@realDonaldTrump) January 3, 2017” It is unclear if Trump's displeasure at last night's vote means he will somehow reverse it.

New Republican Congress reverses ethics move after outcry – BBC - Republicans have ditched a plan to gut the independent body that investigates political misconduct after a backlash. The lawmakers' surprise vote to strip the Office of Congressional Ethics of its independence prompted public uproar and a dressing down from Donald Trump. "Focus on tax reform, healthcare and so many other things of far greater importance!" the president-elect said. The secretive move, which overshadowed the first day of the 115th Congress, was reversed in an emergency meeting. The ethics committee was set up in 2008 following a slew of scandals that resulted in several House lawmakers being jailed. Mr Trump made cleaning up corruption in Washington a key theme of his campaign, and he ended his tweet with "#DTS", an acronym for "drain the swamp". Republican Speaker of the House Paul Ryan had argued unsuccessfully against the rule change, which was adopted on Monday night in a closed-door meeting, but he defended the proposal on Tuesday. The independent ethics investigators had been a source of discomfort for members of Congress on both sides of the aisle, and there was significant interest in limiting their ability to conduct inquiries. Even after Mr Trump's tweets, many congressional Republicans appeared reluctant to back down. House Speaker Paul Ryan, an initial opponent of the measure, issued a statement defending the change. That ended up being little comfort to the party rank and file, however, as pressure increased for them to bend to Mr Trump's political will. In his first confrontation with congressional leadership, the president-elect displayed his dominance. Mr Trump now has a valuable talking point when discussions inevitably turn back to his own ethical questions, such as how he will handle potential conflicts of interest involving his sprawling business empire.

Trump Wins Again: House GOP Reverses On Ethics Office Overhaul - President-elect Trump is on a roll today. Following House Republican's vote to strip the Ethics Office of independence, Trump lashed out with a tweet suggesting Congress' time be better spent on other things... and just minutes ago, following an emergency meeting, Republicans have confirmed the amendment has been pulled. As a reminder, House Republicans abruptly voted on Monday night to eliminate the independence of the Office of Congressional Ethics, the chamber’s nonpartisan ethics board which investigates lawmakers' alleged misconduct, largely stripping it of its power, leading to pushback from Democrats and government watchdog groups. House Republicans, meeting as a group Monday night, approved an amendment from House Judiciary Committee Chairman Bob Goodlatte that would place the office under the oversight of the lawmaker-run House Ethics Committee.And Trump responded...“With all that Congress has to work on, do they really have to make the weakening of the Independent Ethics Watchdog, as unfair as it......may be, their number one act and priority. Focus on tax reform, healthcare and so many other things of far greater importance! #DTS— Donald J. Trump (@realDonaldTrump) January 3, 2017”  Which led House Republicans to hold an emergency meeting , resulting in... (via The Hill)House Republicans at an emergency conference meeting on Tuesday withdrew a proposal to gut an ethics watchdog. House Majority Leader Kevin McCarthy (R-Calif.) offered a motion to restore the current OCE rules, and that was accepted by the GOP conference.

In Latest Tweetstorm, Trump Blasts Chuck Schumer as "Head Clown" - President-elect Trump has once again started off his day with a tweet storm, this time aimed at Senate Minority Leader Chuck Schumer for being a "head clown" for his defense of the "Obamacare lie." Trump says that Democrats fully understand how badly Obamacare has failed but rather than admit their failures and try to find solutions they simply resort to the "typical political thing and blame" others.  He then closes with a plea for democrats and republicans to work together to find a "healthcare plan that really works."The Democrats, lead by head clown Chuck Schumer, know how bad ObamaCare is and what a mess they are in. Instead of working to fix it, they.. January 5, the typical political thing and BLAME. The fact is ObamaCare was a lie from the beginning."Keep you doctor, keep your plan!" It is.... January 5, 2017...time for Republicans & Democrats to get together and come up with a healthcare plan that really works - much less expensive & FAR BETTER!— Donald J. Trump (@realDonaldTrump) January 5, 2017Of course, as we previously noted, Schumer made the rounds on the political talk shows yesterday vowing to "oppose Trump tooth and nail" on his Supreme Court nominees and even suggested that the CIA may attempt to "get back" at Trump for casting some doubt on their "Russian hacking" narrative.  Seems as though he may have struck a nerve.January 21st is looking to be a really fun day.

Many in U.S. Skeptical Trump Can Handle Presidential Duties - Gallup-- As Donald Trump prepares to take the presidential oath on Jan. 20, less than half of Americans are confident in his ability to handle an international crisis (46%), to use military force wisely (47%) or to prevent major scandals in his administration (44%). At least seven in 10 Americans were confident in Barack Obama, George W. Bush and Bill Clinton in these areas before they took office. Confidence in Presidents-Elect to Handle Presidential Responsibilities Americans express somewhat more confidence in Trump to work effectively with Congress (60%), to handle the economy effectively (59%), to defend U.S. interests abroad as president (55%), and to manage the executive branch effectively (53%). But even in these areas, Americans are far less confident in Trump than they were in his predecessors, when comparisons are available. The results for Trump are based on a Dec. 7-11 Gallup poll. They are consistent with prior Gallup polling showing Trump having a much lower favorable rating than prior presidents-elect and a much lower approval rating for how he has handled his presidential transition. The deficits for Trump versus the average for his predecessors range from a low of 15 percentage points on defending U.S. interests abroad to a high of 32 points for preventing major scandals.

Republican Congress Promises to Move Quickly Toward Goals - WSJ: —The nation’s new, all-Republican leadership begins to take power Tuesday with an ambitious agenda of tax cuts, regulation rollbacks and repeal of President Barack Obama’s health law, but they face a complicated legislative path pocked with unresolved policy details. After new senators are sworn in Tuesday by Vice President Joe Biden, a symbol of the departing Democratic administration, and House members by GOP Speaker Paul Ryan, the Republicans among them plan to move quickly to turn back an era defined by Mr. Obama’s ambitions to make the government a more powerful force in the economy. Republicans will hold the White House and both chambers of Congress for the first time since early 2007 once President-elect Donald Trump is sworn in Jan. 20, creating high expectations within the party that it can enact long-held policy goals. When Mr. Trump met recently with Sen. David Perdue (R., Ga.), “all we talked about for the better part of an hour was how to get results in the first part of the year,” Mr. Perdue recalled.One of the first goals for Republican leaders is to dismantle the Affordable Care Act. The Senate’s opening move, coming as soon as Tuesday, will be to initiate a controversial process to repeal parts of the law, which has brought health insurance to more than 19 million people but has taken a hit as the number of insurers offering coverage on the ACA’s exchanges has shrunk and premiums have jumped. As with many of the Republican goals, the effort is creating a maze of challenges. The most pressing is how to develop a replacement for the 2010 health law without triggering the sort of disruptions that accompanied the law’s rollout, which in turn contributed to the Democrats’ loss of their Senate majority in 2014. Many health insurers have stopped writing policies on the exchanges, leaving individual insurance markets struggling in some states, including GOP-leaning Arizona, Alaska and Tennessee. Some Republican lawmakers, whose votes will be crucial to any repeal plan, are worried a repeal would yank the rug out from under people’s coverage before a replacement is in effect. Republicans also know that a confirmation hearing for Rep. Tom Price (R., Ga.), nominated to serve as Health and Human Services secretary, will become an early focal point for debate over any repeal plan, given the congressman’s years of working to replace the health law’s mandates with tax credits for the purchase of insurance. Senate Republicans as soon as Tuesday will start a legislative process that would allow them to repeal much of the law with a simple majority vote—a political necessity, given that they hold 52 seats in the chamber, shy of the 60 needed to pass most legislation.

Republicans Face a Dangerous First 100 Days - The next 100 days in Washington will be tumultuous. Donald Trump and leading Republicans plan to overwhelm the 115th Congress, which convenes Tuesday, with a mind-numbing array of changes. By the end of April, they hope to have confirmed a new Supreme Court justice, cleared a huge infrastructure measure, and be well on the way to enacting big and permanent tax cuts along with sharp cutbacks in spending on domestic programs affecting the poor. They may throw in some education reform and immigration crackdowns. On his first day in office, Trump is expected to issue sweeping executive orders that undo many of the actions taken by President Barack Obama on issues such as the environment and immigration. That's just the formal agenda. Trump, who already has weighed in more than any other president-elect in recent memory -- with tweets praising Vladimir Putin or changing nuclear policy -- predictably will create new controversies on his own. Congress is preparing for this enormous workload. Abandoning the leisurely schedule of recent years, lawmakers are slating four or five day workweeks for the next three months, except for a week off in February. Despite the Republicans' total control there are possible fissures that could create complications. Trump's priority is to quickly enact the biggest infrastructure measure since the Interstate Highway System. That could get support from Democrats if it doesn't include anti-union provisions and isn't funded by cutting other programs. Trump wouldn't care if it blows a big hole in the deficit, though that would be a problem for many conservative Republicans. Congressional Republicans say Trump and Vice President-elect Mike Pence claim they'll essentially delegate the substantive agenda to House Speaker Paul Ryan and other leaders on Capitol Hill, though the president-elect already has had several screaming phone calls with top Republican members of Congress.

Mitch McConnell will be the most important politician in Washington in 2017 — Mitch McConnell will be Washington’s most important player in 2017. Not President Donald Trump or House Speaker Paul Ryan or the lobbyists or the big money donors. McConnell is the Senate Majority Leader, the man charged with building consensus among 52 Republicans with their own differing agendas and constituents. All it takes to trigger gridlock is for three Republicans to join the 48 Democrats, and Cabinet nominees will be blocked, Trump initiatives will stall and Washington’s reputation for ineptness will persist. McConnell, R-Ky., has long been a master of solutions, of knowing when to be defiant and when to be compliant. “He’s a head counter,” said Tripp Baird, who was floor assistant for Senate Majority Leader Trent Lott, R-Miss. When the 115th Congress begins Jan. 3, Republicans will control both the legislative and executive branches of government for the first time in 10 years. They will have a 241 to 194 majority in the House. “We have an opportunity to do big things and tackle some that are not traditional,” said Rep. Mark Walker, R-N.C., who will chair the House’s Republican Study Committee, its influential conservative caucus.Before Congress digs into overhauling the tax code, the Affordable Care Act or immigration, the Senate faces confirmation hearings and votes on Trump nominees. McConnell wants to approve as many as possible by the time Trump takes office, as the Senate usually does, but the path to 51 votes is loaded with political dynamite. Civil rights activists are upset with Attorney General-designate Jeff Sessions. Consumer interests worry about Treasury-designate Steven Mnuchin’s Wall Street ties. Obamacare advocates shudder at the prospect of Obamacare repeal enthusiast Rep. Tom Price, R-Ga., the nominee for Health and Human Services Secretary. And most ominously, there’s Russia. Trump has expressed approval toward Russia. McConnell told reporters this month, “Russia is no friend of ours.”

Claiming mandate, GOP Congress lays plans to propel sweeping conservative agenda -- For six years, since they took back the House of Representatives, Republicans have added to a pile of legislation that moldered outside the White House. In their thwarted agenda, financial regulations were to be unspooled. Business taxes were to be slashed. Planned Parenthood would be stripped of federal funds. The ­Affordable Care Act was teed up for repeal — dozens of times. When the 115th Congress begins this week, with Republicans firmly in charge of the House and Senate, much of that legislation will form the basis of the most ambitious conservative policy agenda since the 1920s. And rather than a Democratic president standing in the way, a soon-to-be-inaugurated Donald Trump seems ready to sign much of it into law. The dynamic reflects just how ready Congress is to push through a conservative makeover of government, and how little Trump’s unpredictable, attention-grabbing style matters to the Republican game plan. That plan was long in the making. Almost the entire agenda has already been vetted, promoted and worked over by Republicans and think tanks that look at the White House less for leadership and more for signing ceremonies. In 2012, Americans for Tax Reform’s Grover Norquist described the ideal president as “a Republican with enough working digits to handle a pen” and “sign the legislation that has already been prepared.” In 2015, when Senate Republicans used procedural maneuvers to undermine a potential Democratic filibuster and vote to repeal the health-care law, it did not matter that President Obama’s White House stopped them: As the conservative advocacy group Heritage Action put it, the process was “a trial run for 2017, when we will hopefully have a President willing to sign a full repeal bill.” “What I told our committees a year ago was: Assume you get the White House and Congress,” House Speaker Paul D. Ryan (R-Wis.) told CNBC in a post-election interview last month. “Come 2018, what do you want to have accomplished?” Negotiations with the incoming Trump administration, he said, were mostly “on timeline, on an execution strategy.”

House GOP Gives Staff Broader New Powers to Grill Witnesses --A little-noticed provision approved Tuesday by the U.S. House dramatically expands the powers of committee staff to haul private citizens and government officials to Capitol Hill to be questioned under oath -- without any lawmakers present, in some cases. The Republican-authored change included in a House rules package marks what Democrats says is a disturbing trend of giving staff powers that have traditionally been reserved for members of Congress. “After spending six years demonstrating their eagerness to spend taxpayer money on wasteful, politically motivated witch hunts, Republicans are giving themselves additional tools to do more of the same," said Representative Louise Slaughter of New York, the top Democrat on the House Rules Committee. "Freely handing out the power to compel any American to appear, sit in a room, and answer staff’s invasive questions on the record -- without members even being required to be present -- is truly unprecedented, unwarranted, and offensive," she said. The provision was overshadowed by a much more high-profile battle over a Republican-led effort to strip the congressional ethics office of its independence. Republicans scrambled to remove that amendment at the last minute after complaints from constituents and critical tweets from President-elect Donald Trump. But Republicans confirmed that the new rules package extends wider deposition authority to more committees. In the past, some witnesses tried to use members’ busy schedules to avoid being deposed, according to House Speaker Paul Ryan’s office. For the past two years, five panels had been granted the wider deposition power under a pilot program that is now being expanded, his office said.

Republicans deliver on 'Day One' promise, begin ObamaCare repeal on Hill | Fox News: Republicans delivered Tuesday on their “Day One” promise to start repealing ObamaCare at the start of the 115th Congress, introducing a resolution to dismantle the 2010 health care law. “Today, we take the first steps to repair the nation’s broken health care system, removing Washington from the equation and putting control back where it belongs: with patients, their families and their doctors,” said Wyoming GOP Sen. Mike Enzi, chairman of the Senate Budget Committee. Enzi and other leaders of the Republican-controlled Congress are relying on a parliamentary maneuver known as “budget reconciliation” to dismantle the law because it avoids a Senate Democrat filibuster and requires only a 51-vote majority for passage in the chamber, not the 60-vote majority. Republicans have a 52-to-48 member majority in the Senate and a 241-to-194 majority in the House, which requires only a simple majority for passage. The GOP can use the reconciliation tactic because federally-subsidized ObamaCare directly impacts the federal budget. (And congressional Democrats used the same tactic in 2009 to complete passage of the law, officially known as the Affordable Care Act.) Incoming GOP President Donald Trump won the 2016 White House race in part on a vow to repeal ObamaCare on “day one” of his administration and to replace it with “something terrific.” But the dismantling process will be decidedly longer and more complicated.

Obama Lashes Out At "TrumpCare", Urges Dems "Don't Rescue" Republicans -- The smooth transition appears to be getting bumpier. Following president-elect Trump's earlier tweet on the "Obamacare disaster," President Obama delivered a mandate to Democrats on Wednesday: "Don't rescue" Republicans on Obamacare. With his legacy in tatters, CNN reports Obama also floated this idea: Start referring to the GOP's new plan as "Trumpcare." Less than three weeks out from leaving the White House, Obama visited Democratic lawmakers on Capitol Hill with a mission to save his signature healthcare reform law as Republicans are moving quickly to unroll the Affordable Care Act. In the closed-door meeting, the President urged fellow Democrats to not "rescue" Republicans by helping them pass replacement measures, according to sources in the room. The feisty remarks from the outgoing President came as Republicans also huddled on Capitol Hill Wednesday morning to chart their path forward repealing Obamacare. Vice President-elect Mike Pence visited with GOP lawmakers in what became a morning of dueling meetings on Day Two of the new Congress. Obama laid out the benefits of the Affordable Care Act in his meeting with Democrats, according to Rep. Maxine Waters, and argued that the country largely likes the law and that he has received countless letters thanking him for Obamacare.  Another lawmaker in the room said the mood among Democrats is "fired up." "In two weeks I will no longer be a politician, but I'll still be a citizen. I envy you so much right now, because I would love to be on the field,"Obama said, according to the member.

GOP’s Health-Law Attack Spurs Messaging Battle  —Donald Trump fired off tweets and President Barack Obama trekked to Capitol Hill on Wednesday at the start of a battle aimed at controlling the political messaging as Congress takes its first steps toward dismantling the president’s signature health-care overhaul. The incoming president warned congressional Republicans that they risk a backlash by moving quickly to repeal the law, adding they were better off letting Democrats own what he called “the failed ObamaCare disaster.” And on Thursday morning, Mr. Trump described Senate Minority Leader Chuck Schumer of New York as the “head clown” leading the Democrats, saying he and the party “know how bad Obamacare is and what a mess they are in.” “Instead of working to fix it, they do the typical political thing and BLAME,” Mr. Trump wrote on Twitter. “The fact is ObamaCare was a lie from the beginning. ‘Keep you doctor, keep your plan!’ It is time for Republicans & Democrats to get together and come up with a healthcare plan that really works—much less expensive & FAR BETTER!” The outgoing president told House Democrats not to help Republicans repeal the law or to provide any political support for a GOP plan that would increase the number of uninsured Americans, according to people in the room. The new Congress is moving swiftly to decide the fate of the ACA, and both sides appeared to be as mindful of the political stakes as of how any changes would affect consumers. While opponents of the law point to sharp premium increases on the ACA insurance exchanges, the latest government estimates indicate about 20 million previously uninsured people have obtained coverage under the law.

Republicans agree on ObamaCare repeal – the replacement is the tricky part | Fox News: They have to repeal it before you can find out what’s in the replacement. You’ve heard this all before. In their zeal to discredit percolating health care legislation in 2010, Republicans seized on a truncated variation of a line uttered by then-House Speaker Nancy Pelosi, D-Calif., in a speech to the National Association of Counties. “We have to pass the bill so that you can find out what is in it – away from the fog of the controversy,” Pelosi said. What Pelosi said is not quite what Republicans or the public heard. But this is politics. Republicans howled that no one knew what was in the bill. They argued the sheer size and scope of the legislation made it impossible for anyone to comprehend.Congressional Republicans aim to deposit the repeal bill on President-elect Trump’s desk by the first big congressional break in mid-February. The replacement part? “We have six months to replace it,” argued Rep. Chris Collins, R-N.Y., after the Pence huddle. Although, that’s not settled. It could be a year. It could be a few years until Republicans require a replacement bill to come into effect – even as the GOP sung the “repeal and replace” mantra for years.

Here's how GOP repeal of Obamacare would swell the federal deficit - Repealing Obamacare will cost the federal government as much as $350 billion, according to a new estimate. Congressional Republicans are eagerly anticipating their long-awaited chance to repeal the 6-year-old Affordable Care Act, one of the signature achievements of the Obama administration. That enthusiasm may be dampened when they learn how much the repeal will cost. The $350 billion cost estimate in an analysis released Wednesday by the nonpartisan Committee for a Responsible Budget would be spread over 10 years unless key provisions of the law are maintained or replaced. "Repealing the entire ACA would leave no funds available for 'replace' legislation, and in fact would require further deficit reduction to avoid adding to the debt," the report said. Most of the law's opponents have focused on the added cost of subsidizing health insurance. But the law also includes dozens of provisions that cut health care and raise taxes that more than offset the money spent. Despite the GOP's steadfast opposition to the law, that net cost of repealing it could give pause to the party's fiscal hawks on Capitol Hill. The new analysis looks only at the net cost to the federal government and doesn't take into account the far bigger economic impact on insurers, hospitals, doctors, drug companies and other parts of the sprawling American health system. Nor does its estimate include the financial impact on the roughly 23 million Americans who, the group estimates, would lose coverage if the ACA is fully repealed and not replaced. After more than 60 failed votes to gut the ACA under President Barack Obama, Republicans now about to be in control of the White House and Congress are poised to eliminate the law that extended health insurance to millions of American families. President-elect Donald Trump and congressional Republicans have vowed to move quickly to repeal the law before articulating the complicated details of a potential replacement.

House votes to ban the CBO from calculating how much the ACA repeal will cost - In the clearest sign that Republicans know that repealing Obamacare is an epic disaster in the making, the House GOP moved to actually ban the Congressional Budget Office (CBO) from calculating or reporting on how much future deficit spiking would result. The move, shrouded in a “rules package” referred to as House Resolution 5, is an attempt to block any eventual fallout from Americans who will watch their healthcare stolen and their deficit explode in an act of political revenge meant solely to rob President Obama of his legacy. An astounded Rep. Keith Ellison exposed the shady maneuver in a tweet that promptly went viral. It’s shady as hell, but there is no denying Republicans have a strong motive for attempting to hide the financial costs of this repeal. In a recent analysis by the bipartisan Committee for a Responsible Federal Budget found that completely killing the law (which Trump claims he will begin doing “on day one” in office) will cost taxpayers $350 billion over the next decade. That’s 350,000,000,000 dollars spent for the sole purpose of depriving millions of Americans affordable healthcare. And the repeal isn’t even popular – for obvious reasons. A majority of Americans do not want Republicans to kill Obamacare. And even polls done by conservative lawmakers have exposed just how unpopular this political gamesmanship is.Faced with overwhelming unpopularity, Republicans decide to hide what they are doing instead of stop doing it.

GOP Doesn't Want Public To Know How Much Obamacare Repeal Will Cost. Study Shows It Could Be Trillions. - Republican leaders racing to tear down as many as 20 million (pdf) individuals' healthcare without providing a replacement, it turns out, also don't want the American people to know how much the repeal will cost. The very same rules package (pdf) in which the GOP had attempted to gut the Office of Congressional Ethics also contains a provision that exempts repeal of the Affordable Care Act (ACA), also known as Obamacare, from the Congressional Budget Office's (CBO) 10-year cost analysis. "In other words," reported Shareblue, the news site owned by Clinton ally David Brock that drew attention to the measure, "the new Republican rules package specifically instructs the CBO not to say how much it would cost to repeal Obamacare"—a provision that "distorts" federal budget analysis "for political gain."As Shareblue pointed out, following a section of the bill (on page 25) that instructs the director of the CBO to conduct a 10-year cost analysis of each bill reported by the House, a subsection lists the areas to which the directive will not apply:

    • (4) LIMITATION.—This subsection shall not apply to any bill or joint resolution, or amendment thereto or conference report thereon—    
    • (A) repealing the Patient Protection and Affordable Care Act and title I and subtitle B of title II of the Health Care and Education Affordability Reconciliation Act of 2010;    
    • (B) reforming the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010; or    
    • (C) for which the chair of the Committee on the Budget has made an adjustment to the allocations, levels, or limits contained in the most recently adopted concurrent resolution on the budget.

Try as they may to conceal the cost of the repeal, an independent study published Thursday estimated that it could cost the states trillions in lost revenue and output.

Republicans Want Revenge for Obamacare and It’s Making Them Do Stupid Things -- For seven years now, the mantra “repeal Obamacare” has been both a spasm of revanchist rage and a cynical ploy to keep a segment of the electorate motivated to vote for Republicans. It was also frequently deployed in the belief that the GOP would not be unexpectedly thrust into a position where their voters could expect them to make good on the promise.But Donald Trump’s Republican Congress convened only three days ago, and members are already finding that eliminating Obamacare will be far messier, politically, than devising and implementing it was for Democrats. As Republicans hurry to repeal the law, “they’re not even close to agreement about what comes next — or even when the repeal should take effect,” Politico reported late Wednesday. “Republicans are reckoning with the reality that dismantling a nearly seven-year-old law that reshaped a $3 trillion health sector and covers millions of Americans is more daunting than simply campaigning against it.”Republicans got themselves into this mess at least in part because of a broad, conservative failure to treat Obamacare on its true terms rather than as an evil abstraction conjured by a political foe. In an important sense, there is no Obamacare anymore; there’s just the health care system Republicans are inheriting, and the one they will leave behind. Eliminating a program that covers 20 million people will create a backlash on obvious humanitarian grounds, but that’s far from the only challenge Republicans now face. Repealing the Medicaid expansion will confront hospitals with an uncompensated care crisis; repealing private insurance subsidies will collapse the individual marketplaces; repealing the coverage guarantee will allow insurers to again discriminate against sick people. Delaying these repeal measures with no promise that they will be replaced with an alternative that makes providers and patients whole, will create major disruptions in the health care system anyhow. This is a stickier wicket than many strident Republicans in Washington realized, and the ones who did know were cynical enough to over-promise anyhow. Republicans thus find themselves at odds not only with one another, but with health industry stake holders and their supporters, too. The American Medical Association (a powerful doctors association), and the even more powerful hospital lobby have warned Republicans not to repeal Obamacare unless an alternative is enacted in tandem. When GOP repeal plans are described to them, Trump-supporting Obamacare beneficiaries in key swing states are rightly horrified. .. according to Politico, “Republicans are now realizing how hard it will be to replace the law, and many of them have plainly settled on the fact that they will never be able to craft a plan to insure as many people as Obamacare does.”

Obama dares Republicans: Give me better health plan and ‘I will publicly support repealing Obamacare‘ - President Barack Obama on Friday told Republicans they should be willing to present a replacement plan for Obamacare before they vote to repeal it. And Obama also said he'd be willing to support killing his own landmark health-care law — which has expanded insurance coverage to 20 million Americans — if the GOP offers an improvement. "I am saying to every Republican right now, if you can in fact put a plan together that is demonstrably better than what is Obamacare, I will publicly support repealing Obamacare" and replacing it with the GOP's plan, Obama told Vox during a live-streamed interview from Blair House in Washington. "But I want to see it first." The president defended his effort to provide health coverage to millions of uninsured people. "If we had a better way to do this, we would have done it," he said, "because I knew I would be judged on how well it worked." Obama noted that Republicans "have adamantly said they can do it better." But he said if that's the case, then they should put their cards on the table and reveal the plan before they repeal the Affordable Care Act.

GOP Congress, Trump Already Pushing Koch Industries' Bill to Hobble Regulatory Agencies – Steve Horn - One of the first orders of business for the freshly convened 115th Congress — now that it's no longer attempting to gut an independent ethics office  — is to pass a bill which could weaken the ability of federal regulatory agencies to do their jobs. That law, the REINS (Regulations from the Executive in Need of Scrutiny) Act of 2017, has long been a legislative priority for Koch Industries, Koch-funded advocacy groups such as Americans for Prosperity, and the American Legislative Exchange Council (ALEC). Its latest iteration, H.R. 26*, has the backing of Republican Speaker of the House Paul Ryan (R-WI) and 159 co-sponsors (five Democrats and 154 Republicans) and has reached full debate on the House floor.  REINS dictates that a “major rule shall not take effect unless the Congress enacts a joint resolution of approval” and won't become law if Congress does not pass that resolution by “70 session days or legislative days, as applicable.” President Barack Obama's Office of Management and Budget (OMB) came out against the 2015 version of the REINS Act.The OMB pointed toward the myriad existing safeguards that already ensure regulatory agency accountability, including the federal court system, the fact that many regulatory proposals actually stem from laws passed by Congress, and the requirement for robust public commenting periods.“This radical departure from the longstanding separation of powers between the Executive and Legislative branches would delay and, in many cases, thwart implementation of statutory mandates and execution of duly-enacted laws, create business uncertainty, undermine much-needed protections of the American public, and cause unnecessary confusion,” OMB wrote in July 2015. “By replacing this well-established framework with a blanket requirement of Congressional approval, H.R. 427 would throw all major regulations into a months-long limbo, fostering uncertainty and impeding business investment that is vital to economic growth.”

House passes bill to overturn 'midnight' regulations en masse | TheHill: Legislation to allow Congress to repeal in a single vote any rule finalized in the last 60 legislative days of the Obama administration sailed through the House Wednesday, the second time in less than two months. The GOP-backed Midnight Rule Relief Act, which passed the previous Congress in November, was approved largely along party lines by a vote of 238-184 on the second day of the new Congress, despite Democratic opposition. If passed by the Senate and signed by President-elect Donald TrumpDonald TrumpConfirmation crush hits peak Wednesday Manchin touts 'productive' meeting with Pence Will Trump condemn the killing squads in Philippines' war on drugs? MORE, the legislation would amend the Congressional Review Act to allow lawmakers to bundle together multiple rules and overturn them en masse with a joint resolution of disapproval. The White House has already threatened to veto the bill if it were to make it to President Obama's desk before he leaves office. Rep. John Conyers Jr. (D-Mich.) criticized Republicans for bringing the bill to the floor so soon.“I’m surprised that without hearings, without opportunity for amendment, we are now considering a measure that has this much opposition,” he said. The American Sustainable Business Council (ASBC), which claims to represent a network of more than 250,000 businesses, sent a letter to members of the House on Wednesday urging them to oppose this “anti-regulatory” measure. “This would be like taking a chainsaw into surgery,” David Levine, ASBC’s CEO and co-founder, said in a statement. “Businesses depend on good regulations to set clear boundaries and rules for fair competition on a level playing field.” Instead, Levine claims that the Midnight Rules Relief Act would enable Congress to undo batches of rules without any consideration of their individual merits.

House passes bill to cancel all regulations created during Obama’s lame duck rule - The House today passed a bill that would allow Congress to repeal all regulations created during the last sixty days of the Obama administration. Legislation to allow Congress to repeal in a single vote any rule finalized in the last 60 legislative days of the Obama administration sailed through the House Wednesday, the second time in less than two months. The GOP-backed Midnight Rule Relief Act, which passed the previous Congress in November, was approved largely along party lines by a vote of 238-184 on the second day of the new Congress, despite Democratic opposition. If passed by the Senate and signed by President-elect Donald Trump, the legislation would amend the Congressional Review Act to allow lawmakers to bundle together multiple rules and overturn them en masse with a joint resolution of disapproval. What is disturbing is how few regulations Congress has cancelled over the decades. This is supposed to be an republic, whereby the rules are set by our elected officials. Instead, they have passed that responsibility off to bureaucrats, and when they hint, as they do here, that they might take back some of that power, the howls of outrage are deafening.

House Passes Bill To Undo Months Of Obama Regulations With Just One Vote --The House of Representatives passed legislation on Wednesday giving Congress the power to kill so-called "midnight rules", months of recently enacted Obama administration regulations with just one vote, as Republicans charged ahead on their campaign to strip down federal regulations. If passed by the Senate and signed by President-elect Donald Trump, the legislation would amend the Congressional Review Act to allow lawmakers to bundle together multiple rules and overturn them en masse with a joint resolution of disapproval. The White House has already threatened to veto the bill if it were to make it to President Obama's desk before he leaves office. "Because outgoing administrations are no longer accountable to the voters, they are much more prone to issue midnight regulations that fly in the face of the electoral mandate the voters just gave the new, incoming administration," said House Judiciary Committee Chairman Bob Goodlatte before the vote. "Waves of midnight rules can also be very hard for Congress or a new administration to check adequately." It was the second time the Republican-dominated chamber took up legislation blocking "midnight rules," those rolled out at the close of a president's term. However, the previous bill, introduced in November, had faced a certain veto from President Barack Obama, a Democrat. On its second day back in session, the House passed the bill on a vote of 238 to 184. Under a law known as the Congressional Review Act, Congress has the right to review regulations for a certain period of time after they are issued. That means any federal regulation approved since May could be voided by the Republican-led Congress once President-elect Donald Trump moves into the White House and can sign off on their disapproval. It would take just a simple majority of both chambers to reverse a rule, giving Senate Democrats little power to block a vote with a filibuster. Called a shotgun approach for a reason as disapproving each regulation separately could span days, Republicans would like to simply vote once to end a variety of new rules on energy, the environment, transportation, banking, finance, education and media ownership.

House Republicans revive obscure rule that allows them to slash the pay of individual federal workers to $1: House Republicans this week reinstated an arcane procedural rule that enables lawmakers to reach deep into the budget and slash the pay of an individual federal worker — down to $1 — a move that threatens to upend the 130-year-old civil service. The Holman Rule, named after an Indiana congressman who devised it in 1876, empowers any member of Congress to propose amending an appropriations bill to single out a government employee or cut a specific program. The use of the rule would not be simple; a majority of the House and the Senate would still have to approve any such amendment. At the same time, opponents and supporters agree that the work of 2.1 million civil servants, designed to be insulated from politics, is now vulnerable to the whims of elected officials. The revival of the Holman Rule was the brainchild of Rep. H. Morgan Griffith (R-Va.), who is intent on increasing the powers of individual members of Congress to reassign workers as policy demands. The rule changes the process of passing spending bills by allowing any rank-and-file House member to propose an amendment that would cut a specific federal program or the jobs of specific federal employees, by slashing their salaries or eliminating their positions altogether. Before the change, an agency’s budget could be cut broadly, but a specific program, employee or groups of employees could not be targeted because of civil service protections. Republicans and Trump advisers have been quietly drawing up plans since the election to erode some of the job protections and benefits that federal workers have received for a generation, starting with a hiring freeze Trump has pledged to put in place in his first 100 days in office. Those plans include an end to automatic raises, a green light to fire poor performers, less generous pensions and a ban on union business on the government’s dime. In light of recent inquiries by the Trump transition team about a list of Energy Department scientists who have worked on climate change, advocates for federal workers say they worry that bureaucrats could be targeted for political reasons.

House Quietly Shifts Federal Policy Making It Easier to Sell Off Public Land -- The House passed a new provision Tuesday that would change the cost calculation of transferring federal land, making it easier to give state and local regulators more control.  The official GOP platform advocates for state control of federal public lands and Tuesday's vote may signify an initial move in how the GOP plans to manage public lands in a Trump Administration .   While Trump has expressed interest in reducing regulations to encourage resource development—including fossil fuels—on large areas of public land nationwide, he has voiced opposition to transferring lands to state control and his nominee for Interior Secretary, Ryan Zinke , is also opposed.   According to the Washington Post , "Many Democrats argue that these lands should be managed on behalf of all Americans, not just those living nearby, and warn that cash-strapped state and local officials might sell these parcels to developers."

GOP aims to rein in liberal cities --  After consolidating power in Washington, D.C., and state capitals under President-elect Donald Trump, Republicans are moving to prevent large cities dominated by Democrats from enacting sweeping liberal agendas. Republican state legislatures are planning so-called preemption laws, which prevent cities and counties from passing new measures governing everything from taxes to environmental regulations and social issues. Republican legislators around the country say liberal cities and counties vastly overstepped their bounds by implementing new taxes on sodas and sugary beverages, by raising local minimum wages or through strict new environmental regulations. “What we see is circumventing the process that’s in place,” said Linda Upmeyer, the Republican speaker of the Iowa state House. “I think we will likely look at language on preemption so that the state is making decisions where it ought to, and cities and counties are making decisions where they should.” Democrats and city officials, however, see the preemption laws as a power grab aimed at limiting local governance in their party’s last bastions of political power — which have become ground zero in the fight to resist Trump.Preemption laws are nothing new in American history. The Supremacy Clause in the U.S. Constitution makes clear that federal law supersedes state law, and similar clauses in state constitutions give state laws precedence over local laws. But in the last four years, after Republicans swept to power in legislatures across the country, the number of issues on which states are asserting their rights has skyrocketed, said Mark Pertschuk, director of the Oakland-based Grassroots Change, which keeps close tabs on preemption legislation.

Trump Treasury Nominee Mnuchin Declines To Answer Senator's Questions, Was Accused Of "Widespread Misconduct" - The confirmation of former Goldman Sachs Partner Steven Munchin, who is Trump's pick for Treasury Secretary, may have gotten just a little more problematic today, after Mnuchin declined to answer questions from Democratic senator Sherrod Brown of Ohio about his views on financial regulations, sanctions and his time as head of a bank accused of unfair foreclosure practices.  Brown, the top Democratic on the senate banking committee sent a letter on Dec. 21 asking Mnuchin to detail his position by Jan. 6 on issues that are under the committee’s purview, including fair lending laws and foreclosure-prevention programs. As Bloomberg reports, Mnuchin doesn’t plan to respond to the senator in writing, though several weeks ago he requested a meeting with Brown, who hasn’t yet accepted, according to Mnuchin’s spokeswoman Tara Bradshaw.“Mnuchin will work with Senator Brown within the protocol of the finance committee - and will not be providing written answers in advance of a deadline yet to be established by the finance committee,” Bradshaw told Bloomberg on Tuesday in an e-mailed reply to questions. Naturally, Brown was displeased by the very public snub by the former Goldmanite: “Senator Brown wants to have a substantive, productive conversation with Mr. Mnuchin, not just a quick handshake and hello,” according to an e-mailed comment from Brown’s office on Tuesday. Should Mnuchin, 54, further antagonize Brown, he may face daunting complications during his public hearing with the Senate Finance Committee members; he will also have to respond to follow-up questions in writing before they vote on his nomination. Brown also sits on that committee.

Treasury Nominee Steve Mnuchin’s Bank Accused of “Widespread Misconduct” in Leaked Memo - David Dayen - OneWest Bank, which Donald Trump’s nominee for treasury secretary, Steven Mnuchin, ran from 2009 to 2015, repeatedly broke California’s foreclosure laws during that period, according to a previously undisclosed 2013 memo from top prosecutors in the state attorney general’s office.The memo obtained by The Intercept alleges that OneWest rushed delinquent homeowners out of their homes by violating notice and waiting period statutes, illegally backdated key documents, and effectively gamed foreclosure auctions.In the memo, the leaders of the state attorney general’s Consumer Law Section said they had “uncovered evidence suggestive of widespread misconduct” in a yearlong investigation. In a detailed 22-page request, they identified over a thousand legal violations in the small subsection of OneWest loans they were able to examine, and they recommended that Attorney General Kamala Harris file a civil enforcement action against the Pasadena-based bank. They even wrote up a sample legal complaint, seeking injunctive relief and millions of dollars in penalties.But Harris’s office, without any explanation, declined to prosecute the case.Mnuchin, the former CEO of OneWest, was already facing challenges in his upcoming Senate confirmation hearings on account of his bank’s ruthless foreclosure practices, ranging from locking out one homeowner during a Minneapolis blizzard to foreclosing on another over a 27-cent payment shortfall. “After years peddling the kind of dangerous mortgage-backed securities that eventually blew up the economy, Mnuchin swooped in after the crash to take a second bite out of families by aggressively — and sometimes illegally — foreclosing on their homes,” Sen. Elizabeth Warren said in a statement last month. Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, warned: “Given Mr. Mnuchin’s history of profiting off the victims of predatory lending, I look forward to asking him how his Treasury Department would work for Americans who are still waiting for the economic recovery to show up in their communities.”

 Mnuchin Nomination for Treasury Shines Harsh Light on U.S. Politics - Pam Martens - Over the span of the last two weeks, President-elect Donald Trump’s U.S. Treasury Secretary nominee, Steven Mnuchin, has been the subject of multiple, scathing investigative reports by the media; earned a web site established by Senate Democrats dubbing him the “Foreclosure King” and soliciting complaints from the public; garnered a television ad campaign directed against him; and has been skewered by a devastating document leaked by someone currently or formerly connected to the California State Attorney General’s Office, indicating that the bank Mnuchin ran from 2009 to 2015, OneWest, repeatedly violated California foreclosure law, including backdating documents and making illegal bids, in order to throw thousands of vulnerable people out of their homes. Mnuchin is also a former Goldman Sachs partner and hedge fund operator who has never held public office before. His rapid rise to nominee for one of the highest posts in the U.S. government, which will also put him atop the Financial Stability Oversight Council (F-SOC), appears to be hinged to raising millions of dollars for Trump’s political campaign as his National Finance Chairman. To millions of Americans, this looks like an unseemly political quid pro quo.In a press release, Democratic Senator Jeff Merkley had this to say about the nominee:“Donald Trump’s choice of Mnuchin is not only a fundamental betrayal of his promise to stand up to Wall Street — it is a punch in the gut to the thousands of American families who were thrown out of their homes by Mnuchin’s bank. The voices of these Americans should be heard loud and clear as the Senate examines his record and considers his nomination.” Senator Bernie Sanders weighed in with this: “Donald Trump’s choice for Treasury Secretary is the same old, same old Wall Street insider who made a fortune during the financial crisis as millions lost their homes. If confirmed, Steve Mnuchin would be the third Treasury Secretary to come from Goldman Sachs in the last 17 years. That is not the type of change that Donald Trump promised to bring to Washington — that is hypocrisy at its worst. The last thing we need is another Treasury Secretary from Goldman Sachs and another broken promise from Donald Trump.

Kamala Harris Fails to Explain Why She Didn’t Prosecute Steven Mnuchin’s Bank David Dayen -- Former California Attorney General Kamala Harris on Wednesday vaguely acknowledged The Intercept’s report about her declining to prosecute Steven Mnuchin’s OneWest Bank for foreclosure violations in 2013, but offered no explanation.“It’s a decision my office made,” she said, in response to questions from The Hill shortly after being sworn in as California’s newest U.S. senator. “We went and we followed the facts and the evidence, and it’s a decision my office made,” Harris said. “We pursued it just like any other case. We go and we take a case wherever the facts lead us.”  Mnuchin is Donald Trump’s nominee to run the Treasury Department, and served as CEO of OneWest from 2009 to 2015. In an internal memo published on Tuesday by The Intercept, prosecutors at the California attorney general’s office said they had found over a thousand violations of foreclosure laws by his bank during that time, and predicted that further investigation would uncover many thousands more. But the investigation into what the memo called “widespread misconduct” was closed after Harris’s office declined to file a civil enforcement action against the bank. Harris’s statement on Tuesday doesn’t explain how involved she was with the decision to not prosecute, or why the decision was made. She also would not say whether the revelations would disqualify Mnuchin for the position of treasury secretary. “The hearings will reveal if it’s disqualifying or not, but certainly he has a history that should be critically examined, as do all of the nominees,” Harris told The Hill.

Justice set for revolution under Sessions --Senator Jeff Sessions (R-Ala.) has emerged as perhaps the most polarizing of President-elect Trump’s Cabinet selections, with attention to his nomination for attorney general reaching a fever pitch this week that will only continue to grow. Some liberal and civil rights groups have worked working furiously to halt his nomination, claiming that as attorney general Sessions will seek to disenfranchise minority voters, strip the LGBT community of protections won during the Obama years, deport DREAMers and fill the jails with low-level drug offenders. Sessions’s opponents also point to alleged decades-old racist remarks, denied by Sessions, which cost him a federal judgeship in 1986. Conservatives are furious over the allegations, which they see as scaremongering designed to smear Sessions as a racist and a bigot. Sessions will sit for his confirmation hearing next Wednesday. Despite opposition, he’s expected to attain the majority he needs from his Senate colleagues to become the next head of the Justice Department. As attorney general, Sessions would have sweeping authority over the nation’s top law enforcement agencies, including the FBI, DEA and the Bureau of Alcohol, Tobacco and Firearms. The attorney general also oversees the Office of Solicitor General, which determines the cases that ultimately make it to the Supreme Court, and the Office of Legal Counsel, which advises the president on what executive actions can be taken without Congressional approval.

Conservatives Should Think Twice before Supporting Jeff Sessions - When President-elect Trump selected Alabama senator Jeff Sessions to be his attorney general, many conservatives cheered. Immigration hardliners were thrilled to have one of their own in the position, while other conservatives saw Sessions as the type of dynamic presence needed to clean out the Stygian morass of President Obama’s Justice Department. Still, there are red flags in Sessions’s record that should worry those who believe in limited government and individual liberty. For instance, he sharply departs from the growing bipartisan consensus on criminal-justice reform. Leading conservatives and libertarians, from former Texas governor Rick Perry to Senators such as Ted Cruz and Rand Paul to the Koch brothers, have embraced the need to make our criminal-justice system more equitable, pushing for a greater emphasis on rehabilitation and a reduction in the incarceration of minor non-violent offenders.  Sessions has not been among them. He was a leading opponent of the Sentencing Reform and Corrections Act, which reduced federal sentences for some non-violent drug offenses and other crimes, and has long been one of the most ardent drug warriors in Congress. At a time when 32 states have legalized medical and/or recreational use of marijuana, Sessions told a Senate hearing last April that, “we need grown-ups in charge in Washington to say marijuana is not the kind of thing that ought to be legalized, it ought not to be minimized, that it’s in fact a very real danger.” His opposition to state legalization measures promises to put the Justice Department in conflict with conservative principles of federalism. Moreover, as George Will has pointed out, Sessions also opposes the reform of asset-forfeiture laws. He has defended these laws, which are considered by most observers to be widely abused, as a means of taking money from people who have “done nothing in their lives but sell dope.” He’s even advocated allowing the federal government to step in and seize assets when state law-enforcement agencies won’t. Just as worrying, Sessions generally opposes Justice Department supervision of local police departments accused of racial abuses.

Follow the Money: Nominee for Secretary of Health and Human Services Traded Health Care Stocks and Owned Tobacco Stocks While in Congress - At least the US president-elect seems to be making the problems of conflict of interests and health care corruption less anechoic. The latest relevant big story was first picked up by Sheila Kaplan writing in Stat. It seems that Dr Tom Price, once a practicing orthopedic surgeon, then a Congressman, and now Mr Trump’s pick for Secretary of DHHS, owned and owns lots of health care related stocks: his stock portfolio includes investments in pharmaceutical, medical device, and health insurance companies, the heart of the industries he would be overseeing as secretary. In particular, Among Price’s holdings are some in Innate Immunotherapeutics, Ltd., a biomedical company in which another lawmaker is a major shareholder. According to his financial disclosure statements, on Aug. 31 he bought between $50,001 and $100,000 worth of stock the firm.Representative Chris Collins, a New York Republican, is a director of the company, which develops drugs to treat multiple sclerosis. He lists assets in the firm worth between $5,000,001 and $25 million. Price also purchased a smaller amount of stock in Innate Immunotherapeutics in 2015.Collins is also a member of Trump’s transition team. In March, Price invested between $1,001 and $15,000 in Amgen; Eli Lilly and Co.; Pfizer; Biogen; Bristol-Myers Squibb; Zimmer Biomet, a medical device company; Aetna; and Athenahealth. Also that month, Price sold the same amounts in Gilead, Abbott Laboratories, and Thermo Fisher Scientific. So for readers of Health Care Renewal, this is very familiar. We have discussed ad infinitum the conflicts of interest that may affect physicians, particularly due to financial relationships with big health care corporations. The issue is that physicians swear oathes to put the health of their individual patients first, and to support the public health in general. Yet the interests of, for example, drug, biotechnology, device companies may be at odds with this primary mission. Such companies in this age of promoting “stock holder value” may primarily be about increasing revenue by selling as much of their products as they can, and let the Devil take the hindmost. Yet physicians ought to use drugs and devices judiciously, and only when their benefits for individual patients outweigh their harms. The concern is that physicians who have financial interests in such and other health care related companies may consciously or unconsciously allow their professional decisions to be influenced by their personal financial advantage.

Exxon Mobil, Tillerson agree to cut all ties | Reuters: Exxon Mobil Corp and Rex Tillerson agreed to sever all ties to comply with conflict-of-interest requirements as the company's former chairman and chief executive awaits confirmation as U.S. secretary of state. If his appointment is confirmed, the value of more than 2 million deferred Exxon Mobil shares (worth about $182 million at Tuesday's closing price) that Tillerson would have received over the next 10 years will be transferred to an independently managed trust, the company said in a statement. The share awards will be canceled and Tillerson will also surrender entitlement to more than $4.1 million in cash bonuses, scheduled to pay out over the next three years, and other benefits, Exxon Mobil said. Separately, Tillerson also committed to the State Department that, if confirmed, he would sell the more than 600,000 Exxon shares he currently owns, the company said. Exxon said last month its president, Darren Woods, will become chief executive and chairman in January following the retirement of Tillerson. Tillerson could face a rocky confirmation process, given concerns among both Democrats and Republicans about his ties to Russia.

Tillerson Discloses Assets Of $400 Million - One day after Exxon announced it would sever ties with its former CEO and Chairman, Rex Tillerson, who is slated to become Trump's secretary of state, in the process awarding him $182 million in deferred shares (presumably tax-free), disclosed assets worth as much as $400 million in an ethics filing that showed investments across more than a dozen nations.Tillerson’s disclosures, first flagged by Bloomberg, reflects more than $300 million in Exxon interests and pension benefits and between $28.6 million and $98 million in other assets. He directly owns 611,087 shares of Exxon, worth about $55 million. He has an additional 2.026 million restricted shares, worth $182 million which he will receive shortly. The ex-CEO's 38-page financial disclosure reveals he has a varied portfolio of investments in companies based in more than a dozen countries, including China, Japan, Germany, Taiwan, India and Brazil. He also disclosed income of at least $20.5 million in 2016, including the $10.3 million he received in salary, bonus and other compensation from Exxon.Tillerson will also have to sell more than 600,000 shares he already owns in North America’s largest oil explorer, abandon $4.1 million in cash bonuses he would have been paid over the next three years and take a $3 million haircut on the restricted stock payout, the company said in a statement on Tuesday.   In cashing out his global holdings, Tillerson could apply for a “certificate of divestiture,” which would allow him to defer capital-gains taxes on certain assets he liquidated to comply with ethics requirements. To qualify for deferral, which is available to eligible appointees, his wealth would have to be reinvested in certain approved investments, such as mutual funds.

Robert Lighthizer Is Named U.S. Trade Representative - WSJ: Donald Trump will name Robert Lighthizer, a former trade official under President Ronald Reagan, to head the U.S. Trade Representative office, the first in a final push of appointments anticipated this week as Mr. Trump fills the remaining senior government vacancies in the run-up to his inauguration, the transition team said Tuesday. The president-elect is also still considering ways to try to bring into his administration two family members, daughter Ivanka Trump and son-in-law Jared Kushner, who were close advisers to his campaign. With a nominee for trade czar position, Mr. Trump has four major positions to fill: the secretaries of Agriculture and Veterans Affairs, the Director of National Intelligence and the head of the Council of Economic Advisers. A top candidate for agriculture secretary is Sonny Perdue, a former Republican governor of Georgia, two people close to the transition said. Toby Cosgrove, chief executive of the Cleveland Clinic, had been in the running for the VA job but has withdrawn his name.The appointments would mark the final steps in a transition process that took on a fast clip after a reorganization by Vice President-elect Mike Pence shortly after the November election. Since then, Mr. Trump has assembled an eclectic group of prospective cabinet members and chief aides, some of whom disagree with each other on such issues as Russia and global warming, setting the stage for a potentially fragmented policy approach. Mr. Lighthizer will be part of a revamped team whose mission includes confronting China and Mexico, which Mr. Trump contends have taken advantage of the U.S. under current trade agreements. Mr. Lighthizer had been the leading candidate for his post for some time. He was among the people who helped run the transition for the trade representative office, which typically leads negotiations on international agreements that lower trade barriers, as well as bringing cases against other countries at the World Trade Organization

Trump to name Lighthizer as trade representative, tap Pence adviser for West Wing  -- President-elect Donald Trump nominated Robert E. Lighthizer as the U.S. trade representative on Tuesday, recruiting to his Cabinet a veteran of the Reagan administration who has decades of experience in trade policy and litigation. Lighthizer, whose selected was first leaked by Trump transition officials late Monday, will join a team of Trump lieutenants charged with fulfilling one the central promises of Trump's populist candidacy: aggressively confronting China, Mexico and other nations the president-elect believes have been taking advantage of international trade agreements, to the detriment of U.S. workers. In the run-up to his Jan. 20 inauguration, Trump will be making a flurry of final nominations for his Cabinet as well as filling out the senior positions in his White House. Trump has recruited Marc Short, who has been serving as a top adviser to Vice President-elect Mike Pence, to the West Wing, likely as head of legislative affairs, three people with knowledge of the position said Monday night. Short will work with Rick Dearborn, who has been serving as executive director of the Trump transition team and is expected to be named White House deputy chief of staff overseeing legislative, intergovernmental and Cabinet affairs. Dearborn is a former chief of staff to Sen. Jeff Sessions (R-Ala.), who is Trump’s nominee for attorney general, and together with Short will manage the administration's legislative agenda and the president's relationships with lawmakers. Short is a longtime veteran operative with deep ties on Capitol Hill and is respected by Republican leaders in both chambers. He served as Pence's chief of staff during his time in Congress and later worked as president of Freedom Partners, the powerful political network of the billionaire industrialist brothers Charles G. and David H. Koch. A longtime Pence loyalist and confidant, Short joined Trump's 2016 campaign team as an adviser to Pence once the Indianan received the vice-presidential nod.

Paul Ryan Breaks With Trump On International Trade Policies - Paul Ryan is defying incoming President Donald Trump and saying that Congress will not consider any attempt to raise tariffs or otherwise disrupt international trade:Speaker Paul D. Ryan, in a break from President-elect Donald Trump, said Wednesday that Congress is not going to increase taxes on imports and exports.“We’re not going to be raising tariffs,” Ryan said on “The Hugh Hewitt Show.”Trump has called for a “big border tax” on companies that leave the United States but continue to sell their goods here.Ryan said “the secret” to getting businesses to stay in the country is to level the playing field on taxes, lowering taxes for businesses, not increasing them. This isn’t the first indication that Trump could have trouble implementing a more restrictionist trade policy due to opposition from fellow Republicans. His position on international trade issues in general, and trade with nations such as Mexico and China in particular, were the subject of intense criticism during the race for the Republican nomination and even during the General Election when fellow Republicans were openly criticizing Trump on several grounds. In this area in particular, Trump’s positions on the myriad issues that fall under the banner of “international trade” are ones that go against decades of Republican and conservative orthodoxy which holds that increased international trade is good policy both because it helps to expand consumer choice and increase business and investment opportunities overseas and because trade tends to ease international tensions between nations that might otherwise potentially become adversaries. After all, if two nations are in a mutually beneficial trading relationship they are less inclined to engage in a war that could disrupt that relationship and harm the economies of both nations.

Two Trade Policy Terms to Remember: VER and ERP – Menzie Chinn - With Robert Lighthizer going to USTR, it’s useful to remember that he was “implementer” of many VER’s, or “Voluntary Export Restraints” on steel imports, during his last stint at USTR during the Reagan Administration.   I’m about to teach a course in international trade policy (see last year’s course), and in just about any trade textbook, one will find VER’s as one of the pernicious policy tools in the pretty bad looking toolkit of trade policies. A VER acts like an import quota, but instead of the quota rents going to domestic agents entitled to import the restricted goods, the rents go to the foreign producers. So, if for example, we slap a VER on Chinese steel, Chinese steel producers get the rents. This is shown in Figure 1. Assume the US is a small country for this market. Then the VER restricts imports so the US market price rises from the world price.  For an import quota, consumer surplus is reduced by the blue area (a+b+c+d), producer surplus increases by dotted area (a), and so b and d are producer and consumer side dead weight loss. The cross-hatched area (c) are quota rents accruing to whoever has the right to import the restricted good. With a VER, the rents accrue to the foreign producer. Watch for this ostensibly “get tough” policy to re-appear. Like many seemingly tough policies, they are actually just plain stupid.   An effective rate of protection (ERP) calculation takes into account the fact that domestic value added might be less than total value added – i.e., there is substantial imported value added in the final good. Suppose a 10% tariff is applied to autos, so that a totally US made auto which originally sold for $50000 (under free trade) can now sell for $55000 because of the protection from foreign imports. In this calculation, effective protection equals nominal, i.e., 10%. However, suppose imported inputs used in cars were $30000. Then the effective rate of protection is 25% (=(25000/20000)-1). Perhaps even more important, suppose instead a 10% tariff is applied to the imported inputs into automobiles. Then the effective rate of protection is -15% (=(17000/20000)-1). To redress this negative rate of protection, the protection on inputs would have to be coupled with a 6% nominal tariff. The more pervasive vertical specialization (i.e., more specifically, the greater the share of imported components), the more prominent this problem.

Trump Tariff on GM Would Violate NAFTA. That May Not Stop Him - - As president, Donald Trump won’t be able to punish General Motors Co. for building cars in Mexico without violating Nafta. That may not stop him from taking an unprecedented step against an American company. Trade experts agree that presidents have wide latitude to impose penalties on imports, at least temporarily, even if courts later find them unlawful. Targeting a single company with a tariff as Trump threatened to do with GM in a tweet Tuesday is unheard of and barred under the North American Free Trade Agreement, according to trade experts. Punishing GM with a tariff on its Mexico-made cars -- or any other U.S. company that has shifted production there -- could prompt a Mexican response that would hurt U.S. exports and raise the price of all goods from the country. “The notion of using emergency tariff-raising authority to influence the investment location decisions of a single company would be an unprecedented use of that authority and far beyond what Congress ever intended,” said Edward Alden, a trade expert at the Council on Foreign Relations. “Turning those powers on a single U.S. company because you don’t like its strategy just takes us to a whole new realm.” The Republican rattled automakers on Tuesday when he tweeted that he would make General Motors pay a “big border tax” on Chevy Cruze models manufactured in Mexico and shipped across the border to U.S. dealers. On the same day, GM’s competitor, Ford Motor Co., canceled plans to expand in Mexico and said it would add jobs in Michigan instead. A GM spokesman said the company has imported to the U.S. only 4,500 of the Cruze hatchbacks it’s manufactured in Mexico. Americans have bought about 190,000 Cruze sedans that were all built in Lordstown, Ohio, a second company spokesman said.

China Threatens Trump With "Big Sticks" If He Wages A Trade War - In the latest not too subtle threat lobbed by China's official press aimed at Donald Trump, the mainland media warned the President-elect that he’ll be met with "big sticks" if he tries to ignite a trade war or further strain ties."There are flowers around the gate of China’s Ministry of Commerce, but there are also big sticks hidden inside the door -- they both await Americans," the Communist Party’s Global Times newspaper wrote in an editorial Thursday in response to Trump’s plans to nominate lawyer Robert Lighthizer, who has criticized Beijing’s trade practices, as U.S. trade representative.The latest lashing out at Trump from a state-run outlet, noticed first by Bloomberg, followed others last month aimed at Peter Navarro, a University of California at Irvine economics professor and critic of China’s trade practices whom Trump last month named to head a newly formed White House National Trade Council. Those picks plus billionaire Wilbur Ross, the nominee for commerce secretary, will form an "iron curtain" of protectionism in Trump’s economic and trade team, the paper wrote.The three share Trump’s strong anti-globalization beliefs and seem unlikely to keep building the current trade order, it said, adding that they will be more interested in disrupting the world trade order.Concurrently, SCMP reported that China’s state media have lambasted US president-elect Donald Trump for commenting on and conducting foreign policy on Twitter. The state-run news agency Xinhua ran a signed commentary headlined “Addiction to Twitter diplomacy is unwise” late on Tuesday night.The article came after Trump fired another salvo at China through Twitter on Tuesday, accusing Beijing of refusing to help contain North Korea’s nuclear ambitions.

Trump, interest rates and Chinese panic: Why euphoria could turn to a credit crunch in 2017: Donald Trump's reflation rally will short-circuit. Rising borrowing costs will blow fuses across the world before fiscal stimulus arrives, if it in fact arrives. By the end of 2017 it will be clear that nothing has changed for the better. Powerful deflationary forces retain an invisible grip over the global economy. Bond yields will ratchet up further and then come clattering down again – ultimately driving 10-year US yields below zero before the decade is over. There are few ‘shovel ready’ projects for Trump’s infrastructure blitz. The headline figures are imaginary. His plan will be whittled down by Congress. The House will pass tax cuts for the rich but these are regressive, with a low fiscal multiplier. The choice of an anti-deficit Ayatollah to head the budget office implies swingeing cuts to federal spending. These will hit the poor, with a high multiplier. This Gatsby mix is economically self-defeating. To the extent that there is any extra juice, it will be countered by the Federal Reserve at this late stage of the cycle. Tight money will push the dollar higher. Once markets accept that Trump is not bluffing - that he means to smash globalism - euphoria will give way to alarm, but for now Wall Street remains intoxicated on wishful thinking. The longer the delusion lasts, the stronger the dollar, and the greater the trouble in Asia and Latin America.Such is the currency paradox. As the Fed's broad dollar index pushes towards an all-time high of 130, the mechanical effects will expose the Achilles Heel of an international system that has never been more dollarised.

Trump Effect Won’t Stop Credit Crunch -- Yves Smith . With an unpopular incoming president who has promised radical change…and sent conflicting messages on what that change will amount to, it’s not hard to believe that Mr. Market’s enthusiasm is overdone. Trump’s economic program rests heavily on pet Republican ideas that are good for the rich, often at the expense of the growth, such as privatization and tax cuts for the wealthy. And while Trump almost certainly favors deficit spending, which give the economy a boost (even though he’s copped a more fiscally conservative posture of late), he’s not likely to get far with Republican deficit hawks.  So as we’ve indicated, Trump’s plans to deliver, or at least appear to deliver, for his base means he needs to follow through with his promises to “reform” immigration and reverse the offshoring of jobs. On the immigration front, I’ve heard of grocery stores that relied on undocumented workers getting rid of them all shortly after the election. The INS has apparently already started telling employers that they are going to be more stringent about enforcement.  Will Trump go further with trying to bring manufacturing jobs back than merely jawboning some high profile employers? Mind you, I’m not a fan of the facile “those jobs are never coming back” thesis. The tacit assumption in the “the jobs won’t return” argument is that the offshoring was a plus for efficiency. In reality:

  • 1. Direct factory labor is typically 10-15% of wholesale product cost
  • 2. Lowering direct factory labor cost via offshoring is offset by:
    • – Higher managerial/coordination costs
    • – Greater financing costs
    • – Higher transport costs
    • – Greater inventory obsolescence risk
    • – Greater fuckup risk (longer supply chain with more vendors = more points of failure)
    • – Greater business system rigidity
  • 3. There are also industries where the Chinese (and sometimes other countries) have been dumping for over a decade, like coated paper. The economics of domestic manufactures would improve, reducing efforts to crush unions and cut wages.

Corporations Prepare to Gorge on Tax Cuts Trump Claims Will Create Jobs -- The official line from U.S.-based multinational corporations is that if they get a huge tax break, they’ll bring home the trillions of dollars in profits they’ve stashed overseas and use it to hire tons of Americans. (Nearly 3 million, says the U.S. Chamber of Commerce!) But now that Donald Trump’s election means it might really happen, corporate executives are telling Wall Street analysts what they’ll actually use that money for: enriching their shareholders and buying other companies. The Intercept’s examination of dozens of earnings calls and investor conference talks since Trump won the presidential election finds that many executives are telling analysts at large banks that they are eager to take the money to increase dividends and stock buybacks as well as snap up competitors. They demonstrate considerably less if any enthusiasm for going on a domestic hiring spree. Many U.S. multinationals, especially in the technology and pharmaceutical industries, have long resisted bringing their overseas profits back to America — because if they did they’d have to pay taxes on them at the current corporate rate of 35 percent. Their accumulated untaxed foreign profits have now grown to a spectacular $2.5 trillion, an amount equal to about 70 percent of the federal government’s annual budget and 14 percent of the entire U.S. economy. While running for president, Trump proudly proclaimed that he’d give those corporations a special 10 percent tax rate on that money — not, you understand, for an unpopular reason like making rich people richer, but because it would help regular Americans. “The wealthy are going to create tremendous jobs. They’re going to expand their companies,” Trump asserted during the first presidential debate. “They’re going to bring $2.5 trillion back from overseas, … to be put to use on the inner cities and lots of other things, and it would be beautiful.” During the third debate he promised that “We’re going to start hiring people, we’re going to bring the $2.5 trillion that’s offshore back into the country. We are going to start the engine rolling again.”

Trump adds Goldman Sachs lawyer to his Wall Street dream team -- Donald Trump’s transition team announced Wednesday morning that Jay Clayton, a veteran Wall Street lawyer, will serve as the new chair of the Securities and Exchange Commission. Clayton works for, among other clients, Goldman Sachs. Which makes a lot of sense since Trump’s National Economic Council director will be a top executive from Goldman Sachs and his Treasury secretary will be a hedge fund manager who got his start by working at Goldman Sachs.  To those who listened to Trump on the campaign trail loudly and repeatedly denounce Goldman Sachs, which he said had “total control” over both Hillary Clinton and Ted Cruz, the sharply pro–Wall Street tilt of his administration may come as a surprise. And yet in many ways, the only surprise here should be that there is any surprise. Trump’s stated policy agenda during the 2016 campaign was and always has been a banker’s wish list, a plan to shower the financial services industry with deregulation and then help out hedge funds with a special tax cut. The divergence between the Trump show on Twitter and a hard-right governing agenda in the Cabinet was always visible in the gap between Trump’s wild rally rhetoric and his sober, conventionally conservative policy speeches.The problem is nobody paid attention. At one of the lowest points of his 2016 campaign, damaged by poor debate performances and rocked by multiple credible allegations of sexual assault, Donald Trump punched back with an audacious conspiratorial speech in which he alleged that all his misfortunes were the result of a vast and far-reaching conspiracy. Allegations against him were published by untrustworthy reporters who “collaborate and conspire directly with the Clinton campaign” as part of a larger “corrupt establishment” that has “trillions of dollars at stake in this campaign.”  This establishment, especially the global banking sector, Trump said, had “bled our country dry,” and it owned Hillary Clinton lock, stock, and barrel.

Goldman-Affiliated Wall Street Lawyer Is Trump's Top Candidate For SEC Chair --Donald Trump is preparing to appoint another Wall Street proxy to the top Wall Street regulation, supervision and enforcement post.  According to the WSJ, Wall Street M&A and IPO lawyer, Jay Clayton, is Trump's leading candidate to become chairman of the Securities and Exchange Commission and could be announced as the nominee as soon as Wednesday. Clayton, who met with Mr. Trump on Dec. 22, is a partner at Sullivan & Cromwell LLP, where he also worked on the 2014 IPO of Alibaba Group. His clients have included Goldman Sachs and Barclays Capital; he would succeed SEC Chairman Mary Jo White, another lawyer with a history of representing Wall Street banks before becoming a regulator. Clayton has spent his career working on the kinds of securities deals that the SEC has a hand in regulating. Among his various listed deals are the following:

  • Ally Financial Inc. in the $4.2 billion sale of its operations in Europe and Latin America to General Motors (GM), as well as in the $4.1 billion sale of its Canadian auto finance business to the Royal Bank of
  • Barclays Capital in connection with its purchase of assets of Lehman Brothers out of bankruptcy
  • Goldman Sachs in connection with the investment of $5 billion by Berkshire Hathaway and the U.S. Treasury’s TARP Investment
  • Bear Stearns in connection with the sale of Bear Stearns to JPMorgan Chase and related matters
  • Goldman Sachs and affiliated funds in connection with various acquisitions and investments in companies involved in financial services, banking, telecom and other industries
  • Initial public offering of $25 billion by Alibaba Group Holding Limited
  • Initial public offering of $190 million by Moelis & Company
  • Initial public offering of $2.375 billion by Ally Financial and private placements of $3 billion and $1.3 billion of common stock in Ally Financial
  • Initial public offering of $230 million by Blackhawk Network Holdings
  • Initial public offering and multiple public and private offerings of equity, preferred and debt securities of Capital Product Partners L.P.
  • Initial public offering of $380 million by Oaktree Capital Group

As noted in the list above, Clayton represented Goldman when it received a $5 billion investment from billionaire Warren Buffett’s company during the peak of the credit crisis in September 2008. He’s also represented Goldman in connection with other investments and acquisitions, according to the law firm. Sullivan is a key outside legal adviser for Goldman and is more closely associated with Wall Street than perhaps any other law firm.

 Trump Selects Jay Clayton, S & C Partner, to Head SEC - Jerri-Lynn Scofield --President-elect Donald Trump has announced the selection of Jay Clayton, a general practice partner at the white shoe law firm Sullivan & Cromwell, to serve as chair of the Securities and Exchange Commission. Unlike his immediate predecessor, Mary Jo White, Clayton’s not a litigator, but a corporate law specialist, with a broad practice, who has worked on capital offerings (including the AliBaba IPO) and mergers and acquisitions (for clients including Ally Financial, Barclays Capital, Bear Stearns, Goldman Sachs). He has also represented clients on regulatory and enforcement matters matters before various agencies, including the Department of Justice (DOJ), the Department of Housing and Urban Development (HUD), and the Federal Housing Finance Agency (FHFA). From the Trump press release announcing the nomination:Clayton will play an important role in unleashing the job-creating power of our economy by encouraging investment in American companies while providing strong oversight of Wall Street and related industries. Robust accountability will be a hallmark of his tenure atop the SEC, and the financial security of the American people will be his top priority. In making many of his previous Cabinet appointments, Trump has prized early loyalty above all else, and has appointed Republicans on the verges of the party. By contrast, Clayton is a surprisingly conventional pick to chair the SEC.  S & C trains its lawyers to be generalists who practice within broad practice areas, and a partner from this firm has precisely the subject matter expertise necessary to head this agency.  Further, while Clayton’s campaign finance contributions suggest that he might lean Republican, he appears to be neither a doctrinaire Republican party nor Trump partisan. The New York Times Dealbook column reports he’s “donated to Mitt Romney and Mr. Obama in previous presidential elections and to Jeb Bush’s primary campaign in 2015, according to public records.”  I was an associate at S & C, also in the general practice group — although I left the firm a couple of years before Clayton arrived. I neither know him personally nor by reputation– so, I’m afraid, I can’t offer up any anecdote or any apt sobriquet that reveals his character or provides any insight as to how he might behave if confirmed. As readers might well recognize, one often has a bit of a love-hate relationship with an ex-employer: guilty as charged. I freely confess to my ancient S & C connection– now more than two decades old– so that readers might be alive to any bias embedded herein– either pro-or anti.

Behold The Impressive M&A and IPO Deal List Of The New Head Of The SEC -- It's official. As previewed earlier this morning, when we reported that according to media reports, Sullivan & Cromwell lawyer Jay Clayton, a long-time favorite of Wall Street and especially Goldman Sachs (Sullivan is a key outside legal adviser for Goldman and is more closely associated with Wall Street than perhaps any other law firm per the WSJ) has been nominated to lead the Securities and Exchange Commission. Donald Trump spokesman Sean Spicer told reporters in a daily conference call. Who is the relatively unknown Clayton, who incidentally is an M&A and not a securities lawyer? Here is a brief bio from earlier this morning: […] But for a far better glimpse into his deal acumen, here is the breakdown of Clayton's Wall Street deal list taken from his bio page. Considering that the Sullivan & Cromwell website is currently down, we can only imagine that most Wall Street participants are quite unfamiliar with the M&A and IPO banker:

Trump Pick Jay Clayton to Be Most Conflicted SEC Chair Ever - When Donald Trump picked hotshot Wall Street defense lawyer Jay Clayton to head the SEC Wednesday, there was a predictable outcry from certain quarters. Ohio Sen. Sherrod Brown, who sits on the banking committee, had one of the most circulated quotes: "It's hard to see," Brown said, "how an attorney who's spent his career helping Wall Street beat the rap will keep President-elect Trump's promise to stop big banks and hedge funds from 'getting away with murder.'"  Most of the consternation over Clayton's appointment has to do with his own background as a longtime defender of big banks. He's been involved in some infamously shadowy episodes in the post-crisis era, with two in particular standing out.He represented Goldman Sachs when the firm received a $5 billion capital infusion from Warren Buffet during the September 2008 meltdown. He also represented Barclays during its malodorous acquisition of the assets of Lehman Brothers, an episode one lawyer described to me years ago as "the greatest bank robbery you never heard of." (There is a chapter about this story in my last book, The Divide.) That Clayton has been a devoted legal slave to the usual Wall Street monsters over the years is obviously concerning, though not terribly unusual.  What makes this situation somewhat unique is the fact that this incoming SEC chief is also married to a broker at Goldman Sachs – his wife Gretchen is a wealth management advisor. This means that a significant portion of Clayton's family income while in office will presumably be coming from a company he is charged with policing. This is both far less common and a much bigger problem than you'd think. As one former congressional aide put it to me today, "Clayton will be the most financially conflicted SEC chairman in history."

Protesters Swarm Goldman Sachs' Headquarters, Are "Physically Ejected" It appears "Occupy Wall Street" is a thing again, and this time it's Donald Trump's fault. Anyone who was wondering if the general population has noticed the abnormal concentration of Wall Streeters in general, and Goldman Sachs alumni in particular, in the Trump administration got their answer on Wednesday afternoon, when screaming protesters, chanting "Drain that Swamp", swarmed the lobby of Goldman Sachs' New York headquarters in opposition to the firm’s growing influence in Donald Trump’s administration.As Bloomberg first reported, "about 40 protesters entered Goldman’s lobby and were ejected, in some cases physically" according to a statement from New York Communities for Change, a social- and economic-justice advocacy group. A video of the rally posted on Facebook shows roughly half that number. The roughly four-minute video provided by New York Communities shows protesters yelling, displaying banners and blocking turnstiles inside the company’s lobby, where they are met by security and police officers. At one point, an officer confiscated a large black banner with the words “Government Sachs.” Later in the video, the officer can be seen shoving some protesters through an open door. The group vowed to return on Jan. 17. The disgruntled protesters criticized Goldman’s role in the U.S. housing crisis and the long history of its former executives taking senior posts in government - apparently having alumni in charge of virtually every major central bank, and in most government posts in previous administration, was not a sufficient wake up call, it took Trump to remind them which company really runs the world (hint: the one whose 34% surge since the Trump election has been responsible for a quarter of the Dow's move in the same period) . The protest came hours after Trump said he would nominate Jay Clayton, an attorney with extensive ties to the investment bank, to lead the Securities and Exchange Commission. Clayton, a Sullivan & Cromwell partner, has done millions worth of billable works in work for Goldman Sachs as reported earlier. Jay's wife, Gretchen, is a VP of wealth management at the bank, Bloomberg notes.

Law Partners of Trump’s SEC Nominee Gave Huge Sums to Elect Hillary – Not Trump - Pam Martens -- The rationale for Donald Trump’s selection of Jay Clayton, a law partner at Sullivan & Cromwell which has represented Goldman Sachs since the late 1800s, to be the next SEC Chairman grew exponentially fuzzier after Wall Street On Parade reviewed political donation records at the Federal Election Commission. FEC records show that 59 of Clayton’s fellow lawyers at the firm made over $900,000 in donations to the Hillary Victory Fund while one lone lawyer, Donald Korb, made two $2700 donations to Trump’s primary and general election campaign. Donations from three other lawyers at the firm, Justin Decamp ($2700), Robert Giuffra ($25,000), and Diane McGimsey ($5,000) to the Trump Victory committee came after Trump was already elected President, according to images of receipts filed with the FEC. In addition to the more than $900,000 that went to the Hillary Victory Fund, tens of thousands of dollars more were donated by Sullivan & Cromwell lawyers to Hillary Clinton’s main campaign committee, Hillary for America. Donors to the Hillary Victory Fund included Sullivan & Cromwell Senior Chairman, H. Rodgin (Rodge) Cohen, who donated $250,000 on May 12, 2016 and another $35,000 the following month. During the Wall Street panic and crash in 2008 and 2009, Cohen darted from representation of one failing institution to another. The Wall Street Journal dryly noted in the midst of the crisis that Cohen was “in demand because he helped mold the financial system that is now under assault. He helped draft the rules that led to the emergence of powerful national banks, waged the first hostile bank takeover in the U.S. and lobbied, in the early 1990s, to expand the Federal Reserve’s power to provide the emergency loans now being employed by the government.” When the Senior Chairman of a powerful law firm gives over a quarter of a million dollars to boost a presidential candidate’s chances, it tends to send a message to his fellow lawyers in the firm. Other Sullivan & Cromwell lawyers giving generously to the Hillary Victory Fund included: Scott D. Miller ($50,000);  Frank Aquila ($33,400); Alexandra Korry ($33,400); Alison Ressler ($33,400); Sharon Nelles ($25,000); Yvonne Quinn ($25,000); George White ($25,000); David Hariton ($20,000); Richard Pepperman ($20,000); Karen Seymour ($16,700); and Sam Seymour ($16,700). Another 21 lawyers at the firm gave $10,000 each while 11 lawyers gave $5,000 or more to the Hillary Victory Fund. Why would President-elect Donald Trump discredit himself further by nominating a Goldman Sachs outside counsel to run the already discredited SEC when the law firm’s partners were funneling serious money into his opponent’s campaign to make sure he didn’t win?

Trump Nominees’ Filings Threaten to Overwhelm Federal Ethics OfficeRex W. Tillerson owns more than $50 million of Exxon Mobil stock, has earned an annual salary of $10 million and holds a range of positions — from director at the Boy Scouts of America to the managing director of a Texas horse and cattle ranch. But Mr. Tillerson is prepared to resign from all those posts, sell all his stock and put much of his money into bland investments like Treasury bonds if he becomes secretary of state, according to an “ethics undertakings” memo he filed this week with the State Department. And, if he returns to the oil industry in the next decade, he could lose as much as $180 million. The nine-page ethics letter detailing Mr. Tillerson’s commitments is the first of hundreds that will be made public in the coming weeks by members of President-elect Donald J. Trump’s cabinet and other top political appointees, presenting a historic test of the federal government’s ability to identify conflicts of interest — and figure out ways to avoid them. Mr. Trump has selected what would be the wealthiest cabinet in modern American history, filled with millionaires and billionaires with complicated financial portfolios. Mr. Tillerson is worth at least $300 million, but is hardly the richest among them: Wilbur L. Ross Jr., the commerce secretary nominee; Betsy DeVos, the education secretary nominee; and Steven T. Mnuchin, the Treasury secretary nominee, each hold assets estimated at more than a billion dollars.

Trump Taps Former Senator Dan Coats As Director Of National Intelligence -- Just minutes after James Clapper finished explaining why Russia is America's arch enemy to congress, president-elect Trump has announced that he is choosing former Indiana Republcian Senator Dan Coats as his Director of National Intelligence. As The Washington Post reports,  Coats, who is seen as a traditional Republican, served two stints in the Senate and was ambassador to Germany during George W. Bush’s presidency. The Indiana Republican’s most recent term in the Senate ended earlier this week when the 114th Congress concluded. He also served in the chamber from 1989-1999.

Trump to tap ex-Sen. Dan Coats as intelligence chief -- President-elect Donald Trump will pick former Indiana Sen. Dan Coats to be his director of national intelligence, a Trump transition source confirmed on Thursday. If the Senate confirms Coats, the recently retired lawmaker will be tasked with leading an intelligence community the incoming president has criticized and vowed to reform. ..Coats — who served on the Intelligence and Armed Services committees while in the upper chamber — reemerged in recent days as the leading candidate to become Trump's intelligence chief, with several news outlets reporting he was the expected choice. He would enter the job at the center of a spat between Trump and the government’s intelligence community over Russia’s alleged hacking of the recent U.S. election. The next commander in chief has repeatedly refused to accept intelligence agencies' conclusion that senior Moscow officials directed the digital campaign, potentially in an attempt to boost Trump’s chances at the White House and undermine the candidacy of Hillary Clinton. Trump believes intelligence personnel have become politicized and are pushing a false narrative to try and undermine his future administration. According to a recent Wall Street Journal report, Trump and his top advisers are working on a plan to scale down the Office of the Director of National Intelligence. The story follows a November Intercept report that Trump’s team was discussing whether to “dismantle” the office altogether.. Current Director of National Intelligence James Clapper on Thursday said his staff had not talked to Trump’s team about such a large-scale rearrangement — or all-out axing — of his office. ODNI oversees intelligence collection and analysis activities at the FBI, NSA, CIA and 13 other agencies in the intelligence community. Sean Spicer, the incoming White House press secretary, has tried to downplay the reports, calling them “false.” “All transition activities are for information-gathering purposes, and all discussions are tentative,” he said on Thursday.

Trump Splits With 'Senior Advisor' Former CIA Chief Woolsey -Trouble in paradise? Following his comments earlier in the week that it was not just the Russians (but China and Iran maybe) that hacked US and that Trump "may be playing us,"former CIA Director James Woolsey has parted ways with the president-elect and will no longer be a Senior Advisor.Woolsey did not appear to be toeing the company-line completely...Former CIA director James Woolsey: Possibility that more than one country is involved in hacking is there. As we noted previously, The Hill reports, Woolsey, who was a senior advisor to President-elect Donald Trump, said:"I don’t think people ought to say they know for sure there’s only one. I don’t think they’re likely to be proven correct. It shouldn’t be portrayed as one guilty party,"“It’s much more complicated than that. This is not an organized operation that is hacking into a target. It’s more like a bunch of jackals at the carcass of an antelope.”Woolsey suggested China and Iran could be behind cyber breaches in the U.S.“Is it Russian? Probably some,” he said. "Is it Chinese and Iranian? Maybe. We may find out more from Mr. Trump coming up today.” This follows Trump's comments on Sunday hinting he would reveal new information about alleged Russian hacking during a New Year’s Eve celebration at his Mar-a-Lago resort in Palm Beach, Fla.

Former CIA director James Woolsey quits Trump transition team -- Former CIA director R. James Woolsey Jr., a veteran of four presidential administrations and one of the nation’s leading intelligence experts, resigned Thursday from President-elect Donald Trump’s transition team because of growing tensions over Trump’s vision for intelligence agencies. Woolsey’s resignation as a Trump senior adviser comes amid frustrations over the incoming administration’s national security plans and Trump’s public comments undermining the intelligence community. “Effective immediately, Ambassador Woolsey is no longer a Senior Advisor to President-Elect Trump or the Transition. He wishes the President-Elect and his Administration great success in their time in office,” Jonathan Franks, a spokesman for Woolsey, said in a statement. Woolsey said on CNN Thursday night that he did not want to “fly under false colors” any longer. “I’ve been an adviser and felt that I was making a contribution….. But I’m not really functioning as an adviser anymore. When I’m on the [television] screen, everybody announces that I’m a former CIA director and that I’m a Trump adviser and I’m really not anymore.” People close to Woolsey said that he had been excluded in recent weeks from discussions on intelligence matters with Trump and retired Lt. Gen. Michael Flynn, the incoming White House national security adviser. They said that Woolsey had grown increasingly uncomfortable lending his name and credibility to the transition team without being consulted. Woolsey was taken aback by this week’s reports that Trump is considering revamping the country’s intelligence framework, said these people, who spoke on the condition of anonymity to talk candidly. “Jim is very uncomfortable being considered an adviser in an area where one might consider him an expert when he is not involved in the discussions,” one person close to Woolsey said. “To be called ‘senior adviser’ and your opinion is not sought is something he cannot handle.”

Report: Trump orders Obama ambassadors to leave posts by inauguration -- Donald Trump's team is demanding politically appointed ambassadors leave their overseas posts by Inauguration Day, The New York Times reports. The mandate could leave the U.S. without Senate-confirmed representatives for months in key countries like Germany and Britain, the Times notes. The order breaks with precedent. In the past, administrations have granted extensions on a case-by-case basis. A senior Trump transition official told the Times there was no "ill will" in the order and that it is meant to make sure President Obama's appointees leave the government on schedule. According to the Times, many ambassadors are considering appealing the decision with Rex Tillerson, Trump's nominee for secretary of state. The State Department reportedly informed all politically appointed ambassadors that they were to submit letters of resignation effective Jan. 20 the day after the election, and instructed those seeking extensions to submit formal requests. Many ambassadors, many of whom have families, are now left to find places to live in the U.S. or their respective countries on short notice. Trump has already named his own ambassadors to two countries. David Friedman, a bankruptcy lawyer and campaign adviser, has been tapped to serve as U.S. ambassador to Israel, while Iowa Gov. Terry Branstad has been chosen to serve in China.

This Congress filled the fewest judgeships since 1952. That leaves a big opening for Trump - President-elect Donald Trump will take office with a chance to fill more than 100 seats on the federal courts, thanks mostly to an extraordinary two-year slowdown in judicial confirmations engineered by Senate Majority Leader Mitch McConnell of Kentucky.  Since Republicans took control of the Senate at the beginning of the 114th Congress last year, senators have voted to confirm only 22 of President Obama’s judicial nominees. That’s the lowest total since 1951-52, in the final years of Harry Truman’s presidency.  By contrast, when Democrats controlled the Senate in the last two years of George W. Bush’s presidency, 68 of his judicial nominees were confirmed.   More than twice as many vacancies, 107, exist on federal benches than when Bush left office.  In total, the Administrative Office of the U.S. Courts counts 890 slots for full-time federal judges. Federal district courts have 84 vacancies, and the regional circuit courts of appeal have another 14. The specialized appeals courts for international trade and federal claims have eight vacant seats.  The 107th vacancy is the best-known: the Supreme Court seat of the late Justice Antonin Scalia.  The vacancies reflect a long-term goal of McConnell and other leading Republicans to tilt the court system toward conservatives. “There was an almost total breakdown of confirmations once the Republicans took control of the Senate,” said Russell Wheeler of the Brookings Institution, who closely tracks federal judges. Once Trump takes office, the GOP has perhaps its best chance yet to reach its goal. Wheeler said Democratic appointees now account for 51% of the judges on the district and appellate courts, reflecting the selections of Obama and President Clinton. But, he said, Trump could tilt the majority back to Republicans within four years aided by both retirements and the unusual number of vacancies.

Here are the eight Trump Cabinet picks Democrats plan to target -- Democratic senators plan to aggressively target eight of Donald Trump’s Cabinet nominees in the coming weeks and are pushing to stretch their confirmation votes into March — an unprecedented break with Senate tradition. Such delays would upend Republican hopes of quickly holding hearings and confirming most of Trump’s top picks on Inauguration Day. But Democrats, hamstrung by their minority status, are determined to slow-walk Trump’s picks unless they start disclosing reams of personal financial data they’ve withheld so far, according to senior aides. Incoming Senate Minority Leader Charles E. Schumer (D-N.Y.) has told Senate Majority Leader Mitch McConnell (R-Ky.) that Democrats will home in especially on Rex Tillerson, Trump’s choice for secretary of state; Sen. Jeff Sessions (R-Ala.), his pick for attorney general; Rep. Mick Mulvaney (R-S.C.), tapped to lead the Office of Management and Budget; and Betsy DeVos, selected to serve as education secretary.There’s also Rep. Tom Price (R-Ga.), Trump’s pick to lead the Department of Health and Human Services and oversee changes to Obamacare, who is expected to be attacked by Democrats for his support for privatizing Medicare. Andrew Puzder, a restaurant executive set to serve as labor secretary, will face scrutiny for past comments on the minimum wage, among other policies. Steve Mnuchin, a former Goldman Sachs partner set to serve as treasury secretary, and Oklahoma Attorney General Scott Pruitt, Trump’s pick to lead the EPA, will also be the focus of Democratic attacks, aides said.

Democrats talk up the one Trump nomination they can torpedo - POLITICO: Democrats are itching to sink at least one Donald Trump Cabinet pick. Unfortunately for them, they seem to really like the one nominee they have the power to block without Republican help — James Mattis. Returning to the Capitol on Tuesday for the start of the new Congress, a half-dozen Senate Democrats said in interviews that they’re open to voting for the waiver Mattis will need to become defense secretary — and several said they’re leaning in that direction. Story Continued Below Some said they view the retired Marine Corps general as a potential key voice within the Trump administration — someone who could temper the president-elect on issues like torture. “I like the idea of [Mattis] being at the table with Donald Trump, who clearly doesn't understand that torture isn't about our enemies — it's about protecting our soldiers that are captured, and that it's unreliable information,” said Sen. Claire McCaskill (D-Mo.), a member of the Senate Armed Services Committee. “I'm going to reserve judgment until the confirmation hearing, but I'm certainly familiar with him, and I certainly approve of how tall in the saddle he has stood against the idea of America ever torturing.” Trump’s other Cabinet nominees will need simple majorities in the Senate to be confirmed, meaning Democrats will not be able to block them without help from some of the Senate’s 52 Republicans. But Mattis, who retired from the military in 2013, will require 60 votes to get a special waiver exempting him from a law barring top military officials from serving as defense secretary until they’ve been retired at least seven years.

The GOP’s Brilliant Plan to Distract from Critical Confirmation Hearings-- The Republican party appears to be employing a strategy wherein the public—and even lawmakers—will be too distracted to place much needed scrutiny on President-elect Donald Trump's cabinet nominees. Not only are six major confirmation hearings now scheduled for the same day (see below)—"preventing any one nominee from dominating a news cycle," as the Washington Post put it—but Trump himself rescheduled a long-awaited press conference for that very day: January 11. And that same Wednesday also happens to be when Senate Majority Leader Mitch McConnell (R-Ky.) plans to begin a so-called vote-o-rama, "in which senators take dozens and dozens of votes on amendments with no clear end," Politico explains. Indeed, as Sen. Chris Coons (D-Del.) told NPR of secretary of state nominee Rex Tillerson's hearing in particular: "It may well happen on a day where we are literally voting continuously for 24 hours. I don't think that's the right day to hold a hearing where the members of the Foreign Relations Committee who have real concerns—both Republicans and Democrats—want to hear his full answers, not just race in and out." But that could be just what some Republicans are hoping for. "The GOP leadership's approach will minimize unflattering process stories and prevent Trump's nominees from receiving the kind of full airing and scrutiny that they would otherwise," James Hohmann wrote for the Post. "It's the political equivalent of running a no-huddle offense in the first quarter and throwing a lot of deep balls when you know the defense is outmatched. The other side's best safety is still recovering from a pulled hamstring, and the defensive coordinator is distracted by the head coaching job he's going to take next season. The odds are that Team Trump will score a bunch of touchdowns."

Trump Tells DHS To Prepare For Border Wall Construction - A memo from the Department of Homeland Security, which was recently reviewed by Reuters, suggest that the Trump administration plans to hit the ground running on the construction of that U.S.-Mexico border wall when they move into the White House later this month.  The memo apparently summarized a meeting held between DHS officials and Trump's transition team on December 5th in which requests were made for an assessment of "all assets available for border wall and barrier construction."In a wide-ranging request for documents and analysis, President-elect Donald Trump's transition team asked the Department of Homeland Security last month to assess all assets available for border wall and barrier construction.The requests were made in a Dec. 5 meeting between Trump's transition team and Department of Homeland Security officials, according to an internal agency memo reviewed by Reuters. The document offers a glimpse into the president-elect's strategy for securing the U.S. borders and reversing polices put in place by the Obama administration.The Trump transition team also allegedly took aim at Obama's executive actions, requesting "copies of every executive order and directive sent to immigration agents since Obama took office in 2009." The transition team also asked for copies of every executive order and directive sent to immigration agents since Obama took office in 2009, according to the memo summarizing the meeting.Trump has said he intends to undo Obama's executive actions on immigration, including a 2012 order to allow children brought to the U.S. illegally by their parents to remain in the country on temporary authorizations that allow them to attend college and work.The program, known as DACA, collected information including participants' addresses that could theoretically be used to locate and deport them if the policy is reversed. Another request of the transition team was for information about whether any migrant records have been changed for any reason, including for civil rights or civil liberties concerns, according to the internal memo seen by Reuters.

Trump plans to revamp top US intelligence agency, restructure CIA | Fox News: – President-elect Donald Trump, a harsh critic of U.S. intelligence agencies, is working with top advisers on a plan that would restructure and pare back the nations’ top spy agency, people familiar with the planning said, prompted by a belief that the Office of the Director of National Intelligence has become bloated and politicized. The planning comes as Mr. Trump has leveled a series of social media attacks in recent months and the past few days against U.S. intelligence agencies, dismissing and mocking their assessment that the Russian government hacked emails of Democratic groups and individuals and then leaked them last year to WikiLeaks and others in an effort to help Mr. Trump win the White House. One of the people familiar with Mr. Trump’s planning said advisers also are working on a plan to restructure the Central Intelligence Agency, cutting back on staffing at its Virginia headquarters and pushing more people out into field posts around the world. The CIA declined to comment on the plan. “The view from the Trump team is the intelligence world [is] becoming completely politicized,” said the individual, who is close to the Trump transition operation. “They all need to be slimmed down. The focus will be on restructuring the agencies and how they interact.”

Trump Is Working On A Plan To Restructure, Pare Back The CIA And America's Top Spy Agency ---  Just in case the accusations that president-elect Donald Trump is a puppet of the Kremlin, intent on destabilizing and weakening the US weren't loud enough, moments ago the WSJ assured these would hit an unprecedented level with a report that Trump, a harsh critic of U.S. intelligence agencies, is working with top advisers on a plan that would restructure and pare back the nation’s top spy agency, the Office of the Director of National Intelligence, prompted by a belief that it has "become bloated and politicized."The Office of the Director of National Intelligence, or ODNI, was established in 2004 in large part to boost coordination between intelligence agencies following the Sept. 11, 2001 terror attacks.The planning comes in a time of turbulence between Trump and American intelligence agencies: the president-elect has leveled a series of social media attacks in recent months and the past few days against the U.S. intelligence apparatus, at times dismissing and mocking their assessment - perhaps with cause, after all there is still no evidence - that the Russian government hacked emails of Democratic groups and John Podesta and then leaked them to WikiLeaks and others in an effort to help Trump win the White House. According to the Journal, among those helping lead Mr. Trump’s plan to restructure the intelligence agencies is his national security adviser, Lt. Gen. Michael Flynn, who had served as director of the Defense Intelligence Agency until he was pushed out by DNI James Clapper and others in 2013. Also involved in the planning is Rep. Mike Pompeo (R., Kan.), who Mr. Trump selected to be his CIA director.

'It's a bad idea': CNN commentator says Trump should stop questioning US intelligence agencies - Donald Trump's tweets questioning the US intelligence community's handling of the Russian cyberattack investigation prompted a warning from a CNN commentator on Tuesday night. Timothy Naftali, a presidential historian for the network, said the president-elect should not try to cast doubt on the nation's top spy agencies. "It's a bad idea," Naftali said, "the intelligence community has information about him that I'm sure he would like not to be released." Naftali stopped short of implying there's a big secret about the incoming president, but said "it doesn't make sense for Trump to be making adversaries in the intelligence community ... a community that serves presidents regardless of party." He suggested Trump should "stay silent" about the Russian hacking investigation. Trump tweeted earlier on Tuesday night: "The 'Intelligence' briefing on so-called 'Russian hacking' was delayed until Friday, perhaps more time needed to build a case. Very strange!"  Unnamed US officials cited by NBC News and USA Today said the meeting between Trump and the heads of US intelligence agencies had already been on the books for Friday.

Trump’s Ignorance Is Matched Only by His Thuggishness -- Don Boudreaux of Cafe Hayek - Here’s a letter to the Washington Post: You report that Donald Trump tweets: “General Motors is sending Mexican made model of Chevy Cruz to U.S. car dealers-tax free across border. Make in U.S.A. or pay big border tax” (“Trump targets GM in latest attack on automakers, while Ford cancels plans for a Mexico plant,” Jan. 3). Forget that such protectionism, by raising U.S. automakers’ costs of production, will reduce these firms’ outputs and abilities to compete with foreign automakers – and that this government-imposed inefficiency might well destroy more jobs in the U.S. auto industry tomorrow than are created by this tariff threat today.  Also forget that such protectionism, by raising the prices that Americans pay for automobiles, will oblige Americans to save less as well as to spend less on other goods and services, thus artificially destroying jobs in other industries.  In short, forget Mr. Trump’s appalling ignorance of the economics of trade. Instead, focus on the ethics of the matter.  Suppose that Mr. Trump is your neighbor and that he complains that the auto mechanic who you regularly hire is from another neighborhood.  So he threatens to have his bodyguards confiscate a portion of your income until and unless you hire a more-pricey mechanic from your immediate neighborhood.  Would anyone excuse such unethical – indeed, predatory – behavior?  Of course not.  So what is it about such behavior that makes it excusable if it is simply carried out on a larger scale?  Answer: nothing at all.  This behavior, regardless of scale, is that of a thug.

Bill Gross Compares Trump To Mussolini --To say that the "former bond king" Bill Gross - unlike his "royal successor" Jeffrey Gundlach, or the world's biggest hedge fund manager Ray Dalio - is not a fan of Donald Trump, or his proposed policies, is an understatement: his first condemnation of Trump came just days after the election, when Gross said that Trump's tenure "will be damaging", followed a month later by slamming the "Trump Rally", calling it misguided and urging investor to "move to cash." Additionally, in his December investment outlook, Gross wrote that the Trump administration may boost stock markets in the short term but his policies will likely limit long-term economic growth by restraining trade and corporate profits.Earlier today, when interviewed on Bloomberg radio, Gross escalated his critisim of Trump, accusing the President-elect’s targeting of corporations, to make them change their practices, as being reminiscent of policies undertaken by Italy's dictator Benito Mussolini."Some of these pre-term policies, where he’s cajoling companies to move production back into the United States, that’s fine, but it reminds me to some extent of policies in Italy long ago associated with Mussolini and government control of corporate interests," Gross said in an interview Friday on Bloomberg Radio. "I don’t want it to go too far."In recent days, Trump singled out companies including makers of airplanes and automobiles, pressuring them on prices or to keep jobs in the U.S. It has generated results: just this week, Ford canceled a $1.6 billion factory in Mexico, saying it would add positions in Michigan instead. A new controversy erupted yesterday when Trump targeted Toyota's new Mexican plant, warning it would pay a substantial tax on cars sold into the US.Gross also said that "there’s a lot of voodoo" in terms of the economics of Trump’s tax policies around cutting rates and repatriation of money by companies to generate revenue and investment.

Donald Trump’s team says more focus should be on ‘punishing’ Hillary Clinton than on Russia election hacking --Donald Trump’s press secretary claimed there should be more focus on “punishing” Hillary Clinton for her alleged manipulation of the election than on Russia’s alleged undermining of US democracy.Sean Spicer questioned the “magnitude” of the scrutiny on Russia’s alleged cyber warfare against the Democratic National Committee in an attempt to boost his boss into the White House. He then attempted to deflect questions on an issue which is gathering bipartisan support by focusing on Mr Trump’s former Democratic rival.“Why aren’t we talking about Hillary Clinton getting debate questions ahead of time? That’s a pretty valid attempt to influence an election – somebody giving her debate questions and answers before an election,” he said, referring to former CNN commentator and DNC chair, Donna Brazile, allegedly handing over primary season debate questions to the Clinton team.Mr Spicer said his team was “still getting information” about Russia’s supposed hack under direct orders from Russian president Vladimir Putin. “When are we going to start talking about the other side of this, which is what did Hillary Clinton do to influence the election? Is she being punished in any way?” asked Mr Spicer.

 The Mysterious Disappearance of Former Clinton Foundation CEO Eric Braverman --Eric Braverman, the Clinton Foundation CEO from 2013 until 2015,  has apparently been missing since October. His absence has fueled speculations in the blogosphere but so far has been ignored by the media.  Some speculate, with good reason, that Braverman may have gone into hiding after an email mentioning his name was released by Wikileaks on October 22 of this year. In the March 2015 email exchange, Center for American Progress President Neera Tanden told Clinton campaign manager and confidant John Podesta there was a mole within the Clinton Foundation. Podesta in his reply told Tanden the mole was Braverman.  Braverman had abruptly resigned from the Clinton Foundation shortly before this email exchange took place. And then, after the email exchange was made public by Wikileaks, Braverman vanished from the public eye.  This seems like a story that someone might want to report.  The last evidence of Braverman’s public activity was October 12, when he posted his last tweet on Twitter.  He is still listed as a lecturer at Yale University and, contrary to some reports, there is a record of his lectures going back several years. I contacted the press office and Braverman’s department at Yale and received no response.  Craig Murray, a former British ambassador to Uzbekistan and a close associate of WikiLeaks founder Julian Assange, told The Daily Mail that Podesta’s emails were leaked to the organization by a disgruntled insider, not the Russians. Consequently, there are suspicions it may have been Braverman. Politico ran a long story about Braverman’s ouster in 2015. Based on email correspondence released by Wikileaks, Braverman was apparently hired by Chelsea Clinton to clean up the corruption in the foundation, but then forced out of the foundation by longtime Clinton loyalists; sources say Podesta made him a target.

White House fails to make case that Russian hackers tampered with election -- Talk about disappointments. The US government's much-anticipated analysis of Russian-sponsored hacking operations provides almost none of the promised evidence linking them to breaches that the Obama administration claims were orchestrated in an attempt to interfere with the 2016 presidential election.  The 13-page report, which was jointly published Thursday by the Department of Homeland Security and the FBI, billed itself as an indictment of sorts that would finally lay out the intelligence community's case that Russian government operatives carried out hacks on the Democratic National Committee, the Democratic Congressional Campaign Committee, and Clinton Campaign Chief John Podesta and leaked much of the resulting material. While security companies in the private sector have said for months the hacking campaign was the work of people working for the Russian government, anonymous people tied to the leaks have claimed they are lone wolves. Many independent security experts said there was little way to know the true origins of the attacks.  Sadly, the JAR, as the Joint Analysis Report is called, does little to end the debate. Instead of providing smoking guns that the Russian government was behind specific hacks, it largely restates previous private-sector claims without providing any support for their validity. Even worse, it provides an effective bait and switch by promising newly declassified intelligence into Russian hackers' "tradecraft and techniques" and instead delivering generic methods carried out by just about all state-sponsored hacking groups. "This ultimately seems like a very rushed report put together by multiple teams working different data sets and motivations," Robert M. Lee, CEO and Founder of the security company Dragos, wrote in a critique published Friday.

US Govt Data Shows Russia Used Outdated Ukrainian PHP Malware - Yesterday the Obama administration announced that they would expel 35 Russian diplomats and close two Russian facilities in the United States, among other measures, as punishment for interfering with the US 2016 election. In addition, yesterday the Department of Homeland Security (DHS) and the Office of the Director of National Intelligence (DNI) released a Joint Analysis Report, or JAR, compiled by the DHS and FBI, which they say attributes the election security compromises to Russian intelligence operatives that they have codenamed ‘GRIZZLY STEPPE‘.  The report contains specific indicators of compromise, including IP addresses and a PHP malware sample.” At Wordfence our focus is WordPress security. Our security analysts spend a lot of time analyzing PHP malware, because WordPress is powered by PHP.  As an interesting side-project, we performed analysis on the PHP malware sample and the IP addresses that the US government has provided as “…technical details regarding the tools and infrastructure used by Russian civilian and military intelligence services (RIS)”. [Source] We used the PHP malware indicator of compromise (IOC) that DHS provided to analyze the attack data that we aggregate to try to find the full malware sample. We discovered that attackers use it to try to infect WordPress websites. We found it in the attacks that we block. Here it is. By viewing the source code, we could find the name of the malware and the version. It is P.A.S. 3.1.0. We googled it and found a website that makes this malware. You can find the site at this address:  The website claims the malware is made in Ukraine and the date at the bottom has the Ukraine country code UA.  But PAS has evolved even further since 3.1.7. It is now version 4.1.1 which you can get from the same website: The malware sample is old, widely used and appears to be Ukrainian. It has no apparent relationship with Russian intelligence and it would be an indicator of compromise for any website.

U.S. Intelligence Got the Wrong Cyber Bear -- Leonid Bershidsky -- The "Russian hacking" story in the U.S. has gone too far. That it's not based on any solid public evidence, and that reports of it are often sooverblown as to miss the mark, is only a problem to those who worry about disinformation campaigns, propaganda and journalistic standards -- a small segment of the general public. But the recent U.S. government report that purports to substantiate technical details of recent hacks by Russian intelligence is off the mark and has the potential to do real damage to far more people and organizations.  The joint report by the Department of Homeland Security and the Federal Bureau of Investigation has a catchy name for "Russian malicious cyber activity" -- Grizzly Steppe -- and creates infinite opportunities for false flag operations that the U.S. government all but promises to attribute to Russia.  The report's goal is not to provide evidence of, say, Russian tampering with the U.S. presidential election, but ostensibly to enable U.S. organizations to detect Russian cyber-intelligence efforts and report incidents related to it to the U.S. government. It's supposed to tell network administrators what to look for. To that end, the report contains a specific YARA rule -- a bit of code used for identifying a malware sample. The rule identifies software called the PAS Tool PHP Web Kit. Some inquisitive security researchers have googled the kit and found it easy to download from the website. It was no longer available on Monday, but researchers at Feejit, the developer of WordPress security plugin Wordfence, took some screenshots of the site, which proudly declared the product was made in Ukraine.

Assange: Russians not involved, Obama’s White House is trying to delegitimize Trump - Wikileaks founder Julian Assange, in an interview set to air at 10 p.m. Eastern on Tuesday, reiterated his stance that the Russians weren’t his source for the hacked emails that many believe played a key role in sinking Hillary Clinton’s presidential campaign. “We can say, we have said, repeatedly, over the last two months that our source is not the Russian government and it is not a state party,” Assange told Fox News host Sean Hannity. Assange said that he has never talked to Vladimir Putin, Donald Trump or any of their surrogates, and that he would have revealed the same type of information if it related to Trump. He also addressed the notion that the email hack helped to put Trump in the White House. “Who knows, it’s impossible to tell,” he said. “But if it did, the accusation is that the true statements of Hillary Clinton and her campaign manager, John Podesta, and the DNC head Debbie Wasserman Schultz, their true statements is what changed the election.” Assange added that he believes the current administration is “trying to delegitimize the Trump administration as it goes into the White House. They are trying to say that President-elect Trump is not a legitimate president.” Here’s a preview of the full interview:

The FBI Never Asked For Access To Hacked Computer Servers — The FBI did not examine the servers of the Democratic National Committee before issuing a report attributing the sweeping cyberintrusion to Russia-backed hackers, BuzzFeed News has learned. Six months after the FBI first said it was investigating the hack of the Democratic National Committee’s computer network, the bureau has still not requested access to the hacked servers, a DNC spokesman said. No US government entity has run an independent forensic analysis on the system, one US intelligence official told BuzzFeed News. “The DNC had several meetings with representatives of the FBI’s Cyber Division and its Washington (DC) Field Office, the Department of Justice’s National Security Division, and U.S. Attorney’s Offices, and it responded to a variety of requests for cooperation, but the FBI never requested access to the DNC’s computer servers,” Eric Walker, the DNC’s deputy communications director, told BuzzFeed News in an email. The FBI has instead relied on computer forensics from a third-party tech security company, CrowdStrike, which first determined in May of last year that the DNC’s servers had been infiltrated by Russia-linked hackers, the U.S. intelligence official told BuzzFeed News.

FBI: DNC rebuffed request to examine computer servers - CNN - The Democratic National Committee "rebuffed" a request from the FBI to examine its computer services after it was allegedly hacked by Russia during the 2016 election, a senior law enforcement official told CNN Thursday."The FBI repeatedly stressed to DNC officials the necessity of obtaining direct access to servers and data, only to be rebuffed until well after the initial compromise had been mitigated," a senior law enforcement official told CNN. "This left the FBI no choice but to rely upon a third party for information. These actions caused significant delays and inhibited the FBI from addressing the intrusion earlier."This statement is in response to reports that the FBI never asked the DNC for access to the hacked systems.The DNC told Buzzfeed News that they did not receive a request from the FBI to access their computer servers."The DNC had several meetings with representatives of the FBI's Cyber Division and its Washington Field Office, the Department of Justice's National Security Division, and US Attorney's Offices, and it responded to a variety of requests for cooperation, but the FBI never requested access to the DNC's computer servers," Eric Walker, the DNC's deputy communications director, told BuzzFeed News.The FBI instead relied on the assessment from a third-party security company called CrowdStrIke. The DNC did not immediately respond to a request for comment by CNN. But President-elect Donald Trump cited Thursday's news to hit Democrats, tweeting, "So how and why are they so sure about hacking if they never even requested an examination of the computer servers? What is going on?"

In Stunning Last Minute Power Grab, Obama Designates Election Systems As "Critical Infrastructure" - In a stunning last minute power grab by the Obama administration with just 14 days left in his Presidency, the Department of Homeland Security released a statement this evening officially declaring state election systems to be "critical infrastructure."  The statement from DHS Secretary Jeh Johnson defines "election infrastructure" as "storage facilities, polling places, centralized vote tabulations locations, voter registration databases, voting machines"and all "other systems" to manage the election pretty much everything.I have determined that election infrastructure in this country should be designated as a subsector of the existing Government Facilities critical infrastructure sector. Given the vital role elections play in this country, it is clear that certain systems and assets of election infrastructure meet the definition of critical infrastructure, in fact and in law.I have reached this determination so that election infrastructure will, on a more formal and enduring basis, be a priority for cybersecurity assistance and protections that the Department of Homeland Security provides to a range of private and public sector entities. By “election infrastructure,” we mean storage facilities, polling places, and centralized vote tabulations locations used to support the election process, and information and communications technology to include voter registration databases, voting machines, and other systems to manage the election process and report and display results on behalf of state and local governments.Of course, it's likely not a coincidence that the DHS made this announcement just hours after the "intelligence community" declassified their "Russian Hacking" propaganda which basically noted that RT has a very effective social media distribution platform while once again providing absolutely no actual evidence.

Angry Trump Demands Congressional Probe Into NBC Leak Of Top Secret Intelligence Report -On Thursday evening, during one of his latest Tweetstorms, Trump criticized leaks to several media outlets detailing contents of the classified Russian hacking report which Trump is set to go over any minute.The leaks came before Trump’s own briefing on those details by the intelligence community. The 50-page report was delivered to US President Barack Obama on Thursday, and is to be delivered to President-elect Donald Trump on Friday by top intelligence officials, including Director of National Intelligence James Clapper and CIA Director John Brennan, the Washington Post reports, one of several outlets that were given priority over the president-elect in learning the details of the document. CNN and NBC News also reported on the classified report, sparking outrage from Trump. “How did NBC get ‘an exclusive look into the top secret report he (Obama) was presented?’ Who gave them this report and why? Politics!” Trump said in a tweet.

US releases declassified report on Russian hacking - The Office of the Director of National Intelligence has released its public report on Russian hacking operations in the United States.  The report, a declassified version of a classified report ordered by President Obama, details attempts by Russia to interfere with the 2016 presidential election, and concludes cyber-operations from the country were directly ordered by President Putin to harm Hillary Clinton’s campaign. “We assess Russian President Vladimir Putin ordered an influence campaign in 2016 aimed at the US presidential election,” according to the report, titled “Assessing Russian Activities and Intentions in Recent US Elections.” “Russia’s goals were to undermine public faith in the US democratic process, denigrate Secretary Clinton, and harm her electability and potential presidency. We further assess Putin and the Russian Government developed a clear preference for President-elect Trump.”  This week, in a hearing in front of lawmakers, Director of National Intelligence James Clapper previewed some parts of the report, saying Russia had relied on a “multifaceted” program to influence opinion in the US, and the report outlines some of those efforts officially for the first time. “The Kremlin’s campaign aimed at the US election featured disclosures of data obtained through Russian cyber operations; intrusions into US state and local electoral boards; and overt propaganda,” according to the report.  The report states that Russian intelligence services made cyber attacks against “both major US political parties,” and specifically mentions the successful hack of the Democratic National Committee. (“Russia collected on some Republican-affiliated targets but did not conduct a comparable disclosure campaign,” it reads.) The report also publicly names Guccifer 2.0 and, two sources of stolen information released to the public, as Russian operatives working on behalf of the country’s military intelligence unit, the GRU. Officials from the organization were recently the target of US sanctions. WikiLeaks is also cited as a recipient of stolen information. The intelligence report cites outlets like RT, as well as quasi-government paid trolls, as sources of pro-Trump, anti-Clinton propaganda online. The report also notes that the US has determined Russia “accessed elements of multiple state or local electoral boards,” though no vote-tallying processes were tampered with.

Despite Iraq debacle, the media is still empowering neocon warmongers on Russian hack story - Under the constant pressure of deadlines while facing a multiplicity of widely differing subjects, journalists often don’t have the time or ability to deeply understand the things they write about. That’s particularly true about arcane areas like foreign affairs, technology and science. Unfortunately for the public, the story of what really happened with the Russian Federation and the 2016 presidential election is centered on these areas about which most mainstream journalists know little. That ignorance is fast becoming dangerous to the American public as false stories have begun spreading like wildfire. On New Year’s Eve, the Washington Post set off an erroneous news conflagration as it claimed that Russian “black hats” had successfully breached America’s electrical grid, the internal network that enables many power companies to transmit electricity to each other and to their customers. “Russian hackers penetrated U.S. electricity grid through a utility in Vermont, officials say,” read the headline on the Post’s report.The story caught fire across news outlets. According to Google News, there were nearly 400,000 results for the query “russia vermont power.” Google Trends, the search giant’s tool for measuring public interest in any search term, showed a hundredfold increase in requests for “russia vermont” over the past few days. Instead of wondering which celebrities would have  drunken meltdowns on New Year’s Eve — Don Lemon and Mariah Carey did not disappoint — many Americans ended up wondering if Vladimir Putin was going to cut off the power to their homes.Those worries were completely baseless, however. The Post had been misled by government officials. As it turned out, a laptop computer belonging to Burlington Electric had been infected with some malware that apparently originated in Russia several years earlier. The infected computer, moreover, was not connected to the power company’s electrical system. Apparently the Post ran its story before obtaining confirmation from Burlington Electric about whether or not that was true.

WashPost Is Richly Rewarded for False News About Russia Threat While Public Is Deceived – Greenwald - In the past six weeks, the Washington Post published two blockbuster stories about the Russian threat that went viral: one on how Russia is behind a massive explosion of “fake news,” the other on how it invaded the U.S. electric grid. Both articles were fundamentally false. Each now bears a humiliating editor’s note grudgingly acknowledging that the core claims of the story were fiction: The first note was posted a full two weeks later to the top of the original article; the other was buried the following day at the bottom.The second story on the electric grid turned out to be far worse than I realized when I wrote about it on Saturday, when it became clear that there was no “penetration of the U.S. electricity grid” as the Post had claimed. In addition to the editor’s note, the Russia-hacked-our-electric-grid story now has a full-scale retraction in the form of a separate article admitting that “the incident is not linked to any Russian government effort to target or hack the utility” and there may not even have been malware at all on this laptop.But while these debacles are embarrassing for the paper, they are also richly rewarding. That’s because journalists — including those at the Post — aggressively hype and promote the original, sensationalistic false stories, ensuring that they go viral, generating massive traffic for the Post (the paper’s executive editor, Marty Baron, recently boasted about how profitable the paper has become). After spreading the falsehoods far and wide, raising fear levels and manipulating U.S. political discourse in the process (both Russia stories were widely hyped on cable news), journalists who spread the false claims subsequently note the retraction or corrections only in the most muted way possible, and often not at all. As a result, only a tiny fraction of people who were exposed to the original false story end up learning of the retractions.

If Donald Trump Targets Journalists, Thank Obama - James Risen, NYT — If Donald J. Trump decides as president to throw a whistle-blower in jail for trying to talk to a reporter, or gets the F.B.I. to spy on a journalist, he will have one man to thank for bequeathing him such expansive power: Barack Obama. Mr. Trump made his animus toward the news media clear during the presidential campaign, often expressing his disgust with coverage through Twitter or in diatribes at rallies. So if his campaign is any guide, Mr. Trump seems likely to enthusiastically embrace the aggressive crackdown on journalists and whistle-blowers that is an important yet little understood component of Mr. Obama’s presidential legacy. Criticism of Mr. Obama’s stance on press freedom, government transparency and secrecy is hotly disputed by the White House, but many journalism groups say the record is clear. Over the past eight years, the administration has prosecuted nine cases involving whistle-blowers and leakers, compared with only three by all previous administrations combined. It has repeatedly used the Espionage Act, a relic of World War I-era red-baiting, not to prosecute spies but to go after government officials who talked to journalists. Under Mr. Obama, the Justice Department and the F.B.I. have spied on reporters by monitoring their phone records, labeled one journalist an unindicted co-conspirator in a criminal case for simply doing reporting and issued subpoenas to other reporters to try to force them to reveal their sources and testify in criminal cases. I experienced this pressure firsthand when the administration tried to compel me to testify to reveal my confidential sources in a criminal leak investigation. The Justice Department finally relented — even though it had already won a seven-year court battle that went all the way to the Supreme Court to force me to testify — most likely because they feared the negative publicity that would come from sending a New York Times reporter to jail.

The War Against Alternative Information - The U.S. establishment is not content simply to have domination over the media narratives on critical foreign policy issues, such as Syria, Ukraine and Russia. It wants total domination. Thus we now have the “Countering Foreign Propaganda and Disinformation Act” that President Obama signed into law on Dec. 23 as part of the National Defense Authorization Act for 2017, setting aside $160 million to combat any “propaganda” that challenges Official Washington’s version of reality. The new law mandates the U.S. Secretary of State to collaborate with the Secretary of Defense, Director of National Intelligence and other federal agencies to create a Global Engagement Center “to lead, synchronize, and coordinate efforts of the Federal Government to recognize, understand, expose, and counter foreign state and non-state propaganda and disinformation efforts aimed at undermining United States national security interests.” The law directs the Center to be formed in 180 days and to share expertise among agencies and to “coordinate with allied nations.” The legislation was initiated in March 2016, as the demonization of Russian President Vladimir Putin and Russia was already underway and was enacted amid the allegations of “Russian hacking” around the U.S. presidential election and the mainstream media’s furor over supposedly “fake news.” Defeated Democratic presidential nominee Hillary Clinton voiced strong support for the bill: “It’s imperative that leaders in both the private sector and the public sector step up to protect our democracy, and innocent lives.” The new law is remarkable for a number of reasons, not the least because it merges a new McCarthyism about purported dissemination of Russian “propaganda” on the Internet with a new Orwellianism by creating a kind of Ministry of Truth – or Global Engagement Center – to protect the American people from “foreign propaganda and disinformation.” As part of the effort to detect and defeat these unwanted narratives, the law authorizes the Center to: “Facilitate the use of a wide range of technologies and techniques by sharing expertise among Federal departments and agencies, seeking expertise from external sources, and implementing best practices.” (This section is an apparent reference to proposals that Google, Facebook and other technology companies find ways to block or brand certain Internet sites as purveyors of “Russian propaganda” or “fake news.”)

Does the “Countering Foreign Propaganda and Disinformation Act” apply to American Independent or Alternative Media? -- naked capitalism by Lambert Strether - Spoiler alert: Yes, it may, owing to what would charitably be called ambiguity in the drafting, and yes, it does, because powers granted to the Act’s “Global Engagement Center” apply to U.S. citizens on US soil who work in media. To be fair, the sponsors of the “Countering Foreign Propaganda and Disinformation Act” (the Act) say differently, so let’s hear from them first. The Act was written by Rob Portman (R-OH) and co-sponsored by Chris Murphy (D-CT). From Portman’s press release on the Act:  […] And, a week after the Act was passed and the ruckus kicked up on “numerous small web outlets,” Chris Murphy: “The United States wouldn’t be picking the messaging. The United States wouldn’t be censoring anyone’s newspaper or web site,” Murphy said. “We simply would be offering to help other countries’ in their efforts to produce more independent journalism to counter this Russian propaganda narrative.” So, the Global Engagement Center will have no domestic effects at all. It’s all about other countries. That’s what Portman and Murphy say. But what does the Act say? Let’s take a look. Portman’s original, standalone bill (S.3274 – Countering Foreign Propaganda and Disinformation Act bill) was folded into S.2943 – National Defense Authorization Act for Fiscal Year 2017, signed by Obama on December 23, at SEC. 1287. Global Engagement Center.  Section 1287(2) of the Act establishes the Center’s purpose:  The purpose of the Center shall be to lead, synchronize, and coordinate efforts of the Federal Government to recognize, understand, expose, and counter foreign state and non-state propaganda and disinformation efforts aimed at undermining United States national security interests. There are two ambiguities here. The first and most obvious: Does the adjective “foreign” apply (a) only to “state propaganda,” or (b) to “state and non-state propaganda? Some readers chose (b), but my reading was (a), probably because I took “foreign state” for a noun phrase, and so don’t distribute the adjective “foreign” over both “state and non-state.” In other words, if the statute were to mean “foreign state and [foreign] non-state propaganda,” I feel that the drafters would have written “foreign state and foreign non-state propaganda.” And fortunately, in my quest for the meaning of “non-state actor” (which we’ll get to in a moment) I found an example where drafters did exactly that. From H.R.4681 – Intelligence Authorization Act for Fiscal Year 2015:

Corporate Censorship of Independent Sites Has Begun –- Yves Smith -- From reader MA via e-mail: I work at [midsized company] near [major Midwestern city]. Sometime in the last week or two, the company server started blocking Naked Capitalism, Truthdig, and Counterpunch. I assume this is not limited to [x], but came as part of a corporate subscription to something or other. There are other sites blocked as well, like Bradblog. Just a heads-up that the algorithm war on progressive thought in corporate America has begun. Are other readers encountering similar restrictions at their workplace? If so, please give details in comments. Thanks.

 After Move To Canada, Wayback Machine Launches Trump Video Library, Complete With "Fact Checks" --Back in November we noted that the Internet Archive (Wayback Machine) had announced plans to move their servers to Canada out of fear of censorship under the new Trump administration, saying "on November 9th in America, we woke up to a new administration promising radical change."  The decision struck us as somewhat odd at the time given the website's seemingly innocuous content. That said, the decision is becoming much more clear with today's announcement that the company will launch a "Trump Archive" with 520 hours of Trump-specific video including 700 televised speech and intereviews from the 2015/2016 campaign cycle.  And wouldn't you know it, many of the videos in the archive will come with convenient "fact checks."  Per The Hill: The Trump Archive houses more than 520 hours of video of the president-elect, including more than 700 televised speeches, interviews and debates,according to an announcement on the Internet Archive’s website.More than 500 of the Trump videos link to fact checks evaluating the veracity of the televised statement.In the announcement, Nancy Watzman, the managing editor of the Internet Archive’s television section, said that the archive is inviting journalists and researchers to help suggest additions to the online Trump library.

Defying Donald Trump’s Kleptocracy - Chris Hedges - Trump plans to oversee the last great campaign of corporate pillaging of America. It will be as crass and brazen as the fleecing of the desperate people, hoping for a miracle in the face of dead-end jobs and ruinous personal debt, who visited his casinos or shelled out thousands of dollars for the sham of Trump University. He will attempt to unleash a kleptocracy—the word comes from the Greek klépto, meaning thieves, and kratos, meaning rule, so it is literally “rule by thieves”—one that will rival the kleptocracies carried out by Suharto in Indonesia and Ferdinand Marcos in the Philippines. It is not that Trump and his family will use the influence of government to increase their wealth, although this will certainly take place on a massive scale; it is that hundreds of billions of federal dollars will be diverted into the hands of cronies, sleazy bankers, unethical financial firms and scabrous hedge fund managers. The pillars of the liberal state will be obliterated.  The only possibility for halting the destruction being designed by the Trump transition team is sustained resistance and civil disobedience that will create popular pressure for impeachment. This is why I will be at the march in Washington, D.C., on Jan. 21 and speak that evening at a rally with Kshama Sawant and Jill Stein.  Trump is impulsive, ignorant and inept. His corruption and greed are so unfettered he may become a burden and embarrassment to his party and the nation, as well as a danger to himself. The longer he stumbles in the unfamiliar corridors of governmental power the more vulnerable he becomes. But if we are not in the streets to hold the system accountable he may be able to cling to power and inflict significant damage. Laurence Tribe, a professor of constitutional law at Harvard Law School, has argued that Trump could be impeached under the Constitution’s emoluments clause. This clause prohibits a federal officeholder from receiving from a foreign power anything of value that could compromise the exclusive loyalty owed to the Constitution. Trump’s global businesses make him vulnerable, Tribe argues, to foreign pressure from countries where he has assets. “Trump’s continued interest in the Trump Organization and his steady stream of monetary and other benefits from foreign powers put him on a collision course with the emoluments clause,” Tribe wrote in The Guardian.

What constitutes a violation of the Emoluments clause? -- I’ve been wondering about this question, and the internet isn’t much help (here is background from Jonathan Adler if you are starting from scratch).  Say a foreign power pays money to my publisher, agent, or speaker’s bureau — does that count?  Intuitively, I would think so, even though the income is legally domestic.  But then it seems the clause is very difficult to define.  If I own an overseas business, or receive overseas royalties, or sell intellectual property overseas, must I trace the identity of every customer?  What if Angela Merkel bought a copy of one of my books translated into German?  Am I then, through the medium of royalties, taking money from a foreign power?  What if the Chinese government bought up a million copies of one of my books?  What if it is a Chinese shell company of unknown origins (they are common), which might be either state-owned or private, did so?  Or what the company is private, but itself owned by a state-owned company?  49 percent?  51 percent?  What if a state-owned Chinese company makes a large grant to a private individual, who then buys a million copies of a book?  Don’t library systems buy books, and aren’t most of them state-owned? This line about China struck me: Print sales, dominated by the country’s 580 state-owned publishing houses, are now worth 44 billion yuan ($7 billion). Of course much of the income for the Obamas, during his time in office, came from royalties from book sales, including abroad and also in China.  For instance: A large portion of the royalties came from sales overseas, an indication of the president’s popularity abroad. The tax return indicates that $1.6 million of the total book income was taxable in “various” foreign countries. I cannot trace whether Obama’s Chinese publishers are state-owned companies, but most likely they are.  Some of the other Obama foreign publishers might be too.  Does that count as a violation of the clause?  Presumably there are foreign translations of some of Trump’s books too, or there will be.  JFK also had published books before he became president, and likely there were foreign rights sales of those too.

 How Trump’s Regulation Skeptic Helps Wall Street Navigate the Rules - WSJ: The man tapped by President-elect Donald Trump to oversee his early financial deregulation strategy has spent the past seven years counseling clients how to influence regulators—sometimes charging $1,200 per hour for the advice, according to people familiar with the matter. Mr. Atkins founded his behind-the-scenes consulting business, Patomak Global Partners LLC, in the garage of his suburban Washington home in 2009 after he stepped down as a Republican member of the Securities and Exchange Commission. Since then, he has prepared private-equity firms for compliance exams, devised strategies for mutual funds to resist government curbs on risk-taking, and helped Chinese accounting firms avert a ban on doing business in the U.S., according to the people familiar with the matter. Patomak’s other clients have included the U.S. Chamber of Commerce and Fidelity Investments, the people said.Patomak—named for an old spelling of the Potomac River bordering Washington—also sells its expertise to the government, monitoring financial companies that commit to upgrade their compliance systems. Even so, Mr. Atkins remains a critic of regulation, attacking Democrats he says believe they can direct the invisible hand of the market. His libertarian political views, combined with his technical grasp of securities laws, made him a fitting choice to head the part of Mr. Trump’s transition team responsible for digging into financial agencies. Mr. Atkins, 58 years old, is also a leading candidate for a top post in the Trump administration, either to run the SEC or to become the Federal Reserve’s point man on banking oversight. Such an appointment would mark a shift for Mr. Trump, who so far has stocked his executive branch largely with people who have run big companies but lack any government experience. Mr. Atkins, on the other hand, built a business around navigating Washington’s nooks and crannies. Mr. Atkins launched Patomak as the Obama administration ramped up oversight and regulation of businesses such as private-equity firms, hedge funds and broker-dealers. Many of his company’s consultants previously worked at the SEC, Commodity Futures Trading Commission or Federal Reserve. Patomak’s clients include firms that have run afoul of government rules and need supervision to get their compliance systems back in order. Mr. Atkins was appointed by a U.S. District Judge in October to monitor Deutsche Bank AG, which was sued by regulators for repeatedly failing to report derivatives trades as required under the 2010 Dodd-Frank law. In other cases, Patomak has aided businesses feuding with the government.    Even though compliance work helps to pay the bills at Mr. Atkins’s firm, people who have worked with him say his passion remains public policy and fighting to restrain the government’s hand in markets. That has made him a natural ally of Republican lawmakers, who chafe at what they view as unnecessary red tape imposed on capital markets.

Senate Banking Panel Takes Shape as GOP Majority Narrows: The Senate Banking Committee will have six fresh faces in the new Congress as Republicans grapple with a slimmer majority. The panel roster was finalized Tuesday as Republicans announced committee assignments that included Sens. David Perdue, R-Ga., Thom Tillis, R-N.C., and John Kennedy, R-La. Perdue and Tillis were elected in 2015 and Kennedy won in a runoff election in 2016 to fill the Senate seat vacated by Sen. David Vitter, a banking panel member in the previous Congress. Sen. Jerry Moran, R-Kan., is also off the committee and Sen. Mark Kirk, R-Ill., lost his 2016 re-election bid. In a statement, Perdue said he will carry the GOP torch to reduce regulations on financial institutions. "We need to dismantle the regulatory regime of Dodd-Frank, encourage entrepreneurial innovation, and unleash economic growth to get Americans working again," Perdue said. Democrats, meanwhile, benefit from an additional seat on the panel. They now have 11 seats, compared with Republicans' 12, reflecting the closer division between political parties in the full chamber. Overall, Democrats had three additional members as two left the committee. Joining the ranks are Sens. Brian Schatz, D-Hawaii, Chris Van Hollen, D-Md., and Catherine Cortez Masto, D-Nev. Sen. Charles Schumer, D-N.Y., will no longer be on the banking committee, instead focusing on his responsibilities as the Senate Democratic leader. Sen. Jeff Merkley, D-Ore., is also getting off the panel. Progressives praised the Democratic assignments. "Adding Schatz, Van Hollen, and Cortez Masto is a pretty clear win for folks who pushed Schumer in October to not stack Senate Banking with even more conservative Democrats," said Kurt Walters, campaign director at Rootstrikers.

 Report: Trump Could Roll Back $1.7 Billion Worth of Dodd-Frank Regulations - President-elect Donald Trump could rescind financial regulations that cost the financial services industry at least $1.7 billion, according to a new analysis from the American Action Forum. Regulators recently completed nine rule-writing projects that Trump would be able to repeal immediately after taking office, as Trump has promised to repeal the Dodd-Frank financial reform law, the Hill reported. Democrats could fight hard on any major changes to the law, but AAF has identified nine regulations that Trump could roll back even without help from Congress. According to the Congressional Review Act, the next Congress and administration can rescind those nine regulations until Congress gives the go-ahead because those regulations were created within the last 60 days of the current Congress. None of the rules would completely repeal Dodd-Frank – any core changes to the law would have to be approved by Congress – but they add up to a significant amount of work. The proposed rules would cost $1.7 billion and require 1.2 million compliance hours from the financial sector. The rules cover a wide range of issues from detailing how records and data should be kept to rules about the derivatives marketplace. The regulations, designed to fight corruption and hold governments accountable, come with an estimated cost of $1.2 billion and require 217,408 hours from businesses.

U.S. banks gear up to fight Dodd-Frank Act's Volcker rule -   Big U.S. banks are set on getting Congress this year to loosen or eliminate the Volcker rule against using depositors’ funds for speculative bets on the bank’s own account, a test case of whether Wall Street can flex its muscle in Washington again. In interviews over the past several weeks, half a dozen industry lobbyists said they began meeting with legislative staff after the U.S. election in November to discuss matters including a rollback of Volcker, part of the Dodd-Frank financial reform that Congress enacted after the financial crisis and bank bailouts. Lobbyists said they plan to present evidence to congressional leaders that the Volcker rule is actually bad for companies, investors and the U.S. economy. Big banks have been making such arguments for years, but the industry’s influence waned significantly in Washington after the financial crisis. The Obama administration’s regulators and enforcement agencies have been tough on banks, while lawmakers from both parties have seized opportunities to slam Wall Street to score political points. Banks now see opportunities to unravel reforms under President-Elect Donald Trump’s administration and the incoming Republican-led Congress, which appear more business-friendly, lobbyists said. While an outright repeal of the Volcker rule may not be possible, small but meaningful changes tucked into other legislation would still be a big win, they said. “I don’t think there will be a big, ambitious rollback,” said one big-bank lobbyist who was not authorized to discuss strategy publicly. “There will be four years of regulatory evolution.”

Banks Just Got a Reprieve from Tighter Capital Rules -- Global banking regulators Tuesday postponed the approval of new capital rules designed to avert a repeat of the financial crisis, saying they needed more time to finalize a long-awaited and contentious reform. Central bank governors and heads of supervision from nearly 30 countries were due to meet on Jan. 8 to approve new rules that will determine how much capital lenders in the world's major financial centers must hold against loans and other assets. But the proposed changes have proven divisive, with European regulators worrying they would curb bank lending - the prime source of funding for companies in the region. After failing to strike an agreement in Chile late last year, the Basel Committee said Tuesday more work was needed before the new rules could be submitted for approval by its oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS). "More time is needed to finalize some work, including ensuring the framework's final calibration," the Basel Committee said. "A meeting of the GHOS, originally planned for early January, has therefore been postponed. The Committee is expected to complete this work in the near future." Sources told Reuters last month regulators had softened the new rules, including a "floor" on how much capital a bank needs to hold irrespective of what its own model says. Many regulators, including some at the U.S. Federal Reserve, have pushed for a high floor, suspicious that European banks in particular would otherwise use their own models to understate the degree of risk on their balance sheets. This rule is bound to have a major impact on large banks, such as Germany's Deutsche Bank and the biggest French banks, that use their own computer models rather than standardised ones to determine their required capital buffers.

As Long as There Are Megabanks, There Will Be Bailouts -- The new administration will undoubtedly address needed reform of the problematic Dodd-Frank Act this year. Especially pressing is Dodd-Frank's Title II, known as the Orderly Liquidation Authority.The OLA gives regulators the power to seize and liquidate failing "too big to fail" banks, attempting to eliminate taxpayer-funded bailouts while minimizing disruption of a collapse to the financial system. It adopts many of the Federal Deposit Insurance Corporation's methods used for small bank receiverships.But critics have correctly noted that Title II has in fact institutionalized TBTF by creating formalized bailout procedures with dedicated taxpayer-supported funding.  GOP lawmakers are now focused on the proposed Financial Choice Act, a contender to replace the DFA. It contains new provisions to prevent future taxpayer-funded bailouts. The provisions include, among other things, a repeal of the OLA procedure, a reform of the bankruptcy laws as an alternative for winding down failing giants, limits on Federal Reserve emergency lending power and repeal of the FDIC's authority to guarantee bank obligations.  The problem with these provisions is they are the wrong solution to the right problem. Attempting to eliminate bailouts while TBTF banks exist is dangerously delusional. Despite DFA's capital and liquidity increase efforts, research shows investors perceive the big six banks — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo — as no safer than they were before the crisis. Banks simply have insufficient capital to cover losses created by forced sales of assets at fire-sale prices during a crisis. Among the post-crisis reforms was the Fed's Total Loss-Absorbing Capacity rule, which requires firms to have enough capital and long-term debt to support a resolution. But the modest capital levels imposed by the rule are unlikely to cover losses in a failure. This leaves the question of what to do should one or more TBTF banks experience financial difficulty during the next crisis. Reform efforts relying on bankruptcy law, like the Choice Act, represent a questionable untested leap of faith with a huge downside should it fail to work. The problem is not with the bankruptcy code, but with trying to apply it to TBTF institutions during a crisis. Trying to resolve one, or more, much larger and more complex TBTF banks during a crisis without a bailout would be like trying to change a flat tire while the car is still moving. This is why "no more bailouts" laws lack market credibility. Investors recognize no government would or should allow a TBTF bank to fail during a crisis.

Bernie Sanders Supporters Launch Glass-Steagall Drive - Pam Martens -- Northwest Ohio supporters of Senator Bernie Sanders’ in his run for President have launched a nationwide push to enlist other organizations to send it letters and take to social media to endorse a demand that President-elect Donald Trump fulfill a campaign pledge. Trump made the pledge on October 26 of this year in a speech he delivered in Charlotte, North Carolina, promising to enact a 21st Century Glass-Steagall Act to reform Wall Street. Such legislation has been sitting dormant in both the House and Senate for years. If enacted, it would separate the deposit-taking, taxpayer-insured commercial banks from the globe-trotting, high-risk trading casinos known as investment banks on Wall Street. The 1933 Glass-Steagall Act kept the financial system of the United States safe for 66 years until its repeal in 1999 during the Bill Clinton presidency. It took only nine years after its repeal for Wall Street to blow up the financial system in a replay of 1929. All that prevented another Great Depression was a massive, secret money drop by the Federal Reserve. Following the financial crash in 2008, the Federal Reserve fought for years in court to avoid providing details of the money it funneled to the Wall Street banks during the years of the crisis. When the Fed finally lost the legal fight, the Government Accountability Office (GAO) tallied up the secret Fed loans, all of which had been made at super low, below-market interest rates with no public or Congressional disclosure. The final tally came to $16.1 trillion in cumulative loans. (See the GAO report for a bank-by-bank breakdown of the loans.) While Wall Street banks received trillions of dollars in almost interest-free loans, many of the same banks were charging the customers they had rendered homeless through foreclosures, double-digit interest rates on their credit cards.

What Trump's SEC Pick Means for Other Finreg Posts --  President-elect Donald Trump's choice of well-known Wall Street lawyer Jay Clayton to head the Securities and Exchange Commission was a relatively safe move that suggests his other financial appointments may be equally conservative, industry observers said. Trump announced Wednesday that Clayton, a partner at Sullivan & Cromwell who was heavily involved in prominent deals during the financial crisis, would be his pick to succeed Mary Jo White as SEC Chairman. What surprised observers was how unsurprising the pick was. "This is a conventional choice for a Republican president," said Jaret Seiberg, an analyst with Cowen Washington Research Group. "Clayton is a lawyer from a high-profile law firm who works with public companies. He almost is from central casting." Ian Katz, a director at Capital Alpha Partners, said "Clayton is the kind of SEC nominee we had expected from Trump. He's a lawyer with dealmaking experience who's comfortable with Wall Street banks and doesn't vilify them." Most said Clayton would likely push forward on Trump's stated deregulatory agenda. "Given Clayton's experience facilitating deals, we expect that oversight will be loosened or at least reconsidered," Katz said. But it may also signal a desire by Trump to play it safe when it comes to financial appointments, observers said. "It suggests Trump could similarly turn to a high profile banking lawyer to be vice chairman for supervision at the Federal Reserve, to be FDIC chairman and to be Comptroller of the Currency," wrote Seiberg. "It is to us the first real indication that Team Trump would turn to a conventional pick for a top bank regulatory position."’

 Regulators Say Jon Corzine Will Pay $5 Million Penalty Over MF Global Collapse -- Former MF Global Chief Executive Jon Corzine will pay a $5 million penalty for his role in the company's collapse, according to the U.S. Commodity Futures Trading Commission. MF Global collapsed in 2011, and hundreds of millions of dollars in customer money disappeared, as we reported. Under the terms of the settlement, Corzine, who has also served as the governor of New Jersey, is barred from commodity trading and cannot use insurance money to pay the penalty. A statement by the CFTC says the amount of customer money the company run by Corzine mishandled is nearly $1 billion. The former assistant treasurer of MF Global, Edith O'Brien, will pay a $500,000 civil penalty in a separate settlement with the regulatory agency, which was also announced Thursday. As we reported in 2013, the approximately 26,000 MF Global customers who lost money in the company's collapse were expected to recoup their entire investments in a court deal that freed up funds from other parts of MF Global's parent corporation. Corzine has apologized to customers for the company's collapse, saying at a 2011 congressional hearing: "I appear at today's hearing with great sadness. My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global's bankruptcy. Their plight weighs on my mind every day — every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected." The Wall Street Journal reported Corzine "said he accepted responsibility for the company's failure and is pleased to have reached a settlement."

U.S. Quietly Drops Bombshell: Wall Street Banks Have $2 Trillion European Exposure -- Pam Martens -  According to a report quietly released by the U.S. Treasury’s Office of Financial Research less than two weeks before Christmas, another financial implosion on Wall Street can’t be ruled out. The Office of Financial Research (OFR), a unit of the U.S. Treasury, was created under the Dodd-Frank financial reform legislation of 2010.  Its 2016 Financial Stability Report, released on December 13, indicates that Wall Street banks have been allowed by their “regulators” to take on unfathomable risks and that dark corners remain in the U.S. financial system that are impenetrable to even this Federal agency that has been tasked with peering into them. At a time when international business headlines are filled with reports of a massive banking bailout in Italy and the potential for systemic risks from Germany’s struggling giant, Deutsche Bank, the OFR report delivers this chilling statement: “U.S. global systemically important banks (G-SIBs) have more than $2 trillion in total exposures to Europe. Roughly half of those exposures are off-balance-sheet…U.S. G-SIBs have sold more than $800 billion notional in credit derivatives referencing entities domiciled in the EU.” When a Wall Street bank buys a credit derivative, it is buying protection against a default on its debts by the referenced entity like a European bank or European corporation. But when a Wall Street bank sells credit derivative protection, it is on the hook for the losses if the referenced entity defaults. Regulators will not release to the public the specifics on which Wall Street banks are selling protection on which European banks but just the idea that regulators would allow this buildup of systemic risk in banks holding trillions of dollars in insured deposits after the cataclysmic results of similar hubris in 2008 shows just how little has been accomplished in terms of meaningful U.S. financial reform. Adding to the potential for another epic crash on Wall Street taking down the entire U.S. economy is data within the OFR report showing how interconnected the big Wall Street banks have become to the largest U.S. insurers through derivatives. This has been allowed to happen despite the fact that the giant insurer, AIG, required a government backstop of $182 billion following the 2008 crash because it had sold credit default protection via derivatives to the big Wall Street banks.

Deutsche Bank’s Financial Crimes Cop to Quit Over Staffing - Deutsche Bank AG’s executive in charge of preventing financial crimes and money laundering, Peter Hazlewood, will step down after only six months, in a disagreement that involved staffing for his group, according to two people familiar with the matter.Hazlewood resigned after the bank last month cut back ambitious plans to almost double staffing at the unit, according to the people, who asked not to be identified because the information is private. He will probably continue to work for Deutsche Bank in a different role, said one of the people. A replacement may be announced in the coming days. Deutsche Bank declined to comment. Hazlewood didn’t respond to an e-mail seeking comment. The abrupt move highlights the difficulties for Chief Executive Officer John Cryan, who is trying to both cut costs and avoid more legal battles, following a $7.2 billion settlement in principle with the U.S. over its role in the sale of mortgage securities in the run-up to the 2008 financial crisis. As the bank’s global head of Deutsche Bank’s anti-financial crime unit and group money-laundering reporting officer, Hazlewood was an important executive for the bank’s relations with regulators. Deutsche Bank is still being probed by U.S. and U.K. authorities over whether it failed to catch transactions that may have moved billions of dollars out of Russia, people familiar with the matter have said. Those transactions occurred before Hazlewood joined the bank. Hazlewood’s anti-financial crime unit had roughly 780 employees at the end of 2016, the people said, up from about 600 at the start of last year. He had sought to increase that number by more than 600 this year, but the bank only approved about 400 new hires, according to the people. Cryan implemented a company-wide hiring freeze in 2016, though that freeze excluded compliance-related roles.

U.S. stocks riding a bull market in corruption - I’m an American, full of pride for President-elect Donald Trump and his big, big, 10% stock market rally since the election!  Now imagine my pride if that had actually happened.  Instead, this recent rally is rooted mostly in corruption — now and in the future. And a rally built on corruption is bound to fail. Here’s why: Financial stocks are responsible for much of the U.S. market’s recent move, and the rally in financials is rooted in hopes for government deregulation of the industry. Financial stocks represent about a third of the S&P and are up around 17% since the election. Take them out and there is no rally, Trump or otherwise.  There's the hope that higher interest rates will finally boost banks' interest income. There's even some fantasy belief that higher interest rates will spur loan volumes — except dramatically higher rates for business means less investment, not more.  Except that interest rates aren’t behind most of the rally. Instead, the enthusiasm for financials is more about prospects for repeal of the Dodd-Frank bank reform bill, as well as the Obama administration fiduciary rule that requires financial advisers, brokers, and asset managers to put clients’ financial interests ahead of their own. Just look at how shares of investment managers have performed lately. Giant asset managers such T. Rowe Price and Alliance Bernstein rose as much as 22% post-election. Clearly, asset managers aren’t interest-rate plays, dispensing of the notion that rising rates are what’s pumping the financials.   Similarly, banks have been moving on Dodd-Frank hopes, but looser rules won’t spur loan demand and could bring back a litany of practices that helped cause the 2008 financial crisis and the loss of 9 million U.S. jobs. Much of the rest of the rally is due to energy stocks. The money on oil now is a bet that recent OPEC production quotas will hold up. That bet has failed repeatedly — crude prices only keep up with inflation, since 1973, during brief fits of effective manipulation. Eventually, kleptocrats always choose stable home fronts over stable prices, and cheat on quotas to achieve it. They will again.

 Neel Kashkari and the Minneapolis Plan to End Too Big to Fail - Neel Kashkari has been President of the Federal Reserve Bank of Minneapolis since January 1, 2016. Prior to that, he was brought over from Goldman Sachs to be Assistant Secretary of the Treasury for Stability from October 2008 to May 2009. His job was to hand out money to the banks as bailout. I believe the first time first time he was mentioned at this blog was right after he was appointed to give away our money: The bail-out will succeed only, repeat, only in the sense that the US succeeded in Iraq in 2003 and 2004 when Simone Ledeen and the rest of the Heritage interns were running around the country handing out trash bags full of money and giving Halliburton money for services it would never begin to render. There will be less yabbering of silly catchphrases like “but what about all the schools that were painted?” this time around, though, because the schools will be exploding when GW is no longer in office. To be extremely precise, this is what I think the success will look like: shady, undeserving characters will be enriched, young versions of the idiots who got us into the mess will launch successful careers (can you say “Kashkari”?), and the promised benefits to the American public, the schmucks footing the bill, will never materialize. From memory, not only is that the first time I mentioned Mr. Kashkari, it is also the most complementary I have been toward him yet. But now, Mr. Kashkari is back with a new scheme to reduce the likelihood of a meltdown. Kashkari provides this slide as a summary of his plan: Accompanying the slide is this platitude which also functions as a fly in the ointment: We cannot make the risk zero, and safety isn’t free. Regulations can make the financial system safer, but they come with costs of potentially slower economic growth. Ultimately, the public has to decide how much safety they want in order to protect society from future financial crises and what price they are willing to pay for that safety. Because Kashkari is a political creature who won’t speak clearly, to get an understanding of what the vegetables he wants us to eat taste like we go to the full plan: We measure the cost of higher capital requirements in terms of lost GDP due to tighter lending conditions. This calculation requires a number of steps. We trace the impact of higher capital requirements to lower bank return on equity (ROE) and then to higher loan rates. Higher loan rates slow economic growth by restricting borrowing. As noted above, this approach closely follows the BIS.

The Golden Era of Hedge Funds Draws to a Close With Clients in Revolt - Drinks flowed as hedge fund titan Robert Mercer, dressed as Mandrake the Magician, partied with Donald Trump, dressed as, well, Donald Trump. The occasion that early December evening was Mercer’s 2016 holiday costume party, an intimate gathering of 250 at his Long Island estate. This year’s theme: “Villains and Heroes.” Trump, more than any other president-elect, has sought out hedge fund types, from Steven Mnuchin, his choice for Treasury, to David McCormick, a leading contender at Defense, heralding a new lucrative era for American finance. But Trump or no Trump, this year marked the beginning of the end of hedge funds as we’ve known them. Their investors are joining a growing revolt, spurred by years in which fund managers grew rich while producing little in the way of returns. In 2016, big money clients finally decided to bail. “Let them sell their summer homes and jets and return those fees to investors,” one New York City official said in a nod to the populist wave that swept Trump into the presidency. “There has been a massive blowback from public pension funds and private endowments,’’ said Craig Effron, who co-founded his Scoggin Capital Management nearly 30 years ago. An investor told him recently that many chief investment officers are so fed up that they would prefer to entrust their cash to a trader who charged no management fee, over one who did, even if they expected the latter to make them more money. Public retirement plans from Kentucky to New York, New Jersey and Rhode Island have decided to pull money from hedge funds. So did a state university in Maryland and other endowments. MetLife Inc. and other insurers followed suit. Money-losing firms were forced to reduce their fees. Client withdrawals ($53 billion in the last four quarters) drove some managers out of business, including veteran Richard Perry, who until recently had managed one of the longest-standing and better-performing firms. The comedown would have been unimaginable in 2007, when Tom Wolfe, who chronicled the lives of Wall Street bankers and their social X-ray wives in the go-go ’80s, proclaimed hedge funders the new Masters of the Universe, an aggressive and status-fixated group focused on pushing the old-money guard aside.

 One of the Last Big Buyouts Is Now Haunting the CDS Market - Some 20 years after their invention, credit default swaps are still going through growing pains. Late last month, the International Swaps and Derivatives Association ruled that the decision of iHeartMedia Inc. to forgo payment on $57.1 million of bonds due to an affiliate constituted a “Failure to Pay Credit Event.” That would trigger payouts on as much as $749 million of swaps linked to the U.S. radio broadcaster’s debt. The decision is causing consternation among some participants in the CDS market, which has been struggling to revive volumes in the aftermath of the financial crisis. According to Barclays Plc analysts, it’s the “first instance that we can recall of CDS being triggered by a company’s failure to pay itself.”It also means one of the last so-called “jumbo” leveraged buyouts of the pre-crisis era -- iHeartMedia racked up about $21 billion of debt thanks largely to a 2008 buyout by Bain Capital and Thomas H. Lee Partners -- is now haunting the CDS market. iHeart forewent payment on bonds due Dec. 15. to its affiliate, Clear Channel Holdings, in a move likely aimed at maintaining control over some key collateral, according to analysts.The ISDA ruling “was consistent with both past decisions and the definitions as they are written, but we think this outcome will be viewed as a significant deficiency of the CDS product,” said the Barclays analysts led by New York-based Vincent Foley. “Investors may be less inclined to sell CDS protection, especially as the iHeartMedia situation could provide a road map for other distressed issuers to do similar, particularly if they are involved in contentious negotiations with basis holders and seeking to restructure their balance sheets.”

 Corporations Need a New Reason to Be - Justin Fox - Publicly traded corporations are at something of an impasse in the U.S. Their numbers are shrinking: from 7,507 in 1997 to not much more than 3,500 now. Their ranks are getting top-heavy, with most profits and cash flow accruing to a shrinking group of giants: Number of firms accounting for 50 percent of U.S. publicly traded corporations: That chart data is from a new(ish) paper, "Is the American Public Corporation in Trouble?" by finance professors Kathleen Kahle of the University of Arizona and Rene M. Stulz of Ohio State University. Their conclusion: Yeah, it is.As a whole, public firms appear to lack ambition, proper incentives, or opportunities. They are returning capital to investors and hoarding cash rather than raising funds to invest more.  Graduate student German Gutierrez and finance professor Thomas Philippon of New York University come to a similar place in their new paper, "Investment-Less Growth: An Empirical Investigation." They find a marked decline in corporate capital investment relative to profits and valuation, starting around the year 2000, and a big increase in payouts to shareholders (dividends and buybacks, although the increase has mostly been in buybacks). And when they look into what might have caused the investment decline, the likeliest culprits appear to be declining competitive pressures and "tight or short-termist governance," which basically means pressure from shareholders. Concerns about the latter have been expressed for several years now by management professors at business schools (some of whom are actually -- horrors! -- sociologists) and rogue economists at somewhat-out-of-the-mainstream places such as the University of Massachusetts at Lowell. What's new is that finance professors, bucking a long tradition of generally assuming that financial markets know best, are joining in on the critique. And not just any finance professors: Stulz, for example, is one of the deans of the discipline, a former president of the American Finance Association and editor of the Journal of Finance.  It’s enough to make a person wonder whether maybe, just maybe, the "shareholder value" view of corporate purpose -- that corporations exist to maximize value for their investors -- is finally on its way out.

Bearish bets against US Treasuries climb to new record - The amount of money making bets that US Treasuries will fall in value climbed to a new record high over the last week in a wager that faster US economic growth and higher inflation will weigh further on government bond prices. So-called “non-commercial” speculative positions selling the 10-year Treasury futures contract have been rising since the US presidential election and hit 816,156 contracts in the week to January 3, outnumbering long positions by 344,931 — a record level — according to fresh data from the Commodity Futures Trading Commission on Friday. The bearish tilt has accompanied a steep sell-off in US government debt since the US election, which has unleashed pent-up animal spirits among investors and driven equity markets higher, on the expectation that a looser regulatory regime and lower taxes will spur growth and rekindle inflation. “There are big shorts out there,” said Michael Cloherty, a strategist at RBC Capital Markets. “We see it in the futures data and we see it in the cash market too.” The CFTC data applies to outright, speculative positions termed non-commercial. Commercial positions related to hedging activity continued to rise for the same 10-year Treasury contract, hitting a record long position of 549,000 contracts. More granular data shows asset managers continuing to buy the 10-year contract, but more aggressively buying the 5-year Treasury future, as fears about rising rates push them into shorter, less rate-sensitive products, said John Brady, managing director at RJ O’Brien. Even having fallen 18 basis points in the past three weeks, Treasury yields have climbed 56 basis points since the election to 2.42 per cent alongside a renewed rally in US stock markets. On Friday, the Dow Jones Industrial Average came within a hair of the 20,000 point level while the S&P 500 set a new record.

 ‘Perfect storm’ could lead to historic bursting of bond bubble, warns Harvard academic - Paul Schmelzing, a PhD candidate who specializes in economic history at Harvard University, took to the Bank of England’s blog on Wednesday to sound the alarm on what he describes as a “perfect storm” facing the bond market.   “Looking back over eight centuries of data, I find that the 2016 bull market was indeed one of the largest ever recorded,” he wrote, using this chart for some perspective on the 36-year run bond run. “Only two previous episodes — the rally at the height of Venetian commercial dominance in the 15th century, and the century following the Peace of Cateau-Cambrésis in 1559 — recorded longer continued risk-free rate compressions.”   And what does it all mean? “History suggests this reversal will be driven by inflation fundamentals, and leave investors worse off than the 1994 ‘bond massacre,’” Schmelzing said. He was referring to the bond market’s meltdown two decades ago, when the 30-year long bond’s yield soared more than 150 basis points in a matter of months to 7.75% after Fed Chairman Alan Greenspan hiked rates in the wake of the 1991 recession.  Schmelzing warned that, in the current environment, the combination of a steepening bond-yield curve, Fed tightening and inflation could have painful implications for investors. “By historical standards, this implies sustained double-digit losses on bond holdings, subpar growth in developed markets and balance-sheet risks for banking systems with a large home bias,” he said.

This Blockchain Thing Is Really Happening, Time To Learn What It Is - Blockchain technology was developed for the bitcoin virtual currency, but increasingly it's being used to track and authenticate all kinds of assets,from stocks and bonds to electrons. Decentralized digital ledger technology—where information is stored in a shared and synchronized way amid hundreds of computers, instead of on a single server—could revolutionize several sectors of the economy. In case you're still scratching your head, don't worry, many parts of our current internet technology also seemed totally alien before we fully adopted them. Here's an excerpt from our longer explainer on how the blockchain works: A blockchain is a ledger of digital events with no central database. It runs simultaneously across thousands of computers, distributing the record across the world. The blockchain is like a collective brain that no one controls and everyone can view. It's both public and private. As a user, you encrypt your personal information, only allowing that data to be revealed when you make a transaction, such as when you transfer bitcoin to another person. But currency isn't the only thing you can deal in. You can also store and transfer digital assets such as stocks, bonds, and airline miles. You can create digital IDs, allowing you to access secure websites or sign documents. This year, we saw a proliferation of well-funded blockchain startups, starting in financial services and extending out to energy trading, remittances, supply chain custody, health care, and international development. In 2017, we're likely to see the first blockchain consumer platforms launch—for example, in person-to-person payments and energy trading between solar households. Something to watch: "decentralized autonomous organizations" (DAOs) that have no executives, directors, and run entirely on the basis of code. These self-managing companies could reduce "managerial wrongdoing and incompetence," say two leading authors. There are a lot of possibilities on the blockchain in 2017.

Here’s the key to understanding blockchain (interactive infographic) There are few technologies making as much noise in the financial services industry right now as blockchain. It may be regarded primarily as the underlying force behind bitcoin, but the disruptive technology has implications reaching far beyond virtual currency. Before getting into what those implications are, it’s important to understand exactly what blockchain is, and how it works.  Blockchain has become an indispensable tool that has the capability to transform the world of digital banking and finance — and beyond. But the complex technical nature of this technology often makes it difficult for individuals to fully grasp the concept. The interactive infographic below helps to simplify the inner workings of blockchain, as well as its future implications beyond just global currency.

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 preemption 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, the chair of the global banking practice at Paul Hastings.

 Beyond Robo-Advisers: How AI Could Rewire Wealth Management Asked if a computer will ever be able to give better investment advice than a human, Oliver Bussmann does not hesitate. "I believe it's possible," said Bussmann, who until March was the chief information officer of UBS. Banks' wealth management departments and other investment firms are starting to adopt artificial intelligence. This is different from the robo-advisers you've probably heard about. Those have simplistic, rules-based models — you give them your age, risk tolerance, goals, and so on and they select a basket of exchange-traded funds for you. The next generation of AI in wealth management uses rules or models crafted by data scientists with Ph.D.s and master's degrees. "They can come up with very sophisticated investing models, leveraging artificial intelligence technology, and potentially can outperform the traditional players," said Bussmann, who now has an eponymous advisory firm and is also a mentor at Level39, a fintech accelerator based in London. "With AI you can scan the available market data and understand events and triggers that change the market situation and potential performance of certain sectors, certain stocks. It's all about the ability to process a huge amount of data, define the rules and drive the right rules." To be sure, overreliance on computer models has gotten the investing world in trouble in the past. High-frequency traders have at times caused volatility and flash crashes through their use of algorithmic trading. The quants (or quantitative analysts) who poured into Wall Street in the early 2000s were heralded for their risk and pricing models, which enabled firms to sell complex collateralized debt obligations to unsuspecting investors that turned out to be based on subprime mortgages. Computer models by themselves can only do so much. For this reason, Bussmann says, it will always be important to keep humans in the equation. "You have always two extremes," he said. "One is, you rely 100% on the models; the other is, you rely just on the human. I think it's necessary to find a balance."

Nine years later, state wins key verdict over tribal payday lenders -- A decade after California financial regulators first went after a pair of online payday lenders with ties to Native American tribes, the California Supreme Court on Thursday handed the state a victory, ruling that case against the lenders can proceed. At issue is whether the lenders, doing business through half a dozen different names including Ameriloan and OneClickCash, are immune from state lending laws because of their affiliation with the Miami Tribe of Oklahoma and the Santee Sioux Nation of Nebraska. Tribes and tribal entities are not subject to state laws. The court ruled, though, that while the lenders were tribal entities in name, they had little connection to the tribes in practice. In a unanimous decision, the court found “scant evidence that either tribe actually controls, oversees, or significantly benefits from the underlying business operations of the online lenders.” Instead, the court said it appeared that the lenders were controlled by Scott Tucker, the owner of Kansas City-area firm AMG Services. AMG and Tucker are not defendants in the California case but have been under federal scrutiny for years over payday lending businesses that regulators and prosecutors say used sham relationships with Native American tribes to flout state lending laws. Federal prosecutors in New York this year charged Tucker with criminal racketeering and violations of federal lending rules.  In October, a federal judge in Nevada ordered Tucker, AMG and related parties to pay $1.3 billion to consumers who paid high and improperly disclosed fees, the result of a case brought by the Federal Trade Commission.

 CFPB fines TransUnion and Equifax for deceiving consumers with their marketing | 2017-01-03 | HousingWire: The Consumer Financial Protection Bureau revealed in a press release on Tuesday that it is not only fining TransUnion but Equifax as well for deceiving consumers in marketing credit scores and credit products. Chicago-based TransUnion and Atlanta-based Equifax are two of the nation’s three largest credit reporting agencies. The other top credit reporting agency is Experian. According to the bureau, it took action against Equifax, TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. The bureau also asserted that the companies lured consumers into costly recurring payments for credit-related products with false promises. As a result, the two companies must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB. Broken up, TransUnion must provide more than $13.9 million in restitution to affected consumer and $3 million to the Bureau’s civil penalty fund. Equifax must provide almost $3.8 million in restitution to affected consumers and pay $2.5 million to the Bureau’s civil penalty fund. Both were also ordered to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services. HousingWire first broke late last week that TransUnion would pay just shy of $17 million as part of a settlement with the CFPB, as revealed by a filing with the Securities and Exchange Commission. Now not even a week later, the CFPB’s report revealed Equifax was fined too.

 CFPB Commission Is Essential, Not a Trojan Horse | Bank Think: Adam Levitin is a well-respected academic, but in his recent op-ed, "What the CFPB 'Commission' Debate Is Really About," he is dead wrong. Levitin concludes that the financial services industry both wants a multimember commission to lead the Consumer Financial Protection Bureau as a way to neuter the agency, and is focusing on the leadership structure as a way to avoid challenging the agency directly. Neither could be further from the truth. Levitin says the financial services industry "doesn't have the courage" to take on the CFPB, but America's local, member-owned credit unions have never backed down from confronting the CFPB when it has overreached. And a survey of the comment letters responding to the CFPB's recent rulemakings as well as the queue of pending and anticipated lawsuits against the bureau dispel any notion that the industry lacks courage to challenge the CFPB or its rules. Levitin asserts that a multimember commission will not lead to more accountability, could still allow for arbitrary actions or abuse of power, and would not further policy stability as much as the Administrative Procedures Act already does. But there are large holes in his logic. First, as presently structured, the CFPB is an anomaly in the federal government, with extraordinary and unprecedented authority vested in a single person, and lacking appropriate levels of congressional oversight. Indeed, the U.S. Court of Appeals for the D.C. Circuit, in its recent opinion PHH Corp. v. CFPB, recognized that CFPB Director Richard Cordray "enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President." That is hardly a recipe for the transparency and accountability that Levitin claims already exist.Second, so far the CFPB has not been a balanced or stable agency for the industry it regulates or for the consumers it aims to protect. Cordray unilaterally, and without notice or comment, reversed years of longstanding policy interpretations by the Department of Housing and Urban Development and levied a massive fine on the company. The CFPB recently used its authority dealing with "unfair, deceptive, or abusive acts or practices" to set aside decades of National Credit Union Administration guidance to credit unions. Through these actions, Cordray has circumvented well-established administrative law and replaced it with a structure that requires regulated entities to read his mind and react to his disciplinary flights of fancy.

The Real Reason Behind the Calls for Firing Richard Corday (and the Costs of Doing So) - Adam Levitin - The calls for Donald Trump to fire CFPB Director Richard Cordray are getting louder (see here and here). It's worthwhile understanding what's really afoot here. Cordray's term as CFPB Director expires in July 2018, so firing him in January 2017 doesn't seem to accomplish a lot.  If Cordray is fired, the Deputy Director automatically becomes the Acting Director and is fully empowered to do everything that the Director would otherwise do, until and unless a replacement Director is confirmed by the Senate (or recess appointed), a process that will take a while.  So we're probably talking about speeding up Republican control of the CFPB by less than a year.  Does that really matter? Actually yes. It is hugely important to the financial services industry in general and to the payday lending industry in particular. The CFPB has two major rule makings pending, one restricting binding mandatory pre-dispute arbitration clauses that are used to prevent class actions and a second imposing an ability-to-repay requirement on payday and auto title loans. It is not clear when the CFPB will publish final rules on the topics; there is some speculation that the arbitration rule might be out before Inauguration Day. But the thinking is that a change in CFPB leadership might come in time to stave off these rule makings.  (Note that both rulemakings would be subject to Congressional override under the Congressional Review Act, but it's quite possible that a few Republicans in the Senate defect on both rulemakings.) In other words the calls to remove Cordray aren't about real outrage over dated employment discrimination allegations at the CFPB, but just shilling for the financial services industry, which is trying to head off the payday and arbitration rulemakings.  One can see the appeal to a Trump administration of firing Corday. It's a chance for Donald to parade out his trademarked "you're fired" line and to quickly claim a victory and please part of its base. I would hope, however that the Trump administration has good enough counsel to recognize that there is real risk from attempting to fire Cordray, such that the cost of firing Corday is likely to outweigh any benefits. Put in Trump terms, it's a bad deal.

Will Trump Take the Poisoned Chalice of Firing CFPB Director Richard Cordray? -- Yves Smith --Georgetown law professor and former Special Counsel to the Congressional Oversight Panel Adam Levitin has just posted on the effort by some Republicans to goad Trump to oust the Director of the Consumer Financial Protection Bureau, Richard Cordray. Since Cordray is set to leave office in July 2018, one might wonder why the Republicans have put getting rid of Cordray so high on their Trump wish list, particularly since the mechanics of getting a new director in isn’t an overnight process. As Levitin explains, the CFPB has two important rulemakings set for this year. Republicans are keen to make sure that they wind up being toothless. The one I regard as the real biggie is that the agency is set to restrict mandatory arbitration clauses. Recall that these are almost universal boilerplate in financial products, such as bank accounts, credit cards, and consumer loans. The main effect is to prevent class action lawsuits, which historically has proven to be the best mechanism for stopping low-level grifting that is too costly for individuals to purse. One of many class actions cases back in the days before banks figured out how to stymie them was banks charging 3% foreign exchange transaction fees on all foreign currency purchases, and even in some cases, ATM withdrawals, without disclosing them. Recall that these agreements have become a sore point in the Wells Fargo fake accounts scandal. A court ruled that mandatory arbitration agreements on valid accounts at Wells Fargo extent to bogus ones! Not only would a CFPB rule severely limiting pre-dispute mandatory have a big impact on the financial services industry, but it could get the ball rolling for restrictions in other areas too, like mobile phone and cable agreements. The other hot topic is that the CFPB is set to issue a requirement that lenders make sure that borrowers have the ability to repay payday and auto title loans. That provision, if enforced, would severely restrict payday lending.  Levitin notes that the agency could conceivably issue both rules before Trump is sworn in. Congress could also override either rule, but Levitin argues that Republicans are not certain to remain united on either issue. However, Trump would likely wind up coming out a net loser if he were to try to fire Cordray. Why?   The head of the CFPB does not serve at the President’s pleasure; he can be removed only for cause:  And there does not seem to be much cause for defenestrating Cordray. As Levitin explains, the op-eds calling for Cordray’s scalp have cited complaints about employment discrimination at the CFPB. There are two wee problems with that. The first is that these allegations were never proven; a GAO report on the controversy left the matter unresolved. So Team Trump would need to conduct a new probe to firm up the charges….even assuming they could be verified, and that would take time.

Customer Data Is a Liability | American Banker: The most significant data breach of 2016 was arguably the one that didn't matter at all. What makes it so significant is not what the hackers took, but the takeaway for the rest of us. The hackers were unable to get any customer data, because there was none to steal. ShapeShift, a digital currency exchange, lost about $230,000 in a series of thefts discovered in March and April. But no customers' funds were taken, nor any of their personal information. Unlike most exchanges, the company holds neither. It simply arranges transfers from one cryptocurrency to another (bitcoin to ether, Dash to Dogecoin, Monero to Zcash, etc.). All users provide is an address to deposit their new coins. "The only thing we need to know is their wallet address, where to send their asset and which asset they want," said Erik Voorhees, founder and CEO of ShapeShift, based in Zug, Switzerland. "That's basically it." As a result, all the hackers could steal was money from the company stash. ShapeShift's no-questions-asked model is an extreme example (and a compliance risk). But the fact that its users were unharmed by a data breach underscores a harsh reality that mainstream financial institutions should recognize: Customer data might be a valuable asset, but it is also a huge liability. You could even call it radioactive. Banks know so much about their customers — not just how much money they have but where and how often they spend it — so they are uniquely positioned to craft targeted offers and advice, the thinking goes. But it is painfully clear that the more information a company has about its customers, the bigger the prize for hackers.

 December 2016: Unofficial Problem Bank list declines to 169 Institutions, Q4 2016 Transition Matrix -- Surferdude808 compiles an unofficial list of Problem Banks compiled only from public sources.  Here are the monthly changes and a few comments from surferdude808: Update on the Unofficial Problem Bank List for December 2016.  During the month, the list fell from 173 institutions to 169 after five removals and one addition.  Assets dropped by $15 billion to an aggregate $45 billion.  A year ago, the list held 250 institutions with assets of $75 billion. This month, actions have been terminated against Flagstar Bank, FSB, Troy, MI ($14.2 billion  Ticker: FBC); First Central Savings Bank, Glen Cove, NY ($537 million); International Bank, Raton, NM ($302 million); North Alabama Bank, Hazel Green, AL ($95 million); and Home Federal Bank of Hollywood, Hallandale Beach, FL ($41 million).  Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,716 institutions have appeared on a weekly or monthly list at some point.  Only 9.8 percent of the banks that have appeared on the list remain today.  In all, there have been 1,547 institutions that have transitioned through the list.  Departure methods include 883 action terminations, 400 failures, 248 mergers, and 16 voluntary liquidations.  Of the 389 institutions on the first published list, 18 or 4.6 percent still remain more than seven years later.  The 400 failures represent 23.3 percent of the 1,713 institutions that have made an appearance on the list.  This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list. During this fourth quarter, only eight banks were removed because of an improved financial condition.  These eight removals represented only 4.5 percent of the 177 banks at the start of the quarter.  This is the smallest number and rate of removal due to rehabilitation since the list was first published.  Of note this quarter, is the removal of Flagstar Bank, FSB and its $14.2 billion in assets.  This significantly narrows the asset differential to around $10 billion between the unofficial and the FDIC’s official figures.  In its last release, the FDIC said there were 132 banks with assets of $35 billion on the official list.  Subsequent to the release of the official figures, the FDIC placed First NBC Bank with assets of $4.9 billion under an enforcement action.  Hence, we expect for the official figures to show an asset increase when they are released at the end of February 2017.

Offices Lead Steep Rise in CMBS Delinquencies in December -- Late payments on securitized commercial mortgages climbed sharply in December to a 14-month high, led by office buildings. The delinquency rate for U.S. commercial real estate loans in CMBS is now 5.23%, an increase of 20 basis points since November. The delinquency rate has now moved higher in nine of the last 10 months, and all of the gains from early 2016 have been reversed. The biggest rise in late payments last month was for loans backed by office buildings, which increased by 56 basis points to 7.13%. December over December, the office rate jumped 134 basis points. That was the biggest increase among major property types in 2016. The year began on an extremely positive note, as the delinquency rate fell 102 basis points over the first two months of the year. At one point in 2016, the rate reflected a year-over-year improvement of 143 basis points. However, a large part of that decrease was due to the resolution of the $3 billion Stuyvesant Town/Peter Cooper Village loan. Since then, the rate has steadily climbed as loans from 2006 and 2007 have reached their maturity dates and have not been paid off via refinancing. With a cascade of loans from the 2007 vintage coming due in 2017, it is hard to see the rate going down any time in the near future, according to Trepp. That's because many of the stronger performing loans from 2006 and 2007 were either defeased (replaced with other collateral) prior to maturity or paid off during their open period. "Those that make it to their maturity date tend to be loans with more middling debt service coverage or uncertainty in their rent rolls," the index provider said in its monthly report. After offices, the biggest jump in the delinquency rate in December was in multifamily buildings, where late payments rose by 22 basis points to 2.72%. However, multifamily is still one of the best performing sectors. The December 2016 delinquency rate is still 556 basis points lower than it was in December 2015.

Reis: Office Vacancy Rate declined in Q4 to 15.7% - Reis released their Q4 2016 Office Vacancy survey this morning. Reis reported that the office vacancy rate declined to 15.7% in Q4, down from 15.9% in Q3. This is down from 16.2% in Q4 2015, and down from the cycle peak of 17.6%. From Reis Economist Barbara Denham: The office market saw stronger demand in the fourth quarter than in the previous three as net absorption (increase in occupancy) exceeded new supply by the widest margin since before the recession. Still, office rent growth decelerated in the quarter to 0.3%. Office rents have decelerated all year. The national vacancy rate declined to 15.7% in the fourth quarter of 2016 from 15.9% in the third quarter and 16.2% at year-end 2015. ... This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual). Reis reported the vacancy rate was at 15.7% in Q4.  The office vacancy rate is at the lowest level since early 2009, but remains elevated. Office vacancy data courtesy of Reis.

Trump Post Office Mechanics Liens  - It's not often that one finds mechanic's liens in the news.  I think this is ripe for inclusion in secured credit casebooks. Update:  After thinking about this more, this gets more interesting than a plain vanilla mechanic's lien.  Recall that Trump doesn't own the Old Post Office.  He has a leasehold, and the building is owned by the federal government.  So this raises the question about whether the lien reaches to the fee simple ownership of the federal government or if it is a lien on the leasehold.  I have no idea. There are some states in which a mechanic's lien triggered by work done by a tenant reaches the landlord's fee simple ownership if the work was done with the landlord's consent (see here, e.g.). DC doesn't appear to have caselaw on this.  (If the lien is filed against the federal government itself, there's a different process through the Miller Act, but I doubt that applies since the federal government was probably not a party to the construction contract.) A potential further complication is the status of federal property in DC. Can it be subject to mechanic's liens?  Can it be foreclosed on?  Where does sovereign immunity come into play?   Finally, what is the effect of a lien on the property on Trump's leasehold?  I can't imagine that there's any way to actually foreclose on Trump's leasehold--the lease for the Old Post Office isn't going to be freely transferable.  If so, what good does a mechanic's lien do, other than embarrass Trump?  Is it an Event of Default under the lease if Trump suffers it to persist?  If so, that would give the contractors some leverage, but this all seems much messier than a typical mechanic's lien situation.

Loans Originated In The Third Quarter Were Higher In Credit Quality Than One Year Ago -- Loans originated in Q3 2016 are among the highest-quality home loans originated since the year 2001, according to the latest CoreLogic Housing Credit Index (HCI) Report.[1] Figure 1 shows the overall Housing Credit Index from Q1 2001 through the end of Q3 2016. Higher index values indicate a higher level of credit risk for new originations and lower index values indicate less credit risk present. Compared with other loans made since mid-2009, the starting point of the current economic expansion, Q3 2016 loans are among the loans originated with the lowest credit risk based on six important credit-risk attributes. The decline in the HCI over the last four quarters has been primarily caused by lower credit-risk characteristics of new refinance loans (Figure 2). In Q3 2016, the HCI for purchase loans was about the same compared to the previous three quarters whereas the HCI for refinance loans had declined each quarter. With the mortgage rate most likely to increase next year, we expect a rise in the share of purchase loans and less influence of refinance loans on overall HCI compared to the current period. An increase in the number of purchase loans may introduce more mortgage fraud risk in 2017 because, contrary to refinancing, purchase transactions involve a new owner and more parties and documents, which offers more opportunities for fraud. Figure 3 plots the six indicators used to calculate the HCI for prime conforming conventional purchase-money loans. The blue hexagon represents an index of credit-risk attributes in the benchmark period (average of 2001 and 2002 set equal to 100 for each attribute) and the red polygon represents characteristics of loans made in Q3 2016 relative to the benchmark. The share of borrowers with credit score less than 640 and the low- and no-doc share were down significantly compared to the 2001-2002 benchmark period. The share of new loans with LTV of 95 percent or higher was slightly above the benchmark period.

How Underwriting Processes Leave Good Business on the Table -- Change looms on the horizon for the mortgage industry — both in the products it offers and in the borrowers it serves. Demographic shifts in household formation are creating a more diverse pool of would-be homebuyers. But those shifts, particularly as they pertain to the growth of Hispanic and black households, present unique challenges to lenders.Black and Hispanic consumers are, according to the Consumer Financial Protection Bureau, more likely to be "credit invisible" than white consumers. Overall, 26 million Americans are credit invisible, meaning they do not have any credit history with a nationwide consumer reporting agency, the CFPB said in a May 2015 report.While 15% of black and Hispanic consumers are credit invisible, only 9% of white consumers find themselves in such a position.The CFPB further reported that 19 million consumers have credit records that are considered unscorable. Again, black and Hispanic consumers were more likely to find themselves in this group than their white peers.One factor that leads to these disparate outcomes can be culture. For instance, many in the Hispanic community do not trust the banking system because of the failures of financial institutions in the countries their families originally immigrated from, "We still conduct our financial lives in cash — it makes us feel safe and secure to have access to cash,"  And now, economists once again expect interest rates to increase, which would result in plunging refinance volume.For lenders, refinances have been their bread and butter in recent years — easy to obtain and relatively low risk. But with that market drying up, lenders are grappling with how to safely tap into underserved borrower segments and specifically, how to underwrite borrowers with limited or nontraditional credit profiles.  Recent efforts to make the credit box more inclusive in today's highly-regulated market have largely relied on manual processes and balance sheet lending. But these strategies are costly, cumbersome and difficult to scale.

GSEs Have Been Ill-Served by Balance Sheet Equity Experiment: "Why are the GSEs functioning institutions and not hollowed-out buildings with smashed glass, like the factories in Youngstown, Ohio, where I grew up?" asks Michael Bright, a director at the Milken Institute's Center for Financial Markets. His answer: "Because the Treasury stood behind them." The same could be said about Bank of America, Citigroup and General Motors, with one important caveat. Had the government-sponsored enterprises not liquefied mortgage markets in the wake of the housing crash, Bank of America, Citigroup and GM would most likely have ended up like the hollowed-out buildings with smashed glass like the factories in Youngstown. One inconvenient truth — consistently ignored by those calling themselves reformers who seek to replace the GSEs — is that America recovered from the financial crisis because Fannie Mae and Freddie Mac performed their public mission. The two companies kept on financing new mortgages when other bailout recipients, faced with the prospect of falling home prices, turned off their credit spigots. The economic benefits derived from the GSEs' business model far exceeded the dollar amount of any temporary support extended by the U.S. Department of the Treasury. Over the past few decades, the GSEs have remained a bulwark of stability in housing finance; no other company had ever come close to matching their standards of underwriting excellence, as measured by credit losses.Today, the benefit of hindsight tells us Treasury's support of the GSEs was structured in a way that proved to be counterproductive. Fannie and Freddie's needs were unlike those of the Wall Street banks; the GSEs never needed taxpayer dollars to fund cash shortfalls and operating expenses. Today, we know that the GSEs relied on bailout funds to offset massive "losses" for fiscal years 2008-2011, which proved to be ephemeral, if not illusory. Those initial losses were driven by non-cash accounting provisions, timing differences under Generally Accepted Accounting Principles, which, as any banker knows, are subject to dramatic change. In the absence of those subsequently reversed accounting provisions, the GSEs' bailout draws would have been much closer to zero.

Wall Street, America’s New Landlord, Kicks Tenants to the Curb - Hedge funds, large investment firms and private equity companies helped the U.S. housing market recover after the crash in 2008 by turning empty foreclosures from Atlanta to Las Vegas into occupied rentals. Now among America’s biggest landlords, some of these companies are leaving tenants like Allen, 44-year-old father of two, in the cold. In a business long dominated by mom-and-pop landlords, large-scale investors are shifting collections conversations from front stoops to call centers and courtrooms as they try to maximize profits. “My hope was that these private equity firms would provide a new kind of rental housing for people who couldn’t -- or didn’t want to -- buy during the housing recovery,” said Elora Raymond, the report’s lead author. “Instead, it seems like they’re contributing to housing instability in Atlanta, and possibly other places.” American Homes 4 Rent, one of the nation’s largest operators, and HavenBrook filed eviction notices at a quarter of its houses, compared with an average 15 percent for all single-family home landlords, according to Ben Miller, a Georgia State University professor and co-author of the report. HavenBrook -- owned by Allianz SE’s Newport Beach, California-based Pimco -- and American Homes 4 Rent, based in Agoura Hills, California, declined to comment. Colony Starwood Homes initiated proceedings on a third of its properties, the most of any large real estate firm. Tom Barrack, chairman of U.S. President-elect Donald Trump’s inauguration committee, and the company he founded, Colony Capital, are the largest shareholders of Colony Starwood, which declined to comment.

 After helping a fraction of homeowners expected, Obama’s foreclosure prevention program is finally ending -- When the Obama administration announced a massive effort to help distressed homeowners in 2009, it set high expectations. The program, government officials said, would keep up to 4 million borrowers out of foreclosure. “It will give millions of families resigned to financial ruin a chance to rebuild,” President Obama said at an event announcing the effort. “By bringing down the foreclosure rate, it will help shore up housing prices for everyone.” Nearly eight years later, Obama is preparing to leave office and the Home Affordable Modification Program is scheduled to accept its final applications on Friday having helped a small fraction of the homeowners government officials initially expected. About 1.6 million borrowers have seen their mortgage payments lowered through the program so far, but about a third of those people eventually fell behind on their payments again. “The president set out an ambitious goal that wasn’t met,”  HAMP is one of the last remnants of the $700 billion taxpayer bailout effort, known as the Troubled Asset Relief Program or TARP, put in place during the financial crisis. Some of that money, about $28 billion, was carved out to help distressed homeowners by paying banks to lower their interest rates and monthly payments. It was launched in the midst of one of the deepest housing crises in U.S. history. Millions of people had taken out subprime loans that they could no longer afford, sending foreclosure rates to record levels. The Obama administration set out to save more homeowners from foreclosure, but the effort has been bedeviled by complaints that banks repeatedly lost homeowners’ paperwork or incorrectly told them that they didn’t qualify for help. The Treasury Department didn’t act quickly enough to force banks to abide by the rules of the program, housing advocates have said. Nearly 70 percent of the homeowners who applied for the program were rejected, according to government data.

Loan Mods Plunge at Largest National Banks —  National banks have experienced a dramatic drop in loan modification activity over the past year, according to a report released Wednesday by the Office of the Comptroller of the Currency. The seven largest national banks completed 35,642 loan modifications in the third quarter of 2016, down from 147,542 in the same quarter in 2015, the Mortgage Metrics report said. Meanwhile, the percentage of seriously delinquent loans — those 90 days or more past due — has fallen to 2.2% as of Sept. 30, 2016, down from 2.6% a year ago. “The overall performance of mortgages…continues to improve from a year earlier,” the OCC said. The OCC report culls data from Bank of America, Citibank, HSBC, JPMorgan Chase, PNC, U.S. Bank and Wells Fargo. Mortgage data from OneWest, which was acquired by the CIT Group last year, was also included in OCC data through the fourth quarter of 2015. The OCC also reported that the seven banks initiated 47,955 new foreclosures in the third quarter, a 25.3% decrease from a year ago. Meanwhile, the servicing portfolios of the seven banks have been shrinking over the past two years due to the runoff of subprime, alt-A and other nonprime loans. Overall, the servicing portfolios totaled $3.5 trillion in the third quarter, down from nearly $4 trillion in the third quarter of 2014.

Distressed Sales Made Up 7.3 Percent Of All Home Sales In September: Cash sales accounted for 31.7 percent of total home sales in September 2016, down 1.3 percentage points year over year from September 2015. The cash sales share peaked in January 2011 when cash transactions accounted for 46.6 percent of total home sales nationally. Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25 percent. If the cash sales share continues to fall at the same rate it did in September 2016, the share should hit 25 percent by mid-2019.Figure 1 shows the historical trend in cash sales share by sale type. REO sales had the largest cash sales share in September 2016 at 59.4 percent. Resales had the next highest cash sales share at 31.7 percent, followed by short sales at 31.2 percent and newly constructed homes at 15.5 percent. While the percentage of REO sales within the all-cash category remained high, REO transactions have declined since peaking in January 2011. Figure 2 shows the distressed sales share of total home sales, of which REO sales made up 4.7 percent and short sales made up 2.7 percent in September 2016. The distressed sales share of 7.3 percent in September 2016 was the lowest distressed sales share for any month since September 2007. At its peak in January 2009, distressed sales totaled 32.4 percent of all sales with REO sales representing 27.9 percent of that share. The pre-crisis share of distressed sales was traditionally about 2 percent. If the current year-over-year decrease in the distressed sales share continues, it will reach that “normal" 2-percent mark in mid-2018. All but nine states recorded lower distressed sales shares in September 2016 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 18.9 percent [1] in September 2016, followed by Connecticut (18.4 percent), Michigan (17.6 percent), New Jersey (15.9 percent) and Illinois (15.1 percent). North Dakota had the smallest distressed sales share at 2.7 percent. While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are close to their pre-crisis levels (each within one percentage point). Figure 3 shows the cash sales share by state [2] for September 2016. Alabama had the largest cash sales share of any state at 47.6 percent, followed by West Virginia (45.8 percent), New York (45.3 percent), Florida (41.6 percent) and Indiana (40.9 percent).

Rising Property Taxes Forcing Longtime Residents Out of Homes -- From Midland Avenue to Sixth Street in Lexington, Ky., new restaurants and stores are opening. Historic homes on several streets have been gutted, renovated and sold again. But with development comes a problem — long-time residents struggling to stay in homes they own because property values and property taxes inch up. "There is a lot of concern that people can no longer afford to live in places they have lived for decades because they can no longer afford the property taxes," said Lexington Councilman James Brown, who represents the East End, an area that has seen a lot of new investment over the past several years. Brown wants a council committee to explore a program that will help long-time residents pay property taxes in areas where new investment and development is starting to drive up property taxes. Brown, who put the issue in committee in December, said he hopes the Budget, Finance and Economic Development Committee will tackle the topic early in 2017. The city is exploring a program modeled on one in Philadelphia called Longtime Owner Occupants Program or LOOP that pays the increase in property taxes for people who have owned their homes for more than 10 years and meet certain income guidelines. The fund is for lower-income or people on fixed incomes such as Social Security or pensions.

New Rural Housing Program Struggles to Spark Interest: — The lending arm of U.S. Department of Agriculture guaranteed 3,439 single-family construction loans in the first quarter of fiscal year 2017, which ended Dec. 31, but just nine of those loans involved its new single-close construction-to-permanent financing option. "We expect to see the numbers increase with the temperature this spring," said Rural Housing Service spokeswoman Jacqueline Susmann in an email. So far, 25 lenders have signed up to offer the RHS single-close construction loan program and agency officials are encouraging more participants. "We are working with lenders, builders, builder's associations and reporters to get the word out about the flexibility of the single-close construction-to-permanent financing option," said RHS Administrator Tony Hernandez in a statement. Under the traditional RHS construction loan program, the builder must secure funding for the construction phase. Once construction is completed and the house is ready for occupancy, RHS will guarantee the final loan. RHS designed the single-close program to be more attractive to lenders and builders with the loan made to the homebuyer, not the builder. As a result, the builder doesn't have to secure financing or a line of credit for the construction phase. The Rural Housing Service guaranteed 9,687 single-family construction loans in fiscal year 2016, which ended Sept. 30. Just 39 loans were the single-close loans totaling nearly $7.5 million.

MBA: Mortgage Applications Decreased Over Two Week Period --From the MBA: Mortgage Applications Decreased Over Two Week Period in Latest MBA Weekly SurveyMortgage applications decreased 12 percent from two weeks earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 30, 2016. The results included adjustments to account for the Christmas holiday.... The Refinance Index decreased 22 percent from two weeks ago. The seasonally adjusted Purchase Index decreased 2 percent from two weeks earlier. The unadjusted Purchase Index decreased 41 percent compared with two weeks ago 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 ($417,000 or less) decreased to 4.39 percent from 4.45 percent, with points increasing to 0.43 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. With the current level of mortgage rates, refinance activity will probably decline further. The second graph shows the MBA mortgage purchase index. The purchase index was "1 percent lower than the same week one year ago". Even with the increase in mortgage rates, purchase activity is still holding up. However refinance activity has declined significantly.

Are Mortgage Rates Now Unaffordable?: In mid-October 2016 the average 30-year fixed mortgage rate was 3.64% and a 15-year fixed at 2.93%! Now, post-presidential election and based on the fixed income markets belief that the economy is going to improve thus spurring further rate increases by the Federal Reserve, 30-year fixed rate mortgages are on average 4.31% and 15-year fixed at 3.56%. For the first-time homebuyer who reads about this approximate 70 or so basis point increase in mortgage rates the immediate thought might be that a mortgage, at one point so affordable, has now become unaffordable. Is this belief actually the case or is it based more on the emotion that if the low in the mortgage rate market had been missed, jumping in now would be the wrong thing to do? As someone who has been around the block once or twice and seen 30-year fixed mortgage rates in 1980 well above 10% and about 7% in 1994 when I bought my home, the current level of 4.31% is most definitely affordable! Will the increase in interest rates move some people from qualifying to not qualifying? An upward move is always going to do that but of course there are ways that an experienced mortgage originator can help you through the process.Bottom line? While no one wants to have to pay more than they might have been able to pay a month or two ago, the reality is that mortgage affordability is still at unprecedented levels. Another reality is that no one can tell you with any certainty whether in a years time mortgage rates will be higher or lower. And, while there was no urgency to pull the trigger and buy property over the last few years because it seemed as if economic growth would remain tepid and rates at historic lows, that fact may be changing. For perspective, look at where mortgage rates have been over the last 45 years:

Freddie Mac: 30-year mortgage rate falls for first time since presidential election | 2017-01-05 | HousingWire: After rising nine-weeks straight, mortgage rates finally recorded a decrease for the first time since the election, welcoming the year on a lower note, the latest Freddie Mac Primary Mortgage Market Survey posted. Sean Becketti, chief economist with Freddie Mac, stated that this marks the first time since 2014 that mortgage rates opened the year above 4%. In the two weeks after the election, the 30-year mortgage rate jumped 40 basis points, surging to to 3.94%. Chief Financial Analyst Greg McBride noted at the time that the week’s increase in mortgage rates was dubbed the ‘Trump Tantrum’, the biggest one-week increase since the ‘Taper Tantrum’ in June 2013. Now, looking at the latest Freddie Mac report, the 30-year fixed-rate mortgage sits at 4.20% for the week ending Jan. 5, 2017, down from last week when it averaged 4.32%. However, this is still significantly higher than a year ago at this time when the 30-year FRM averaged 3.97%. Also dropping, the 15-year FRM this week averaged 3.44%, falling from last week’s 3.55%. A year ago at this time, the 15-year FRM averaged 3.26%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.33% this week, moving up from last week’s average of 3.30%. A year ago, the 5-year ARM averaged 3.09%. Check out the chart below for an overview of mortgage rates over the last year.

Mortgage Credit Availability Rises for Fourth Straight Month - Mortgage credit availability grew for the fourth consecutive month in December, the Mortgage Bankers Association reported.The MBA’s Mortgage Credit Availability Index increased 0.6% to 175.2 in December. An uptick in the index reflects looser credit standards.“Credit availability was up for the fourth consecutive month in December driven by jumbo loan programs as well as loan programs for borrowers with lower credit scores and low down payments,” Lynn Fisher, MBA’s vice president of research and economics, said in a news release Thursday. The jumbo MCAI rose by 1.3% over the month. The index’s other three components expanded as well. The conventional MCAI rose 0.7%, while the government MCAI increased 0.6% and the conforming MCAI lifted 0.04%.

 CoreLogic: House Prices up 7.1% Year-over-year in November --The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA). From CoreLogic: CoreLogic US Home Price Report Shows Prices Up 7.1 Percent in November 2016 Home prices nationwide, including distressed sales, increased year over year by 7.1 percent in November 2016 compared with November 2015 and increased month over month by 1.1 percent in November 2016 compared with October 2016, according to the CoreLogic HPI.  ..“Last summer’s very low mortgage rates sparked demand, and with for-sale inventories low, the result has been a pickup in home-price growth,” said Dr. Frank Nothaft, chief economist for CoreLogic. “With mortgage rates higher today and expected to rise even further in 2017, our national Home Price Index is expected to slow to 4.7 percent year over year by November 2017.” “Home prices continue to march higher, with home prices in 27 states above their pre-crisis peak levels,” said Anand Nallathambi, president and CEO of CoreLogic. “Nationally, the CoreLogic Home Price Index remains 4 percent below its April 2006 peak, but should surpass that peak by the end of 2017.”

November 2016 CoreLogic Home Prices Year-over-Year Growth Rate Now Improved to 7.1% -.CoreLogic's Home Price Index (HPI) shows that home prices in the USA are up 7.1 % year-over-year year-over-year (reported up 1.1 % month-over-month). Last month's 6.7 % year-over-year gain was revised downward to 6.1 %. CoreLogic HPI is used in the Federal Reserves's Flow of Funds to calculate the values of residential real estate. CoreLogic has been revising their data significantly downward in the following month - I would not take the 7.1 % to the bank. However, I would be comfortable suggesting that next month we will discover that the 7.1 % was really 6.2 % (similar to what happened this month). Overall, home price growth trends seem to be marginally trending up - likely do to the low inventory levels of homes for sale. Dr Frank Nothaft, chief economist for CoreLogic stated: Last summer's very low mortgage rates sparked demand, and with for-sale inventories low, the result has been a pickup in home-price growth. With mortgage rates higher today and expected to rise even further in 2017, our national Home Price Index is expected to slow to 4.7 percent year over year by November 2017. Anand Nallathambi, president and CEO of CoreLogic stated: Home prices continue to march higher, with home prices in 27 states above their pre-crisis peak levels. Nationally, the CoreLogic Home Price Index remains 4 percent below its April 2006 peak, but should surpass that peak by the end of 2017.

Home Price Growth to Slow in 2017: CoreLogic: Home values continued to climb in November, but in 2017 price appreciation is likely to slow due to rising interest rates, according to CoreLogic. In November, home prices increased 7.1% year over year, CoreLogic said in its Home Price Index report released Tuesday. The index was also 1.1% higher than October's revised figure. Oregon and Washington experienced the highest year-over-year growth of any states at 10.3% and 10%, respectively. Connecticut was the only state to experience price depreciation in November, down 0.5%. Looking ahead, CoreLogic forecasts that prices will only rise 4.7% year over year in November 2017, a reflection of the impact rising interest rates will have on the housing market. "Last summer's very low mortgage rates sparked demand, and with for-sale inventories low, the result has been a pickup in home-price growth," Frank Nothaft, chief economist for CoreLogic, said in a news release . "With mortgage rates higher today and expected to rise even further in 2017, our national Home Price Index is expected to slow to 4.7% year over year by November 2017."

Case-Shiller Shows Housing Unaffordable - Robert Oak - The October 2016 S&P Case Shiller home price index shows a seasonally adjusted 5.6% price increase from a year ago for the 20 metropolitan housing markets and a 4.3% yearly price increase in the top 10 housing markets.  Last month the annual gain was 5.4%.  Home prices are still climbing over double the rate of inflation and are back up to 2007 housing bubble price levels.  The U.S. National Home Price Index has also increased 5.6% from a year ago and has hit an all time high.  This index covers all nine U.S. Census geographical divisions.  Since the price low of March 2012, the 10-City composite index has increased 40.4% and the 20-City composite index has increased 43.1% and prices are back to winter 2007 levels.  Affordability is gone with measures showing 20-30% declines since 2012. We can see below that prices on every Case-Shiller index are back to 2007 levels and thus completely unaffordable with stagnant wages and incomes.  Inflation has increased but wages and incomes have barely budged.  The housing bubble peak was in July and June 2006.  Nationally, housing prices have surpassed that peak by 0.2%.  The 20-city index is still -7.1% below and the 10-city index is -9.2% below.  Yet labor participation rates are still at record lows showing millions people simply never returned to the labor force and assuredly many were not by choice.  Below are all of the composite-20 index cities yearly price percentage change, using the seasonally adjusted data.  The Northwest is on fire with Portland Oregon home prices increasing 10.3% and Seattle, Washington prices worse with a 10.7% annual increase.   Denver Colorado prices increased over 8.3% from a year ago.  Dallas Texas homes have also increased 8.1% in a year  California is already sky high, one needs to be a millionaire to be a homeowner, yet prices increased in the mid five percentage range again for the year.  This is so unattainable for most people, especially now with mortgage rates increasing.

 Construction Spending increased in November - Earlier today, the Census Bureau reported that overall construction spending increased in November: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during November 2016 was estimated at a seasonally adjusted annual rate of $1,182.1 billion, 0.9 percent above the revised October estimate of $1,171.4 billion. The November figure is 4.1 percent above the November 2015 estimate of $1,135.5 billion During the first 11 months of this year, construction spending amounted to $1,070.9 billion, 4.4 percent above the $1,025.5 billion for the same period in 2015. Both private and public spending increased in November: Spending on private construction was at a seasonally adjusted annual rate of $892.8 billion, 1.0 percent above the revised October estimate of $884.3 billion ... In November, the estimated seasonally adjusted annual rate of public construction spending was $289.3 billion, 0.8 percent above the revised October estimate of $287.1 billion. This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Private residential spending has been generally increasing, but is 32% below the bubble peak. Non-residential spending is now 4% above the previous peak in January 2008 (nominal dollars). Public construction spending is now 11% below the peak in March 2009, and 10% above the austerity low in February 2014. The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 3%. Non-residential spending is up 6% year-over-year. Public spending is up 3% year-over-year. Looking forward, all categories of construction spending should increase in the coming year. This was above the consensus forecast of a 0.6% increase for November. A solid report.

November 2016 Construction Spending Improved Again: The headlines say construction spending was up, and was above expectations. Consider this a very strong report. Public construction and private construction are in expansion. Overall, construction is now trending STRONGLY up. The rolling averages STRONGLY improved. But the confusion is that construction spending does not correlate to construction employment - casting doubt on the validity of one or both data sets.Econintersect analysis:

  • Growth accelerated 2.5 % month-over-month and up 4.7 % year-over-year.
  • Inflation adjusted construction spending up 3.9 % year-over-year.
  • 3 month rolling average is 9.5 % ABOVE the rolling average one year ago, and accelerated 4.0 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.
  • Backward revision for the last 3 months was marginally downward.
  • Up 0.9 % month-over-month and up 4.1 % year-over-year (versus the reported +3.4 % year-over-year growth last month).
  • Market expected from Bloomberg / Econoday 0.1 % to 0.8 % month-over-month (consensus +0.6) versus the 0.9 % reported

Construction spending (unadjusted data) was declining year-over-year for 48 straight months until November 2011. That was four years of headwinds for GDP.

 Reis: Apartment Vacancy Rate declined in Q4 to 4.1% -- Reis reported that the apartment vacancy rate was at 4.1% in Q4 2016, down from 4.2% in Q3, and down from 4.3% in Q4 2015. The vacancy rate peaked at 8.0% at the end of 2009, and this is a new low for this cycle. A few comments from Reis Economist Barbara Denham: Showing continued resiliency, the national apartment vacancy rate declined to 4.1% from 4.2% in the third quarter and 4.3% at year-end 2015. Although net absorption (occupancy growth) was the lowest level in more than two years, new construction was also weaker. The fourth quarter statistics ... confirm that the pace of new completions has slowed after soaring over the last few years. Rent growth decelerated as well to a rate of 0.3% in the fourth quarter. Although the fourth quarter usually sees the lowest growth rates of the year, this quarter's results were the lowest since 2009. ... Looking ahead, while new construction is expected to exceed demand (occupancy growth), we do not foresee a spike in vacancy rates. As mentioned above, recently surveyed data shows that the pace of completions has slowed while net absorption has stayed healthy. This means that prospective home buyers have not abandoned the apartment market as rapidly as many had thought would do so by this stage of the expansion.

Reis: Regional Mall Vacancy Rate decreased in Q3 2016, Strip Mall Vacancy Rate increased -- Reis reported that the vacancy rate for regional malls was 7.8% in Q4 2016, unchanged from Q3, and unchanged from 7.8% in Q4 2015. This is down from a cycle peak of 9.4% in Q3 2011. For Neighborhood and Community malls (strip malls), the vacancy rate was 9.9% in Q4, unchanged from Q3, and down from 10.0% in Q4 2015. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011. Comments from Reis Economist Barbara Byrne Denham : Although net absorption was positive, the U.S. vacancy rate for neighborhood and community shopping centers was flat at 9.9%. The national retail average asking rent grew 0.4% for the quarter, as was the effective rent growth rate which was in line with previous quarters. For the year, asking rents increased 1.8% while effective rents increased 1.9%.  The statistics for Malls tell a similar story: a flat vacancy rate and very little change in asking or effective rents. The regional mall vacancy rate was 7.8% -- no change from last quarter or from the fourth quarter of 2015. Asking rents increased 0.4% for the quarter and 2.0% for the year...In short, the fourth quarter statistics show that the growth in e-commerce that has led to scores of store closures across the U.S. is truly starting to impact many retail property markets in a meaningful way. Evidence of this came earlier this week when both Macy's and Sears/Kmart announced more store closures.

A giant wave of store closures is about to hit the US - Retailers are bracing for a fresh wave of store closures at the start of the new year. The industry is heading into 2017 with a glut of store space as shopping continues to shift online and foot traffic to malls declines, according to analysts. "I f you are weaker player, it's going to be a very tough 2017 for you, " said RJ Hottovy, a consumer equity strategist for Morningstar. He said he's expecting a number of retailers to file for bankruptcy next year, in addition to mass store closures. Nearly every major department store, including Macy's, Kohl's, Walmart, and Sears, have collectively closed hundreds of stores over the last couple years to try and stem losses from unprofitable stores and the rise of ecommerce.But the closures are far from over.  Macy's has already said that it's planning to close 100 stores, or about 15% of its fleet, in 2017. Sears is shuttering at least 30 Sears and Kmart stores by April, and additional closures are expected to be announced soon. CVS also said this month that it's planning to shut down 70 locations.Mall stores like Aeropostale, which filed for bankruptcy in May, American Eagle, Chicos, Finish Line, Men's Wearhouse, and The Children's Place are also in the midst of multi-year plans to close stores. Many more announcements like these are expected in the coming months.The start of the year is a popular time to announce store closures. Nearly half of annual store closings announced since 2010 have occurred in the first quarter, CNBC reports.In addition to closing stores, retailers are also looking to shrink their existing locations. "As leases come up, you're going to see a gradual rotation into smaller-footprint stores," Hottovy said. Despite recent closures, the US is still oversaturated with stores.

How Do Americans Get Rich? (And Stay Rich?) --Steve Roth - It’s the American dream. A third of Americans think they’ll be rich someday. More than half of 18–29 year olds think they will be.Less than 5% actually make it.* And many of those do it the old-fashioned way: they inherit it. About 60% of U.S. household wealth is inherited. Between a quarter and a third of Forbes 400 billionaires got rich that way. It may not be the most common way to get there, but it’s widespread, and it’s surely the easiest way.  That aspiration to wealth is deeply understandable. Getting high income from a good job is all well and good, but because wealth begets more wealth — people are compensated simply for owning things — wealth is, potentially, forever. It persists, and spreads through families and dynasties. Wealth can, and often does, endure for generations.So it’s worth asking: how do Americans accumulate wealth? And how does that vary across income and wealth classes? How do the bottom 50% accumulate wealth, for instance, compared to the top 1%? A huge aid to answering that question arrived last month. Gabriel Zucman, Emmanuel Saez, and Thomas Piketty (PSZ) released one of the most important pieces of economic research in the last century. Their Distributional National Accounts (DINAs) reveal the distribution of national income to different income classes, wealth classes, age groups, and genders (and potentially different races, etc. etc.). This has been unavailable in the national accounts, and as a result it’s absent in most macroeconomic empirical work. Here’s one poster exhibit: Collect the whole set. Zucman and company explicitly hope this distributional data “will be adopted by government agencies down the road” (see Conclusion slide). Here’s to it. The DINAs are a magisterial achievement, a treasure trove for empirical economists that merits easy access and prominent, front-and-center presentation in each release of the national accounts. But impressive as they are, the DINAs don’t fully answer the question of how Americans accumulate wealth. Because the DINAs only tally income, and income doesn’t include households’ holding (or “capital”) gains on stock portfolios, real estate, etc. Income does include much “property income” — dividends, interest, etc. That’s income from owning things. But it’s not everything that households receive from ownership. Holding gains figure large in that picture.

"Depressed" Millennials Are Convinced The Trump Economy Is Going To Implode - When asked about the economic outlook for America, millennials were the only generation to predict 2017 would be worse than 2016. As Bloomberg reports, the feeling of impending doom wasn't exclusively reserved for 2017: about a third of millennials surveyed said they don't think they'll have enough money to comfortably retire at all. While the new year marks a fresh start for many, millennials aren't so optimistic. In fact, this generation is the only one to say they're feeling worse, financially, about 2017 than 2016. As Bloomberg details, in the days following the election, Country Financial Group, an insurance and investment firm, conducted its annual financial security index and found that the score was lowest for millennials, defined as those between 18 and 34 years old, at 60.9 (the highest score is 100). To determine its score, used a survey that asked over 1,000 Americans questions about their financial stability, like whether they had savings, or if their assets were adequately assured. Independent research firm GfK collected the data. Generation X-ers, (people aged 35 to 49), had a score of 66.6. Boomers (between the ages of 50 to 64) came in at 69.2. The Silent Generation, defined as those over age of 65, had the highest score at 71.2.

What RVs Say About the American Economy —Anyone despairing about the possibility of an economic slowdown may want to visit this county of 200,000 in northern Indiana for a boost. Elkhart County is the capital of the recreational-vehicle (RV) industry, with 65 percent of all RVs made in the county, according to the Recreational Vehicle Industry Association. And right now, the recreational vehicle industry is doing very, very well. “We’re going gangbusters,” Wes Bogan, marketing director of RV company Thor Motor Coach, told me on a tour of the factory where the vehicles are assembled. The RV industry predicts that 2017 will be a banner year, with manufacturers shipping a record 438,000 units, up 4.4 percent from 2016. This is good news not just for the thousands of people employed in the RV and related industries in Indiana. Usually, economists look at some fairly standard indicators to assess the economy’s health: new claims for unemployment insurance filed by the recently jobless, consumer confidence surveys, and theconsumer confidence index, which measures how Americans feel about the economy. (Some also look to wackier signs: Alan Greenspan has a theory that an uptick in men’s underwear sales is good economic news.) But RV sales turn out to be a pretty good predictor too: When RV sales are doing well, the economy follows; when RV sales tank, the economy is soon to tank too.

Rail Week Ending 31 December 2016: Rail Down 5% for the Year: Week 51 of 2016 shows same week total rail traffic (from same week one year ago) improved according to the Association of American Railroads (AAR) traffic data. If coal and grain are removed from the analysis, rail over the last 6 months been declining around 5% - but this week improved 4.2%. This week's data is a slight outlier caused by week 52 this year being entirely between Christmas and New Years (a low volume period) - and last year week 52's beginning was before Christmas (included some higher volume days). But the monthly data would be little affected and it is expanding. The question is: Is the year long contraction in rail over? It may be. A summary of the data from the AAR: The Association of American Railroads (AAR) today reported weekly U.S. rail traffic, as well as volumes for December 2016 and all of 2016. Carload traffic in December totaled 973,642 carloads, up 2.8 percent or 26,147 carloads from December 2015. U.S. railroads also originated 1,011,870 containers and trailers in December 2016, up 11.2 percent or 102,215 units from the same month last year. For December 2016, combined U.S. carload and intermodal originations were 1,985,512, up 6.9 percent or 128,362 carloads and intermodal units from December 2015. In December 2016, 13 of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with December 2015. These included: coal, up 4.2 percent or 13,360 carloads; grain, up 10.5 percent or 8,663 carloads; and chemicals, up 3.9 percent or 4,599 carloads. Commodities that saw declines in December 2016 from December 2015 included: petroleum and petroleum products, down 17.4 percent or 8,568 carloads; crushed stone, gravel and sand, down 4.1 percent or 2,889 carloads; and miscellaneous carloads, down 5.9 percent or 1,265 carloads. Excluding coal, carloads were up 2 percent or 12,787 carloads in December 2016 from December 2015. Total U.S. carload traffic for 2016 was 13,096,860 carloads, down 8.2 percent or 1,169,152 carloads, while intermodal containers and trailers were 13,490,491 units, down 1.6 percent or 220,171 containers and trailers when compared to 2015. In 2016, total rail traffic volume in the United States was 26,587,351 carloads and intermodal units, down 5 percent or 1,389,323 carloads and intermodal units from the same point last year.Total U.S. weekly rail traffic for the week ending December 31, 2016 was 425,998 carloads and intermodal units, up 7.7 percent compared with the same week last year.

 November Trade Deficit Up $2.9B from Revised October -  - The U.S. International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with data going back to 1992. The monthly reports include revisions that go back several months. This report details U.S. exports and imports of goods and services. Here is an excerpt from the latest report: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $45.2 billion in November, up $2.9 billion from $42.4 billion in October, revised. November exports were $185.8 billion, $0.4 billion less than October exports. November imports were $231.1 billion, $2.4 billion more than October imports. The November increase in the goods and services deficit reflected an increase in the goods deficit of $3.4 billion to $66.6 billion and an increase in the services surplus of $0.5 billion to $21.4 billion. Year-to-date, the goods and services deficit decreased $4.9 billion, or 1.1 percent, from the same period in 2015. Exports decreased $56.6 billion or 2.7 percent. Imports decreased $61.4 billion or 2.4 percent. Today's headline number of -45.20B was worse than the forecast of -42.50B. The previous month was revised upward by 200M. This series tends to be extremely volatile, so we include a six-month moving average.

Trade Deficit at $45.2 Billion in November -- From the Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $45.2 billion in November, up $2.9 billion from $42.4 billion in October, revised. November exports were $185.8 billion, $0.4 billion less than October exports. November imports were $231.1 billion, $2.4 billion more than October imports.  The trade deficit was larger than the consensus forecast. The first graph shows the monthly U.S. exports and imports in dollars through November 2016.Imports increased and exports decreased in October. Exports are 12% above the pre-recession peak and up 1% compared to November 2015; imports are up 3% compared to November 2015. It appears trade might be picking up a little. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $40.82 in November, up from $40.01 in October, and down from $39.19 in November 2015. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012. The trade deficit with China decreased to $30.5 billion in November, from $31.3 billion in November 2015. The deficit with China is a substantial portion of the overall deficit, but the deficit with China has been declining.

November 2016 Trade Data Improving: Trade data headlines show the trade balance degraded from last month. Our analysis paints an improving picture for trade. Trade was data was positive - with imports growing (good sign for the USA economy) and exports growing (good sign for global economy). There was insignificant backward revision. In any event, both export and import trends seem to be generally improving. Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported up month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth accelerated 6.9 % month-over-month (unadjusted data) - up 5.1 % year-over-year (up 5.2 % year-over-year inflation adjusted). The rate of growth 3 month trend is flat (rate of change of growth is accelerating). Exports of goods were reported down, and Econintersect analysis shows unadjusted goods exports growth acceleration of (not including services) 3.7 % month-over month - up 2.4 % year-over-year (up 2.7 % year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating.

  • The decline in seasonally adjusted (but not inflation adjusted) exports was attributed to capital goods exports. Import growth was due to industrial goods.
  • The market expected (from Bloomberg) a trade balance of $-46.0 B to $-42.0 B (consensus $44.5 billion deficit) and the seasonally adjusted headline deficit from US Census came in at $45.2 billion.
  • It should be noted that oil imports were up 13 million barrels from last month, and up 28 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

The headline data is seasonally but not inflation adjusted. Econintersect analysis is based on the unadjusted data, removes services (as little historical information exists to correlate the data to economic activity), and inflation adjusts. Further, there is some question whether this services portion of export/import data is valid in real time because of data gathering concerns. Backing out services from import and exports shows graphically as follows:

Yes Folks, Trade Really Did Cost Manufacturing Jobs  Dean Baker -Yet again the Washington Post tries to tell readers that trade has not been a major factor in the loss of manufacturing jobs in this century. It concluded an interesting piece on Ford's decision to cancel plans for a plant in Mexico by telling readers: "The president-elect has argued that trade policy has quashed American livelihoods, encouraging businesses to seek cheaper labor in other countries. He has criticized Ford, General Motors and Carrier on Twitter for shuttling work south of the border.  "A study last year from the Center for Business and Economic Research at Ball State University, a school in the manufacturing heartland, tells a different story. Co-author Michael Hicks, an economics professor, found that advances in technology caused far more job loss. That’s because automation has enabled factories to produce more goods with fewer people." Actually, automation is not new. It's called "productivity growth" and has been going on for centuries, often much faster than it is today. As we can see, manufacturing employment remained roughly even, with cyclical ups and downs, from 1970 to 2000. It then plunged as the trade deficit exploded to almost 6.0 percent of GDP in 2005 and 2006 ($1.1 trillion in today's economy).  The basic story is that manufacturing employment was declining as a share of total employment through this whole period and undoubtedly would have continued to do so regardless of what happened with trade. However, the sharp plunge in employment that we saw in the years 2000 to 2007 (pre-crash) was due to the trade deficit. It is remarkable that the Washington Post feels so much need to deny this simple fact. It is in the same vein as its refusal to correct its 2007 editorial claiming that NAFTA had led Mexico's GDP to quadruple between 1987 and 2007. The actual number is 83 percent according to I.M.F data. A serious newspaper would correct such an egregious error.

Defense Firms Cash In Amid Soaring Demand for Munitions - WSJ: The makers of precision-guided missiles and bombs are running to keep up with demand as the U.S. military bombards Islamic State from the air. Companies such as Boeing Co., Lockheed Martin Corp. and BAE Systems PLC—which make the precision-guidance kits that carry U.S. missiles and bombs to their targets—are benefiting from the U.S. military’s increased reliance on air power in the Middle East. Nowhere is the U.S. emphasis on air power more pronounced than in the campaign against Islamic State. As of mid-December, the U.S. had conducted 13,041 airstrikes against Islamic State in Iraq and Syria over about 28 months, according to U.S. Central Command, with a single strike often carrying more than one munition. Coalition allies carried out an additional 3,747 strikes over the same period. “Right now, we’re more kinetic than we’ve ever been in this campaign,” U.S. Air Force Chief of Staff Gen. David Goldfein said in an interview late last year. “We’re hitting more targets than we’ve ever hit in a long time in Iraq, Syria and in Afghanistan, so when that goes up, that means more munitions are required.” The extremely accurate munitions don’t come cheap. Equipped with sophisticated laser or GPS targeting technology, a single bomb or missile can cost from $30,000 to $115,000. Overall, the U.S. Air Force has expended about $2 billion worth of precision-guided munitions on Islamic State since the start of the campaign in August 2014, dropping more than 40,000, according to Air Force officials. U.S. aircraft have dropped nearly 18 times more weapons on Islamic State than on targets in Afghanistan over the same period.

Factory goods orders fall, but trend points to recovery | Reuters: New orders for U.S.-made goods fell in November, weighed down by a plunge in the volatile civilian aircraft category, but the underlying trend suggested manufacturing is gradually firming. Factory goods orders declined 2.4 percent, the Commerce Department said on Friday after an upwardly revised 2.8 percent increase in October. November's drop followed four straight months of gains and was the biggest decline since December 2015. Economists polled by Reuters had forecast factory orders decreasing 2.2 percent in November after a previously reported 2.7 percent gain in October. The department also said orders for non-defense capital goods excluding aircraft -- seen as a measure of business confidence and spending plans -- rose 0.9 percent in November as reported last month. Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, gained 0.2 percent in November as previously reported. A report this week showed factory activity hitting a two-year high in December, driven by a surge in new orders. In November, orders for transportation equipment tumbled 13.2 percent, the largest drop since August 2014, reflecting a 73.8 percent decline in civilian aircraft orders. Orders for primary metals jumped 2.2 percent, the biggest rise since December 2015. Machinery orders increased 1.4 percent, the largest gain since January last year. There were increases in orders for computers and electronic products, and electrical equipment, appliances and components. Shipments of overall factory goods slipped 0.1 percent in November after rising 0.2 percent the prior month. Inventories of factory goods increased 0.2 percent. That left the inventories-to-shipments ratio unchanged at 1.34 in November. Unfilled orders at factories dipped 0.1 percent after rising 0.8 percent in October.

November 2016 Manufacturing New Orders Declined: US Census says manufacturing new orders declined. Our analysis is a little better. The rolling averages were unchanged but are in expansion year-over-year. According to the seasonally adjusted data, it was aircraft that caused the decline. The data in this series is noisy so I would rely on the unadjusted 3 month rolling averages which was unchanged but in expansion.

  • The seasonally adjusted manufacturing new orders is down 2.4 % month-over-month, and down 1.8 % year-to-date (last month was down 2.0 % year-to-date)..
  • Market expected (from Bloomberg / Econoday) month-over-month growth of -3.6 % to -1.9 % (consensus -2.5 %) versus the reported -2.4 %.
  • Manufacturing unfilled orders down 0.1 % month-over-month, and down 1.2 % year-over-year.
  • Unadjusted manufacturing new orders growth accelerated 0.8 % month-over-month, and up 1.2 % year-over-year.
  • Unadjusted manufacturing new orders (but inflation adjusted) up 1.0 % year-over-year.
  • Three month rolling new order rolling averages was unchanged month-over-month, and is up 0.5 % year-over-year.
  • Unadjusted manufacturing unfilled orders growth decelerated 0.1 % month-over-month, and down 1.2 % year-over-year
  • As a comparison to the inflation adjusted new orders data, the manufacturing subindex of the Federal Reserves Industrial Production growth was statistically unchanged month-over-month, and up 0.4 % year-over-year.

"We're Gonna Need More War" - November Factory Orders Plunge Most Since August 2014 Despite Defense Spike --Following October's pre-election surge in new factory orders, November saw orders plunge 2.4% MoM (worse than expected) and the biggest drop since Aug 2014. This drop comes despite a 103% MoM rise in defense aircraft orders as non-defense aircraft orders crashed 73.8%. Factory Orders also dipped back into negative territory YoY. An ugly drop in factory orders in November... And Year-over-year, Factory Orders declined for the 23rd month of the last 25...It appears we are going to need more war to keep this dream alive...

ISM Manufacturing index increased to 54.7 in December --The ISM manufacturing index indicated expansion in December. The PMI was at 54.7% in December, up from 53.2% in November. The employment index was at 53.1%, up from 52.3% last month, and the new orders index was at 60.2%, up from 53.0%. From the Institute for Supply Management: December 2016 Manufacturing ISM® Report On Business® . “The December PMI® registered 54.7 percent, an increase of 1.5 percentage points from the November reading of 53.2 percent. The New Orders Index registered 60.2 percent, an increase of 7.2 percentage points from the November reading of 53 percent. The Production Index registered 60.3 percent, 4.3 percentage points higher than the November reading of 56 percent. The Employment Index registered 53.1 percent, an increase of 0.8 percentage point from the November reading of 52.3 percent. Inventories of raw materials registered 47 percent, a decrease of 2 percentage points from the November reading of 49 percent. The Prices Index registered 65.5 percent in December, an increase of 11 percentage points from the November reading of 54.5 percent, indicating higher raw materials prices for the 10th consecutive month. The PMI®, New Orders, Production and Employment Indexes all registered new highs for the year 2016, and the forward-looking comments from the panel are largely positive.”  Here is a long term graph of the ISM manufacturing index. This was above expectations of 53.8%, and suggests manufacturing expanded at as faster pace in December than in November. Another solid report.

ISM Manufacturing Index: December PMI Highest in Two Years - Today the Institute for Supply Management published its monthly Manufacturing Report for December. The latest headline Purchasing Managers Index (PMI) was 54.7 percent, an increase of 1.5 percent from 53.2 previous month and its highest since December of 2014. Today's headline number was above the forecast of 53.6 percent. Here is the key analysis from the report: “The December PMI® registered 54.7 percent, an increase of 1.5 percentage points from the November reading of 53.2 percent. The New Orders Index registered 60.2 percent, an increase of 7.2 percentage points from the November reading of 53 percent. The Production Index registered 60.3 percent, 4.3 percentage points higher than the November reading of 56 percent. The Employment Index registered 53.1 percent, an increase of 0.8 percentage point from the November reading of 52.3 percent. Inventories of raw materials registered 47 percent, a decrease of 2 percentage points from the November reading of 49 percent. The Prices Index registered 65.5 percent in December, an increase of 11 percentage points from the November reading of 54.5 percent, indicating higher raw materials prices for the 10th consecutive month. The PMI®, New Orders, Production and Employment Indexes all registered new highs for the year 2016, and the forward-looking comments from the panel are largely positive.” [source]  Here is the table of PMI components.

Markit Manufacturing PMI: 21 Month High in December - The final December US Manufacturing Purchasing Managers' Index conducted by Markit came in at 54.3, up from the 54.1 November final. Today's headline number was slightly above the consensus of 54.2. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.  Here is the opening from the latest press release:December data signalled a strong end to the year for the US manufacturing sector, with overall business conditions improving at the fastest pace since March 2015. Robust rises in new orders and production volumes led to the sharpest pace of job creation for a year-and-a-half. Meanwhile, greater client spending and upbeat business confidence resulted in the largest accumulation of preproduction inventories since August 2014. Adjusted for seasonal influences, the Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) registered 54.3 in December, up slightly from 54.1 in November, to signal the strongest improvement in business conditions for just under two years. The latest rise in the headline index reading was largely driven by stronger rates of employment growth and inventory building in December, which more than offset slightly weaker increases in output and new orders. [Press Release] Here is a snapshot of the series since mid-2012.

 Stagflation Signs Build As US Manufacturing Surveys Hit 2-Year Highs -- Despite the weakness in 'hard' industrial production data, US Manufacturing 'soft' survey data from ISM and Markit surged in November and December. PMI rose to 54.3 final for December - a 21-month high - with employment rising and inventory-building. However, stagflation concerns continue to build as new orders declined and input price inflation accelerated. ISM rose to its highest since Dec 2014 with prices paid soaring to the highest since June 2011. Spot the difference between 'hard' and 'soft' data... As Stagflation looms... The breakdown shows the surge in pries paid... Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said: “The manufacturing sector ended 2016 on a buoyant note, with promising signs that growth could pick up further in 2017. “The pace of growth signalled by the PMI in December was the strongest for almost two years, and the combination of improving current demand and optimism for a further upturn in 2017 prompted companies to build inventory and boost capacity. The latter was reflected in the largest rise in factory payroll numbers for one and a half years. “The upturn is being driven almost entirely by rising demand from domestic customers, with exports stymied by the dollar’s recent surge. “The improvement in the survey data raises hopes that the official data will soon likewise show signs of the manufacturing sector’s recent malaise lifting. The latest official data showed manufacturing output stagnant compared to the start of the year, but the December PMI is consistent with production growing at an annualised rate approaching 4%.”

U.S. Light Vehicle Sales increase to 18.3 million annual rate in December, Record Year --Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 18.29 million SAAR in December. That is up about 5% from December 2015, and up 3% from the 17.75 million annual sales rate last month.This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for December (red, light vehicle sales of 18.29 million SAAR from WardsAuto).This was above the consensus forecast.From John Sousanis at WardsAuto December 2016 U.S. LV Sales Thread: U.S. Automakers Set Light-Vehicle Sales Record in 2016  U.S. automakers outpaced analyst expectations in December, ensuring that 2016 was the best year for light-vehicle sales ever. A total of 1.68 million LVs were sold in the final month of the year, edging the full-year tally 0.4% over the prior record, set in 2015. The second graph shows light vehicle sales since the BEA started keeping data in 1967..Sales for 2016 hit a new annual record. Sales in 2016 were at 17.465 million, up from the previous record of 17.396 million set last year.

December Auto Sales Exceed Estimates As SAAR Reaches Record Highs -- After Ford warned that North American auto sales had reached a plateau a few months ago, December 2016 auto sales blasted through that plateau to reach all-time record highs.  At a seasonally adjusted selling rate of 18.2mm units, the December SAAR broke through the "plateau" of 18.0mm units set in November of last year... ..and tied the all-time high 18.2mm SAAR level first set in September 2009 (with the exception of a couple of blips in the mid-80s). Meanwhile, every auto OEM blew through selling estimates for the month while GM's chief economist said the "U.S. auto industry remains well-positioned for sales to continue at or near record levels in 2017.” “Key economic indicators, especially consumer confidence, continue to reflect optimism about the U.S. economy and strong customer demand continues to drive a very healthy U.S. auto industry,” said Mustafa Mohatarem, GM’s chief economist. “We believe the U.S. auto industry remains well-positioned for sales to continue at or near record levels in 2017.”

Trump Takes Aim At GM In Tweet: "Make In USA Or Pay Big Border Tax" --Having previously spooked shareholders of Boeing and Lockheed, moments ago Trump started off his week by taking aim at none other than the company bailed out by Barack Obama in one of the most controversial bankruptcies in recent history, General Motors.In a tweet, the President-elect said “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!”, a warning which could be read as an effective ultimatum to move production back to the US or risk tariffs on foreign-made products.General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!— (@realDonaldTrump) January 3, 2017Another potential problem for GM, as shown in the chart below, is that while GM has posted a substantial recovery since its bankruptcy following the financial crisis, the firm's number of jobs has barely budged, even as its biggest "Detroit" competitor has been on a hiring spree. What makes Trump's criticism surprising, however, is that one month ago, Trump appointed GM CEO Mary Barro to his 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." The obligatory Trump criticism following his tweet promptly emerged from the usual sources:

Ford Cancels Plant in Mexico, Moves Jobs to Michigan: — Ford is canceling plans to build a new $1.6 billion factory in Mexico and will invest $700 million in a Michigan plant to build new electric and autonomous vehicles.Ford, however, still plans to shift production of the Focus small car to Mexico and will make the car at an existing plant. President-elect Donald Trump has been pressuring Ford to keep production of the Focus in the U.S.The company made the announcements Tuesday at a factory in Flat Rock, Michigan, near Detroit. The factory will get 700 new jobs.Among the new vehicles it will make are a fully electric small SUV with 300 miles of range.Ford also plans a gas-electric hybrid version of the F-150 pickup.Tap to read full story

Mexico Responds To Ford's Decision To Scrap Its New Plan --Mexico "regrets" Ford's decision to scrap the plan to build a plant in the central Mexican state of San Luis Potosi, the Economy Ministry said on Tuesday, adding that it has made sure Ford will reimburse any costs and expenses from the state government to facilitate the now defunct investment.  In a surprising statement on Tuesday at 11am ET, in an act of goodwill toward the president-elect, the second largest U.S. automaker said it will scrap the $1.6 billion factory in Mexico and will invest $700 million at a Michigan factory, after President-elect Donald Trump had harshly criticized the Mexico investment plan.The Mexican ministry said that jobs created in Mexico have contributed to maintaining other manufacturing jobs in the U.S. that would have disappeared to Asian competition.Meanwhile, Mexico vowed to maintain its commitment to making Mexico a competitive nation to attract investment, and reiterated its commitment to modernizing NAFTA in a way that strengthens competitive capacity of North America.It may find roadblocks in that regard if Trump follows through with his threat to build a "great, big wall" between the two nations.

Mexican standoff looms between Trump and carmakers south of border -- Mexico’s motor industry has seen extraordinary growth in the 22 years since the North American Free Trade Agreement opened up the US market. Production more than tripled to 3.4m vehicles in 2015, and 82 per cent of the country’s 2.7m exports that year went to the US or Canada. But Ford’s announcement on Tuesday that it was abandoning plans for a new Mexican car plant highlights the serious threat that incoming US president Donald Trump poses to the industry. The president-elect has publicly berated US companies that move work across the southern border, including General Motors just this week, and threatened to tear up Nafta. Sergio Marchionne, chief executive of Fiat Chrysler, has already described Mr Trump’s election as a “game changer” for the car industry. Since 1994, low labour costs, unfettered access to the US market and free-trade deals covering another 44 countries have propelled Mexico to become the world’s seventh largest car manufacturer and fourth-largest exporter. Its plants and supply chain support more than 750,000 jobs. Mexican suppliers also provide 40 per cent of all the components used in US-assembled cars, including almost all of the seat belts, air bags and seat covers that go into cars built in the US. In total, a third of all exports from Mexico to the US are cars or associated components. “Without question, the success of Mexico vehicle manufacturing is tied closely to US, and any tinkering with that could have an impact on output and investment in the country,” says Bill Rinna, a senior analyst at forecasting group LMC Automotive.

Trump the Trade Comic: GM Small Cars in Mexico --American nagger-in-chief Doanld Trump has made a habit of criticizing any and all American firms having manufacturing activities overseas. From his nuance-free viewpoint, all such manufacturing is a net loss for the United States, especially in terms of foreigners "stealing jobs." Although there are literally hundreds of economically sensible reasons for doing so--many of which actually benefit Americans overall--the latest Trumpian idiocy takes the cake. Let us consider the ways. Rick Newman of Yahoo Finance has the lowdown... (1) The latest target of Trump's ire is the manufacture of a small car in Mexico that is sold in very small quantities Stateside--hardly a mass exodus of carmaking activity. The incoming president lashed General Motors (GM) on Twitter recently for making its Chevrolet Cruze subcompact in Mexico. Whoops. The Cruze sedan—which accounts for 97.6% of all US Cruze sales—is actually built in Lordstown, Ohio. The slow-selling Cruze hatchback is built in Mexico, but annual sales of just 4,400 units are virtually negligible.  (2) Of the cars GM actually does sell a lot of Stateside--big cars to fit big Americans--almost all of the models with the most American content are made by General Motors:While GM has three factories in Mexico, Trump may not be aware that it also builds some of the most “American” cars on US roads. In an annual “made in America” index calculated by American University’s Kogod School of Business, 9 of the 10 vehicles with the most American content are GM models, including the Buick Enclave, Chevy Corvette and Chevy Equinox. The Ford F-150 pickup is the only non-GM vehicle in the top 10. The Kogod rankings are meant to capture the value that accrues to the US economy from all aspects of automotive production, including not just manufacturing but also things like research and development and where the automaker’s profits are likely to be spent.

Trump’s Miniature Jobs Strategy - From time immemorial corporate executives have played a certain back-scratching if fundamentally dishonest game with politicians, usually at the state or local levels. The corporate types make an investment or employment decision that appears to benefit a particular place, maybe because it makes sense generally, maybe in response to government inducements (maybe disclosed publicly, maybe not). And then they cooperate by giving credit to a friendly politician, who gets to announce a ribbon-cutting or ground-breaking or “jobs saved” claim which is supposed to symbolize the pol’s economic development chops. Usually the economic impact of the “deal” is small potatoes, and may even be offset by the cost of inducements. And in most cases the positive development would have probably happened anyway. But it is in not in the interest of any of the players in the game to admit that it’s all a shuck. It is increasingly apparent that one of the distinctive features of the Trump administration will be raising that particular game to the national level. The first such Trump-brokered “deal” involved the Carrier Corporation, of course. But since that was a particular company Trump bashed during the presidential campaign for its outsourcing practices, and because Trump’s own running mate Mike Pence was in a position to create inducements as governor of Indiana, it looked like it could be a unique event. Not any more. The automaker Ford has announced Trump is responsible for a decision to make certain cars in Michigan rather than Mexico. Ford claims they didn’t get any public subsidies or concessions to make this showy about-face, from Trump or anyone else; no, it was just a “vote of confidence” in the mogul’s plans to make America a lean, mean, job-creatin’ machine. Never mind that Trump attacked Ford for its Mexican plans during the campaign, or that he threatened to slap a 35 percent tariff on the company’s Mexican-produced vehicles — that’s apparently just a coincidence. Now, aside from the rather ludicrous suggestion that Trump’s threats were not a factor in this decision, it is important to note that it involves 1,000 jobs (or so Ford claims, anyway). Yes, there are spin-off effects, and sure, if you are an unemployed or potentially unemployed autoworker living in Flat Rock, Michigan, it’s a big deal.

Tech Giants Seem Invincible. That Worries Lawmakers. - NYTimes: In the technology industry, the sharks have never long been safe from the minnows. Over much of the last 40 years, the biggest players in tech — from IBM to Hewlett-Packard to Cisco to Yahoo — were eventually outmaneuvered by start-ups that came out of nowhere. Then, in the last half decade, something strange happened: The sharks began to get bigger and smarter. Nearly a year ago, I argued that we were witnessing a new era in the tech business, one that is typified less by the storied start-up in a garage than by a posse I like to call the Frightful Five: Amazon, Apple, Facebook, Microsoft and Alphabet, Google’s parent company. Together the Five compose a new superclass of American corporate might. For much of last year, their further rise and domination over the rest of the global economy looked not just plausible, but also maybe even probable. In 2017, much the same story remains, but there is a new wrinkle:  The world’s governments are newly motivated to take on the tech giants. In the United States, Europe, Asia and South America, the Five find themselves increasingly arrayed against legal and regulatory powers, and often even against popular will.

ISM Non-Manufacturing Index at 57.2% in December --The December ISM Non-manufacturing index was at 57.2%, unchanged from 57.2% in November. The employment index decreased in December to 53.8%, from 58.1%. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management:December 2016 Non-Manufacturing ISM Report On Business®  "The NMI® registered 57.2 percent in December, matching the November figure. This represents continued growth in the non-manufacturing sector at the same rate. The Non-Manufacturing Business Activity Index decreased to 61.4 percent, 0.3 percentage point lower than the November reading of 61.7 percent, reflecting growth for the 89th consecutive month, at a slightly slower rate in December. The New Orders Index registered 61.6 percent, 4.6 percentage points higher than the reading of 57 percent in November. The Employment Index decreased 4.4 percentage points in December to 53.8 percent from the November reading of 58.2 percent. The Prices Index increased 0.7 percentage point from the November reading of 56.3 percent to 57 percent, indicating prices increased in December for the ninth consecutive month at a slightly faster rate. According to the NMI®, 12 non-manufacturing industries reported growth in December. The non-manufacturing sector closed out the year strong maintaining its rate of growth month-over-month. Respondents' comments are mostly positive about business conditions and the overall economy." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. This was above the consensus forecast of 56.8, and suggests about the same rate of expansion in December as in November.  A solid report.

ISM Non-Manufacturing: Growth Flat in December - The Institute of Supply Management (ISM) has now released the December Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 57.2 percent, unchanged from last month. Today's number came in above the forecast of 56.6 percent.Here is the report summary:"The NMI® registered 57.2 percent in December, matching the November figure. This represents continued growth in the non-manufacturing sector at the same rate. The Non-Manufacturing Business Activity Index decreased to 61.4 percent, 0.3 percentage point lower than the November reading of 61.7 percent, reflecting growth for the 89th consecutive month, at a slightly slower rate in December. The New Orders Index registered 61.6 percent, 4.6 percentage points higher than the reading of 57 percent in November. The Employment Index decreased 4.4 percentage points in December to 53.8 percent from the November reading of 58.2 percent. The Prices Index increased 0.7 percentage point from the November reading of 56.3 percent to 57 percent, indicating prices increased in December for the ninth consecutive month at a slightly faster rate. According to the NMI®, 12 non-manufacturing industries reported growth in December. The non-manufacturing sector closed out the year strong maintaining its rate of growth month-over-month. Respondents' comments are mostly positive about business conditions and the overall economy." [Source] Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

Markit Services PMI Down Slightly in December -   The final December US Services Purchasing Managers' Index conducted by Markit came in at 53.9 percent, down 0.7 percent from the final November estimate. The consensus was for 53.4 percent. Markit's Services PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release:December data highlighted a sustained upturn in business activity and incoming new work across the U.S. service sector. Greater workloads and improved confidence towards the business outlook in turn contributed to the fastest rise in payroll numbers since September 2015. However, the latest survey indicated that inflationary pressures pricked up again in December, with prices charged by service providers increasing at the steepest pace for one-and-a-half years.The seasonally adjusted final Markit U.S. Composite PMI™ Output Index registered 54.1 in December, down slightly from 54.9 in November but above the 50.0 no-change mark for the tenth News Release Page 2 of 3 © IHS Markit 2017 consecutive month. Moreover, the average reading for the final quarter of 2016 (54.6) was the strongest since Q4 2015. The composite index is based on original survey data from the Markit U.S. Services PMI and the Markit U.S. Manufacturing PMI. [Press Release] Here is a snapshot of the series since mid-2012.

US Services Economy "Loses Momentum" As Inflationary Pressure Surges --While better than expectations, Markit Services PMI dropped to 3-month lows at 53.9 in December as input prices soared at the fastest rate since July 2015 "which could feed through to reduced consumption." ISM Services was flat at 57.2 in December, holding at 14-month highs from November, with employment declining despite rising new orders.The divergence continues but both surveys showed meomentum fading... Inflationary pressures are building...Input cost inflation accelerated in December and was the joint-fastest since July 2015. Reports from survey respondents suggested that suppliers had passed on higher fuel and raw material prices.A number of firms also pointed to increased food costs. Latest data indicated a solid rise in average prices charged by service providers and the rate of inflation was the steepest recorded since June 2015. ISM Breakdown - note decline in employment and new export orders (strong dollar) as well as surging 'Prices Paid'

Weekly Initial Unemployment Claims decrease to 235,000 -- The DOL reported:In the week ending December 31, the advance figure for seasonally adjusted initial claims was 235,000, a decrease of 28,000 from the previous week's revised level. The previous week's level was revised down by 2,000 from 265,000 to 263,000. The 4-week moving average was 256,750, a decrease of 5,750 from the previous week's revised average. The previous week's average was revised down by 500 from 263,000 to 262,500.
There were no special factors impacting this week's initial claims. This marks 96 consecutive weeks of initial claims below 300,000, the longest streak since 1970.
The previous week was revised down. The following graph shows the 4-week moving average of weekly claims since 1971.

US Challenger: December Layoffs Rise, But 2016 Down From 2015 (MNI) - There were 33,627 layoff intentions announced in December, up from 26,936 in November and up sharply from the 23,622 level in December 2015, job placement firm Challenger, Gray and Christmas, Inc. said in a report released Thursday. The data are not seasonally adjusted. The automotive sector posted the largest number of job cuts in December, accounting for 4,705 of the layoffs. The government sector announced 3,498 layoffs and the transportation sector posted 3,439 layoff intentions. For the full year, there were 526,915 layoff intentions, down from 598,510 in 2015 and slightly below the annual average since 2010. The 2016 total included only 91,303 layoffs in the fourth quarter, the lowest quarterly total since the second quarter of 2000. The 2016 total was led by the energy sector, which posted large layoffs earlier in the year when oil prices were low, but saw layoffs taper off later in the year as prices rose. "Oil prices are back on the rise. The new administration poised to take over the White House in January could further benefit the industry by relaxing regulations and drilling restrictions," said John Challenger, chief executive officer of Challenger, Gray & Christmas. Challenger added that oil companies may continue to expand in 2017, but cautioned that the supply of skilled workers remains thinner than needed. In other data released, there were 35,198 hiring intentions in December after a 108,994 surge in November than was led by Yum Brands, which owns Taco Bell, Pizza Hut, and Kentucky Fried Chicken. The computer sector accounted for 26,115 of the hiring intentions in December.

U.S. Gallup Good Jobs Rate Down in December -- The Gallup Good Jobs (GGJ) rate in the U.S. was 44.7% in December, down from 45.7% in November. While the GGJ rate often declines somewhat in December, this represents the first month with a year-on-year decrease since April 2014. The U.S. GGJ rate was 45.3% in December 2015. U.S. Gallup Good Jobs Rate, Monthly Trend The December GGJ rate is down from the record high of 47.1% in July. GGJ typically peaks in June and July with summer employment and then drops in the fourth quarter, with a limited uptick in October. November's 0.7-percentage-point decrease to 45.7% fit this pattern, but the one-point drop in December is large relative to Decembers in the past several years. The latest results are based on Gallup Daily tracking interviews with more than 27,000 Americans, conducted Dec. 1-29 by landline telephone and cellphone. The GGJ metric tracks the percentage of U.S. adults, aged 18 and older, who work for an employer full time -- at least 30 hours per week. Gallup does not count adults who are self-employed, who work fewer than 30 hours per week, who are unemployed or who are out of the workforce as payroll-employed in the GGJ metric. The Gallup Good Jobs metric does not take into account factors such as job satisfaction or salary level, and solely reflects full-time employment for an employer. GGJ is not seasonally adjusted. Gallup first measured the GGJ rate in January 2010, a time of high unemployment (10.9%). At that time, 42.5% of Americans were employed full time by an employer. GGJ fell as low as 41.7% in February 2011 but improved over the next few months. Before this year, the previous high point was 45.7% in October 2012.

 ADP: Private Employment increased 153,000 in December -From ADP: Private sector employment increased by 153,000 jobs from November to December according to the December ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. .. “As we exit 2016, it’s interesting to note that the private sector generated an average of 174,000 jobs per month, down from 209,000 in 2015,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “And while job gains in December were slightly below our monthly average, the U.S. labor market has experienced unprecedented seven years of growth that has brought us to near full employment. As we enter 2017, the tightening labor market will likely slow the growth.”  Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth remains strong but is slowing. The gap between employment growth in the service economy and losses on the goods side persists. Smaller companies are struggling to maintain payrolls while large companies are expanding at a healthy pace.”This was below the consensus forecast for 172,000 private sector jobs added in the ADP report.   The BLS report for December will be released Friday, and the consensus is for 175,000 non-farm payroll jobs added in December.

Anticipating the December Employment Report: 153K New Nonfarm Private Jobs Comment on The economic mover and shaker this week is Friday's employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, the most publicized being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository). Today we have the ADP December estimate of 153K new nonfarm private employment jobs, a drop from November's 215K, which was a tiny downward revision of 1K. October was revised upward by 5K. The 153K estimate came in below the consensus of 170K for the ADP number. The forecast for the forthcoming BLS report is for 178K nonfarm new jobs (the actual PAYEMS number) and the unemployment rate to rise from 4.6% to 4.7%. Here is an excerpt from today's  ADP report: “As we exit 2016, it’s interesting to note that the private sector generated an average of 174,000 jobs per month, down from 209,000 in 2015,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “And while job gains in December were slightly below our monthly average, the U.S. labor market has experienced unprecedented seven years of growth that has brought us to near full employment. As we enter 2017, the tightening labor market will likely slow the growth.” Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth remains strong but is slowing. The gap between employment growth in the service economy and losses on the goods side persists. Smaller companies are struggling to maintain payrolls while large companies are expanding at a healthy pace.” Here is a visualization of the two series over the previous twelve months.

A Closer Look at This Morning's ADP Employment Report - dshort - Advisor Perspectives: In this morning's ADP employment report we got the December estimate of 153K new nonfarm private employment jobs from ADP, a decline from November's 215K, which was a tiny downward revision of 1K. October was revised upward by 5K. The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics. But the ADP report includes a wealth of information that's worth exploring in more detail. Here is a snapshot of the monthly change in the ADP headline number since the company's earliest published data in April 2001. This is quite a volatile series, so we've plotted the monthly data points as dots along with a six-month moving average, which gives us a clearer sense of the trend. As we see in the chart above, the trend peaked 20 months before the last recession and went negative around the time that the NBER subsequently declared as the recession start. At present the six-month moving average has been hovering in a relatively narrow range around 200K new jobs since around the middle of 2011. ADP also gives us a breakdown of Total Nonfarm Private Employment into two categories: Goods Producing and Services. Here is the same chart style illustrating the two. The US is predominantly a services economy, so it comes as no surprise that Services employment has shown stronger jobs growth. The trend in Goods Producing jobs went negative over a year before the last recession. At present this series is drifting into contraction with job losses for six of the past eleven months. For a sense of the relative size of Services over Goods Producing employment, the next chart shows the percentage of Services Jobs across the entire series. The latest data point is a record high.There are a number of factors behind this trend. In addition to our increasing dependence of Services, Goods Production employment continues to be impacted by automation and offshoring. The percentage in the chart above leveled off in late 2010 but began drifting higher in early 2015. For a better sense of the components of the two Goods Producing and Service Providing cohorts, here is a snapshot of the five select industries tracked by ADP. The two things to note here are the relative sizes of the industries and the relative trends. Note that Construction and Manufacturing are Production industries whereas the other three are Service Providing.

December Employment Report: 156,000 Jobs, 4.7% Unemployment Rate - From the BLSTotal nonfarm payroll employment rose by 156,000 in December, and the unemployment rate was little changed at 4.7 percent, the U.S. Bureau of Labor Statistics reported today. Job growth occurred in health care and social assistance.  The change in total nonfarm payroll employment for October was revised down from +142,000 to +135,000, and the change for November was revised up from +178,000 to +204,000. With these revisions, employment gains in October and November were 19,000 higher than previously reported.  In December, average hourly earnings for all employees on private nonfarm payrolls increased by 10 cents to $26.00, after edging down by 2 cents in November. Over the year, average hourly earnings have risen by 2.9 percent. The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 156 thousand in December (private payrolls increased 144 thousand). Payrolls for October and November were revised up by a combined 19 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In December, the year-over-year change was 2.16 million jobs. This has been moving down, but still a solid year-over-year gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate increased in December to 62.7%. This is the percentage of the working age population in the labor force. A large portion of the recent decline in the participation rate is due to demographics. The Employment-Population ratio was unchanged at 59.7% (black line). I'll post the 25 to 54 age group employment-population ratio graph later. The fourth graph shows the unemployment rate. The unemployment rate increased in December to 4.7%. This was below expectations of 175,000 jobs, however the previous two months were revised up. And there was a pickup in wage growth.

December jobs report:

  • +156,000 jobs added
  • U3 unemployment rate up +0.1% from 4.6% to 4.7%
  • U6 underemployment rate down -0.1% from 9.3% to 9.2%
  • Not in Labor Force, but Want a Job Now: down -176,000 from 5.876 million to 5.662 million  
  • Part time for economic reasons: down -64,000 from 5.662 million to 5.598 million
  • Employment/population ratio ages 25-54: up +0.1% from 78.1% to 78.2% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.07 from $21.73 to $21.80,  up +2.5% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

October was revised downward by -7,000, but November was revised upward by +26,000, for a net change of +19,000.  The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.

  • the average manufacturing workweek rose 0.1 from 40.6 to 40.7 hours.  This is one of the 10 components of the LEI, and is a positive. 
  • construction jobs decreased by -3,000 YoY construction jobs are up +102,000.   
  • manufacturing jobs increased by +17,000, but are down -45,000 YoY
  • temporary jobs decreased by -15,500.
  • the number of people unemployed for 5 weeks or less --creased by ---,000 from 2,421,000 to 2,----,000.  The post-recession low was set over 1 year ago at 2,095,000.
  • Overtime rose +0.1 from 3.2 to 3.3 hours.
  • Professional and business employment (generally higher- paying jobs) increased by +15,000 and are up 522,000 YoY.
  • the index of aggregate hours worked in the economy rose by 0.2  from  105.8 to 106.0
  • the index of aggregate payrolls rose by 0.7 from 131.0 to 103.7.

December Payrolls Disappoint, Rise Only 156K, But Average Hourly Earnings Jump --With Wall Street expecting a 178K payrolls print for president Obama's final full monthly December jobs report, the headline December nonfarm payrolls increase of just 156K is likely to disappoint. However, the poor December number will likely be offset by a revision to the November print from 178K to 204K, even as October was revised downward from 142K to 135K, for a net revision of the past two months to 19K higher.The unemployment rate printed at 4.7% as predicted, fractionally higher from last month's 4.6%.However, the big silver lining in today's jobs report, and what Wall Street will likely mostly focus on, is the jump in average hourly earnings, which rose 0.4% in December, up from the disappointing November -0.1% decline, and ahead of the 0.3% expected by consensus.Some more details from the report:Total nonfarm payroll employment rose by 156,000 in December, with an increase in health care and social assistance. Job growth totaled 2.2 million in 2016, less than the increase of 2.7 million in 2015.Employment in health care rose by 43,000 in December, with most of the increase occurring in ambulatory health care services (+30,000) and hospitals (+11,000). Health care added an average of 35,000 jobs per month in 2016, roughly in line with the average monthly gain of 39,000 in 2015.Social assistance added 20,000 jobs in December, reflecting job growth in individual and family services (+21,000). In 2016, social assistance added 92,000 jobs, down from an increase of 162,000 in 2015.Employment in food services and drinking places continued to trend up in December (+30,000). This industry added 247,000 jobs in 2016, fewer than the 359,000 jobs gained in 2015.Employment also continued to trend up in transportation and warehousing in December (+15,000). Within the industry, employment expanded by 12,000 in couriers and messengers. In 2016, transportation and warehousing added 62,000 jobs, down from a gain of 110,000 jobs in 2015.Employment in financial activities continued on an upward trend in December (+13,000). This is in line with the average monthly gains for the industry over the past 2 years.In December, employment edged up in manufacturing (+17,000), with a gain of 15,000 in the durable goods component. However, since reaching a recent peak in January, manufacturing employment has declined by 63,000.Employment in professional and business services was little changed in December (+15,000), following an increase of 65,000 in November. The industry added 522,000 jobs in 2016.Employment in other major industries, including mining, construction, wholesale trade, retail trade, information, and government, changed little in December.The average workweek for all employees on private nonfarm payrolls was unchanged at 34.3 hours in December. In manufacturing, the workweek edged up by 0.1 hour to 40.7 hours, and overtime edged up by 0.1 hour to 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.6 hours.In December, average hourly earnings for all employees on private nonfarm payrolls increased by 10 cents to $26.00, after edging down by 2 cents in November. Over the year, average hourly earnings have risen by 2.9 percent. In December, average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $21.80. The change in total nonfarm payroll employment for October was revised down from +142,000 to +135,000, and the change for November was revised up from +178,000 to +204,000. With these revisions, employment gains in October and November were 19,000 higher than previously reported. Over the past 3 months, job gains have averaged 165,000 per month.

Little Change in Unemployment/Employment as Job Growth Slows: - Dean Baker  The Labor Department reported little change in the unemployment or employment rates in December, as job growth slowed slightly to 156,000 in the month. The unemployment rate edged up from 4.6 percent to 4.7 percent, but this is well within the margin of error of the survey. The overall employment-to-population ratio (EPOP) remained unchanged at 59.7 percent. The same is true for the EPOP for prime-age workers, which remained at 78.2 percent for the third consecutive month. This is more than 2 full percentage points below the pre-recession peak and almost four percentage points below the 2000 peak.The December job growth was somewhat below the 180,000 average over the last year. Although the falloff is not an obvious cause for concern and the economy is clearly getting closer to full employment, there are aspects of the payroll survey that are disconcerting. ...The average hourly wage is up by 2.9 percent both year-over-year and comparing the last three months with the prior three months. However, it is important to remember that compensation is being shifted from benefits to wages, so total compensation growth is slower.It is also worth noting that average weekly hours are lagging, with the aggregate weekly hours index for December the same as the October level and just 1.0 percent above the year-ago level. This is not a pattern that would be expected in a tight labor market.The other news in the household survey was generally positive. Involuntary part-time employment  continues to edge down, while more people are choosing to work part-time. The number of people working part-time, for economic reasons, fell slightly to about 5,600,000 in December. It is now down by almost 2.2 million from December of 2013, before the key provisions of the Affordable Care Act (ACA) took effect. By contrast, the number of people choosing to work part-time has continued to rise, presumably because they no longer need to get insurance from their employer. It now stands just over 21,250,000, or more than 2.4 million above its pre-ACA level. The number of self-employed is up by 890,000 or just over 6.0 percent.Less encouraging is a drop in the share of unemployment due to voluntary quits from 12.5 percent to 12.0 percent, although the share of long-term unemployment fell to 24.2 percent, a new low for the recovery.

December Employment Slightly Off Expectations (7 graphs) Today’s employment report from the BLS revealed that establishments increased employment by 156,000 in December.  In addition, over-the-month revisions decreased October employment by 7,000 while adding 26,000 to November’s job gain.. There were 144,000 more private sector jobs, 12,000 of those in goods producing and 132,000 in service sector jobs. 2016 saw an increase of 2.2 million new jobs, lower than the 2.7 million jobs added in 2015. Health care and social assistance led the way with a 63,300 employment gain. Durable goods manufacturing employment increased 15,000. On the downside, temporary help services shed 15,500 jobs; construction down 3,000 and mining and logging down 2,000. While employment gains were less than many anticipated (somewhere in the 180,000 range) hours of work were also a bit disappointing, remaining at 34.3 after a downward revision to November from 34.4. to 34.3. Most of 2014 and 2015 saw the workweek in the 34.5 to 34.6 range while 2016 started off with a 34.6 reading but has declined over the year. Real earnings of all private workers has been trending up, finally showing signs of wage growth. In real terms, however, the CPI has eaten away some of the gains. From the household survey the labor force increased 184,000, causing the participation rate to climb slightly to 62.7, while the number of employed increased 63,000, so that the unemployment rate increased from 4.65% to 4.72%. The overall picture for 2016 shows a labor market that continues to expand, but lethargically, although at a pace higher than the recovery from the 2001 recession. Looking at the 12 month moving average there is some evidence of a slowing down in employment growth. However, given the recent election and the mostly positive effects on confidence measures as well as the stock market, perhaps signals a brighter future for the labor market.

Jobs Report: 2.2 million jobs gained in 2016; Unemployment ends year at a low 4.7% -- Jared Bernstein -- Payrolls rose 156,000 last month and the unemployment rate ticked up slightly to 4.7, as the US job market continues to post solid and steady gains. Over 2016, average hourly wage growth is up 2.9 percent, the fastest yearly gain thus far in the recovery that began in 2009. Coupled with low inflation, this means the job market is delivering real gains to paychecks. JBs monthly smoother (average monthly gains over 3, 6, and 12-month periods) shows that the pace of job growth has slowed over the year, in part due to weaker GDP growth, but also as is characteristic of maturing recoveries. The Federal Reserve’s rate hikes, albeit small, may also be in the mix as they too are intended to tap the growth brakes. The 2.9 percent increase in average hourly pay over 2016 is the fastest pace of wage growth since mid-2009, when the current expansion got underway. (Do not make a big deal out of the big monthly bump of 0.4 percent–that’s a bounce back from last month’s nominal wage decline.) While this number may spook some inflation hawks, it should not:

  • –nominal wage growth of 3-3.5 percent is considered non-inflationary by the Fed;
    –after years of stagnation, wage earners have a lot to make up, and part of that should come from the non-inflationary source of shifting some national income from the profit to the wage side;
    –there’s little evidence of wage growth bleeding into price growth in recent years; as wage growth has accelerated, prices have not;
    –for 80 percent of the private workforce who are blue collar and non-managerial workers, pay is up 2.5 percent over the past year, so the gains may not fully be reaching all corners of the job market.

As noted, 2016 ended with the unemployment rate at a low 4.7 percent. While that measure is about what the Federal Reserve considers full employment (and thus a rationale for their December rate hike), other indicators, while also improved, are not there yet. For example, underemployment, a broader measure of labor market slack that includes 5.6 million part-timers who’d want but can’t find full-time work, remains somewhat elevated at 9.2 percent. Note that this is down from almost 10 percent over the year, and the lowest it’s been yet over the recovery. The labor force participation rate ticked up slightly to 62.7 percent, the same level as a year ago and well below its pre-recession peak. Below, I discuss the recent history of this important benchmark. Also, the employment rate for prime-age workers (25-54) stayed constant at 78.2 percent last month. While this proxy for labor market demand for a core group of workers (who are generally non-retirees) is up almost 4 percentage points from its trough, it remains about 2 points below its pre-recession peak.

The Slow Fade For US Job Growth Continues - US companies added 144,000 workers to payrolls in December, well below the 198,000 advance in November, the Labor Department reports. The softer increase was conspicuous in the year-over-year trend too, reaffirming what’s been clear for some time: the labor market’s well past its peak for this point in the cycle as job creation continues to shift into lower gear. The high water mark for annual growth since the recession ended in 2009 is February 2015, when private payrolls gained 2.58% vs. the year-earlier level. Those days are long gone: companies increased the workforce by 1.63% last month vs. a year ago—the slowest annual increase in more than five years. The good news is that the weaker growth trend appears relatively stable, which is to say that the decline is gradual. At some point, the slide will start to pinch, raising questions about recession risk. But if recent history’s a guide, the decline can roll on, perhaps well into next year, without triggering a conspicuous warning signal for the business cycle. But when and if we reach the point where the labor market’s growth is below ~1% a year, the outlook for the macro trend will suffer. Meantime, slow growth prevails, and for the moment there’s no reason to assume that the expansion won’t endure. The rebound in wage growth last month, in fact, inspires some analysts to argue that the year ahead looks brighter than the year-over-year trend in payrolls implies. “It’s a very strong job market overall,” says Scott Brown, chief economist for Raymond James Financial. “There’s a further tightening in labor market conditions. Wage pressures are certainly building, and we should continue to see further upward pressure this year.” The wild card is the incoming Trump administration, which is planning on rolling out a new set of policies that cut taxes, reduce regulation, and introduce infrastructure spending projects. Does it all add up to stronger economic growth? If so, will growth in the labor market re-accelerate?

Comments: Solid December Employment Report, Pickup in Wage Growth - The headline jobs number was below expectations, but, including the combined upward revisions to the previous two months, this was a solid report. Job growth has averaged 180,000 per month this year. In December, the year-over-year change was 2.16 million jobs. A key positive was the increase in hourly earnings.  This is a noisy series, and the trend is clearly up. This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees. Nominal wage growth was at 2.9% YoY in December. According to the BLS employment report, retailers hired seasonal workers at a lower pace than the last few years. Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year. This graph really shows the collapse in retail hiring in 2008. Since then seasonal hiring has increased back close to more normal levels. Note: I expect the long term trend will be down with more and more internet holiday shopping. Retailers hired 673 thousand workers (NSA) net in October, November and December, this is down from just over 739 thousand for the same period over the last several years. Note: this is NSA (Not Seasonally Adjusted). This suggests retailers were a little cautious about the holiday season. Or maybe retailers had trouble finding seasonal hires. The 25 to 54 participation rate increased in December to 81.5%, and the 25 to 54 employment population ratio was unchanged at 78.2%. The participation rate has been trending down for this group since the late '90s, however, with more younger workers (and fewer older workers), the participation rate might move up some more. The number of persons employed part time for economic reasons (also referred to as involuntary part-time workers), at 5.6 million, was essentially unchanged in December but was down by 459,000 over the year. These workers are included in the alternate measure of labor underutilization (U-6) that declined to 9.2% in December. This is the lowest level for U-6 since April 2008. This graph shows the number of workers unemployed for 27 weeks or more. According to the BLS, there are 1.831 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.856 million in November. This is trending down, and is at the lowest level since July 2008.

Where The December Jobs Were: Nurses, Waiters, And Waste Cleaners -- Something remains very broken with the US labor market: while the unemployment rate remains just shy of the lowest print since August 2007, rising fractionally to 4.7%, wage growth for most workers, as reported earlier, rose just 2.5%, far below the 4.0% it was when the unemployment rate last hit 4.7%. This continues to vex economists who have vowed that if only one lowers the unemployment rate far enough, all the slack in the labor market will be soaked up. Alas, that is not happening, for several reasons, the chief of which is that the quality of jobs added remains subpar, with wage growth - especially for less than "supervisory" and management positions - flat. Still, according to the BLS at least, some 155,000 seasonally adjusted jobs were added in December, arbitrarily goalseeked as they may have been. Where were they?  Here is the answer:

  • The most actively hiring sector was health care, which saw a whopping 70,000 increase in December jobs, nearly half of total. Most of the increase occured in ambulatory health care services (+30,000) and hospitals (+11,000). Social assistance added 20,000 jobs in December, reflecting job growth in individual and family services (+21,000).
  • Professional and Busines Services rose by a total of 30,500, the second highest gaining category. here the biggest contributor was Administrative and Waste Services to Buildings and Dwellings, which rose by 10,600.
  • Another minimum wage job category that added jobs in December was
    Leisure and Hospitality, which added a grand total of 24,000 jobs. here, the biggest contributor was an old favorite: employment in food services and drinking places, which continued to trend up in December (+30,000).
  • What is curious is that while retailers have been laying off thousands of people left and right, according to the BLS this category added another 6,300 in December, if a substantial drop from November's 19,500.
  • Highly paid construction jobs declined by 3,000 in December after posting a substantial rebound of 17,000 in November

Not So Fast: This Is Where All The "Blistering" Hourly Earnings Growth Came From --There is a simple reason why the vast majority of American workers, some 82% of them, are not feeling any wage growth: there simply isn't any. After today's jobs report, Wall Street has been fast to ignore the modest headline payrolls disappointment, which in December rose less than expected following an upward revised November, and focus exclusively on that "other" number, the jump in average hourly earnings, which in December rose 0.4% on a monthly basis, and a blistering 2.9% Y/Y, the highest annual growth since the financial crisis, as shown in the chart below. Wall Street analysts were quick to praise the jump in hourly earnings, such as Deutsche Bank's Alan Ruskin who said the following: The particular medium-term relevance of the acceleration in earnings is:

    • i) this is coming well before any fiscal stimulus hits, and underscores the unusual timing and therefore inflationary influence that a fiscal stimulus can have at this point in the business cycle;
    • ii) it tends to provide evidence that indeed the economy is at full employment and that estimates of the nature rate are not apt to drift much lower, negating some of the spare capacity participation arguments that would suggest otherwise.
    • iii) it plays to the idea that the Fed may already be behind the curve, not least because the impetus from lower oil prices has turned more inflationary as well.

A nice analysis, there is just one problem: it may well be totally wrong.As we try to point out every month, this headline hourly earnings number - impressive as it may be - tells an incomplete story as it consolidates wages for both production & nonsupervisory employees, which comprise the vast majority, or 82.3% of the labor force, and the top echelon of workers, the 17.7% of private workers who are classified as supervisory, and managerial.What happens when one looks at just the subset of production and nonsupervisory private workers, which in October amounted to 101.3 million, or just over 82% of the entire private workforce? Well, we find that their wage growth story is very different. According to the BLS, these particular workers made on average $21.80 per hour, up only 2.5% from $21.26 a year ago, which as the chart below shows is where wage growth for this group has been for three years, and after a modest dip in late 2014, has been largely unchanged since the start of 2014. So where did the wage growth come from? Simple: the 17.7% of supervisory, managerial private workers that are excluded from the above grouping, but make up the balance of America's 123.1 million private workers. It is this group that saw a surge in their implied average wages, which soared by a record high 4.7% in December!

  ‘Routine’ Jobs Are Disappearing --One of the most worrying economic trends over the past few decades has been the decline of middle-class jobs in the U.S. As “routine” jobs—often middle-class work based on a relatively narrow set of repeated tasks, such as welding-machine operators or bank tellers—disappear, many workers who would typically have held them have taken on lower-paying low-skill manual work or simply dropped out of the labor force, according to new research from a trio of economists. The paper, called “Disappearing Routine Jobs,” provides more evidence that the transformation of work in the U.S.—from an industrial economy to a digital one where routine work is automated or outsourced and the remaining jobs are concentrated in low-paid service work or high-skilled knowledge work—is contributing to the shrinking labor-force participation rate, said co-author Henry Siu, a professor at the University of British Columbia. The share of Americans working in routine jobs has fallen from 40.5% in 1979 to 31.2% in 2014, according to the paper. The federal government’s official measure of Americans age 16 and over who are working or seeking work has fallen from a recent high of 67.3% in 2000 to 62.7% in November 2016. “Routine jobs are disappearing and more and more prime-age Americans aren’t working,” said Mr. Siu. “These things are two sides of the same coin.” The authors also found that the impact of the loss of routine jobs fell mostly on male high-school dropouts of all ages as well as men under age 50 with high-school diplomas. These groups have failed to move into high-paying, nonroutine jobs that require skills in areas like critical thinking and problem-solving. Instead, they have to a great extent stopped working at all, as many studies have documented. To counter these trends, the U.S. must invest in raising the skills of the workers most likely to be affected by the disappearance of routine jobs, labor-market experts say.

Why Men Don’t Want the Jobs Done Mostly by Women - NYTimes: It hasn’t been a great time to be a man without a job. The jobs that have been disappearing, like machine operator, are predominantly those that men do. The occupations that are growing, like health aide, employ mostly women. One solution is for the men who have lost jobs in factories to become health aides. But while more than a fifth of American men aren’t working, they aren’t running to these new service-sector jobs. Why? They require very different skills, and pay a lot less. They’re also seen as women’s work, which has always been devalued in the American labor market. The two occupations predicted by the Bureau of Labor Statistics to decline most quickly from 2014 to 2024 are locomotive firers, shrinking 70 percent, and vehicle electronics installers and repairers, down 50 percent. They are 96 percent and 98 percent male. Of the fastest-growing jobs, many are various types of health aides, which are about 90 percent female. When men take these so-called pink-collar jobs, they have more job security and wage growth than in blue-collar work, according to recent research. But they are paid less and feel stigmatized.With a few exceptions, the fastest-growing jobs are predominantly female, while the fastest-declining ones are mostly male. “The jobs being created are very different than the jobs being eliminated,” said David Autor, an economist at M.I.T. “I’m not worried about whether there will be jobs. I’m very worried about whether there will be jobs for low-educated adults, especially the males, who seem very reluctant to take the new jobs.”

Beef-jerky plant employee fired after call to 911 over severed thumb: The owner of a now-closed beef-jerky maker is being sued by the federal government for firing an employee who tried to call 911 to help a co-worker with a severed thumb. John M. Bachman, who owned the Lone Star Western Beef plant in Fairmont, could be forced to pay back wages and punitive damages to the employee as a result of the lawsuit, which the U.S. Labor Department filed Thursday against him and his company in federal court in Clarksburg. The lawsuit said that when a band saw severed part of a worker’s right thumb in July 2014, his co-worker applied pressure to the wound while using her cell phone to call 911. But before responders could answer, Bachman allegedly ordered her to hang up, and she was fired two days later. Instead of calling an ambulance, Bachman collected the severed part of Chris Crane’s thumb and told a supervisor to take him to an urgent care clinic. Crane was ultimately transferred to a hospital, where efforts to reattach the thumb were unsuccessful, the lawsuit said. The co-worker, Michele Butler-Savage, told a U.S. agriculture inspector later that day that Bachman did not fully clean or sanitize the area of the plant where the accident happened. She also mentioned a lack of personal protective equipment. After she was fired, she filed a complaint with the Occupational Safety and Health Administration, which found the company violated federal whistleblower protections for workers who report violations of the law. ... Bachman didn’t immediately return a message left at a telephone number listed on the company’s website. In January 2015, the plant closed and relocated to Reading, Pennsylvania, the Labor Department said.

The hidden cost of made-in-America retail bargains -- He had spent his latest 45-hour workweek hunched over a sewing machine, attaching labels and stitching collars and tightening black and gold blouses that would soon sell at bargain prices at a popular retailer. But now it was Saturday afternoon, paycheck time, when Pedro felt the full sting of that bargain: It was his own salary that helped keep the prices down for consumers. His manager gathered the 30-some workers from their stations in the unmarked brick building and passed out payslips. For the week, he said, he’d been paid $225. Or $5 per hour. “There’s nothing to do but take it,” Pedro said in an interview earlier this month, recalling his workweek. While immigrants often face criticism for stealing jobs, they are the ones being increasingly undercut in America’s clothing industry, forced to accept wages below the legal minimum as retailers fight to pass on bargain prices to consumers.Federal regulators have uncovered a widespread practice of garment workers, most of them undocumented, being paid below the legal minimum wage, according to a recent Department of Labor report. Those findings were echoed in interviews with workers and workers activists here.“It’s almost been a perfect storm for the garment industry,” said Ruben Rosalez, a regional administrator at the Department of Labor’s Wage and Hour division, based in San Francisco. “Not only do [the employers] have the pricing pressure, but they have a labor force that’s prone to being exploited. They’re using that, taking advantage of these workers.”

What If Jobs Weren't The Solution, But The Problem? - Work means everything to us Americans. For centuries – since, say, 1650 – we’ve believed that it builds character (punctuality, initiative, honesty, self-discipline, and so forth). We’ve also believed that the market in labour, where we go to find work, has been relatively efficient in allocating opportunities and incomes. And we’ve believed that, even if it sucks, a job gives meaning, purpose and structure to our everyday lives – at any rate, we’re pretty sure that it gets us out of bed, pays the bills, makes us feel responsible, and keeps us away from daytime TV. These beliefs are no longer plausible. In fact, they’ve become ridiculous, because there’s not enough work to go around, and what there is of it won’t pay the bills – unless of course you’ve landed a job as a drug dealer or a Wall Street banker, becoming a gangster either way. These days, everybody from Left to Right – from the economist Dean Baker to the social scientist Arthur C Brooks, from Bernie Sanders to Donald Trump – addresses this breakdown of the labour market by advocating ‘full employment’, as if having a job is self-evidently a good thing, no matter how dangerous, demanding or demeaning it is. But ‘full employment’ is not the way to restore our faith in hard work, or in playing by the rules, or in whatever else sounds good. The official unemployment rate in the United States is already below 6 per cent, which is pretty close to what economists used to call ‘full employment’, but income inequality hasn’t changed a bit. Shitty jobs for everyone won’t solve any social problems we now face. Don’t take my word for it, look at the numbers. Already a fourth of the adults actually employed in the US are paid wages lower than would lift them above the official poverty line – and so a fifth of American children live in poverty. Almost half of employed adults in this country are eligible for food stamps (most of those who are eligible don’t apply). The market in labour has broken down, along with most others.  The current federal minimum wage is $7.25. Working a 40-hour week, you would have to make $10 an hour to reach the official poverty line. What, exactly, is the point of earning a paycheck that isn’t a living wage, except to prove that you have a work ethic?

 F@ck Work? - --In the wake of Donald Trump’s alarming election to the White House, historian James Livingston published an essay in Aeon Magazine with the somewhat provocative title, “Fuck Work.” The piece encapsulates the argument spelled out in Livingston’s latest book, No More Work: Why Full Employment is a Bad Idea (The University of North Carolina Press, 2016). In both his book and the Aeon essay, Livingston sets out to address several overlapping crises: an alienating and now exhausted “work ethic” that crystallized during the Protestant Reformation; forty years of rampant underemployment, declining wages, and widening inequality; a corresponding surge in financial speculation and drop in productive investment and aggregate demand; and a post-2008 climate of cultural resentment and political polarization, which has fueled populist uprisings from Left to Right. What the present catastrophe shows, according to Livingston’s diagnosis, is the ultimate failure of the marketplace to provision and distribute social labor. What’s worse, the future of work looks dismal. Citing the works of Silicon Valley cyber-utopians and orthodox economists at Oxford and M.I.T., Livingston insists that algorithms and robotization will reduce the workforce by half within twenty years and that this is unstoppable, like some perverse natural process. “The measurable trends of the past half-century, and the plausible projections for the next half-century, are just too empirically grounded to dismiss as dismal science or ideological hokum,” he concludes. “They look like the data on climate change—you can deny them if you like, but you’ll sound like a moron when you do.” Livingston’s response to this “empirical,” “measurable,” and apparently undeniable doomsday scenario is to embrace the collapse of working life without regret. “Fuck work” is Livingston’s slogan for moving beyond the demise of work, transforming a negative condition into a positive sublation of collective life. In concrete terms, this means implementing progressive taxation to capture corporate earnings, and then redistributing this money through a “Universal Basic Income,” what in his book is described as a “minimum annual income for every citizen.” Such a massive redistribution of funds would sever the historical relationship between work and wages, in Livingston’s view, freeing un- and underemployed persons to pursue various personal and communal ends. Such a transformation is imminently affordable, since there are plenty of corporate funds to seize and redirect to those in need. The deeper problem, as Livingston sees it, is a moral one. We must rebuff the punishing asceticism of the Protestant work ethic and, instead, reorganize the soul on more free and capacious bases.

The UBI already exists for the 1% - Matt Bruenig - The universal basic income — a cash payment made to every individual in the country — has been critiqued recently by some commentators. Among other things, these writers dislike the fact that a UBI would deliver individuals income in a way that is divorced from working. Such an income arrangement would, it is argued, lead to meaninglessness, social dysfunction, and resentment. One obvious problem with this analysis is that passive income — income divorced from work — already exists. It is called capital income. It flows out to various individuals in society in the form of interest, rents, and dividends. According to Piketty, Saez, and Zucman (PSZ), around 30% of all the income produced in the nation is paid out as capital income. If passive income is so destructive, then you would think that centuries of dedicating one-third of national income to it would have burned society to the ground by now. In 2015, according to PSZ, the richest 1% of people in America received 20.2% of all the income in the nation. Ten points of that 20.2% came from equity income, net interest, housing rents, and the capital component of mixed income. Which is to say, 10% of all national income is paid out to the 1% as capital income. Let me reiterate: 1 in 10 dollars of income produced in this country is paid out to the richest 1% without them having to work for it. Even if you exclude the capital component of mixed income (since it is connected to work even if the income is not from labor) and housing rents (since these are imputed to homeowners rather than paid to them as cash), that still means that, from equity income and interest alone, the top 1% receives 7.5% of the national income without having to work for it. Put another way: the average person in the top 1% receives a UBI equal to 7.5 times the average income in the country.

 Trump team seeks agency records on border barriers, surveillance (Reuters) In a wide-ranging request for documents and analysis, President-elect Donald Trump's transition team asked the Department of Homeland Security last month to assess all assets available for border wall and barrier construction.The team also asked about the department's capacity for expanding immigrant detention and about an aerial surveillance program that was scaled back by the Obama administration but remains popular with immigration hardliners. And it asked whether federal workers have altered biographic information kept by the department about immigrants out of concern for their civil liberties.The requests were made in a Dec. 5 meeting between Trump's transition team and Department of Homeland Security officials, according to an internal agency memo reviewed by Reuters. The document offers a glimpse into the president-elect's strategy for securing the U.S. borders and reversing polices put in place by the Obama administration. Trump's transition team did not comment in response to Reuters inquiries. A spokeswoman for the Department of Homeland Security and U.S. Customs and Border Protection declined to comment.  In response to the transition team request, U.S. Customs and Border Protection staffers identified more than 400 miles along the U.S.-Mexico border, and about the same distance along the U.S.-Canada border, where new fencing could be erected, according to a document seen by Reuters.   Reuters could not determine whether the Trump team is considering a northern border barrier. During the campaign, Trump pledged to build a wall and expand fencing on parts of the U.S.-Mexico border but said he sees no need to build a wall on the border with Canada.

California Farmers Fret Over Labor Shortages As Trump Vows To Deport Their Work Force -- Unbeknownst to most Americans, the Central Valley of California is an agricultural powerhouse producing nearly 50% of all fruits and vegetables grown in the United States, including over 90% of popular items like almonds, carrots and table grapes.  But producing all those fruits and vegetables is extremely labor intensive requiring up to nearly 500,000 laborers each year. The problem is that those jobs are extremely seasonal (see chart below) and extremely difficult requiring hours of back-breaking work in the 100-degree California sun. Needless to say, America's snowflakes have no interest in such "back-breaking" work and so California farmers have grown reliant on migrant labor from Mexico to grow and harvest their crops.  Which is why Trump's deportation vows have California's farmers a bit concerned. As one farm labor contractor told the Associated Press, farmers are growing increasingly concerned that there won't be enough labor for the 2017 season. "Our workers are scared," said Joe Garcia, a farm labor contractor who hires up to 4,000 people each year to pick grapes from Napa to Bakersfield and along the Central Coast. "If they're concerned, we're concerned."Since Election Day, Garcia's crews throughout the state have been asking what will happen to them when Trump takes office. Farmers also are calling to see if they'll need to pay more to attract people to prune the vines, he said. Garcia tells farmers not to panic. They'll learn how many return from Mexico after the holidays. "We'll plan around what we have," he tells them. "That's all we can do." But some farmers are planning for the worst and investing additional capital now to make their operations more labor efficient.  Fresno farmer Kevin Herman said he's heard too many stories of workers that don't plan to return from their holiday trips to Mexico for the 2017 ag season.

 Houses of Worship Poised to Serve as Trump-Era Immigrant Sanctuaries - Tucked one floor below the majestic Gothic sanctuary of Arch Street United Methodist Church, Javier Flores Garcia sleeps on a cot in a basement Sunday-school classroom that church members have outfitted with a microwave, a compact refrigerator and a television. Mr. Flores, an arborist, longs for the open air, but does not dare set foot outside. He was supposed to report to the immigration authorities last month to be deported to his homeland, Mexico, but one day before his report date, he took refuge in the church. His family is why he is fighting to remain, and when they visited him in the church recently, his 5-year-old son, Javier Jr., parked on his lap. The boy often refuses to leave his father’s side, and has ended up staying for days with him in the church. On Christmas Day, Mr. Flores had been there six weeks. This downtown church is one of 450 houses of worship in the United States that have offered to provide sanctuary or other assistance to undocumented immigrants, according to leaders of the Sanctuary Movement. (Few congregations have the space and fortitude to risk harboring immigrants indefinitely, so others are lining up to contribute money, legal aid, food, child care or transportation.) The congregations joining this network have more than doubled since the election of Donald J. Trump — a rapid rebuttal to Mr. Trump’s postelection promise to deport two million to three million unauthorized immigrants who he said have been convicted of crimes. Protecting immigrants is shaping up to be a priority of the religious left, an amorphous collection of people and groups reflecting many faiths and ethnicities. It has been jolted into action by Mr. Trump’s victory and his selection of an attorney general nominee who supports a crackdown on immigrants.

Cuomo vetoes bill requiring N.Y. to fund legal services for poor - Gov. Cuomo vetoed a bill late Saturday that would have required the state to fund legal services for the poor in each county. Cuomo’s office in a New Year’s Eve statement released just over an hour before the bill was required to be signed or vetoed said last-minute negotiations with the Legislature to address the governor’s concerns failed to yield a deal. “Until the last possible moment, we attempted to reach an agreement with the Legislature that would have achieved the stated goal of this legislation, been fiscally responsible, and had additional safeguards to ensure accountability and transparency,” Cuomo spokesman Richard Azzopardi said. “Unfortunately, an agreement was unable to be reached and the Legislature was committed to a flawed bill that placed an $800 million burden on taxpayers — $600 million of which was unnecessary — with no way to pay for it and no plan to make one.” He said the issue will be revisited in the upcoming legislative session.The bill, which had support from progressive and conservative groups, would have given the state seven years to take over complete funding of indigent legal services from towns. Dozens of groups representing public defenders, municipalities and others expressed disappointment. Jonathan Gradess, executive director of the New York State Defenders Association, called Cuomo’s decision to veto the bill “stunning.” “We are all shocked that the Governor vetoed a bill that would have reduced racial disparities in the criminal justice system, helped ensure equal access to justice for all New Yorkers, provided improved public defense programs for those who cannot afford an attorney, and much-needed mandate relief for counties, Gradess said. “The governor refused to accept an independent oversight mechanism on state quality standards, and now, sadly tens of thousands of low-income defendants will pay the price.”

Chicago Violence Worst In 20 Years: "Not Seen This Level Of Disrespect For Police Ever" -- For months we've been writing about the staggering rise of violence in Chicago.  As the year has worn on, the grim milestones have added up: the deadliest month in 23 years, the deadliest day in 13 years, 4,300 people shot...the list goes on and on.  With five days left in 2016, official police records indicate that homicides in Chicago surged 57% YoY and shootings spiked 46%.  To put those numbers into perspective, Chicago recorded over 20% more murders in 2016 than New York and Los Angeles combined, despite having a fraction of the population.  Per the Chicago Tribune:Through Dec. 26, 754 people were slain in Chicago compared with 480 during the same period last year, an increase of 57 percent, according to official Police Department statistics. The last time Chicago tallied a similar number of killings was in 1997, when 761 people were slain. Shooting incidents also jumped by 46 percent this year to 3,512 from 2,398, the statistics show.What's more, crimes went up by double digits in nearly every major category, including criminal sexual assaults, robberies and thefts.The city's homicides outpaced New York City and Los Angeles combined, even though their populations far exceed Chicago's 2.7 million people.According to official statistics through Dec. 18, the most recent publicly available, New York and Los Angeles had a combined 613 homicides, fewer than Chicago's total. In addition, there were a combined 2,306 shooting victims in the two cities, about half of Chicago's total.

2017 opens with 3 killed, 16 wounded after violent 2016 has its last homicide on New Year's Eve – Chicago Tribune - Three people were killed and 16 others were wounded during the first six hours of the year as the city ended a year that brought levels of violence that had not been seen in the city since the 1990s. In total, four people were killed and 25 other people were wounded in separate shootings from New Year's Eve to early Sunday. Around 2:30 a.m. an unnamed man was shot by a Chicago police officer, authorities said at a news conference Sunday, about 12 hours after the shooting. They reported that a man led cops on a car chase and physically resisted once he was finally stopped. The man, who is in critical condition, was shot after a scuffle, police said. About two hours later, two men were killed in the year's first fatal shooting, which took place at 4:25 a.m. Sunday in the 4600 block of North Broadway in the city's Uptown neighborhood on the North Side. A 38-year-old man was shot in the chest and the right leg. He was identified as Maurice Delaney, 38, of the 9000 block of Skokie Boulevard in Skokie, according to the Cook County medical examiner's office. A second man, who police believe is 35 to 40 years old, was shot multiple times on his right side. He had not yet been identified. Both men were taken to Illinois Masonic Medical Center, where they were later pronounced dead at 5:19 a.m. Police were still investigating what led to the shooting.

It's A Hate Crime: Chicago PD Finally Charge Four Attackers In Kidnapping And Torture of Special Needs Trump Supporter -- After 24 hours of the Chicago Chief of Police and the MSM telling us that four black Chicago teens kidnapping a mentally disabled white Trump supporter isn’t a hate crime, the Chicago PD has finally caved to pressure and upgraded the situation from “kids messing around” and “just bad home training” to a full on hate crime. Don’t think for a second that the Chicago PD did this out of some sort of new found moral compass. This was purely in reaction to national outrage at what’s very obviously a hate crime – despite CNN editing out “Fuck Trump” and “Fuck white people” from the video of the incident.

Illinois ends 2016 with $11 billion in unpaid bills - Illinois state government has left the people of the Prairie State quite the stocking stuffer this holiday season: an $11 billion bill backlog that is expected to hit $14 billion by summer 2017. However, with money from a June stopgap funding agreement set to run out by the new year, nonprofit service providers and students receiving state grants may view it more as a lump of coal. Funding for service providers hasn’t been a priority for the General Assembly for quite some time. Service providers wait, on average, nearly a year to be paid. Illinois politicians have been delaying payment to service providers since 2002, valuing increases in government-worker salaries and pensions more than compensating those who aid the most vulnerable Illinoisans. Spending on state-employee pension benefits increased 586 percent from 2000 to 2015, yet funding for human services only increased by10 percent during that time. Funding for student grants and education has also been at the bottom of Springfield’s priority list. K-12 education has seen a steady increase in funding since 2006, rising at an annual average rate of 6.2 percent. However, most of this is being swallowed up by ballooning pension costs, leaving funding for classrooms and other educational operations virtually flat. At the higher education level, over half of the state’s funding for state colleges and universities is being spent on employee pension and retirement costs. The state’s total pension debt has swelled to $130 billion, up 17 percent since 2015. If the debt is divided by household, it amounts to $27,000 per family. Pension spending now accounts for 25 percent of the state budget, consuming funds that could be spent in other critical areas. Most other states do not have this problem. The median rate for state pension spending nationwide is only 4.1 percent.

 Disclosing the Costs of Corporate Welfare - For decades, politicians of both parties have touted the glories of massive tax-break deals. Whether it’s a governor announcing an auto assembly plant or a mayor breaking ground for a new mall, they invariably take credit for the jobs and claim that tax breaks did the trick. But the costs of such deals and the programs that bankroll them have seldom been fully disclosed. The details are usually buried in different state, county, and city agencies. And of course, the costs are suffered by taxpayers over decades, long after the politicians win their re-election.Taxpayers in Canton, Mississippi, for example, were shocked to learn that the Nissan assembly plant they thought cost $295 million in subsidies actually cost $1.3 billion. The smaller figure they remembered from a long-ago special vote by the state legislature. But $1 billion more was revealed in local records, where long-term property tax abatements were impoverishing schools, and in an obscure state program in which Nissan workers were actually paying taxes to the company.Activists seeking to rein in corporate welfare have long argued that if the true costs of proposed deals were as obvious as the alleged benefits, many deals would never happen. Precious public dollars would be preserved for vital public services.Well, in 2017 the true costs are going to become obvious.For the first time in U.S. history, the costs of corporate welfare are going to be revealed, coast to coast. Tens of billions of dollars never before disclosed will become visible to taxpayers—and some people say they might have better uses for the money. The price-tag data won’t arrive a moment too soon: As school districts and other local and state government bodies finally report these huge costs, they will also be struggling to cope with big cuts in federal aid soon to be enacted by the Trump administration and the Republican-led Congress. For activists fighting to preserve fair public services, the new numbers will become ready ammunition.

Sexual harassment common among middle school children, study finds: Sexual harassment common among middle school children, study finds University of Illinois at Urbana-Champaign Sexual harassment is a prevalent form of victimization that most antibullying programs ignore and teachers and school officials often fail to recognize, said bullying and youth violence expert Dorothy L. Espelage. Espelage recently led a five-year study that examined links between bullying and sexual harassment among schoolchildren in Illinois. Nearly half - 43 percent - of middle school students surveyed for the study reported they had been the victims of verbal sexual harassment such as sexual comments, jokes or gestures during the prior year.While verbal harassment was more common than physical sexual harassment or sexual assault, 21 percent of students reported having been touched, grabbed or pinched in a sexual way, and 18 percent said peers had brushed up against them in a suggestive manner. Students also reported being forced to kiss the perpetrators, having their private areas touched without consent and being "pantsed" - having their pants or shorts jerked down by someone else in public. About 14 percent of the students in the study reported having been the target of sexual rumors, and 9 percent had been victimized with sexually explicit graffiti in school locker rooms or bathrooms. According to Espelage, "sexual harassment among adolescents is directly related to bullying," particularly homophobic bullying. Homophobic name-calling emerges among fifth- and sixth-grade bullies as a means of asserting power over other students, Espelage said. Youths who are the targets of homosexual name-calling and jokes then feel compelled to demonstrate they are not gay or lesbian by sexually harassing peers of the opposite sex. About 16 percent of students in the study reported that they had been the targets of homophobic name-calling or jokes, and nearly 5 percent of youths reported that this harassment happened to them often.

8th Grader Uses Real $2 Bill For Lunch, School Immediately Calls Cops For Her Arrest – AWM: An eighth grade student at Christa McAuliffe Middle School in Houston Texas became the subject of a police investigation after officials at the school accused her of using bogus currency to pay for her school lunch. Fourteen year old Danesiah Neal sets the scene for us by explaining how the whole affair started, ””I went to the lunch line, and they said my $2 bill was fake. They gave it to the police. Then they sent me to the police office. A police officer said I could be in big trouble.” Sharon Kay Joseph, Danesiah’s grandmother was called by officials from the school immediately after the exchange, “’Did you give Danesiah a $2 bill for lunch? He told me it was fake,” recalls of the conversation. After investigating the alleged forgery, authorities from the Fort Bend School District Police determined the two dollar bill was, in fact, legal tender. They tracked the bill’s journey from a convenience store that had given it to Joseph as change for a transaction. They then took the bill to a local bank and had it examined. The uncommon, yet legal bill was issued in 1953 and has remained in circulation since.Speaking of how the officer handled the situation, Joseph continues, “He brought me my $2 bill back. He didn’t apologize. He should have, and the school should have because they pulled Danesiah out of lunch, and she didn’t eat lunch that day because they took her money.”

New York Governor Proposes "Free Tuition" For Public Universities - There is little doubt that easy access to federally subsidized student loans have contributed to the astronomical increase in the cost of attending college in the United States.  After all, what 18 year old would turn down $200,000 in free money to party for 4 years?  As an added bonus, when you figure out upon graduation that your degree in anthropology if fairly worthless, you can always just move back in with mom and force taxpayers to pick up your debt burden.  Anything less would be a substantial "triggering" event and we just can't have that. As we noted roughly a year ago, the amount of student debt outstanding is on track to reach nearly $17 trillion by 2030...which is clearly enough artificial demand to send the price of almost any commodity product soaring. Well, apparently New York's Governor doesn't think that misinformed government policies are doing nearly enough to drive up college tuition costs.  As a result, he has decided to jump on the Bernie Sanders bandwagon with a new proposal that would provide free tuition at public state and city colleges to any student whose parents earn less than $125,000.As the New York Times notes, Cuomo's plan could apply to as many as 1 million New York families though it was not "immediately clear how the program would be paid for"...which is just a minor detail anyway.Mr. Cuomo hopes for a quick start for his idea, with a three-year rollout beginning in the fall, though it will require legislative approval, a potential snag when the governor and lawmakers on both sides of the aisle have been at odds over a pay raise and other issues.It was not immediately clear how the program would be paid for, though the administration said the state already provided nearly $1 billion in support through its tuition assistance program; those awards are capped at $5,165, and many of the grants are smaller.If the plan is approved, the Cuomo administration estimates the program would allow nearly a million New York families with college-age children, or independent adults, to qualify. 

Foreign Students Offer Lifeline to Cash-Strapped U.S. State Schools -- As U.S. state schools face lingering funding challenges brought on by the 2007-2009 recession, they're turning to a growing pool of full-tuition-paying students from abroad to replenish their coffers, according to a new study from the National Bureau of Economic Research that calculates a strong link between changes in state appropriations and foreign enrollment at U.S. public colleges.  The number of international students at American colleges and universities rose to 1.04 million last year, up 7.1 percent from the previous year and 85 percent over the past decade, according to data from the Institute of International Education. Foreign students accounted for 5.2 percent of the total student population at U.S. institutions last year, compared with 3.2 percent 10 years ago. China, where a limited supply of resource-rich schools are struggling to keep up with growing demand for higher education amid economic growth, remained the leading country of origin for the seventh consecutive year, followed by India and Saudi Arabia.The rising demand from abroad has helped keep U.S. public colleges — where out-of-state tuition is often double or triple the in-state amount — afloat as they grapple with continued recession-induced funding shortages.  As the chart above shows, in 2008, student tuition made up 35.8 percent of public colleges’ revenue, which also includes state appropriations. As public funding fell during the recession, the share from tuition rose to 47.8 percent in 2013. While public universities’ reliance on tuition has come down a bit over the last few years, it’ still well above its pre-recession level.

The U.S. Needs More Colleges - Noah Smith - The idea of free college, one of the pillars of Bernie Sanders’ unsuccessful presidential bid, hasn't been discarded in the wake of the 2016 election. Just this week, New York Governor Andrew Cuomo released a plan to make all public colleges in that state free for residents whose families earn less than $125,000 a year. The policy isn't all that radical. It’s actually pretty similar to what selective private schools such as Stanford and Harvard already do. At those schools, students from rich families subsidize those from more modest backgrounds (like mine). In New York’s case, a lot of the subsidy will also come from foreign students, who pay full sticker price. Nor would Cuomo’s policy be likely to have a huge effect. Public university tuition is already fairly inexpensive for most students from low- and lower-middle-income backgrounds: Making public schools even cheaper for lower-income kids isn’t a bad idea, but it does represent tinkering at the margins. And that tinkering doesn’t come free, of course -- colleges, now receiving more state money in the form of tuition waivers, will raise their sticker prices (though states sometimes try to address this with price caps). So in addition to the transfer of wealth from rich and foreign students to poor ones, there will be a transfer of taxpayer money to university administrators and professors. But there’s an even bigger limitation to the free college idea. As long as the number of available college spots remains roughly fixed, reducing the price of college will have only a very modest effect in creating broad-based economic opportunity.  Lower-income students who do well in high school -- such as me, once upon a time -- will get a free ride to a brighter future, while those who don’t put up the requisite numbers will be left to the dubious mercy of the high-school-only job market.  We should figure out a way to deliver a brighter future to the kids who don’t quite get a top SAT score. My recommended solution is to focus on increasing the number of college spots available. Those could be four-year university slots, or vocational education -- a mix of both would probably be best. But the key is that supply should go up.

These are the classes you get when you give college students control - For much of each week, UC Berkeley senior Caelle McKaveney studies chemical signaling in spiders, nucleotide coding patterns and other serious science. But Monday evenings were different last semester. She was able to nerd out in a non-textbook way in a class designed by students for fellow students who shared a childhood obsession: Harry Potter. In a class called “UC Hogwarts: The Wizarding World of Harry Potter,” McKaveney could leave the muggle world of the nation’s top public research university behind and bond with fellow Potter geeks over Hermione’s feminism and the metaphorical links between werewolves and those afflicted with HIV/AIDS. She let loose and channeled her inner Snape during a class skit, allowing her long hair to cover her face and dropping her voice to the deep tones of the brooding master of the dark arts.  Harry Potter may not be a lure for everyone. But courses created by Berkeley students cover a dizzying array of other topics — nearly 200 across 60 departments, taken by as many as 4,000 students each semester.The courses in DeCal — short for Democratic Education at Cal — aren’t graded, so there is little stress. But they count for one or two credits. And they have their roots in Berkeley’s landmark free speech movement from five decades ago, when students pressed for and won greater academic rights.DeCal marked the nation’s first experiment with classes created and led by students, who enlist faculty sponsors to oversee the curriculums they concoct. Similar programs have been launched at more than a dozen other universities, including UCLA, Stanford, Tufts and Rice. At Berkeley, students can debate political strategy as seen in “Game of Thrones” or discuss relationships through the lens of “Modern Family.” They can learn the art of lion dancing and the secrets of a Rubik’s Cube. They can stoke their social activism with courses on human trafficking and mass incarceration. They can indulge research interests in stem cells, surgery, human genetics and 3-D bioprinting. Or they can explore spirituality through Koran recitation, Sufi meditation and the study of Christian thought.

 Professor Claims University Forced Him To Teach Math Because ‘Asians Are Good At Math’ - A Korean-American professor filed a lawsuit against the University of Illinois at Chicago last week, claiming that officials in his department “systematically harassed” him because of his ethnicity and forced him to teach a math class because he was Asian. Seung-Whan Choi, a professor of international relations, says that UIC’s political science department denied him fair raises, treated him unfairly and forced him to teach classes that he wasn’t qualified to teach, according to a lawsuit filed last week and obtained by The Huffington Post. “They don’t like Korean-Americans,” Choi, a retired Army officer who was born in South Korea, told The Chicago Tribune. “I’m supposed to be very submissive to the department head, who is white-American.” The lawsuit claims that department officials forced Choi to teach a statistics class because, as it quotes one department head as saying, “Asians, especially Koreans, are very good” at math. Similarly, Choi claims that the department pressured him into teaching a class in Korean politics, even though he has had no formal training in that field of study. The lawsuit also claims that Dennis Judd, who was head of the political science department in 2015, changed one of Choi’s student’s grades without first telling Choi. When confronted about the grade change, the lawsuit says, Judd told Choi that, “as a foreigner,” he “has to keep in mind who he is dealing with and what he is wishing for” and that Koreans “are stubborn and do not understand American culture of compromise.” The professor also claims that his colleagues have wrongfully accused him of lacking in academic contributions, though a copy of Choi’s curriculum vitae posted on UIC’s website shows that Choi authored two books in 2016 and has had 35 scholarly articles published.

The Department of Education’s Power to Cancel Student Debt: Something has to give on student loans. The $1.4 trillion in outstanding student loan debt has weakened the macroeconomy and has become a form of regressive taxation. In the process, an increasing number of individuals have had to defer starting a family, accept jobs that they do not want, and endure the significant psychological and physical burdens of heavy indebtedness. Although there has been plenty of discussion surrounding these issues, with a specific focus on student loan interest rates and income-based repayment plans, little has been said about the U.S. Department of Education’s broad powers to outright cancel existing student loans. This series of four essays will discuss the most important of those powers, and why the Department’s authority has not been frequently discussed—much less invoked by the agency.   These issues will be examined through the lens of for-profit college students’ demands that the Department cancel their debts under a law mandating discharges in the case of school fraud. The essays in this series will reveal that despite the breadth of the Department’s debt-cancellation powers to discharge these debts, the Department has failed to employ its powers to their fullest extent—to the detriment of the many students who had been defrauded by their former institutions. This is a problem, as the essays will explore, that largely stems from the fact that the Department views maximizing collection as its primary responsibility with respect to student debt. Accordingly, the Department has relied on questionable arguments about the limits of the Department’s powers, while pointing the finger at a dysfunctional Congress instead of acknowledging its responsibility to students—enabling the Obama Administration to maintain its image of cracking down on these for-profit schools and protecting defrauded students, while still fulfilling its budgetary prerogative. After analyzing this saga, this series will conclude by addressing the Department’s broadest power: its discretionary compromise and settlement authority, which, if fully invoked—as it should be—could be used to discharge all outstanding student loans under the right political circumstances. The tremendous potential of this authority can only be implemented, however, if we reconsider the obligations of education officials to student debtors and vice versa. ...

CalPERS makes debt, cost difficult to see -- New annual CalPERS reports no longer prominently display the pension debt of local governments as a percentage of pay, making it more difficult for the public to easily see the full employer pension cost. An example of how the debt can get lost in the shuffle of the new policy happened last month when the California Public Employees Retirement System dropped its long-term earnings forecast from 7.5 percent to 7 percent. To help fill the funding gap created by lower investment earnings, the annual rates paid to CalPERS by state and local government employers will gradually increase over the next eight years.A California State Association of Counties report to its members about the new rate increase only included the CalPERS sample of higher employer rates for the “normal cost,” the amount paid for the pension earned during a year. Not mentioned in the county report was the additional rate increase for the rapidly growing pension debt or “unfunded liability” from previous years, mostly caused by investment earnings (expected to pay two-thirds of future pensions) that were less than the forecast.For many employers, the current CalPERS rate for the unfunded liability is higher than the rate for the normal cost. The need to pay down the unfunded liability, which grew to $139 billion this year, is the reason for the new round of CalPERS rate increases.What tends to obscure or mask the debt in the new CalPERS reports is a change in the way rates are set and reported. The “normal cost” rate is still a percentage of pay. But now the unfunded liability rate is a dollar amount.Instead of a total rate shown as a percentage of pay, a presentation to the CalPERS board last month and a CalPERS news release both showed the average rate increase for employers in two separate parts, each reported in a different way.

In Massive Blow To California Unions, A Second Court Rules That Pension Benefits Can Be Reduced - Back in September, we noted that, in a surprisingly logical decision particularly for a state like California which is typically devoid of all reason, a court upheld the rights of Marin County (and it's taxpayers) to reduce final year salary levels utilized to calculate pension payments. The ruling was meant to protect taxpayers against "salary spiking," a practice whereby union employees artificially drive up their final year salary, by taking cash vacation payouts or 1x bonus payments for example, in an effort to game the annual pension payment they'll then receive in perpetuity. Now, according to Pension & Investments, a second California court in San Francisco has made a similar ruling, finding that while a public employee does have a "vested right" to a pension it is only to a "reasonable pension." A second California appeals court panel has said that vested pension rights can be reduced or eliminated in California as long as employees still receive a pension that is “substantial” and “reasonable,” court filings show. The Dec. 30 decision by a three-member panel in San Francisco affirmed a state pension reform law that went into effect in 2013 and eliminated the right of participants of the $302.4 billion California Public Employees' Retirement System, Sacramento, to enhance their pension by buying retirement credits. A lower court in Alameda County in 2015 had ruled that the pension enhancement benefits could be eliminated. The enhanced benefit, known as an airtime service credit, allowed CalPERS participants to increase their retirement benefit by up to five years by making additional contributions from their salary. Meanwhile, the San Francisco court cited the Marin Country decision from August which found that employees have a right to a pension but "not an immutable entitlement to the most optimal formula of calculating the pension." The August decision in Marin County was pivotal because, for the first time, it brought into question a 5-decade California rule which held that pension benefits could not be cut.

The People Who Evangelized for the 401(k) Now Think It’s Made Retirement Much Tougher --We’re not even a week into 2017, and we already have another reason to feel gloomy about our futures. The Wall Street Journal’s Timothy Martin tracked down several early proponents of the 401(k) and asked them what they think of their innovation, which has supplanted the traditional pension at most companies. Answer: not much!  Herbert Whitehouse, a former Johnson & Johnson human resources executive who pushed the then-new savings vehicle in the early 1980s, now says even he can’t retire until his mid-70s if he wishes to maintain his standard of living, because, Martin writes, his 401(k) “took a hit” in 2008. He’s 65. And Ted Benna, the man most frequently credited for the 401(k) as we know it, says he doesn’t believe “any system currently in existence” can help most Americans finance their financial needs in retirement. Oof.  What went wrong? The 401(k) began as a technical adjustment to the tax code, one meant to mostly impact high-earning executives using profit-sharing plans. People like Benna, a benefits consultant, convinced the Reagan administration that the language of the statute allowed for all employees to put aside a portion of their salaries on a tax-deferred basis. It was supposed to supplement corporate pensions. Instead, in something almost no one foresaw, the 401(k) replaced them.  In 2017, we know that this historic accident isn’t working out for many people. The Center for Retirement Research currently estimates that about 52 percent of households are “at risk of not having enough to maintain their living standards in retirement” with “the outlook for retiring Baby Boomers and Generation Xers far less sanguine than for current retirees.” The Economic Policy Institute says just under half of households headed by someone between the ages of 32 and 61 have nothing saved for retirement. Some, like noted economist Richard Thaler, see a simple fix to the 401(k) savings problem:The sad thing is we know how to fix this. Auto enroll. Auto escalate. Company match. Low fee default. Offer to employees w/out plans. Do it! Richard H Thaler (@R_Thaler) January 3, 2017    Unfortunately, it’s more complicated than that. Many companies already do auto-enroll their workers, but as of now employers aren’t required to even offer a 401(k) and they’re certainly not required to offer a match—and if they do match, they can stop at any point. Given the political climate in Washington, it’s hard to believe any of that will change soon.

When  the Health Care Market Cannot Regulate Itself - When making health care decisions, few patients with health insurance have to consider the overall costs of their treatment. Instead, they are able to focus on their recovery. What most patients don’t realize, however, is that they benefit from a system of negotiated prices and under-paid procedures, which often leaves uninsured patients to shoulder the costs. Vermont is now taking steps to address problems that can arise from this opaque system, including rising health care costs. The state will soon implement an “all-payer” health care plan that requires Medicare, Medicaid, and private payers to reimburse health providers at the same rate, based on performance and patients’ recovery. Like most health care markets, Vermont currently uses a fee-for-service model. The Green Mountain Care Board, the state agency responsible for regulating health care in Vermont, is overseeing the transition to the all-payer system. According to the Care Board, the fee-for-service model is the most common compensation system in the United States. However, because that model operates by paying providers for each health care service performed, the Board explains that “it is widely recognized as a significant driver of health care spending growth.” Because providers are compensated for each service, the fee-for-service model rewards providers who deliver a larger volume of health care services, without taking into account patients’ medical outcomes. Under the fee-for-service model, if a patient does not recover from a procedure effectively, that patient will then have to pay not only for the procedure but also for necessary treatment during recovery. Health care costs in Vermont were projected to increase almost seven percent annually under the fee-for-service model. The all-payer system seeks to cut that in half.

 TrumpCare: ObamaCare, Medicaid, Medicare, and the Veterans Administration - Assuming that Trump takes office on January 20, we can expect health care policy to shift from the left side of the Overton Window to the right, even as the only solutions that remain “on the table” are neoliberal and markets-first non-solutions. Let’s begin by setting the baseline for a rational and humane health care policy — i.e., not neoliberalism — as a universal benefit.[1] From Richard D. Lamm and Vince Markovchic in the Denver Post: In 2015 we spent $3.2 trillion on health care, which was $10,000 per person in the U.S., ($25,000 for a typical American family). This is 17.5 percent of the U.S. Gross Domestic Product (GDP). To put this in perspective, this is more than twice what most other developed nations spend on health care while insuring all of their residents. This year we are on track to exceed that amount with it being 18 percent of GDP. Even with the implementation of the Affordable Care Act, we still have 28 million people with no health insurance, and many more are under-insured due to rising co-pays and deductibles…. Of the $3.2 trillion health spending, 70 percent goes directly to fund the cost of our healthcare. The remaining 30 percent is spent on administration and profit, which is more than twice that of any other nation.   This current system is unsustainable, but who will tell the American public? We suggest that the solutions to the real problems of health care are hardly being talked or written about. The ideal health insurance system is one that: provides free choice of hospitals and doctors; provides insurance coverage to all at all times (i.e., not tied to an employer); is affordable and will remove all risk of medical bankruptcy. This system should have an administrative cost of less than 5 percent and have everyone in the risk pool, thus making premiums affordable. We have such a system now: Medicare covers all persons over 65, those on total disability, and all renal dialysis patients. So, the health insurance companies are parasites who should be removed. Now, I don’t know why Lamm and Markovchic don’t just lower the age for Medicare eligibility from 65 to zero, like Teddy Kennedy proposed. And I also don’t know why Democrats (including Sanders) aren’t prefacing every statement they make on heatlh care with “Of course, Americans deserve Medicare for All. Until then….” Instead, they’re digging in to defend a flawed system that hasn’t covered 28 million people, instead of going on the offense for the universal benefit. (That’s the difference between “resistance” and “revolution,” I guess. The one is reactionary; the other is, er, progressive.) Anyhow, it is what it is and we are where we are. Absent a universal benefit[1], we get health care silos: ObamaCare, Medicare, Medicaid, and the Veterans Administration, among others. In this post, I’m going to take a very quick look at the current news in each silo. All the silos are in decay and disrepair — except from the standpoint of those who profit from them, of course — and all suffer from neoliberal infestations, but the forms of decay and the degrees of infestation differ. So the post will be a bit of a patchwork, but then the health care system itself if a patchwork. As always, I welcome comments from readers with informed experience interacting with these systems, for good or ill.

Republicans Have No Choice But to Repeal Obamacare -- No Matter the Cost: We're less than three weeks away from the dawn of a new era in Washington, and the engine of that transformation will be the Republican Congress. Having suffered for eight long years under a president who stood in the way of their noble efforts to turn America into a paradise of prosperity and morality, they are counting down the days until they finally get what they want, until their legislative blessings burst from the Capitol building in a wondrous eruption of virtue and wisdom, make a quick stop on Pennsylvania Avenue for President Trump's signature, then wash over a grateful nation. Some of the items on their long, long list of priorities may be relatively easy to accomplish, but others are trickier. And none is more fraught with political peril than their single most important goal: repeal of the hated Affordable Care Act. Since the election, there has been reason to believe that Paul Ryan and Mitch McConnell might want to tread carefully on repealing the ACA, but they're sending the message that the throttle is wide open. The new Congress will be sworn in on January 3, and as The New York Times reports, "Within hours of the new Congress convening on Tuesday, the House plans to adopt a package of rules to clear the way for repealing the health care law and replacing it with as-yet-unspecified measures meant to help people obtain insurance coverage." McConnell insists that "The Obamacare repeal resolution will be the first item up." Sure, they don't yet know what they want to replace the ACA with (though Trump did promise during the campaign that the replacement would be "something terrific"). But that can all be worked out later. Once Americans find themselves blissfully unburdened from the law, they won't much care about the details.

GOP won't promise ObamaCare fix will cover all - Republican leaders are refusing to commit to their ObamaCare replacement plan covering as many people as President Obama's health law. Congressional Republicans are quickly moving forward to pass a repeal of ObamaCare and say a replacement plan will come later this year. But it's unclear whether that eventual replacement will provide insurance options for at least 20 million people, the number who gained coverage under ObamaCare, amid worries that many could lose their health insurance. Speaker Paul Ryan(R-Wis.) on Thursday declined to commit when asked at a press conference if the Republican plan would allow everyone covered through ObamaCare to remain insured. “Look, I’m not going to get ahead of our committee process,” Ryan said. “We’re just beginning to put this together.” He instead called for a system “that gives us access to affordable healthcare in this country without a costly government takeover.” Senate Majority Leader Mitch McConnell(R-Ky.) also declined to make a commitment when asked on Wednesday. McConnell sidestepped a question about whether his priority was making sure no one with coverage now was left behind. “Let me just say, we have on the floor of the Senate now the ObamaCare repeal resolution,” McConnell said. “The priorities between now and January 20th are hearings on Cabinet members.” It is impossible to know how many people a GOP plan would cover, because Republicans are moving forward to repeal ObamaCare without an immediate replacement.

U.S. judge blocks transgender, abortion-related Obamacare protections | Reuters: A federal judge in Texas on Saturday issued a court order barring enforcement of an Obama administration policy seeking to extend anti-discrimination protections under the Affordable Care Act to transgender health and abortion-related services. The decision sides with Texas, seven other states and three Christian-affiliated healthcare groups challenging a rule that, according to the judge, defines sex bias to include "discrimination on the basis of gender identity and termination of pregnancy." In granting an injunction one day before the new policy was to take effect, U.S. District Judge Reed O'Connor held that it violates the Administrative Procedure Act, a federal law governing rule-making practices. The judge also ruled that plaintiffs were likely to prevail in court on their claim that the new policy infringes on the rights of private healthcare providers under the Religious Freedom Restoration Act. As explained in O'Connor's 46-page opinion, the plaintiffs argued that the new regulation would "require them to perform and provide insurance coverage for gender transitions and abortions, regardless of their contrary religious beliefs or medical judgment." The same judge issued a similar court order in August blocking a separate Obama administration policy that would have required public schools, over the objections of 13 states, to allow transgender students to use restrooms of their choice. It was not immediately clear whether the Obama administration, which has just 20 days left in office, would seek to appeal the latest injunction.

 US spending on personal health care is crazypants - One of my fist big efforts on this blog was a ten point series on health care spending in the US. It also led to this video, which led to Healthcare Triage. It’s not surprising, therefore, that I have an ongoing interest in spending on health. A recent publication in JAMA got into the weeds of where that money has gone:  US health care spending has continued to increase, and now accounts for more than 17% of the US economy. Despite the size and growth of this spending, little is known about how spending on each condition varies by age and across time. Government budgets, insurance claims, facility surveys, household surveys, and official US records from 1996 through 2013 were collected and combined. In total, 183 sources of data were used to estimate spending for 155 conditions (including cancer, which was disaggregated into 29 conditions). For each record, spending was extracted, along with the age and sex of the patient, and the type of care. Spending was adjusted to reflect the health condition treated, rather than the primary diagnosis. Researchers went through many data sources, including government budgets and records, insurance claims, surveys of households and facilities. Specifically, they used 183 sources to look at spending for 155 conditions (cancer took up 29 of them). For each record of spending, they also looked at the age and sex of the patient, as well as what care they received. Between 1996 and 2013, more than $30 trillion was spent on personal health care. Let that sink in for a minute or two. Over that time period, spending increased between 3% and 4% annually for most age groups. The highest growth was in emergency care (6.4%) and prescribed retail pharma (5.6%). Inpatient care, on the other hand, went up 2.8% and nursing facility care went up 2.5%.As you might expect, spending by condition varied by age, sex, year, and type of care. But it pretty much kept going up and up and up. For 143 of the 155 conditions, spending increased between 1996 and 2013. Spending increased the most on diabetes (#1 in 2013) and low back and neck pain (#3 in 2013).

Why Healthcare Premiums are increasing Faster than Healthcare Costs - In the first three years of the PPACA, a Risk Corridor Program was established to help insurers get past the initial loss phases. This is typical of startups and was used with Republican President George Bush’s Part D Drug insurance program. The PPACA had built in protections for insurers who enrolled abnormally sick people, provided backup payments for very high-cost cases, and protected against big losses during the first three years. Not only did it help Insurers cover their losses; but, it was an incentive for insurers not to increase premiums. Much of the funding for the program comes from Federal Government funding and profitable Insurance companies paying into the fund which unprofitable companies use to recoup losses. However in the first three years losses exceeded funding from profitable companies due to a Republican Congress passing laws forcing the Risk Corridor Program to be revenue neutral. Approximately 12.6% of the necessary funds to make insurance companies whole is available. As many probably know, the shortfall of funding forced many Co-ops to go bankrupt and resulted in Healthcare Insurance companies to pull out of the PPACA Exchanges.  Those Healthcare Companies still a part of the PPACA have gone to Federal Court to sue the administration for sustained losses. Moda Health sued the administration for $191 million due to losses in implementing the PPACA supposedly covered by the Risk Corridor Program. Moda has dropped its program in Alaska as a result of its losses and has only received ~$14 million. The Risk Corridor Program ended in 2016 and companies now face the issue of never recouping losses beyond just this. Interesting how the Republicans have been the proverbial slugs in the process and took advantage of the crisis they created by forcing the PPACA to be budget neutral when the Part D Drug Program had no restrictions. They limited how the PPACA can fund the same Risk Corridor Program used for George Bush’s Part D Program. In September of this year, “ five Republican Senators sent HHS Secretary Burwell a letter demanding how HHS is handling a much-maligned insurance provision within the Affordable Care Act. Earlier this month, the CMS had sent a memo to health insurance companies that said the agency would not be making risk-corridor payments for 2015 because any collections would be used to cover the $2.5 billion shortfall from 2014.”

How to Become a ‘Superager’ - Think about the people in your life who are 65 or older. Some of them are experiencing the usual mental difficulties of old age, like forgetfulness or a dwindling attention span. Yet others somehow manage to remain mentally sharp. My father-in-law, a retired doctor, is 83 and he still edits books and runs several medical websites. Why do some older people remain mentally nimble while others decline? “Superagers” (a term coined by the neurologist Marsel Mesulam) are those whose memory and attention isn’t merely above average for their age, but is actually on par with healthy, active 25-year-olds. My colleagues and I at Massachusetts General Hospital recently studied superagers to understand what made them tick. Our lab used functional magnetic resonance imaging to scan and compare the brains of 17 superagers with those of other people of similar age. We succeeded in identifying a set of brain regions that distinguished the two groups. These regions were thinner for regular agers, a result of age-related atrophy, but in superagers they were indistinguishable from those of young adults, seemingly untouched by the ravages of time.  What are these crucial brain regions? If you asked most scientists to guess, they might nominate regions that are thought of as “cognitive” or dedicated to thinking, such as the lateral prefrontal cortex. However, that’s not what we found. Nearly all the action was in “emotional” regions, such as the midcingulate cortex and the anterior insula.  My lab was not surprised by this discovery, because we’ve seen modern neuroscience debunk the notion that there is a distinction between “cognitive” and “emotional” brain regions. How do you become a superager?  We’re still studying this question, but our best answer at the moment is: work hard at something. Many labs have observed that these critical brain regions increase in activity when people perform difficult tasks, whether the effort is physical or mental. You can therefore help keep these regions thick and healthy through vigorous exercise and bouts of strenuous mental effort.

Legal Drugs, Deadly Outcomes --Prescription drug overdoses now claim more lives than heroin and cocaine combined, fueling a doubling of drug-related deaths in the United States over the last decade. Health and law enforcement officials seeking to curb the epidemic have focused on how OxyContin, Vicodin, Xanax and other potent pain and anxiety medications are obtained illegally, such as through pharmacy robberies or when teenagers raid their parents' medicine cabinets. Authorities have failed to recognize how often people overdose on medications prescribed for them by their doctors. A Los Angeles Times investigation has found that in nearly half of the accidental deaths from prescription drugs in four Southern California counties, the deceased had a doctor's prescription for at least one drug that caused or contributed to the death.Reporters identified a total of 3,733 deaths from prescription drugs from 2006 through 2011 in Los Angeles, Orange, Ventura and San Diego counties.An examination of coroners' records found that:

  • In 1,762 of those cases — 47% — drugs for which the deceased had a prescription were the sole cause or a contributing cause of death.
  • A small cadre of doctors was associated with a disproportionate number of those fatal overdoses. Seventy-one — 0.1% of all practicing doctors in the four counties — wrote prescriptions for drugs that caused or contributed to 298 deaths. That is 17% of the total linked to doctors' prescriptions.
  • Each of those 71 physicians prescribed drugs to three or more patients who died.
  • Four of the doctors — including Dr. Van H. Vu — had 10 or more patients who fatally overdosed.
  • Vu had the highest total: 16.

Dirty Money - Studies have piled up in recent years describing exactly how filthy—specifically how bacteria-laden—our dollars and cents can be. Fecal bacteria and other pathogens may have hitched a ride from someone’s hands, nose or apron onto our cash. And yeast or mold might have taken hold, too. The result could be a durable risk to our health whenever our money changes hands. The fibrous surfaces of U.S. currency provide ample crevices for bacteria to make themselves at home. And the longer any of that money stays in circulation, the more opportunity it has to become contaminated. Lower-denomination bills are used more often, so studies suggest our ones, fives and tens are more likely to be teeming with disease-causing bacteria. Some of these pathogens are known to survive for months, according to a recent review of “dirty money” studies. Unfortunately, dirty dollars—whether denominations of $1 or $100—are not whisked away to the cleaners when they need it. They tend to circulate for about four to 15 years, according to the Federal Reserve. And U.S. coins last even longer: about 25 years, the Fed says. While cash spends all that time wandering from, say, a cocaine-sniffer’s nose to a waiter’s hands to someone’s back pocket, it is going to meet microbes. Many may be harmless but others could make us sick, and data accruing since the 1970s spotlights the microbial milieu that can hide on our cash. Antibiotic-resistant bacteria such as methicillin-resistant Staphylococcus aureus (MRSA), which can cause life-threatening blood infections, can survive on our currency. The rogues’ gallery of pathogens isolated from banknotes or coins also includes: Escherichia coli (which can cause bloody diarrhea and sometimes even kidney failure or death) and Pseudonomnas aeruoginosa (which causes urinary tract and respiratory system infections). Separately, small quantities of cocaine, heroin, yeast and fungi have also been found on cash. A 2010 analysis by Australian researchers looked at the actual number of bacteria per square centimeter on various banknotes and found that a U.S. note contains 10 such microbes per square centimeter (higher than what Australia and New Zealand had on their currency.)  This pathogenic retinue likely extends beyond a few errant dollars that made their way to scientific labs. U.S. Air Force researchers published findings back in 2002 that concluded most $1 bills—94 percent of 68 tested dollar notes—were harboring bacteria, including some which could cause pneumonia or other serious infections.

Dad's exposure to phthalates in plastics may affect embryonic development - A new study led by environmental health scientist Richard Pilsner at the University of Massachusetts Amherst, one of the first to investigate whether preconception exposures to phthalates in fathers has an effect on reproductive success via embryo quality, found that exposures from select chemicals tested were associated with "a pronounced decrease in blastocyst quality" at an early stage in embryo development. Phthalates are compounds found in plastics and personal care products that are estimated to be detectable in nearly 100 percent of the U.S. population. The authors believe theirs is the first prospective study to assess associations between paternal exposure to phthalates and embryo quality through the blastocyst stage in humans. Pilsner and colleagues say their prospective study of 761 oocytes, or immature eggs, from 50 couples undergoing in vitro fertilization (IVF) "provides the first data demonstrating associations between preconception paternal phthalate and phthalate alternatives and embryo development, in a critical step towards our understanding of the paternal contributions to reproductive success." Details appear in the current issue of Human Reproduction from Oxford University Press. .. They add that "future studies are needed to investigate the long-term effects of altered embryo development" and to identify a mechanism by which a father's preconception exposure to phthalates may affect embryo development. "If corroborated with other studies, such findings will have public health and clinical significance for both the general population and those undergoing IVF."

Living near heavy traffic increases risk of dementia, say scientists - People living near a busy road have an increased risk of dementia, according to research that adds to concerns about the impact of air pollution on human health.  Roughly one in 10 cases of Alzheimer’s in urban areas could be associated with living amid heavy traffic, the study estimated – although the research stopped short of showing that exposure to exhaust fumes causes neurodegeneration.  Hong Chen, the scientist who led the work at Public Health Ontario, said: “Increasing population growth and urbanisation has placed many people close to heavy traffic, and with widespread exposure to traffic and growing rates of dementia, even a modest effect from near-road exposure could pose a large public health burden.”Previously, scientists have linked air pollution and traffic noise to reduced density of white matter (the brain’s connective tissue) and lower cognition. A recent study suggested that magnetic nano-particles from air pollution can make their way into brain tissue.The latest study, published in The Lancet, found that those who live closest to major traffic arteries were up to 12% more likely to be diagnosed with dementia – a small but significant increase in risk. The study, which tracked roughly 6.6 million people for more than a decade, could not determine whether pollution is directly harmful to the brain. The increased dementia risk could also be a knock-on effect of respiratory and cardiac problems caused by traffic fumes or due to other unhealthy life-style factors associated with living in built-up urban environments.

Mounting Evidence Links Lead, Mercury and Arsenic to Autism - In November 2016, I reported on six studies that found strong relationships between biomarkers for mercury toxicity in children with autism including a direct correlation between the levels of mercury toxicity and the severity of autism symptoms. Those finding are supported by recent research that links industrial exposures of lead, mercury and arsenic to the prevalence of autism spectrum disorder (ASD). The study , led by a team of 13 scientists from leading American universities and hospitals, was published in the July 2016 issue of Environmental Monitoring and Assessment. Investigators studied the Center for Disease Control and Prevention (CDC) data on 4,486 children with ASD residing in 2,489 census tracts across the country. They used an overlay of the Environmental Protection Agency regional air pollution data to determine if air concentrations of various metals could be connected with autism prevalence and found strong correlations between ambient concentrations of lead, mercury and arsenic and the occurrence of ASD. Tracts with air concentrations of lead in the highest quartile had significantly higher ASD prevalence than tracts with lead concentrations in the lowest quartile. In addition, tracts with mercury concentrations above the 75th percentile and arsenic concentrations below the 75th percentile had a significantly higher ASD prevalence compared to tracts with arsenic, lead and mercury concentrations below the 75th percentile. An earlier study published in 2015 by an even larger research team found an association between urban residential proximity to industrial facilities emitting air pollutants (arsenic, lead or mercury) and higher autism prevalence.  Other recent studies have found significant associations between environmental sources of mercury exposure and ASD. A study , led by the Division of Environmental and Occupational Disease Control, California Department of Health Services published in Environmental Health Perspectives in 2006, implicated mercury, among other metals, as the air pollutant that is most associated with higher risks of ASD diagnoses among a sample of children born in the San Francisco Bay area in 1994. Meanwhile, a master's thesis completed at Louisiana State University in 2006 noted an association between mercury in fish and air emissions and developmental disorders, including autism.

CDC considers lowering lead level threshold by 30 percent: The U.S. Centers for Disease Control and Prevention is considering lowering its threshold for lead levels in children by at least 30 percent. The move would make it easier for health practitioners to identify more children affected by the heavy metal. The last time this was done was in 2012 when the CDC set the threshold at five micrograms per deciliter for children under age six. And while no lead level is safe for children, those who test above the threshold set by the agency require a public health response. But based on a new public health survey, the CDC is considering lowering the reference level down to 3.5 micrograms per deciliter in the coming months, based on information from six people briefed by the agency, according to Reuters. The measure is supposed to come up for discussion at a CDC meeting on Jan. 17 in Atlanta. But the CDC's move could prove to be controversial. Lowering the threshold could drain already sparse resources used to address health responses involving those children most impacted by elevated blood lead levels. The CDC budget for assisting states with lead safety programs was just $17 million. And surprisingly, only 29 states, Washington D.C. and five cities are funded by the CDC for safe lead level programs as well as the reporting of lead levels in children. A number of states not funded by the agency report lead level statistics to the CDC voluntarily.  The CDC has estimated that as many as 500,000 U.S. children have lead levels at or above the current threshold. The agency encourages “case management” for these children, which is often carried out by state or local health departments. But progress has been uneven in addressing what is a major public health threat in many communities.  Reuters published an investigation this month that revealed nearly 3,000 areas with recently recorded lead poisoning rates of at least 10 percent. This was double those levels of lead in Flint, Michigan during their water crisis. Additionally, over 1,100 of the communities had elevated blood lead levels that were four times higher than the levels in Flint.

Forty years later, FDA finally restricts use of antibiotics in livestock - Forty years after it first made the attempt, the U.S. government has instituted controls on some antibiotics used in meat animals to prevent the emergence of resistant bacteria that threaten human health. The rules, known technically as Guidance for Industry #213, put an end to two longstanding practices: giving antibiotics to animals to make them gain weight, a practice called “growth promotion,” and buying antibiotics in a feed store or over the internet with no veterinary oversight. With the new rules in effect, growth promotion becomes illegal in the United States, and antibiotics that are judged “medically important” — that is, needed to cure specific human infections — become available to the livestock industry only through authorization by a veterinarian. The rules do not ban all antibiotic use in livestock raising, and some advocates worry that they may not have as much effect as the FDA believes. But their implementation, scheduled for Jan. 1 and confirmed by the FDA Tuesday afternoon, marks an important shift in a battle that has been going on since 1977, the first time the agency tried — and failed — to restrict farm antibiotic use. “This is a great step in the right direction,” said Karin Hoelzer, a veterinarian and senior officer in the Pew Charitable Trusts’ antibiotics project. “But more needs to be done.” The new rules also put the United States in line with the European Union, where growth-promoting antibiotic use has been outlawed since the beginning of 2006. However, European countries discovered after their ban that routine antibiotic use continued, resistant bacteria kept emerging, and additional political action was necessary to reduce the threat.

Scottish salmon farming ‘fighting a losing battle’ against sea lice - Campaigners have warned that Scottish salmon farming is “fighting a losing battle” against chemically resistant sea lice. It follows the revelation that the use of toxic chemicals to fight sea lice on salmon farms has soared by almost 1,000% in the past decade. According to official data that has sparked fresh criticism of the industry, between 2006-16, farmed salmon production increased by 35% while the use of chemicals to control flesh-eating lice rose 932%. They included compounds that have been linked to reduced fertility in wild salmon and mortality in shellfish such as lobsters. Critics of salmon farming said that the growing use of chemicals to fight sea lice, a parasite that kills millions of farmed fish every year, raises serious questions about the industry’s environmental impact. It has rekindled calls for some of Britain’s leading supermarkets to ban the sale of farmed salmon from parts of Scotland where sea lice infestations are “rampant” and pose a threat to the survival of wild salmon and sea trout. “The drugs don’t work anymore. Sadly, Scotland’s lobsters and other shellfish are collateral damage in the salmon farming industry’s war on sea lice.” The latest figures, obtained under freedom of information from the Scottish Environment Protection Agency (Sepa), show that Scottish salmon farms used 45kg of chemicals in 2006 but this increased to 467kg in 2016. Since 2002, salmon farmers have carried out almost 8,500 separate chemical treatments with nearly four tonnes of chemicals dumped into the seas around Scotland. The treatments used by Scottish salmon farms included cypermethrin, a pesticide that was abandoned in 2012 after sea-lice developed resistance. Scientific studies have suggested that it impairs fertility in wild salmon.

Is GMO Corn Safe to Eat? - A unique new study published in December 2016 in the scientific journal Nature has used molecular profiles to reveal major differences in composition between a GMO corn and its non-GMO parent. These findings question industry and regulatory position of "substantial equivalence" and have serious safety implications. The peer-reviewed study led by Dr. Michael Antoniou at King's College London describes the effects of the process of genetic engineering on the composition of a genetically modified Roundup-resistant GMO corn variety, NK603. "Our study clearly shows that the GM transformation process results in profound compositional differences in NK603, demonstrating that this GMO corn is not substantially equivalent to its non-GMO counterpart," Dr. Antoniou said. "The marked increase in putrescine and especially cadaverine is a concern since these substances are potentially toxic, being reported as enhancers of the effects of histamine, thus heightening allergic reactions and both have been implicated in the formation of carcinogenic nitrosamines with nitrite in meat products. Our results call for a more thorough evaluation of the safety of NK603 corn consumption on a long-term basis." In-depth analysis of types of proteins ("proteomics") and small biochemical molecules ("metabolomics") revealed major compositional differences between NK603 and its non-GMO parent. The results obtained show not only disturbances in energy utilisation and oxidative stress (damage to cells and tissues by reactive oxygen), but worryingly large increases in certain substances (polyamines). Polyamines found to be present in increased amounts in GMO NK603 corn include putrescine and cadaverine, which can produce various toxic effects. For example, they enhance the effects of histamine, thus heightening allergic reactions and both have been implicated in the formation of carcinogenic substances called nitrosamines. Overall, the findings of this study disprove industry and regulatory agency claims that NK603 is "substantially equivalent" to its non-GMO counterpart and suggest that a more thorough evaluation of the safety of consuming products derived from this GMO corn on a long term basis should be undertaken.

If Those Who Forget the Past are Doomed to Repeat it, the Future Looks Grim: The Bayer-Monsanto Merger: On December 8th 2016, the State of Washington's Attorney General's office filed a lawsuit against Monsanto for contaminating rivers, land, air, people and wildlife. 120 bodies of water in Washington were named as suffering from PCB contamination. This recklessness by Monsanto comes as no surprise and is a glimpse as what to expect if the Bayer Monsanto merger is completed. From Bayer's systematic killing of and forced-testing on people in Nazi Germany, to their preventable spread of HIV to thousands, and Monsanto’s deadly development of Agent Orange, PCBs and dioxin, this merger would mark a dangerous new precedent for the biotechnology/biochemical industry if approved. Together, these two corporations have been responsible for the suffering, torture and deaths of millions. Communities, organizations, small farmers and social movements are working to resist these corporations, and have made a resounding rejection of their merger. Bayer, based in Germany, became famous for producing the headache-relieving drug Aspirin in 1899. In 1897, heroin also gained traction with the public, as Bayer was the first to commercially manufacture it. Bayer coined it “Heroin” for the "Heroic" effects upon its first volunteers – Bayer's very own factory workers. Bayer marketed Heroin as a drinkable health tonic and a remedy for coughing fits.The first well-documented incident of Monsanto’s disregard for human health originated with the manufacturing of polychlorinated biphenyls (PCBs).  Monsanto considered the chemicals toxic enough to give workers protective gear and clothing, and encourage them to hose off after each shift. Monsanto researchers and executives began writing confidential memos describing their fears about the chemicals’ toxic effects, but drafted plans for continuing to sell them despite these suspicions.”

China smog: millions start new year shrouded by health alerts and travel chaos -- Millions in China rang in the New Year shrouded in a thick blanket of toxic smog, causing road closures and flight cancellations as 24 cities issued alerts that will last through much of the week. On the first day of 2017 in Beijing, concentrations of tiny particles that penetrate deep into the lungs climbed as high as 24 times levels recommended by the World Health Organization. More than 100 flights were cancelled and all intercity buses were halted at the capital’s airport. In the neighbouring port city of Tianjin, more than 300 flights were cancelled while the weather forecast warned thick smog will persist until 5 January. All of the city’s highways were also shut as low visibility made driving hazardous, effectively trapping residents. Across northern China 24 cities issued red alerts on Friday and Saturday, while orange alerts persisted in 21 cities through the New Year holiday. A red alert is the highest level of a four-tier warning system introduced as part of China’s high-profile war on pollution. Decades of economic development have made acrid air a common occurrence in nearly all major Chinese cities, with government-owned coal burning power stations and heating plants and steel manufacturing concentrated in northern provinces the main source of pollution.

Dramatic Time-Lapse Video Captures Arrival Of Beijing Smog Cloud --The following dramatic time-lapse video, shows a wall of toxic smog rolling into Beijing over a 20-minute period collapsed into a 10 second video; it gives a glimpse of the pollution problem in China's capital city. Chas Pope, a British engineering consultant working in Beijing, shot the video.An air-quality index released by China's municipal environmental protection bureau, which measures potentially hazardous particles in the air, hit 482 on Sunday, almost touching the 500 mark where the scale tops out, and far beyond the point deemed hazardous to health, according to the South China Morning Post. "Everyone should avoid all physical activity outdoors," a warning accompanying the reading warns. "People with heart or lung disease, older adults, and children should remain indoors and keep activity levels low."As a result of the heavy smog to hit much of northern China on Sunday, hundreds of flights were canceled and highways shut, disrupting the first day of the New Year holiday. The latest smog incident to hit Beijing, and which forced local authorities to extend an "orange alert" - the second highest level for air pollution until Jan. 4 - followed a similar hazardous smog alert in mid-December, leading authorities to order hundreds of factories to close and to restrict motorists to cut emissions.The latest bout of air pollution began on Friday and is expected to persist until Thursday, although it will ease slightly on Monday, the last day of the New Year holiday according to ABC.In Beijing, 126 flights were canceled at the city's main airport and all buses from there to neighboring cities suspended, state news agency Xinhua said. Average concentrations of small breathable particles known as PM2.5 were higher than 500 micrograms per cubic meter in Beijing - 50 times higher than World Health Organization recommendations.

Chinese Cruise Ship With 2,000 Passengers Stuck At Sea For Two Days Due To Smog --Beijing's pollution problem is getting worse by the day.On Wednesday, the Chinese capital issued its highest "red fog alert" for only the second day in history, keeping highways closed in and around the city which is already under a smog alert after weeks of choking winter pollution. China's weather bureau warned of visibility of less than 50 meters in some areas, leading many airports to cancel flights.The heavily polluted Hebei province, which surrounds most of Beijing, said on Tuesday it had ordered all polluting firms in Tangshan, China's biggest steel-producing city to the east of Beijing, to shut down which likely means that China is in for a substantial "manufacturing" shock in the coming months. Hebei, which was home to seven of China's 10 smoggiest cities in 2015, will build the world's biggest dust prevention barrier, stretching nearly two miles, at the major coal port of Qinhuangdao in a bid to cut pollution, state media said on WednesdaFor now, however, China is very much defenseless against the toxic byproduct of its rapid industrialization, which also happens to be a major factor permitting the Chinese economy to grow at the goalseeked 6-7% level or somewhere thereabouts. Unfortunately for Beijing, it's a choice of either stable manufacturing growth or clean air: the two are mutually exclusive. And nowhere was that more visible today, so to speak, than near the port of Tianjin, where according to the Beijing Evening News, a large cruise ship with more than 2,000 people on board was stuck at sea for two days because it was unable to dock in the heavy smog that has enveloped much of northern China. The vessel finally returned to the Port of Tianjin on Monday afternoon after drifting for two days at sea. The thick air pollution had earlier made it impossible to safely berth the vessel, according to the article

If Trump's Nominee Scott Pruitt Is Confirmed, 'EPA Would Stand for Every Polluter's Ally' - Nominating Oklahoma Attorney General Scott Pruitt to run the U.S. Environmental Protection Agency (EPA) gives lie to Donald Trump 's claim that he is serious about protecting the public from pollution. While the president-elect has waffled on climate change , he has been unequivocal about toxics.  "Clean air is vitally important," Trump declared during a Nov. 22, 2016 interview with The New York Times. "Clean water," he added, "crystal clean water is vitally important. Safety is vitally important." And when he announced Pruitt's nomination in early December, Trump vowed that the attorney general would "restore the EPA's essential mission of keeping our air and water clean and safe."  Putting aside the fact that the EPA has not forsaken that mission, Pruitt's track record indicates that he would do the exact opposite. Under Pruitt, the acronym EPA would stand for Every Polluter's Ally.  Since he took office as Oklahoma's attorney general in 2010, Pruitt has repeatedly sued the EPA to block key safeguards limiting power plant pollution, most notably the Cross-State Air Pollution Rule , which limits sulfur dioxide and nitrogen oxides and the Mercury and Air Toxics Standards (MATS), which curb mercury, arsenic, cyanide and other emissions.  Sulfur dioxide and nitrogen oxides are primary ingredients of soot and smog pollution, which cause a number of respiratory problems, including bronchitis and aggravated asthma, as well as cardiovascular disease and premature death. Mercury and other toxic pollutants covered by MATS have been linked to heart disease, neurological damage, birth defects, asthma attacks and premature death. Some 25 million Americans suffer from asthma, alone. That's one out of every 12 people.  Pruitt also has sued the EPA to prevent the agency from implementing a rule that would reduce the amount of ground-level ozone or smog, which the American Lung Association says is the most widespread pollutant nationwide and one of the most dangerous. Produced when sunlight heats nitrogen oxides, volatile organic compounds and carbon monoxide from power plants, industrial facilities and automobiles, ozone pollution has been linked to respiratory problems, cardiovascular disease and premature death.

Here's What You Need to Know on the Upcoming War on Our Health and Environment -- Before Inauguration Day, the Trump era has opened with an extremist agenda that poses an alarming threat to our people, our environment and the core values we share about justice, fair play and our commitment to leave future generations a livable world. Already, we've seen a set of cabinet nominees dominated by fossil fuel advocates, billionaires and bankers; a president-elect who says "nobody really knows" what's happening to our climate ; and a full-on witch hunt for the experts who know the truth.  This is not normal. It's the most radical approach to American governance we've seen in our lifetime. Whatever we voted on in November, nobody voted for dirty water and air. Nobody voted to walk away from climate leadership and millions of clean energy jobs. And nobody voted to hand over our country to a pollute-ocracy that puts polluter profits first—and puts the rest of us at risk.  The following list addresses some, but not all, programs, policies and initiatives the Trump administration and GOP lawmakers have targeted. This could become the worst legislative and executive assault in history against the common sense safeguards we all depend on to protect our environment and health. At risk is the water we drink, the air we breathe, our public oceans, coasts and lands and the very approach we've taken for generations in this country to protect our common inheritance.  At the Natural Resources Defense Council (NRDC), we will stand up and hold this government to account, by making sure the public understands what's at stake—for our country, our people and the common future we share.

 California Dems Retain Eric Holder To Fight "Clear And Present Danger" From Trump -A few weeks ago we highlighted an epic climate change rant offered up by California's governor, Jerry Brown, who vowed to fight Trump, saying "we've got the scientists, we've got the lawyers and we're ready to fight" (see "Caught On Tape: CA Governor Brown Goes On Epic Climate Change Rant; Vows To Defy Trump").  And while Brown touted his army of lawyers, apparently he needed just one more which prompted the retention of former Obama Attorney General, Eric Holder.  Per the New York Times:“With the upcoming change in administrations, we expect that there will be extraordinary challenges for California in the uncertain times ahead.  This is a critical moment in the history of our nation. We have an obligation to defend the people who elected us and the policies and diversity that make California an example of what truly makes our nation great.”“Having the former attorney general of the United States brings us a lot of firepower in order to prepare to safeguard the values of the people of California,” Kevin de León, the Democratic leader of the Senate, said in an interview. “This means we are very, very serious.”Mr. de León said he expected California to challenge Washington — and defend itself from policies instituted in Washington — on issues including the environment, immigration and criminal justice. He said California Democrats decided to turn to Mr. Holder as they watched Mr. Trump assemble his cabinet and begin to set the tone for his presidency.“It was very clear that it wasn’t just campaign rhetoric,” Mr. de León said of Mr. Trump’s proposals over the past year. “He was surrounding himself with people who  are a very clear and present danger to the economic prosperity of California.”

The overwhelming whiteness of US environmentalism is hobbling the fight against climate change --  If the Trump administration fails to take climate change seriously, the results could be disastrous for wide swaths of the national and international population. But communities of color, who are disproportionately susceptible to effects of climate change including heat waves, extreme weather, and pollution, are especially at risk. Given the environmental threats posed by a Trump administration, it’s more crucial than ever that Americans work together to fight climate change. And in order to achieve broad, collaborative action, the mainstream environmental movement will need to take a hard look at how its overwhelming whiteness has thus far hobbled its efforts.  Despite the immediate threat of climate change to communities of color, cultural stereotypes maintain that Hispanic people, African Americans, and other people of color are less concerned than whites about environmental issues. But in reality, Hispanics and African Americans are some of the most ardent supporters of progressive climate and energy policies. They are also more likely than whites to voice support for these policies, even when it means personally incurring greater costs. Studies have also found that Hispanics are significantly more likely than whites to say the Earth is warming because of human activities, and that the US should do whatever it takes to protect the environment. A recent New York Times poll also found that Hispanics, to a greater degree than whites, view climate change as a legitimate concern and support robust mitigation policies. Clearly, people of color are invested in working to address climate change and other environmental issues. And yet the mainstream environmentalist movement has failed them, largely because it has been designed by and for a white, upper-middle-class demographic. (Close your eyes and picture an environmentalist, and you’re likely to summon up a white guy in a Patagonia jacket, standing proudly next to his Prius with camping equipment loaded in the back.) And so it should come as no surprise that racial minorities, who are underrepresented in mainstream environmental organizations, are less likely to identify as “environmentalists” or to align themselves with environmental advocacy groups.

 Sensing Gains Ahead Under Trump, the Kochs Court Minorities - NYTimes: “Your energy bill’s paid!” the M.C. declared between soaring numbers from recording artists like VaShawn Mitchell and Charles Jenkins, calling to a young woman from the audience, who shrieked and started twirling on the floor. Though few in the crowd knew it, the concert had a powerful sponsor: Fueling U.S. Forward, a public relations group for fossil fuels funded by Koch Industries, the oil and petrochemicals conglomerate led by the ultraconservative billionaire brothers David H. and Charles G. Koch. About halfway through the event, the music gave way to a panel discussion on how the holidays were made possible by energy — cheap energy, like oil and gas. The concert flier was adorned with a red car bearing Christmas gifts. “Thankful for the fuels and innovation that make modern life possible,” it read. The Kochs, whose use of their fortune to promote climate-change denial research has angered environmentalists, are quietly courting new allies in their quest for a fossil fuel resurgence: minorities. Since its start in the spring of 2016, Fueling U.S. Forward has sent delegates to, or hosted, at least three events aimed at black voters, arguing that they benefit most from cheap and abundant fossil fuels and have the most to lose if energy costs rise. Fueling U.S. Forward is “dedicated to educating the public about the value and potential of American energy, the vast majority of which comes from fossil fuels,” the group says on its website. “We’ll talk to people of diverse backgrounds — industry employees, small-business owners, community leaders and low-income families — and share their stories.”

Spread by trade and climate, bugs butcher America’s forests (AP) — In a towering forest of centuries-old eastern hemlocks, it’s easy to miss one of the tree’s nemeses. No larger than a speck of pepper, the Hemlock woolly adelgid spends its life on the underside of needles sucking sap, eventually killing the tree. The bug is one in an expanding army of insects draining the life out of forests from New England to the West Coast. Aided by global trade, a warming climate and drought-weakened trees, the invaders have become one of the greatest threats to biodiversity in the United States. Scientists say they already are driving some tree species toward extinction and are causing billions of dollars a year in damage — and the situation is expected to worsen. “They are one of the few things that can actually eliminate a forest tree species in pretty short order — within years,” This scourge is projected to put 63 percent of the country’s forest at risk through 2027 and carries a cost of several billion dollars annually in dead tree removal, declining property values and timber industry losses, according to a peer-reviewed study this year in Ecological Applications. That examination, by more than a dozen experts, found that hundreds of pests have invaded the nation’s forests, and that the emerald ash borer alone has the potential to cause $12.7 billion in damage by 2020.  Insect pests, some native and others from as far away as Asia, can undermine forest ecosystems. For example, scientists say, several species of hemlock and almost 20 species of ash could nearly go extinct in the coming decades. Such destruction would do away with a critical sponge to capture greenhouse gas emissions, shelter for birds and insects and food sources for bears and other animals. Dead forests also can increase the danger of catastrophic wildfires. While all 50 states have been attacked by pests, experts say forests in the Northeast, California, Colorado and parts of the Midwest, North Carolina and Florida are especially at risk. Forests in some states, like New York, are close to major trade routes, while others, like in Florida, house trees especially susceptible to pests. Others, like New Hampshire, Massachusetts and Maine, are experiencing record warming.

Last endangered Mexican porpoises to be rounded up by US Navy-trained dolphins - US Navy-trained dolphins and their handlers will participate in a last-ditch effort to catch the last few dozen of Mexico’s vaquita porpoises to save them from extinction. The trained animals will use their sonar to locate the extremely elusive vaquitas, then surface and advise their handlers. The number of vaquitas, the world’s smallest and most endangered porpoise species, has been devastated by illegal fishing for the swim bladder of the totoaba, a fish which is a prized delicacy in China. According to rough estimates, with the vaquita population falling by 40% a year, and only 60 alive a year ago, there could be as few as three dozen left. Although the vaquita has never been held successfully in captivity, experts hope to put the remaining porpoises in floating pens in a safe bay in the Gulf of California, also known as the Sea of Cortez, where they can be protected and hopefully breed. International experts confirmed the participation of the navy marine mammal program in the effort, which is expected to start in the spring. “Their specific task is to locate” vaquitas, which live only in the Gulf of California, Fallin said. “They would signal that by surfacing and returning to the boat from which they were launched.” The dolphins have been trained by the navy for tasks such as locating sea mines. Lorenzo Rojas-Bracho, the chairman of the International Committee for the Recovery of the Vaquita, wrote that “an international group of experts, including navy personnel, have been working on two primary goals: determining the feasibility of locating and catching vaquitas, as a phase one. And as a second phase, to determine the feasibility of temporarily housing vaquitas in the Gulf of California.”

The US is the only country that hasn’t signed on to a key international agreement to save the planet -  On Dec. 2, 2016, Mexico’s environment minister Rafael Pacchiano Alamán faced the thousands of participants and delegates who traveled to Cancun for the 13th conference of the United Nations Convention on Biological Diversity, and opened the high-level meeting by addressing the elephant in the room.“Warnings have been made on all the problems that this wall could cause,” Pacchiano said, noting the biological impacts of US president-elect Donald Trump’s promised border wall between Mexico and the United States.  The little-known Convention on Biological Diversity (pdf) is an international treaty adopted in 1992—one day after the UNFCCC. It’s designed to address international conservation concerns, such as mass extinctions and ecosystem degradation. The Convention on Biological Diversity’s main mechanism of action is incentives for conservation and sustainable use, and importantly, developing countries can apply for funding from other nations signed on to the convention for critical biodiversity conservation projects.  Over the past 24 years, 196 parties have ratified the agreement, including the European Union, three non-UN states, and all the UN states, with the exception of one: the United States. Up until now, analysts agree America’s absence hasn’t much mattered. Independent national commitments mimic those already in the convention; the US has sent a full-fledged observing delegation to every conference; and every administration has chosen to financially support the convention’s programs. But now, as Trump prepares to take office, the country’s refusal to ratify the agreement could weaken biodiversity conservation both at home and abroad. Throughout the 1980s, it was the US that championed the idea of a biodiversity treaty. But when the papers finally hit the desk of then-president George H. W. Bush in 1992 following successful negotiations at the Rio de Janeiro Earth Summit, he refused to sign amid the tumultuous presidential election.

 House GOP moves to ease federal land transfers | TheHill: House Republicans are endorsing a procedural change to make it easier for Congress to transfer federal land to state or local government agencies. The provision in the package of House rules due for a vote Tuesday would prohibit the Congressional Budget Office from taking into account lost federal revenue from energy production, logging, recreation or other uses when it decides whether a piece of legislation is revenue-neutral or would contribute to the federal deficit. The rules package is expected to pass the House Tuesday. The change regarding federal land would make it easier from a budgetary standpoint to reduce the federal government’s land holdings, an idea that has picked up steam in recent years among some Republicans.House Natural Resources Committee Chairman Rob Bishop(R-Utah), who supports federal land transfers, sponsored an amendment that the GOP caucus voted on to include the provision in the rules resolution. Parish Braden, Bishop’s spokesman, said the provision aligns with Bishop’s position that moving land from federal to state or local control is in the country’s interests. “In many cases federal lands create a significant burden for the surrounding communities,” Braden said in a statement. Rep. Raul Grijalva (Ariz.), the top Democrat on the Natural Resources Committee, slammed the change in a letter urging his colleagues to vote against it. “The House Republican plan to give away America’s public lands for free is outrageous and absurd,” he said in a statement. “This proposed rule change would make it easier to implement this plan by allowing the Congress to give away every single piece of property we own, for free, and pretend we have lost nothing of any value. Not only is this fiscally irresponsible, but it is also a flagrant attack on places and resources valued and beloved by the American people.”

Scientists Say 2016 Is Hottest Year Ever Recorded - Climate scientists are all but assured that 2016 was the hottest year ever recorded. If that sounds familiar, 2014 and 2015 were also the hottest years since record-keeping began in 1880.   "2016 will break the global temperature record that was set in 2015, which broke the record that was set in 2014," climate change scientist Noah S. Diffenbaugh, professor of the Department of Earth System Science at Stanford University, told The Mercury News .   A number of experts and government organizations had already predicted that 2016 was Earth's hottest year in recorded history.   Last month, the National Oceanic and Atmospheric Administration (NOAA) announced that El Nino drove much of the record warmth during the first two-thirds of 2016, while a weak La Nina cooled the globe down during the past few months. However, the period between January to November of 2016 was the warmest such period on record.   "The average global temperature was 1.69 degrees F above the average of 57.2 degrees, surpassing the record set in 2015 by 0.13 degrees F," the agency stated.  Recent headlines from publications around the world—from Houston, Texas to Singapore —have declared extreme heat. Meanwhile, the Arctic in particular saw " a meteoric rise " in October heat that contributed to the region's record low sea ice extent for the month, which clocked in at 28.5 percent below the 1981-2010 average.  According to The Mercury News, both NOAA and NASA are expected to announce that 2016 was the hottest year ever recorded on Jan. 18, two days before the presidential inauguration of notorious climate change denier Donald Trump .  "This reality is not going to simply disappear by denying that it exists, or by dismissing it as a hoax, or by claiming that it is too complicated to understand or to address,"

World heat shatters records in 2016 in new sign of global warming | Reuters: Last year was the hottest on record by a wide margin, with temperatures creeping close to a ceiling set by almost 200 nations for limiting global warming, the European Union's Copernicus Climate Change Service said on Thursday. The data are the first of the New Year to confirm many projections that 2016 will exceed 2015 as the warmest since reliable records began in the 19th century, it said in a report. The Arctic was the region showing the sharpest rise in temperatures, while many other areas of the globe, including parts of Africa and Asia, also suffered unusual heat, it said. A few parts of South America and Antarctica were cooler than normal. Global surface temperatures in 2016 averaged 14.8 degrees Celsius (58.64°F), or 1.3C (2.3F) higher than estimated before the Industrial Revolution ushered in wide use of fossil fuels, the EU body said. In 2015, almost 200 nations agreed at a summit in Paris to limit global warming to "well below" 2C above pre-industrial times while pursuing efforts to hold the rise to 1.5C as part of a sweeping shift away from fossil fuels towards clean energy. Temperatures last year broke a 2015 record by almost 0.2C (0.36F), Copernicus said, boosted by a build-up of greenhouse gases in the atmosphere and by a natural El Nino weather event in the Pacific Ocean, which releases heat to the atmosphere. In February 2016 alone, temperatures were 1.5C above pre-industrial times, the study said. Rising heat is blamed for stoking wildfires, heat waves, droughts, floods and more powerful downpours that disrupt water and food supplies.

'Earth On The Edge': EU Agency Confirms 2016 As Hottest Year On Record  - Huffington Post - The first global analysis of 2016 climate data is out, confirming what many scientists had predicted: Last year was the hottest on record, surpassing the 2015 record by 0.2 degrees Celsius (0.36 degrees Fahrenheit), the European Union’s Copernicus Climate Change Service announced Thursday.  Earth, the agency concluded, is “on the edge.”#Earth on the edge: Record breaking 2016 was close to 1.5°C warming according to #Copernicus #ClimateChange Service — Copernicus EU (@CopernicusEU) January 5, 2017In 2016, the average global surface temperature soared to around 14.8 degrees Celsius (58.6 degrees Fahrenheit), approximately 1.3 degrees Celsius (2.3 degrees Fahrenheit) above pre-industrial times, the earth observation program said.  Copernicus found that temperatures, fueled by climate change and a strong El Nino, peaked in February at about 1.5 degrees Celsius above pre-industrial times ― a warming benchmark that nearly 200 countries are striving to hold temperatures below as part of last year’s historic Paris climate pact. In a statement accompanying the findings, Copernicus Director Juan Garcés de Marcilla said the effects of climate change are being felt around the world.  “Land and sea temperatures are rising along with sea levels, while the world’s sea-ice extent, glacier volume and snow cover are decreasing; rainfall patterns are changing and climate-related extremes such as heat waves, floods and droughts are increasing in frequency and intensity for many regions,” Marcilla said. “The future impact of climate change will depend on the effort we make now, in part achieved by better sharing of climate knowledge and information.” 

 Heat Is On for 2017, Just Not Record-Setting - 2016 is about to cap off the hottest year on record for the third straight year, a remarkable streak fueled primarily by the excess heat trapped in Earth’s atmosphere by ever-rising levels of greenhouse gases.  While that streak is expected to end, in part because of the demise of one of the strongest El Niños on record, 2017 is still expected to be among the hottest years in more than 130 years of record keeping, according to a forecast from the U.K. Met Office.  Because of global warming, “each new year is basically predestined to be among the warmest on record,” Deke Arndt, chief of the monitoring branch of the U.S. National Centers for Environmental Information, said in an email. Because of global warming, 16 of the 17 hottest years on record have occurred this century, the only exception being the strong El Niño year of 1998.  Each year, the Met Office uses climate models to forecast the global annual average temperature for the coming decade, in an effort to improve shorter-term climate forecasting of features like hurricane season activity and droughts. Forecasters expect 2017’s temperature to fall between 1.13°F (0.63 °C) and 1.57°F (0.87 °C) above the 1961-1990 average.

No Pause in Global Warming - Various studies have debunked the idea of a pause, or hiatus, in global warming—the contention that global surface temperatures stopped rising during the first decade of this century. The arguments for and against “the pause” were somewhat muted until June 2015, when scientists at the National Oceanic and Atmospheric Administration published a paper in Science saying that it had slightly revised the sea surface temperatures it had been citing for the 1900s. The measurement methods, based on sensors in the engine intake ports of ships, had been flawed, NOAA said. The revised methodology also meant that sea surface temperatures during the 2000s had been slightly higher than reported. NOAA adjusted both records, which led to a conclusion that global surface temperatures during the 2000s were indeed higher than they had been in previous decades. No hiatus. Critics attacked NOAA, claiming it had cooked the books to dismiss claims of a pause. Republican Rep. Lamar Smith of Texas opened a congressional investigation of NOAA scientists, including demands that they turn over their emails, which they have not.Now independent scientists have weighed in. A study published Wednesday in Science Advances shows that the adjustments NOAA made were justified. A team led by Zeke Hausfather at the University of California at Berkeley and Kevin Cowtan at the University of York analyzed raw data from buoys, satellites and robotic sensors around the world’s oceans. They concluded that the old methods had indeed overestimated sea surface temperatures in the past—but that the newer calculations had underestimated temperatures for the 2000s. Hausfather and Cowtan explain their review in a guest blog Wednesday on Scientific American’s Website, and make a case for why such investigations should be done by independent scientists, not politicians. Hausfather also describes the details of his team’s analysis in a clear and interesting video, below.

 Climate change escalating so fast it is 'beyond point of no return' | The Independent: Global warming is beyond the “point of no return”, according to the lead scientist behind a ground-breaking climate change study. The full impact of climate change has been underestimated because scientists haven't taken into account a major source of carbon in the environment. Dr Thomas Crowther’s report has concluded that carbon emitted from soil was speeding up global warming. The findings, which say temperatures will increase by 1C by 2050, are already being adopted by the United Nations. Dr Crowther, speaking to The Independent, branded Donald Trump’s sceptical stance on climate change as “catastrophic for humanity”. “It’s fair to say we have passed the point of no return on global warming and we can’t reverse the effects, but certainly we can dampen them,” said the biodiversity expert. The report, by an exhaustive list of researchers and published in the Nature journal, assembled data from 49 field experiments over the last 20 years in North America, Europe and Asia. It found that the majority of the Earth’s terrestrial store of carbon was in soil, and that as the atmosphere warms up, increasing amounts are emitted in what is a vicious cycle of “positive feedbacks”.The study found that 55bn tonnes in carbon, not previously accounted for by scientists, will be emitted into the atmosphere by 2050.“As the climate warms, those organisms become more active and the more active they become, the more the soil respires – exactly the same as human beings," said Dr Crowther, who headed up the study at Yale Climate & Energy Institute, but is now a Marie Curie fellow at the Netherlands Institute of Ecology. “Our study shows that this major feedback has already certainly started, and it will have a significant impact on the climate in the coming decades. This information will be critical as we strive to understand how the climate is going to change in the future. And it will also be critical if we are to generate meaningful strategies to fight against it.”

Record-breaking extreme weather in Australia in 2016 devastates ecosystems -  Australia’s weather was extreme in 2016, driven by humankind’s burning of fossil fuels as well as a strong El Niño, according to the Bureau of Meteorology’s annual climate statement.That extreme weather led to devastated ecosystems both on land and in the sea, with unprecedented bushfires in regions that don’t usually burn, the worst coral bleaching on record, and has been attributed as the cause of damage to vast tracts of crucial kelp forests, oyster farms and salmon stocks across southern Australia.The statement, released on Thursday, said the country as a whole had its fourth-warmest year on record, but locally, Sydney and Darwin broke records for both their hottest maximum temperatures and hottest minimum temperatures.Hobart had its warmest night on record in 2016 and both Hobart and Brisbane had records for their hottest annual mean temperature fall as well. The hot and dry start to the year sparked bushfires in Victoria, Tasmania and Western Australia.The fires that swept through the Tasmanian world heritage forests were described as the worst crisis those forests faced in decades. The usually damp alpine forests there had been dried out by earlier dry weather and then a huge number of lightning strikes – which are expected to become more common as temperatures rise – burned through forests, killing trees that were hundreds of years old.While land burned, the sea around Australia broiled. The bureau’s statement said despite the surface temperature of the seas around Australia being consistently high in recent years, 2016 reached a new record temperature, being 0.73C above the 1961-90 average.Off the coast of Queensland, those record temperatures led to the worst coral bleaching on record, where an estimated 22% of the coral on the entire 2,300km length of the Great Barrier Reef was lost.In the northern, most remote and most pristine part of the reef, coral was devastated by the unusually warm water, which scientists say will become the norm in fewer than 20 years. The bureau’s statement also notes that ocean temperatures were at record highs around Tasmania in 2016. The freakishly hot waters there have been attributed as the cause of damage to oyster, salmon and abalone industries, as well as increased stress to kelp forests, already devastated by warmer waters in recent years.

We’re Just As Vulnerable To A Dust Bowl Drought As We Were In The 1930s - We've had huge revolutions in agriculture since the Dust Bowl droughts of the 1930s, from advances in pesticides to drone monitors to wide mechanization.  It would not be unreasonable to expect that with such developments over the past 80 years, American agriculture would be more capable of handling a major drought than it was in the 1930s. After all, we’ve had plenty of time to practice, plenty of warning about the impacts of climate change, and have developed plenty of technology to address these issues. Unfortunately, a new study from researchers at the University of Chicago indicates that this might not be the case. The researchers simulated a Dust Bowl-style drought on modern crops to see how they’d react, and the results are pretty alarming. The researchers estimate that yield losses would be around 50 percent worse than during the drought of 2012, and that with each degree (Celsius) the temperature rises, yields decrease by another 25 percent. This is a big deal; these are bankruptcy and starvation percentages. In large part the continued vulnerability of crops to drought is in place because of the simple fact that the most popular modern seeds aren’t designed to withstand drought, but to increase yield. That isn’t true across the board—farmers and scientists are increasingly looking to species and varieties that can handle lower precipitation and higher heat—but it isn’t the norm. The researchers involved in the study suggest that, well, maybe it should be.

Signs of climate change hit Great Lakes | NCPR News: Climate change is an issue of concern for many around the world. Scientists say the signs are everywhere, and here in the Great Lakes region, the evidence of regional climate change can be seen in every day. The Great Lakes Integrated Sciences and Assessments Center in Michigan specializes in presenting climate change information specific to this area. Researcher Laura Briley said one sure sign of regional climate change can be found in the water. “The lakes themselves, are actually changing,” she said. “Water temperatures have been increasing and in some cases increasing at a faster rate than air temperatures.” Briley said other signs of climate change in the Great Lakes basin include severe storms, increased precipitation and reduced ice cover on the lakes. "In the last 30 or so years, we've seen a large increase in extreme precipitation events ... so more risk of flooding and runoff," she said.

Study predicts more extreme storms for California in the future -- Scientists believe a warmer climate will deliver more extreme storms to California, like the one that dropped three inches of rain on San Francisco in just an hour in 2014, triggering flooding and mudslides. According to new models developed by scientists at MIT, a rise in global temperature of 4 degrees Celsius will yield an extra three extreme precipitation events per year in California by the end of the century. "One of the struggles is, coarse climate models produce a wide range of outcomes. [Rainfall] can increase or decrease," Adam Schlosser, senior research scientist in MIT's Joint Program on the Science and Policy of Global Change, said in a news release. "What our method tells you is, for California, we're very confident that [heavy precipitation] will increase by the end of the century." Most models predict future precipitation by analyzing large scale climate trends. These models have trouble integrating local factors like moisture convection and topography. As part of their prediction efforts, scientists decided to forgo local precipitation forecasting in favor or large-scale atmospheric patterns. "We've actually found there's a connection between what climate models do really well, which is to simulate large-scale motions of the atmosphere, and local, heavy precipitation events," Schlosser said. "We can use this association to tell how frequently these events are occurring now, and how they will change locally, like in New England, or the West Coast." Scientists looked extreme precipitation events in California and the Midwest between 1979 to 2005, paying special attention to the two most influential factors, wind currents and moisture content. "We essentially take snapshots of all the relevant weather information, and we find a common picture, which is used as our red flag," "When we examine historical simulations from a suite of state-of-the-art climate models, we peg every time we see that pattern."

Study: Coastal NC officials not willing to prepare for sea level rise - Coastal Carolina officials may not be willing to prepare for climate change until it's too late, according to a new study out of N.C. State and Appalachian State Universities. Appalachian State University researcher Brian Bulla surveyed local officials in 20 coastal counties and found that knowledge of the science behind climate change didn't make officials more willing to prepare their communities for impacts like sea-level rise. To Bulla, the findings raised concerns.  “It seems to suggest that just providing people − whether public officials or the general public − with more or better information is not necessarily going to increase adaptive action,” he said. Since 1870, global sea level has risen by about 7.5 inches, according to the Environmental Protection Agency, which further estimates global sea levels will rise at a greater rate during the next century.  Bulla said officials were more likely to respond when the threats were imminent. But he said it would be cheaper and safer for communities to prepare for impacts before they strike.

North Carolina environmental chief moves to block his own removal by new governor -A top state environmental regulator who has urged Trump to rein in the EPA and has been criticized for his lenient treatment of polluters, stepped down over the holidays — giving himself a staff position that will be protected under the new North Carolina administration. Donald van der Vaar, former Secretary of the North Carolina State Department of Environmental Quality, will be an environmental program manager, the News and Record (Greensboro, NC) reported, a position that enjoys normal employee protections and is not subject to gubernatorial appointment. Van der Vaart was appointed as DEQ secretary by Gov. Pat McCrory (R), who failed in his reelection bid in November and will be replaced by former state Attorney General Roy Cooper (D) later this month. It should come as no surprise that Governor-Elect Cooper did not plan to keep Van der Vaart at the helm of the DEQ. Under Van der Vaart and McCrory, the agency has been criticized for protecting Duke Energy, the state’s largest utility, where McCrory spent decades of his career. Duke has numerous environmental violation for its storage of coal ash, including ongoing leaks, a massive 2014 spill, and drinking water contamination.

 As Seas Rise, Miami Development Continues Unabated -- Jeff Goodell, Rolling Stone contributing editor, has a warning for south Florida residents: “Miami, as we know it today, is not going to exist.” That’s because the ocean is rising, and it will be hard to keep the water out. Some Miami neighborhoods already flood during high tides. And yet, “the building here is going on at a record rate … high-rises all along the beach. Basically, nothing has changed,” Goodell says in this month’s “This Is Not Cool” video by independent videographer Peter Sinclair. Describing how extensive parts of South Florida are “built on a big porous sponge,” he says levees cannot mitigate the problem. “It’s just a big flat limestone pancake.” “The ice did not get the memo to stop melting in the year 2100,” adds Retired Admiral David Titley, the former chief naval oceanographer now teaching at Penn State. He cautions of sea-level problems ahead even if global temperatures are somehow capped at the 2°C threshold sought under the December 2015 Paris climate agreement. Goodell says the “resort culture” of the area means those problems often are overlooked and “are not part of the culture here … It’s a place where you go to get away from problems, to have fun on the beach.” Goodell points to ongoing ambitious new housing and other development activities in the face of continually rising sea level: “It’s the Miami sea-level rise story in a nutshell,” he says. “Nothing is changing.”

Louisiana Faces Faster Levels of Sea-Level Rise Than Any Other Land on Earth --- Louisiana —which faces faster levels of sea-level rise than any other land on Earth —could lose as many as 2,800 square miles of its coast over the next 40 years and about 27,000 buildings will need to be flood-proofed, elevated or bought out, the New Orleans Advocate reported.  These dire predictions were pulled from a new rewrite of the state's Coastal Master Plan for 2017 released Tuesday by the Louisiana Coastal Protection and Restoration Authority.  The plan, first introduced in 2007 post- Hurricane Katrina , acts as a 50-year blueprint for restoring the Pelican State's rapidly disappearing coastal wetlands and protecting the state's natural resources and communities. Louisiana's Legislature unanimously approved the 2007 and 2012 versions.  The new plan, which is now out for public review and must be voted up or down by the Legislature, calls for 120 new projects , including a $6 billion proposal to protect or vacate properties in areas that are at risk of experiencing a 100-year storm. The plan also aims to restore 800 to 1,200 square miles of wetlands and build new levees and flood walls to protect against hurricane storm surges. The plan was authored by state coastal scientists and engineers and several federal agencies. Stakeholders from the shipping and fishing industries also provided input. The most significant details are the grim edits made to the 2012 plan. As the Advocate detailed, "the worst-case scenario for human-caused sea-level rise in the 2012 plan, 1.48 feet, has become the best-case scenario in the 2017 edition. In fact, the National Climate Assessment now estimates sea levels on U.S. coastlines could rise 4 feet by 2100 ."  Not only that, "the new worst-case scenario projects that 4,000 square miles of the coast would be lost if the state stops all efforts to restore its coastal landscape. That's double the loss projected in the same scenario in the 2012 plan

Greenland Is Adding Extraordinary Amounts Of Ice And Snow -- Greenland’s ice sheet kicked off 2017 gaining about eight gigatons of snow and ice, which is well above what’s usually added to the ice sheet Jan. 1 for the last 24 years, according to Danish meteorologists.In fact, Greenland’s ice sheet has been gaining ice and snow at a rate not seen in years based on Danish Meteorological Institute (DMI) data. DMI reports the Greenland ice sheet’s “mass surface budget” has been growing significantly since October. Greenland’s “surface mass budget” for winter 2016-2017 is already more than two standard deviations higher than the northern ice sheet’s mean snow and ice accumulation over the last 24 years. DMI data shows the ice sheet added 8 gigatons of ice and snow Jan. 1, well above the standard deviation for that day. Greenland’s booming snow and ice gains come after the U.S. National Snow and Ice Data Center (NSIDC) found the northern ice sheet had an “above average” melt season.  NSIDC found “near-average to below-average coastal snowfall levels that exposed bare ice earlier in the melting season, combined with warm and sunny conditions at lower elevations, led to high overall ice loss from runoff.” Greenland “had a high early-season melt area, the pace slowed in mid-July relative to the warmest years,” NSIDC reported. Early 2016 saw an incredibly strong El Nino warming event. Greenland’s extraordinary ice sheet gains also come as Arctic sea ice levels stand more than two standard deviations below normal. Arctic sea ice coverage shrank in November, setting a record low, due to “unusually high air temperatures, winds from the south, and a warm ocean.” DMI notes Greenland’s ice sheet “snows more than it melts,” but adds that “calving of icebergs also adds to the total mass budget of the ice sheet.”

Tillerson Led Exxon’s Shift on Climate Change; Some Say ‘It Was All P.R.’ -  In January 2009, Rex W. Tillerson, the chief executive of Exxon Mobil, gave a speech in Washington that might have seemed impossible even a few years before. He announced that his company supported a carbon tax to help fight climate change. “As a businessman, it is hard to speak favorably about any new tax,” Mr. Tillerson told reporters. But, he said, it was “a more direct, a more transparent and a more effective approach” than an alternative gaining support in Congress known as cap and trade, which would set an upper limit on carbon dioxide emissions and then rely on a permit-trading system to meet the target. Mr. Tillerson’s speech was years in the making — part of a turnaround after decades of public denial that the planet was warming, even as Exxon’s own research suggested that it was. It had paid outside organizations to spread doubts about the science. But pressure on the company was building, and the newly elected President Obama had pledged to fight climate change and had singled out Exxon as an example of corporate greed. Mr. Tillerson — President-elect Donald J. Trump’s nominee to be secretary of state — presided over the company’s shift, which appears to have begun with public statements delivered without fanfare by the company in 2006. In 2007, he personally acknowledged that climate change was happening and that human activity was a contributing factor. Was this a sincere change of heart, or merely a cynical shift in corporate messaging? Environmental activists are skeptical. “They deliberately changed their stripes on climate, but it was all P.R.,” said Kert Davies, who has spent years investigating the company’s internal documents and practices at Greenpeace and who founded the Climate Investigations Center, an environmental research and advocacy organization. The history of Exxon’s shift suggests that however earnest Exxon Mobil might sound in its pronouncements on policy, it has done little or nothing to help put carbon taxes into effect.

Scientists discovered 55 lakes in Eastern Antarctica that shouldn't have been there (Video) Eastern Antarctica is considered to be the coldest place on Earth. So cold, that scientists expected its ice shelves were frozen solid and more stable against climbing global temperatures than Western Antarctica or Greenland. But new research published in the widely-esteemed journal Nature Climate Change has proven otherwise. If you want to learn more, lead scientists Jan Lenaerts and Stef Lhermitte break down the science in this educational blog post.

Huge Antarctic iceberg poised to break away - BBC News: An iceberg expected to be one of the 10 largest ever recorded is ready to break away from Antarctica, scientists say. A long-running rift in the Larsen C ice shelf grew suddenly in December and now just 20km of ice is keeping the 5,000 sq km piece from floating away. Larsen C is the most northern major ice shelf in Antarctica. Researchers based in Swansea say the loss of a piece a quarter of the size of Wales will leave the whole shelf vulnerable to future break-up. Larsen C is about 350m thick and floats on the seas at the edge of West Antarctica, holding back the flow of glaciers that feed into it. Researchers have been tracking the rift in Larsen C for many years, watching it with some trepidation after the collapse of Larsen A ice shelf in 1995 and the sudden break-up of the Larsen B shelf in 2002. Last year, researchers from the UK's Project Midas reported that the Larsen C rift was growing fast. But in December the speed of the rift went into overdrive, growing by a further 18km in just a couple of weeks. What will become a massive iceberg now hangs on to the shelf by a thread just 20km long.  "If it doesn't go in the next few months, I'll be amazed," project leader Prof Adrian Luckman, from Swansea University, told BBC News. "There hasn't been enough cloud-free Landsat images but we've managed to combine a pair of Esa Sentinel-1 radar images to notice this extension, and it's so close to calving that I think it's inevitable." Prof Luckman says the area that will break off will be about 5,000 sq km, a size he says that would put the iceberg among the top 10 biggest that have been recorded. The researchers say that this is a geographical and not a climate event. The rift has been present for decades, they say, but it has punched through at this particular time. It is believed that climate warming has brought forward the likely separation of the iceberg but the scientists say they have no direct evidence to support this. However, they are concerned about how any break-off will impact the rest of the ice shelf, given that its neighbour, Larsen B, disintegrated spectacularly in 2002 following a similar large calving event.

 Shocking Crack in Ice Shelf Grows Another 11 Miles - A 70-mile long crack in the Larsen C ice shelf grew another shocking 11 miles in December alone. That leaves just 12 miles before an iceberg the size of Delaware snaps off into the Southern Ocean. "The Larsen C Ice shelf in Antarctica is primed to shed an area of more than 5000 square kilometers [approx. 3,100 square miles] following further substantial rift growth," wrote the Project MIDAS team, which has been studying the ice shelf. "After a few months of steady, incremental advance since the last event, the rift grew suddenly by a further 18 kilometers [about 11 miles] during the second half of December 2016." During the last Antarctic winter, the rift averaged about three miles per month of growth. In December, NASA released a set of images that found the crack measured 70 miles in length, 300 feet wide and one-third of a mile deep. The sudden acceleration of the split in the ice has scientists convinced that a massive calving event is imminent. "If it doesn't go in the next few months, I'll be amazed," Professor Adrian Luckman, project leader from Swansea University, told BBC News .  By itself, the iceberg that is set to break off won't lead to a rise in sea levels , as the ice shelf already floats on the ocean. However, the Larsen ice shelf acts as a buttress against continental glaciers that could then be free to slide into the sea. BBC reports that if all the ice that Larsen C holds back were released into the ocean, global waters would rise by 10 cm, or four inches.

How Climate Rules Might Fade Away - In February 2009, a month after Barack Obama took office, two academics sat across from each other in the White House mess hall.  Greenstone and Sunstein knew they needed a Plan B: a way to regulate carbon emissions without going through Congress. Over the next year, a team of economists, scientists, and lawyers from across the federal government convened to come up with a dollar amount for the economic cost of carbon emissions. Whatever value they hit upon would be used to determine the scope of regulations aimed at reducing the damage from climate change. The bigger the estimate, the more costly the rules meant to address it could be. After a year of modeling different scenarios, the team came up with a central estimate of $21 per metric ton, which is to say that by their calculations, every ton of carbon emitted into the atmosphere imposed $21 of economic cost. It has since been raised to around $40 a ton. This calculation, known as the Social Cost of Carbon (SCC), serves as the linchpin for much of the climate-related rules imposed by the White House over the past eight years. From capping the carbon emissions of power plants to cutting down on the amount of electricity used by the digital clock on a microwave, the SCC has given the Obama administration the legal justification to argue that the benefits these rules provide to society outweigh the costs they impose on industry. It turns out that the same calculation used to justify so much of Obama’s climate agenda could be used by President-elect Donald Trump to undo a significant portion of it. As Trump nominates people who favor fossil fuels and oppose climate regulation to top positions in his cabinet, including Oklahoma Attorney General Scott Pruitt to head the Environmental Protection Agency and former Texas Governor Rick Perry to lead the Department of Energy, it seems clear that one of his primary objectives will be to dismantle much of Obama’s climate and clean energy legacy. He already appears to be focusing on the SCC.

The U.S. isn’t the only big country at risk of falling behind on climate change. Meet Brazil - Environmental advocates are worried that President-elect Donald Trump will try to withdraw the United States from the Paris climate agreement — and a recent scientific analysis says that if he does and other major countries follow suit, the consequence could be dire, tipping the world toward a dangerous level of global warming.  But what other countries might also fail to keep their promises to the world under that agreement? Recently, concerns have grown about the seventh-largest emitter, Brazil, which seems to be seeing some environmental backsliding as it battles a fierce recession and reels from a tumultuous impeachment of former president Dilma Rousseff.  In September, environmentalists praised Brazil’s decision to ratify the Paris climate agreement — a significant move for the global climate, given Brazil’s high rank among emitters of greenhouse gases and the fact that it is home to the world’s largest tropical rain forest. But now rising deforestation and proposed environmental policy changes have some experts worried that the nation might not live up to its climate pledges after all. Recent data from Brazil’s National Institute for Space Research indicate that deforestation in the Brazilian Amazon rain forest between August 2015 and July 2016 increased by 29 percent from the previous year. That followed a similar uptick in deforestation between August 2012 and July 2013.   Preserving the forests serves many environmental interests, such as safeguarding biodiversity, protecting water quality and upholding the rights of indigenous peoples in the Amazon. But it’s especially important for the global climate. Forests are important carbon sinks, but they release this carbon into the atmosphere when they’re destroyed. Much of Brazil’s carbon emissions are actually the result of deforestation — and if forest losses continue to grow, it would be nearly impossible for the nation to meet its climate commitments.

In the world of climate science, the skeptics are coming in from the cold - Researchers who see global warming as something less than a planet-ending calamity believe the incoming Trump administration may allow their views to be developed and heard. This didn’t happen under the Obama administration, which denied that a debate even existed. Now, some scientists say, a more inclusive approach – and the billions of federal dollars that might support it – could be in the offing. “Here’s to hoping the Age of Trump will herald the demise of climate change dogma, and acceptance of a broader range of perspectives in climate science and our policy options,” Georgia Tech scientist Judith Curry wrote this month at her popular Climate Etc. blog. William Happer, professor emeritus of physics at Princeton University and a member of the National Academy of Sciences, is similarly optimistic. “I think we’re making progress,” Happer said. “I see reassuring signs.” Despite harsh criticism of their contrarian views, a few scientists like Happer and Curry have pointed to evidence that global warming is less pronounced than predicted. They have also argued that this slighter warming would bring positive developments along with problems. For the first time in years, skeptics believe they can find a path out of the wilderness into which they’ve been cast by the “scientific consensus.” As much as they desire a more open-minded reception by their colleagues, they are hoping even more that the spigot of government research funding – which dwarfs all other sources – will trickle their way.

The Search Is on for Pulling Carbon from the Air -- Nations worldwide have agreed to limit carbon dioxide emissions in hopes of preventing global warming from surpassing 2 degrees Celsius by 2100. But countries will not manage to meet their goals at the rate they’re going. To limit warming, nations will also likely need to physically remove carbon from the atmosphere. And to do that, they will have to deploy “negative emissions technology”—techniques that scrub CO2 out of the air. Can these techniques, such as covering farmland with crushed silica, work? Researchers acknowledge that they have yet to invent a truly cost-effective, scalable and sustainable technology that can remove the needed amount of carbon dioxide, but they maintain that the world should continue to look into the options. “Negative emissions technologies are coming into play because the math [on climate change] is so intense and unforgiving,” Katharine Mach, a senior research scientist at Stanford University. Last week at the American Geophysical Union conference in San Francisco, researchers presented several intriguing negative emissions strategies, as well as the drawbacks.Earth’s surface naturally removes carbon dioxide from the atmosphere through the chemical breakdown of rocks, but the phenomenon occurs extremely slowly. Scientists have proposed speeding up this process—which is called “weathering”—with man-made intervention. At the AGU conference, David Beerling, director of the Leverhulme Centre for Climate Change Mitigation, explained an agricultural technique that could quicken weathering and theoretically benefit crops as well. In this method, farmers would apply finely crushed silicate rocks to their land. The roots of crops and fungus in the soil would accelerate the chemical and physical breakdown of the silicate rocks, and at the same time, carbon dioxide would be pulled from the air into the soil due to a chemical reaction that occurs as part of the weathering process. Grinding the silicate rocks into the size of pellets or sand grains would speed up natural weathering because it increases the amount of rock surface area available to react. In addition to capturing carbon dioxide, the weathered rocks would release valuable nutrients such as phosphorus and potassium into the soil, which would help crops grow. The rocks would provide plants with silica as well, which Beerling says could help them build stronger cells to better fend off pests. “You could reduce fertilizer and pesticide use, which would reduce the cost to the farmers as well,”

Can Carbon Capture Technology Prosper Under Trump? - Can one of the most promising — and troubled — technologies for fighting global warming survive during the administration of Donald J. Trump?  The technology, carbon capture, involves pulling carbon dioxide out of smokestacks and industrial processes before the climate-altering gas can make its way into the atmosphere. Mr. Trump’s denial of the overwhelming scientific evidence supporting climate change, a view shared by many of his cabinet nominees, might appear to doom any such environmental initiatives. But the new Petra Nova plant about to start running here, about 30 miles southwest of Houston, is a bright spot for the technology’s supporters. It is being completed essentially on time and within its budget, unlike many previous such projects. When it fires up, the plant, which is attached to one of the power company NRG’s hulking coal-burning units, will draw 90 percent of the CO2 from the emissions produced by 240 megawatts of generated power. That is a fraction of the roughly 3,700 megawatts produced at this gargantuan plant, the largest in the Lone Star State. Still, it is enough to capture 1.6 million tons of carbon dioxide each year — equivalent to the greenhouse gas produced by driving 3.5 million miles, or the CO2 from generating electricity for 214,338 homes. From a tower hundreds of feet above the Petra Nova operation, the carbon capture system looks like a fever dream of an Erector set fanatic, with mazes of pipes and gleaming tanks set off from the main plant’s skyscraping smokestacks and busy coal conveyors. Petra Nova, a billion-dollar joint venture of NRG and JX Nippon Oil and Gas Exploration, will not just grab the CO2, it will use it, pushing compressed CO2 through a new pipeline 81 miles to an oil field. The gas will be injected into wells, a technique known as enhanced oil recovery, that should increase production to 15,000 barrels a day from about 300 barrels a day. And since NRG owns a quarter of the oil recovery project, what comes out of the ground will help pay for the carbon capture operation.

Republicans can cancel some Obama environment rules. But they’ll have to choose carefully. - Two bills under consideration in Congress, each expected to go to a swift vote, could help expedite the process of undoing recent regulations — or even make it more difficult to pass them in the first place. The Midnight Rules Relief Act would allow multiple rules to be considered for repeal under a single resolution. And the REINS Act — which stands for Regulations from the Executive in Need of Scrutiny Act — would require any new rules to be approved by a joint resolution in Congress before they could take effect at all. Both bills have previously passed in the House, but it’s unclear whether resistance from Democrats in the Senate would allow either to make it to the president’s desk — and, given that both bills represent an attempt to rein in executive authority, it’s also unclear whether Trump would sign them if they got there. But these aren’t actually the likeliest way for regulatory reform — long a goal of industry — to happen. Rather, the most surefire approach at the moment involves a rarely invoked law that could spell a quick demise for any of 150 or so late-breaking regulations effected in the past six months. And that means several major environmental rules finalized this year could be at risk of being rolled back in the coming weeks or months.   The Congressional Review Act, enacted in 1996, allows Congress 60 legislative days, starting from the date the rule is submitted to Congress and published in the Federal Register, to overturn new federal regulationsby submitting something called a “joint resolution of disapproval.” Sometimes, a congressional session adjourns before these 60 days are up, in which case the countdown starts all over again in the new session. If the resolution is signed by the president, the Congressional Review Act holds that the rule in question cannot take effect — and furthermore, it may not be issued in “substantially the same form” again unless Congress authorizes it with a new law. “Typically you’d expect a huge rush of midnight rulemaking from an outgoing administration. The existence of the CRA makes that very unattractive for the Obama administration to try in its last month.” This is because if a late-breaking rule were to be repealed under the Congressional Review Act, it might never be rewritten. Even so, the Obama administration has issued a number of highly publicized rules in November and December, including controversial regulations for oil and gas operations and the coal industry.

Secretary of State John F. Kerry’s exit memo is filled with policies that Trump could undo - Secretary of State John F. Kerry, in an exit memo written with the incoming administration in mind, on Thursday called for the United States to continue resettling refugees from the Middle East and to keep up the battle against climate change. “It would be a moral failing of the highest caliber to turn our backs on those in need — including and especially from countries like Syria and Iraq,” Kerry wrote in a memo that was among about two dozen released by the White House from cabinet secretaries enumerating their accomplishments. Kerry devoted a significant share of his 21-page summary to climate change, which he said he had raised in virtually every bilateral relationship since becoming secretary in 2013. “If we can build on this course in the decades to come, there is at least a chance that our children and our grandchildren will look back at the last years of this administration as the moment the world finally woke up to the threat,” he said. There was a poignant quality to Kerry’s arguments, as many of the very policies he championed could soon be discarded or weakened. As a candidate and lately as president-in-waiting, Donald Trump has repudiated many of Kerry’s initiatives: the Iran nuclear deal, the insistence that Syrian President Bashar al-Assad must step down, support for refugees from largely Muslim countries torn apart by war and terrorism. Kerry directly mentions neither Trump nor his own nominated successor, Rex Tillerson. But aides said it is hoped that the incoming administration will read the case Kerry makes and consider taking the same path. “The secretary is laying down a stark message about the consequences if some of these things are rolled back,” said a senior State Department official. “He sees it as his responsibility as a statesman, as someone who has been a public servant for over 40 years.”

Methane's on the rise, but regulations to stop gas leaks still debated -  There’s more methane gas in the atmosphere than there used to be, by every scientific measure. The Obama administration has been trying to stem the increase of this powerful greenhouse gas, but the incoming Trump administration appears bent on keeping the government's hands off methane. The gas comes from agriculture, especially flooded agricultural lands like rice fields, as well as from the digestive tracts of livestock. But it's also the main component of natural gas; some methane escapes from leaky oil and gas operations. Whatever the source, scientists have found that, after many years of very little change, concentrations of methane in the atmosphere have increased by 3 percent over the past eight years. "Methane concentrations in the atmosphere are surging faster than any time in the last 20 years," environmental scientist Rob Jackson, of Stanford University, told NPR. Jackson and his colleagues have long tracked various sources of methane, as it emanates from oil and gas wells, city sewers and manure pits; he recently published scientific papers on global as well as local concentrations of the gas. Other climate researchers have confirmed Jackson's findings, and point out that methane warms the atmosphere at about 30 times the rate carbon dioxide does. Jackson said the recent increase convinces him that methane deserves as much, if not more, immediate attention as carbon dioxide, the main contributor to greenhouse gas. Scientists point to agriculture as the likeliest source of the new methane, especially in Asia and Africa. Feeding more people has meant more rice fields, more livestock and more manure — all sources of methane. But Jackson noted that there are other sources. "We also see evidence for some increase from the fossil fuel sector," he said, meaning drilling, processing and the transporting of natural gas. Recent research shows that leaks from the natural gas supply chain are more widespread than previously thought. There also is some evidence that small changes in the chemistry of the atmosphere may be allowing methane to stay aloft longer than usual, giving it more time to warm the air.

EU to exempt foreign flights from emissions scheme | Reuters: The European Union is set to extend the exclusion of foreign airlines from its emissions trading system to give a United Nations-brokered global deal time to come into effect, two EU sources said. The move would be welcomed by the airline industry which wants a single, global emissions trading system (ETS) for aviation as opposed to a patchwork of national and regional schemes. The European Union had ordered foreign carriers to buy credits under its ETS in 2012 but backtracked when countries said it violated their sovereignty and China threatened to cancel plane orders to Airbus Group SE. It granted airlines operating flights into and out of the EU an exemption until 2016 to give the International Civil Aviation Organization (ICAO) time to craft a global system. The United Nations body clinched a deal in October, raising hopes that the EU executive would prolong the extension beyond the end of this year when it automatically expires unless the law is changed. "Expectation is it will be extended," one of the sources said. The proposal by the EU executive, the European Commission, will be adopted at the end of January, two sources said. Another EU source said the proposal was very sensible and would create predictability for operators. The ICAO deal will be voluntary from 2021 to 2026 and mandatory from 2027 for states with larger aviation industries, prompting criticism from the European Parliament who had called for something more ambitious. The exemption for foreign carriers could be extended until it is clear the ICAO system is working, one of the sources said.

China to cap 2017 energy consumption at 4.4 bln tonnes coal equivalent (Reuters) - China aims to cap total primary energy consumption at around 4.4 billion tonnes of coal equivalent in 2017, the director of the National Energy Administration (NEA) said on Wednesday, close to 2016 levels as the country continues a push to use cleaner fuel. The world's biggest consumer of energy plans to lift the ratio of natural gas in its energy mix to 6.8 percent next year from 5.9 percent in 2015, Nur Bekri, director of the NEA told a conference in Beijing. He said the goal was to reduce coal consumption to around 60 percent of the total next year from 64 percent in 2015. His remarks came as China enters the third year of a "war on pollution", with previous years of blistering energy demand growth putting China's environment under increasing pressure. The rate of average annual energy demand growth was 6.4 percent in the period 2005-2012. Total primary energy consumption is expected to have reached 4.36 billion tonnes of coal equivalent in 2016, up 1.4 percent from 2015 - higher than the 0.9 percent growth rate forecast by the NEA earlier this year. As its economy slows, China has vowed to switch to less energy-intensive industries and make more efficient use of its resources. Bekri said on Wednesday China will aim to raise the ratio of non-fossil fuel consumption in its energy mix to 14.3 percent in 2017, up from an estimated 13.3 percent this year. The NEA will give priority to upgrading coal-fired power plants, as well as building new gas-burning utilities, Bekri told the conference. "We have to pay a great deal of attention to overcapacity in coal-fired power plant," Bekri said, adding the country will continue to crack down on illegal coal mines and strictly control coal output in 2017. China said in its 2016-2020 five-year plan in March that it would aim to keep total energy consumption below 5 billion tonnes of standard coal equivalent by the end of the decade. It aims to cap coal-fired power capacity at 1,100 gigawatts by the end of 2020, an estimated 55 percent of the country's total.

China to plow $361 billion into renewable fuel by 2020 | Reuters: China will plow 2.5 trillion yuan ($361 billion) into renewable power generation by 2020, the country's energy agency said on Thursday, as the world's largest energy market continues to shift away from dirty coal power towards cleaner fuels. The investment will create over 13 million jobs in the sector, the National Energy Administration (NEA) said in a blueprint document that lays out its plan to develop the nation's energy sector during the five-year 2016 to 2020 period. The NEA said installed renewable power capacity including wind, hydro, solar and nuclear power will contribute to about half of new electricity generation by 2020. The agency did not disclose more details on where the funds, which equate to about $72 billion each year, would be spent. Still, the investment reflects Beijing's continued focus on curbing the use of fossil fuels, which have fostered the country's economic growth over the past decade, as it ramps up its war on pollution. Last month, the National Development and Reform Commission (NDRC), the country's economic planner, said in its own five-year plan, that solar power will receive 1 trillion yuan of spending, as the country seeks to boost capacity by five times. That's equivalent to about 1,000 major solar power plants, according to experts' estimates. The spending comes as the cost of building large-scale solar plants has dropped by as much as 40 percent since 2010. China became the world's top solar generator last year. "The government may exceed these targets because there are more investment opportunities in the sector as costs go down," said Steven Han, renewable analyst with securities firm Shenyin Wanguo. Some 700 billion yuan will go towards wind farms, 500 billion to hydro power with tidal and geothermal getting the rest, the NDRC said.

China Aims to Spend at Least $360 Billion on Renewable Energy by 2020 - NYTimes: China intends to spend more than $360 billion through 2020 on renewable power sources like solar and wind, the government’s energy agency said on Thursday.The country’s National Energy Administration laid out a plan to dominate one of the world’s fastest-growing industries, just at a time when the United States is set to take the opposite tack as Donald J. Trump, a climate-change doubter, prepares to assume the presidency.The agency said in a statement that China would create more than 13 million jobs in the renewable energy sector by 2020, curb the growth of greenhouse gasses that contribute to global warming and reduce the amount of soot that in recent days has blanketed Beijing and other Chinese cities in a noxious cloud of smog.China surpassed the United States a decade ago as the world’s biggest emitter of greenhouse gasses, and now discharges about twice as much. For years, its oil and coal industries prospered under powerful political patrons and the growth-above-anything mantra of the ruling Communist Party. The result was choking pollution and the growing recognition that China, many of whose biggest cities are on the coast, will be threatened by rising sea levels. But even disregarding the threat of climate change, China’s announcement was a bold claim on leadership in the renewable energy industry, where Chinese companies, buoyed by a huge domestic market, are already among the world’s dominant players. Thanks in part to Chinese manufacturing, costs in the wind and solar industries are plummeting, making them increasingly competitive with power generation from fossil fuels like coal and natural gas.

Wave of spending tightens China’s grip on renewable energy China is strengthening its dominance of the global renewable energy industry after increasing investments in green technology overseas to more than $32bn — far in excess of the amounts deployed by any other country. The 60 per cent surge in Chinese capital last year highlights the country’s increasing economic commitment to low-carbon forms of energy even as Donald Trump, the US president-elect, threatens to weaken Washington’s backing for the shift away from fossil fuels. China is already investing more than $100bn a year in domestic renewable energy projects — more than double the US figure — and the latest data show that Chinese money also dwarfs US green finance globally. “As the US owned the advent of the oil age, so China is shaping up to be unrivalled in clean power leadership today,” said Tim Buckley, director of energy finance studies for the Institute for Energy Economics and Financial Analysis, a US-based think-tank. Chinese companies made 11 outbound investments in excess of $1bn in 2016, adding up to a combined $32bn, compared with eight deals for a combined $20bn in 2015, according to research by IEEFA.These ranged from an offshore wind farm in Germany and a solar power project in Egypt, to an Indonesian hydropower plant and lithium production for electric vehicle batteries in Chile. Four of the five biggest renewable energy deals worldwide in 2016 were made by Chinese companies, according to Mr Buckley, and he predicted this trend would continue irrespective of any change in approach by the US. “Whether it’s for energy security, or the need to improve air quality, or the need to create jobs and find outlets for capital; by any of these logics China is totally committed to renewable energy,” said Mr Buckley. “Until recently it was a domestic story but in the past year or two China has started to invest globally.”

 Five Lessons From China’s Renewable Energy “Success” – Forbes - Environmentalists are touting China’s increasing use of renewable power, and there are several lessons we can learn from this. Here are five important lessons and takeaways from China’s growing use of renewable power.

  • Lesson 1: China’s Progressive Definition of ‘Renewable’. China plans on meeting 27 percent of its electricity output through renewable energy by 2020. This is possible because China defines its ‘renewable’ power mix as including hydro and nuclear power in addition to wind and solar power. Thanks to an impressive recent expansion of hydro and nuclear power, China currently generates 18 percent of its power through renewable sources. Increasing its renewable power mix from 18 percent to 27 percent during the next four years is an ambitious goal, but it is plausible only through a progressive definition of its renewable energy mix..
  • Lesson 2: China’s Goal of 80 Percent Renewables by 2050 Is Highly Unlikely. Lin Boqiang, representing the Center of China Energy Economics Research at Xiamen University, points out that China is highly unlikely to meet its stated goal. It is easy for today’s politicians to take credit for grandiose goals they know they personally will never have to meet, but tomorrow’s policymakers will respond to market forces, economics, and political realities.
  • Lesson 3: Wind and Solar Growth Remains Marginal. China generates only 3 percent of its electricity from wind power and less than 2/10 of 1 percent of its power from solar power. If wind and solar power increase from 2 percent to 3 percent of China’s electricity mix, then it is factually accurate to say China increased its wind and solar power by 50 percent. But going from a total of 2 percent wind and solar power to 3 percent wind and solar power still leaves wind and solar power a marginal player in China’s electricity mix.
  • Lesson 4: China’s Marginal Growth in Wind and Solar Power is Not Sustainable. Much of the growth occurred because China manufactured wind and solar equipment for export to other nations. When the United States and Western Europe cut back on expensive renewable energy programs, China was stuck with excess product.
  • Lesson 5: Rising Living Standards Require Affordable Energy Sources. China will add low- and zero-emissions power only to the extent they facilitate rising living standards. This is why China still generates more than 70 percent of its electricity from coal, and why hydro and nuclear power account for the vast majority of new zero-emissions power production.

Here's How We Can Power 100% of the World With Renewable Energy – Jeff Masters - Here's a 2017 New Year's resolution I'd like to see the nations of the world adopt: an immediate international effort to invest in a world where 100 percent of our electricity will be generated by wind , water and solar power by 2050.  Such an effort is technically and economically feasible and has been championed by Stanford professor Mark Jacobson since 2009. His latest research on the subject was laid out in a series of talks last month in San Francisco at the annual meeting of the American Geophysical Union —the world's largest conference on climate change .  During his talks, Jacobson outlined a plan to power 139 nations of the world for all purposes—including electricity, transportation, heating/cooling, industry and agriculture/forestry/fishing—using a mix of approximately 37 percent wind, 58 percent solar, 4 percent hydropower, and 1 percent geothermal, wave and tidal power. He argued that his plan would:

  • 1. Replace 80 percent of business-as-usual power by 2030, and 100 percent by 2050.
  • 2. Reduce power consumption by 42.5 percent because of electricity's better work:energy ratio, efficiency and lack of mining needed.
  • 3. Create 24.3 million more jobs than lost.
  • 4. Eliminate 3.5 million premature air pollution deaths per year and save $23 trillion (7.6 percent of GDP) in air pollution health costs per year by 2050 (for comparison: the World Bank estimated in 2016 that air pollution in 2013 killed 5.5 million people, with non-health care costs of more than $5 trillion).
  • 5 . Save $28.5 trillion per year in avoided climate change costs by potentially keeping global warming 1.5 C below pre-industrial levels.
  • 6. Reduce war by creating energy-independent countries.
  • 7. Decentralize energy production, thereby reducing power outages, terrorism threats to energy installations and energy poverty .

 The 100 percent renewable energy future: The good news and the bad news -- Authors Richard Heinberg and David Fridley in their recent book Our Renewable Future make the case for a society that runs on 100 percent renewable energy. But they don't pull any punches, giving us both the good news and the bad news. Okay, here's the good news: A 100 percent renewable energy society is well within our technical capability, and we've taken some important steps already. Now, here's the bad news: The 100 percent renewable energy society is inevitable whether we plan for it or not. I know the bad news perhaps sounds like good news, but it's not. The bad news may make it seem as if all we have to do is sit back while solar, wind, geothermal, hydroelectric, biomass and other forms of renewable energy are deployed at an ever faster pace. But, what the bad news really implies is that if this deployment process isn't coupled with strenuous efforts to decrease our fossil-fuel energy use dramatically, we may find ourselves in a dystopian energy-starved world with a chaotic climate, a world that little resembles the one we live in now. Here's the problem as the authors explain it toward the end of the book: "Sound national and international climate policies are crucial: without them, it will be impossible to organize a transition away from fossil fuels and toward renewable energy that is orderly enough to maintain industrial civilization, while speedy enough to avert catastrophic ecosystem collapse." In other words, we'll get to a renewable energy economy eventually as fossil fuels become ever more expensive to take out of the ground. But the default endpoint is not one that results from a planned transition which would try to save the best of industrial civilization while jettisoning the worst. Rather, the default endpoint is merely the wreckage of an industrial civilization that didn't prepare properly. Such a society would be forced to make due with the energy budget available from renewables like all past civilizations. That's a lot less than we in industrialized countries use, and, more important, far less than we could have if we make sensible and serious plans and implement them starting now.

Solar could beat coal to be the cheapest power on Earth --Solar power is now cheaper than coal in some parts of the world. In less than a decade, it’s likely to be the lowest-cost option almost everywhere.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. Now, Saudi Arabia, Jordan and Mexico are planning auctions and tenders for this year, aiming to drop prices even further. Taking advantage: Companies such as Italy’s Enel SpA and Dublin’s Mainstream Renewable Power, who gained experienced in Europe and now seek new markets abroad as subsidies dry up at home.  Since 2009, solar prices are down 62 percent, with every part of the supply chain trimming costs. That’s help cut risk premiums on bank loans, and pushed manufacturing capacity to record levels. By 2025, solar may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance. “These are game-changing numbers, and it’s becoming normal in more and more markets," said Adnan Amin, International Renewable Energy Agency ’s director general, an Abu Dhabi-based intergovernmental group. "Every time you double capacity, you reduce the price by 20 percent.” Better technology has been key in boosting the industry, from the use of diamond-wire saws that more efficiently cut wafers to better cells that provide more spark from the same amount of sun. It’s also driven by economies of scale and manufacturing experience since the solar boom started more than a decade ago, giving the industry an increasing edge in the competition with fossil fuels.The average 1 megawatt-plus ground mounted solar system will cost 73 cents a watt by 2025 compared with $1.14 now, a 36 percent drop, said Jenny Chase, head of solar analysis for New Energy Finance. That’s in step with other forecasts.

  • GTM Research expects some parts of the U.S. Southwest approaching $1 a watt today, and may drop as low as 75 cents in 2021, according to its analyst MJ Shiao.
  • The U.S. Energy Department’s National Renewable Energy Lab expects costs of about $1.20 a watt now declining to $1 by 2020. By 2030, current technology will squeeze out most potential savings, said Donald Chung, a senior project leader.
  • The International Energy Agency expects utility-scale generation costs to fall by another 25 percent on average in the next five years. 
  • The International Renewable Energy Agency anticipates a further drop of 43 percent to 65 percent for solar costs by 2025. That would bring to 84 percent the cumulative decline since 2009.

2016 was the year solar panels finally became cheaper than fossil fuels. Just wait for 2017 --The renewable energy future will arrive when installing new solar panels is cheaper than a comparable investment in coal, natural gas or other options. If you ask the World Economic Forum (WEF), the day has arrived. Solar and wind is now the same price or cheaper than new fossil fuel capacity in more than 30 countries, the WEF reported in December(pdf). As prices for solar and wind power continue their precipitous fall, two-thirds of all nations will reach the point known as “grid parity” within a few years, even without subsidies. “Renewable energy has reached a tipping point,” Michael Drexler, who leads infrastructure and development investing at the WEF, said in a statement. “It is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns.” Those numbers are already translating into vast new acres of silicon and glass. In 2016, utilities added 9.5 gigawatts (GW) of photovoltaic capacity to the US grid, making solar the top fuel source for the first time in a calendar year, according to the US Energy Information Administration’s estimates. The US added about 125 solar panels every minute in 2016, about double the pace last year, reports the Solar Energy Industry Association.The solar story is even more impressive after accounting for new distributed solar on homes and business (rather than just those built for utilities), which pushed the total installed capacity to 11.2 GW.

How Low Can Solar & Wind Go? -- For the second year in a row, wind and solar accounted for roughly two-thirds of new U.S. generating capacity, while natural gas and nuclear made up most of the rest. That’s because right now, in much of the United States, wind and solar are the cheapest form of power available, according to a new report from investment bank Lazard. Analysts found that new solar and wind installations are cheaper than a new coal-fired power installation just about everywhere — even without subsidies. The cost of renewables continues to fall rapidly.. Since just last year, the cost of utility-scale solar has dropped 10 percent, and the cost of residential solar dropped a whopping 26 percent — and that is coming after years of price declines. The cost of offshore wind declined by 22 percent since last year, though it still remains more expensive than onshore wind. The Lazard report is just the latest chapter in the success story of renewable energy. Since 2009, the cost of solar has been cut nearly in half. The cost of wind has fallen by two-thirds. The precipitous drop in price is reminiscent of shrinking costs for personal computers. Wind and, particularly solar, have yet to level off. New technologies and cheaper materials will continue to drive down costs in the years ahead.

 Russia Hysteria Infects WashPost Again: False Story About Hacking U.S. Electric Grid -- The Washington Post on Friday reported a genuinely alarming event: Russian hackers have penetrated the U.S. power system through an electrical grid in Vermont.The first sentence of the article directly linked this cyberattack to alleged Russian hacking of the email accounts of the DNC and John Podesta — what is now routinely referred to as “Russian hacking of our election” — by referencing the code name revealed on Wednesday by the Obama administration when it announced sanctions on Russian officials: “A code associated with the Russian hacking operation dubbed Grizzly Steppe by the Obama administration has been detected within the system of a Vermont utility, according to U.S. officials.” The Post article contained grave statements from Vermont officials of the type politicians love to issue after a terrorist attack to show they are tough and in control. The state’s Democratic governor, Peter Shumlin, said: Vermonters and all Americans should be both alarmed and outraged that one of the world’s leading thugs, Vladimir Putin, has been attempting to hack our electric grid, which we rely upon to support our quality of life, economy, health, and safety. Vermont Sen. Patrick Leahy issued a statement warning: “This is now about trying to access utilities to potentially manipulate the grid and shut it down in the middle of winter. That is a direct threat to Vermont and we do not take it lightly.” The article went on and on in that vein, reviewing past acts of Russian treachery, and drawing the scariest possible conclusions. The media reactions, as Alex Pfeiffer documents, were exactly what one would expect: hysterical, alarmist proclamations of Putin’s menacing evil: The Post’s story also predictably and very rapidly infected other large media outlets. Reuters thus told its readers around the world: “A malware code associated with Russian hackers has reportedly been detected within the system of a Vermont electric utility.What’s the problem here? It did not happen. There was no “penetration of the U.S. electricity grid.” The truth was undramatic and banal. Burlington Electric, after receiving a Homeland Security notice sent to all U.S. utility companies about the malware code found in the DNC system, searched all its computers and found the code in a single laptop that was not connected to the electric grid.  Apparently, the Post did not even bother to contact the company before running its wildly sensationalistic claims, so Burlington Electric had to issue its own statement to the Burlington Free Press, which debunked the Post’s central claim (emphasis in original): “We detected the malware in a single Burlington Electric Department laptop not connected to our organization’s grid systems.” So the key scary claim of the Post story — that Russian hackers had penetrated the U.S. electric grid — was false. All the alarmist tough-guy statements issued by political officials who believed the Post’s claim were based on fiction.

 “How The Washington Post’s Defense Of Its Russian Hacking Story Unraveled Through Web Archiving” [Forbes].As the Washington Post’s story of Russian hackers burrowed deep within the US electrical grid, ready to plunge the nation into darkness at the flip of a switch unraveled into the story of a single non-grid-connected laptop with a piece of malware on it, the Post has faced fierce criticism over how it fact checked and verified the details of its story. It turns out that the Post not only did not fact check the story until after it was published live on its website, but in its defense of the story, the Post made a number of false statements about what was written when, which the Internet Archive’s Wayback Machine reveals. When I wrote yesterday about the Washington Post story, Kris Coratti, Vice President of Communications and Events for the Washington Post had offered just a single emailed response and had not responded to any of my remaining questions regarding the Post's fact checking and construction of the article in question. Last night, just over 20 hours later, she finally did respond to two of my questions. As I noted yesterday, it seemed odd that Burlington Electric issued a formal response refuting the Post’s claims just an hour and a half after the Post’s publication. This would suggest that the Post would have gotten a response from Burlington if only it had just contacted the utility prior to publication, as is required by standard journalistic practice. In fact, when I asked the Post why it had not contacted the utilities prior to publication, in her emailed response to me, Ms. Coratti asserted that the Post had indeed contacted both utilities for comment prior to publication and had not received a reply from either and so proceeded with publication. In fact, she went as far as to state “we had contacted the state’s two major power suppliers, as these sentences from the first version of the story attest: ‘It is unclear which utility reported the incident. Officials from two major Vermont utilities, Green Mountain Power and Burlington Electric, could not be immediately reached for comment Friday.’"

Washington Post Admits “Russian Government Hackers do not Appear to have Targeted Vermont Utility” - Earlier today, the Russophobes fools at the Washington Post were forced to admit Russian Government Hackers do not Appear to have Targeted Vermont Utility. In today’s whitewash the Washington Posted stated “The Post initially reported incorrectly that the country’s electric grid had been penetrated through a Vermont utility. After Burlington Electric released its statement saying that the potentially compromised laptop had not been connected to the grid, The Post immediately corrected its article and later added an editor’s note explaining the change.”That’s a bunch of BS in and of itself.The original Washington Post headline was Russian hackers penetrated U.S. electricity grid through a utility in Vermont, U.S. officials say.  Although the Washington Post added a note, the revised headline remained major BS: “Russian operation hacked a Vermont utility, showing risk to U.S. electrical grid security, officials say.”Both headlines were fake news. Today we learn …U.S. officials are continuing to investigate the laptop. In the course of their investigation, though, they have found on the device a package of software tools commonly used by online criminals to deliver malware. The package, known as Neutrino, does not appear to be connected with Grizzly Steppe, which U.S. officials have identified as the Russian hacking operation. The FBI, which declined to comment, is continuing to investigate how the malware got onto the laptop.Experts also said that because Yahoo’s mail servers are visited by millions of people each day, the fact that a Burlington Electric employee checking email touched off an alert is not an indication that the Russian government was targeting the utility.   “It’s not descriptive of anything in particular,” said Robert M. Lee, chief executive of Dragos, a cybersecurity firm. The company said it was told much the same thing by authorities.

SEC Nominee Jay Clayton Works At Firm That Encourages Companies To Disclose Their Climate Risks: Donald Trump has called climate change a “hoax,” prompting concern that his administration could rescind the federal government’s key climate disclosure directive. Trump’s nominee to head the Securities and Exchange Commission is no stranger to that directive — his firm has cited it in encouraging its corporate clients to more thoroughly disclose the risks they face from climate change.  On Thursday, Trump announced the agency would be headed by Jay Clayton, whose law firm has represented fossil fuel industry clients. In that role, the firm — Sullivan & Cromwell — has warned its corporate clients that the SEC’s 2010 climate directive means companies should consider more clearly telling shareholders about how climate change will affect their business models. “Reporting companies, particularly those in fossil fuel industries, may wish to review their disclosure practices regarding the possible financial impact of climate change,” said a 2015 Sullivan & Cromwell memo that listed Clayton as a contact for more information. “In particular, companies may wish to consider whether their disclosure takes appropriate account of internal analyses or projections, as well as analyses or projections prepared by consultants, that may have been prepared regarding the potential financial impact of these matters.”  An earlier Sullivan & Cromwell memo outlined the original SEC climate directive, providing clients with guidance on what the firm suggests would be proper ways to comply with the disclosure requirements. Another 2009 memo warned companies that under a separate SEC policy shift, “Companies engaging in activities that could arguably be a factor in climate change such as energy and mining companies, should expect to see an increase in shareholder proposals” related to environmental issues. The memos are significant because they shed light on what Clayton’s own law firm sees as adequate compliance with existing federal climate change directives that Clayton would be responsible for enforcing at the SEC. In running the agency, though, Clayton would be in a position to change or rescind the directive — a possibility that Sullivan & Cromwell implicitly acknowledged when it noted that the SEC can use its discretion to strengthen or weaken enforcement.

Senators Ask Trump EPA Chief Pick to Disclose Energy Industry Ties - — Democrats on the U.S. Senate's environment panel on Wednesday asked President-elect Donald Trump's choice to head the Environmental Protection Agency to disclose his ties to the energy industry ahead of his confirmation hearing early next year. The six senators sent a letter to Scott Pruitt, who as Oklahoma Attorney General led several lawsuits against the Obama administration's EPA to block its environmental rules. They asked him to list his connections to energy companies, to weigh whether these will influence his ability to run the agency. "What that conduct says about your ability to lead EPA in a manner that is not beholden to special or secret interests is a subject that we expect will receive a full airing during your confirmation hearing," the senators wrote in the letter. The senators raised concerns about a 2014 New York Times report, which found that Pruitt's policy positions as Oklahoma's top attorney reflected his close ties to Devon Energy Corp. For his part, Pruitt told The Oklahoman newspaper that Devon Energy was a constituent he represents and the company made people aware of regulatory overreach on fracking. AdvertisementContinue reading the main story The senators also noted Pruitt's involvement with the Rule of Law Defense Fund, which they said supports initiatives by the billionaire industrialist Koch brothers, who have opposed the EPA's climate change regulations. They asked Pruitt to submit details about his connections and contributions to the fund, his communications with the fund and a "list of all federal and state legislation or regulations the Fund has taken a position on." "The confirmation process, starting with your responses to Committee questions before your hearing, is an opportunity for you to dispel the notion that the advocacy you have undertaken on environmental issues as Attorney General of Oklahoma has been directed by and for the benefit of the energy industry," the senators wrote.

Greens launch six-figure campaign against EPA nominee | TheHill: An environmental group is launching a new advertising campaign against the confirmation of President-elect Donald Trump’s pick to head the Environmental Protection Agency (EPA). Clean Air Moms Action, a project of the Environmental Defense Action Fund, said Tuesday it is spending at least $100,000 on the campaign which centers on children's health concerns, targeting the Washington, D.C., area, and six states with senators who could swing the confirmation vote. The television and digital campaign is the latest salvo in the high-stakes battle over Scott Pruitt, the current attorney general of Oklahoma, and Trump's pick for the EPA. Only 51 senators would need to approve his confirmation for it to pass, and Republicans hold 52 seats in the Senate.  The ads focus on Pruitt’s leading role in fighting President Obama’s 2011 rule limiting mercury and other air toxic pollutants from coal-fired power plants. The television ad cites scientific research to say that mercury harms children’s health, but says Pruitt doubted that science in court filings fighting the regulation. “We can’t trust Pruitt with our kids’ health,” the voiceover says. “Ask the Senate to vote ‘no’ on Pruitt.” The ad also highlights that Pruitt accepted more than $300,000 in donations from the fossil fuel industry. Meanwhile, Pruitt is getting some new support from conservative circles. FreedomWorks, a free-market group backed by billionaire brothers Charles and David Koch, Tuesday made Pruitt’s confirmation its first “key vote” of 2017. FreedomWorks uses key votes to score lawmakers.

Rick Perry’s Texas giveaways -   Donald Trump’s selection of Rick Perry to lead the Department of Energy has prompted many Democrats to question Perry’s qualifications for the position. While he governed a state rich in fossil fuels and wind energy, Perry has far less experience than President Obama’s two energy secretaries, both physicists, in the department’s primary work, such as tending the nuclear-weapons stockpile, handling nuclear waste and carrying out advanced scientific research. That’s not to mention, of course, that Perry four years ago called for doing away with the entire department. However, there’s one realm in which Perry will have plenty of preparation: doling out taxpayer money in the form of government grants to the energy industry.  What often gets lost in all the talk of the Texas job boom under Perry is how much economic development strategy was driven by direct subsidies to employers who promised to relocate to the state or create jobs there. Of course, many states have for years engaged in the game of luring companies with tax incentives. But by the count of a 2012 New York Times investigation, Texas under Perry vaulted to the top, giving out $19 billion in incentives per year, more than any other state. Perry’s economic development largesse came in many forms, but among the most high-profile were two big pots of money that he created while in office. In 2003, he founded the Texas Enterprise Fund, which he pitched as a way to help him close the deal in bidding wars for large employers thinking of moving to the state. Over the course of Perry’s tenure, which ended in early 2015, the fund gave out more than $500 million. In 2005, Perry created the Emerging Technology Fund, which was intended for start-ups. It gave out $400 million before being shuttered last year by his Republican successor, Greg Abbott. Disbursements from both funds were controlled by Perry, the lieutenant governor and the speaker of the House. The technology fund had a 17-member advisory board, all appointed by Perry.

How the “Trump Effect” Could Undermine Germany’s Clean Energy Revolution - Germany has long been a clean energy pioneer. Despite the fact that the sun hardly shines there, the country was the world leader in installed solar capacity until it was finally overtaken last year by China, a vastly larger and sunnier country. By 2050, Germany aims to get 80 percent of its electricity from renewable sources and to cut its greenhouse gas emissions by as much as 95 percent. It currently derives about one-fifth of its power from wind and solar (and one-third from total renewables), compared to just 5 percent in the United States. Even though this dramatic energy transition—known as the Energiewende—has contributed to higher household electricity costs, 90 percent of Germans say they support it. For years, Germany’s mainstream political parties have supported clean energy, too. But that broad consensus could soon face a significant test. Unlike many of its neighbors, Germany hasn’t had a far-right party represented in its parliament since the Second World War. But that’s almost certain to change next year, when national elections could make the Alternative for Germany party (known by its German acronym, AfD) the second- or third-strongest faction in the government, if polling trends continue. The party, which began as a euro-skeptic movement, has built its success on stringent opposition to immigration and admission of refugees—and on inflammatory rhetoric that echoes the campaign of Donald Trump. The AfD also opposes Germany’s clean energy policies. It’s calling for an end to the law behind the Energiewende and even questions the existence of human-induced climate change, stating on its website, “Scientific research on the long-term development of the climate because of man-made CO2 emissions is fraught with uncertainty.” Now, in an effort to slow the AfD’s rapid rise, the country’s mainstream parties could be poised for a step back in the fight against global warming.

Electric cars can cost more to run than diesel vehicles, report finds Rip-off electric cars can cost more to run than diesel vehicles, report finds sparking calls for transparency - THE cost of charging electric cars could be reduced and standardised after it was revealed that eco-friendly drivers could be getting ripped off with current prices. Rules will be introduced next year to make costs for charging electric cars more “consistent and transparent” after a report found that charging prices are too high, costing up to £7.50 for a half-hour – which works out at roughly the same price of owning a diesel car. The changes mean that drivers could access public charge points and common standards for pricing between suppliers could be introduced to stop potential customers being turned off by sky-high costs. Currently, about 90 per cent of charging for electric cars takes place at home – but a better roadside charging system is needed for motorists who want to drive long distances. There are more than 11,000 public charge points in Britain – including free, pay-as-you go and subscription charge points, which require registration and a monthly fee.

U.S. Coal Fleet Continues Contractions Despite Looming Changes in Policy - Despite hope from the election of Donald Trump and a potential shift toward more coal-friendly energy policies, coal plant owners across the country continued the trend toward shutdowns and reduced operations that have marked the past few years. On December 19, NRG Energy announced that it had completed 2,780 MW of coal-to-gas conversions at four plants in its fleet. The 11 units in Louisiana, Illinois, and Pennsylvania made the change in order to remain competitive and reduce their environmental impact, the company said. On December 21, Florida Power & Light (FPL) formally announced plans to retire the 250-MW Cedar Bay Generating Plant in Jacksonville. FPL said the deal will save its customers $70 million. FPL is also in the process of completing a similar deal for the 330-MW Indiantown Power Plant, which it also plans to buy and shut down, thus saving its customers another $129 million. Finally, Great River Energy (GRE), owner of the Coal Creek Station in North Dakota said on Dec. 20 that it is transitioning the plant to cycling operation in order to stay competitive in the MISO market. The plant has been working hard to stay ahead of shifts in the regulatory and economic markets, and GRE ultimately decided that a move from baseload to flexible operations offered the best chance to stay economic.

Washington state denies lease permit for proposed coal export terminal - Washington state dealt a blow Tuesday to the last remaining coal export terminal proposed along the West Coast, throwing the viability of the project into question. The state will not allow the developer to build the terminal’s loading docks on state-owned land, outgoing Public Lands Commissioner Peter Goldmark announced, citing the developer’s failure to answer questions about the structure of the loading dock, as well as questions about the overall financial viability of the project. Last year, Arch Coal — a minority stakeholder in the project — filed for Chapter 11 bankruptcy protection after slumping coal production. The land is currently leased by Northwest Alloys, which had requested a permit from the Washington Department of Natural Resources to lease the land to Millennium Bulk Terminal, the developer behind the proposed export terminal.The project has drawn stiff opposition from both environmentalists and some Longview residents, who criticize both the local impacts of the project as well as the larger affect the project might have on global climate change.  If completed, the project would bring 16 coal trains a day through the town of Longview and would add 37.6 million metric tons of carbon dioxide equivalent to the atmosphere over a 20 year period (roughly the same as adding 8 million passenger vehicles to the road in one year), according to the Washington Department of Ecology’s draft Environmental Impact Statement (EIS). Columbia Riverkeeper Jasmine Zimmer-Stucky praised Goldmark’s decision, citing a history by Millennium of obscuring the true scope of the project. In 2011, a lawsuit brought against the project by environmental groups uncovered documents which revealed that the company intended to ship 60 million tons of coal annually through the terminal rather than the 5.7 million tons of coal that it had originally applied for.

The Next Big Climate-Change Battle Starts in India - The easiest way to get richer is to industrialize and dig up a bunch of coal and burn it — and India is endowed with a very large coal deposits. According to the BNEF report, Indian emissions are set to soar: In order to prevent dangerous climate change, India will need to industrialize differently from the way Europe, the U.S. and East Asia did. It will have to skip most of the coal stage and go right to solar. The falling cost of solar will help with that, obviously, but India’s unusually abundant, cheap coal resources mean it will be late to the renewable party unless the government takes action. Although the Narendra Modi administration has made big promises on cutting carbon emissions, many question the government’s ability and will to follow through, especially given the country’s traditional reluctance to address the issue. That reluctance was understandable. It’s manifestly unfair for India to hobble its growth when most other nations got rich by burning fossil fuels with abandon. That will create popular pressure for the government to do less than it should. The simple solution would seem to be for rich countries to pay India and other fast-developing nations to skip coal and go straight to solar. However, with European economies in the dumps and the U.S. now headed by the Trump administration, such a grand bargain seems unlikely.

 China Is Set To Dominate The Global Coal Market In 2017 --Even as coal declines in Europe and America, the shift to the East is accelerating. Coal is the preferred option to increase power generation in growing economics that face electricity shortages. Solid consumption and growth is expected for India, Vietnam, and Indonesia, although China will continue to be the largest coal consumer by far over the period. Coal production and trade has been traditionally believed to be less affected by geopolitical issues due to easy logistics and widely distributed reserves. As coal consumption shifts to Asia, however, IEA has raised the possibility that coal production, demand, trade, technology, and finance might disappear from Europe and America and become increasingly concentrated in Asia. IEA believes this might make coal consumption more controversial, complicating negotiations on mitigation of C02 emissions. Despite increasing restrictions from many European and North American banks and institutions on coal financing, the agency reports investments in coal power generation have been stable over the past few years.

Indian Point Nuclear Power Plant to Close by 2021 - NYTimes: The Indian Point nuclear plant will shut down by April 2021 under an agreement New York State reached this week with Entergy, the utility company that owns the facility in Westchester County, according to a person with direct knowledge of the deal. Under the terms of the agreement, one of the two nuclear reactors at Indian Point will permanently cease operations by April 2020, while the other must be closed by April 2021. The shutdown has long been a priority for Gov. Andrew M. Cuomo, who — though supportive of upstate nuclear plants — has repeatedly called for shutting down Indian Point, which he says poses too great a risk to New York City, less than 30 miles to the south. “Why you would allow Indian Point to continue to operate defies common sense, planning and basic sanity,” Mr. Cuomo told reporters in June. Despite the political opposition to Indian Point, which is perched on the edge of the Hudson River in Buchanan, N.Y., the plant is an important supplier of inexpensive power to the metropolitan area. It has the capacity to generate more than 2,000 megawatts, or about one-fourth of the power consumed in New York City and Westchester County. The prospects for replacing that power are so far unclear, but potential options include hydropower from Quebec and power from wind farms already operating across New York, according to the person. State officials believe the Entergy agreement will help convince renewable energy providers that the state is serious about looking for new sources of energy, the person said. But without a viable replacement source, ratepayers in New York City could be burdened with higher energy prices for years.

Reid’s retirement may revive Yucca Mountain nuclear waste storage plan -- The retirement of Sen. Harry Reid may give new life to a project he’s made a career out of opposing. For years, the Senate minority leader and Nevada Democrat has been the most vocal opponent of a plan to store nuclear waste at Yucca Mountain, a remote site less than 100 miles northwest of Las Vegas. Analysts say Mr. Reid’s staunch political opposition to the proposal partly led to the Obama administration to pull the plug on Yucca Mountain in 2011. But the incoming Trump administration reportedly wants to give the site another look, and they’ll no longer have to deal with the politically powerful Mr. Reid, who has served in the Senate since 1987 and been his party’s leader in the chamber since 2005. Even diehard opponents of the Yucca Mountain proposal concede that the debate around the facility had become almost entirely about Mr. Reid and his heavy-handed opposition, creating a narrative that he was the sole reason the project never came to fruition. “The great irony here is that because Sen. Reid has been so successful in using his knowledge of the Senate rules, procedures, and powers to hobble the Department of Energy’s program, there are lots of people who have come to the reasonable conclusion that the problem with Yucca Mountain is Harry Reid,” said Robert Halstead, executive director of the Nevada Agency for Nuclear Projects.

Uranium supply in Spain set to boost EU’s energy security - About a quarter of EU power comes from nuclear, and that is expected to continue; Euratom wants 100 new stations commissioned by 2050 but these will be mostly replacing old plants that are coming offline. Yet the EU has little indigenous uranium fuel supply – just 3pc of demand, coming from small mines in the Czech Republic and Romania, as well as some recovered as a byproduct from other metal extraction. Kazakhstan, by far the biggest supplier, has more than 41pc of the global market. That is more than the next three – Canada (16pc), Australia (9pc) and Niger (7pc) – combined. Yet new and diverse supplies are going to be needed now that the future demands of the industry are becoming clearer, as exemplified by the UK’s commitment in September to a new reactor at Hinkley Point. Non-EU markets such as China’s new fleet of 60 reactors will be coming online just as many forward contracts end. Uranium supplies in Western Europe are thus becoming more interesting, as they will be geopolitically secure and have modern infrastructure to hand. The Salamanca mine is situated in a historic uranium mining region and as a result local people are well aware of the socioeconomic benefits of having an operating mine in the region – and are hugely supportive of the project. The Zona 7 deposit, which was discovered in 2015, transformed the economics of the project; the uranium is easily accessible, just a few metres beneath the surface, and of outstanding quality. The area also benefits from extensive EU-funded modern infrastructure and is located just a few hours’ drive west of Madrid, making it easily accessible. When the Salamanca mine comes online in 2018, it will be economically viable on the world market and also fit very well into the Euratom model for sustainability, competitiveness and diversity.

Swiss Voters Divided Over Costly Environmental Policy Choices -- In November 2016, Swiss citizens voted quite narrowly (55% to 45%) against closing down the country’s nuclear power plants. This means that the country’s five nuclear power plants can continue operating as long as the nuclear safety authority considers them safe. No new nuclear power plants will be built. Domestic electricity production in Switzerland is exclusively based on hydropower (60%) and nuclear energy (40%). One key reason for the No vote was concern that giving up nuclear power would quickly result in more imports of fossil fuels or nuclear energy produced in other countries to fill the gap. The costs of abandoning nuclear energy would be considerable for the power supplier Axpo, which estimated a loss of US$4.1 billion while the loss of competitor Alpiq Holding AG would be US$2.5 billion. Swiss energy policy mandates that the 40% nuclear share in national electricity production should eventually be replaced with renewables, rather than with imports or domestic production of “dirty” electricity. But how to achieve this remains contested. The November 2016 vote thus means that the Swiss have kicked the can down the road for a later decision.

‘Hypocritical’ Eskom ‘forcing’ nuclear power on South Africa -- While Europe spends mega euros on technology to generate “green energy”, here government seems bent on spending mega rands on nuclear technology, and taxpayers’ monies on court cases to defend it. South Africa’s energy guru, Chris Yelland – writing for – slammed Eskom’s attempts to “force” nuclear power on South Africa, adding to the voice of public opinion that Eskom has not played open cards and appears to want nuclear power for the wrong reasons. “Eskom’s preferred scenario artificially constrains cheaper solar PV and wind capacity, uses unrealistically high and inconsistent technology prices for solar PV and wind and an unrealistically low and inconsistent LCOE for nuclear power, and applies more stringent carbon emission constraints, thus forcing the IRP model to fit 25GW of nuclear power into the mix,” Yelland wrote. “Yet at the same time, Eskom continues to proceed with its massive coal-fired new-build programme, and plans to extend the life of its environmentally noncompliant coal fleet. The hypocrisy of pushing for stringent carbon emission constraints to facilitate its nuclear ambitions on the one hand, while maintaining high-emission coal power and constraining low-emission renewable energy, seems lost on Eskom,” noted Yelland.

Iran eyes 12 GW of nuclear power generation by 2025 - Iran plans to increase its power generation capacity to 100 gigawatts (GW) by 2025, of which 12 percent would be nuclear power, Behrooz Kamalvandi, spokesman for the Atomic Energy Organization of Iran (AEOI), said. He added that the country’s nominal power generation capacity stands at 75-80 GW currently. "We have a [1-GW Bushehr] nuclear power plant and an agreement on construction of the second nuclear power plant has been sealed [with Russia]," he told IRNA. Iran plans to increase the number of nuclear power plants to 12. According to the latest weekly report released by Energy Ministry, Iran’s nominal power generation capacity stands at 75.916 GW – up by 1.8 GW since the beginning of the current fiscal year on March 21. During the nine months of the current fiscal year, Iran generated 226 billion kilowatt hours (kWh) of electricity, the report says.

Ohio utility’s efficiency programs to move forward under settlement | Midwest Energy News As 2016 drew to a close, key environmental groups signed onto FirstEnergy’s revised energy efficiency plan for its Ohio utility customers.The December 8 stipulation addresses major objections to FirstEnergy’s earlier plan, including elimination of terms that would have let the company profit from energy-saving activities it played no part in.FirstEnergy’s revised energy efficiency plan “comes on the heels of the thaw on Ohio’s previously frozen clean energy standards, and the growing acknowledgement across Ohio’s utilities of the value of energy efficiency for customers,” said Samantha Williams at the Natural Resources Defense Council, which is one of the settling parties. While other Ohio utilities continued to offer a range of money-saving efficiency programs during the recent two-year freeze on the state’s clean energy standards, FirstEnergy moved to gut most of its efficiency programs in 2014. “Thankfully, the programs are back, and we’re very encouraged by the progress we’ve made with the utility in working towards more extensive, innovative options,” said Williams. “The plan will allow our customers to participate in energy-saving programs through 2019, and strives to achieve energy savings each year that will meet or exceed Ohio’s annual reduction targets,” FirstEnergy spokesperson Doug Colafella said. Not all parties have joined in the settlement, however, and the revised plan still requires approval by the Public Utilities Commission of Ohio. A hearing is scheduled for January 23.

Five years after the 4.0 quake, Ohio is a seismic-monitoring leader, ODNR officials say. -  In the five years since a magnitude-4.0 injection well- induced earthquake jolted the Mahoning Valley, Ohio has become a leader in seismic monitoring, state regulatory officials say. That memorable, locally unprecedented earthquake rattled the Valley shortly after 3 p.m. Dec. 31, 2011. It was one of 13 tremors between March 17, 2011, and Jan. 13, 2012, which the Ohio Department of Natural Resources determined were caused by a 9,000-foot-deep D&L Energy Inc. injection well on Ohio Works Drive in Youngstown, which was used for brine disposal. Before that series of Youngstown earthquakes began, no quakes centered in the Mahoning Valley had ever been recorded. “I believe we’ve had no felt [earthquake] events in [Ohio] injection wells since the Youngstown event,” of Dec. 31, 2011, said Jim Zehringer, director of the Ohio Department of Natural Resources, whose Division of Oil and Gas regulates the drilling industry. Rick Simmers, the state’s Division of Oil and Gas chief, seconded Zehringer’s observation and clarified that “felt” earthquakes are generally of a magnitude 2.5 or greater. Zehringer and Simmers were referring to the lack of felt injection-well-induced quakes in the last five years.A magnitude-3.0 quake, however, linked to fracking shook Poland Township on March 10, 2014.That and subsequent quakes were associated with fracking by Hilcorp. Energy Co. at the Carbon Limestone landfill.ODNR said in April of that year the fracking likely aggravated a small, previously undetected fault. A fault is a fracture in rock. ODNR imposed a moratorium on drilling at that site, but allowed Hilcorp. to recover oil and gas from five previously drilled wells with seismic monitoring.

 Judge orders Ohio to let company reopen brine injection well - Columbus Dispatch — The pumping of waste from hydraulic fracturing operations into a closed Ohio injection well is expected to resume after a judge's ruling that the state's oil-and-gas regulator failed to consider a new plan after shutting down the well in 2014 because of two small earthquakes nearby. Franklin County Common Pleas Judge Kimberly Cocroft ordered the state and well operator, American Water Management Services, to submit language for a judgment order to reopen the well in Trumbull County's Weathersfield Township, about 65 miles southeast of Cleveland. Cocroft's ruling last month said the state had the authority to shut down the well after earthquakes were detected below ground in July and August of 2014. But the ruling said the Division of Oil and Gas Resources Management should have allowed American Water to resume operations after submitting a plan that called for pumping brine at lower pressures and volumes. At least 20 other small seismic events were recorded in 2014 near the well before it was closed. The ruling noted that American Water was operating within state guidelines when the shutdown order came. A spokesman for the Ohio Department of Natural Resources said state attorneys are considering a response to Cocroft's order. The state argued in court that it was waiting to formulate state regulations based on guidance from a national workgroup studying the link between injection wells and seismic activity. Cocroft's ruling said it's unclear when the workgroup would complete its study. Larry James, an attorney for American Water, said the company hoped to resume operations soon. The shutdown has cost the company "a lot" of money, James said, but didn't have a dollar figure for the loss.  The state argued that the well was a health and safety risk to the community. Regulators placed a temporary moratorium on injection well operations statewide in December 2011 after a 4.0 earthquake was detected above ground close to a well owned by a different company near Youngstown. The state cited evidence then that injecting fracking waste below ground caused existing fault lines to become stressed, resulting in earthquakes. That injection well remains closed.

Legislature kicks locals on fracking: The legislature just made it harder for anyone to use local ballot issues to fight fracking, thanks to a bill rammed through the legislature, House Bill 463, which Gov. John R. Kasich signed Wednesday. That’s not the only problem that mars the 67-page Christmas tree, which passed Dec. 8. Reprehensibly, the bill also weakens Ohio’s housing-discrimination law. As to the environment, HB 463 takes aim at attempts to propose county charters, or city or village ballot issues, that would ban fracking or any other local initiative that would run counter to statewide law (example: ballot issues to soften marijuana penalties). HB 463 gives Boards of Elections and the secretary of state power to decide if a municipal initiative or proposed county charter fails to follow proper procedures for reaching the ballot – or (this is key) tries to claim local control over powers the state reserves for itself. (A 2004 law gives the state sole authority over oil and gas production.) If a ballot issue does either, HB 463 allows elections boards and the secretary to keep it off the ballot. The backdrop: In 2015, voters in Athens, Fulton (Wauseon) and Medina counties signed petitions proposing county charters they wanted on the ballot. The 2015 proposals didn’t make changes in each county’s government structure; for example, an executive wouldn’t have replaced county commissioners. But, Ohio’s Supreme Court said, the proposed Athens, Fulton and Medina charters would’ve “effectively (banned) high-volume hydraulic fracking as a method of oil and gas extraction (in each county).” Secretary of State Jon Husted ruled the proposals off the ballot. He said Ohio law gives sole authority over oil and gas production to the state. And Husted said the proposals didn’t include required specifics about which county officeholders the proposed charter counties would elect, etc.

Startup offers “online booking” for industrial water - MIT News - With oil and gas drilling, water is always on the move — and it’s pricey. Hydraulic fracturing (fracking), for instance, requires millions of gallons of fresh water to be shipped daily to drilling sites, and it produces millions more gallons of wastewater that are sent to treatment facilities or disposal wells. However, this water-management supply chain still relies heavily on word-of-mouth and phone calls to find and conduct business. “The whole process is managed by one guy calling another guy and asking him to come by and bring his truck to haul off water,” Adler says. “The whole system is stuck in the 1950s.” Sourcewater, on the other hand, provides users with a list and interactive map of all available fresh and wastewater, treatment facilities, shippers, and other water-based services. Users can search based on price, location, water quality, and other parameters to reduce the distance, cost, and environmental impact of hauling water. A fracking firm, for instance, may list its wastewater with about 30 characteristics, such as location, quality, volume produced per day, and mineral or chemical properties. Then, they’ll list a price they’ll pay to have it hauled it away. Shippers and treatment facilities can bid on transporting and treating the water. Alternatively, a nearby gas-drilling firm may offer to take away the wastewater for its own operations. From all these offers, the firm can choose the deal that best fits its budget and schedule. Consider it “an Expedia for water management,” Adler says. Currently, the website has about 1.4 billion barrels of water listed online, primarily in the Marcellus Shale region of the United States — including Pennsylvania, Ohio, and West Virginia. Among the dozens of companies and organizations using Sourcewater are Shell, Mountaineer Keystone, Pennsylvania General Energy, and Waste Management, Inc.

Oil calling the shots in new administration - When we drove from Elkins to Snowshoe in late August, I was surprised to note the absence of political campaign signs at that time. What we did see were lots of “No Pipeline” signs in both Randolph and Pocahontas counties, an indication of continuing opposition by homeowners, landowners and others on the relentless drive to build unneeded gas pipelines through scenic mountains, farmland and even the treasured national forests in West Virginia. The pipeline issue drives home a sense of helplessness and lack of control felt by many in their own lives to intrusions by both government and big business interests, a sentiment that was a key factor in this year’s election. Through a wide-angle lens, how this battle plays out will determine whether the United States can move toward a clean energy future or whether we’ll be tied to a fossil fuel infrastructure for the next 50 years or longer. With President-elect Donald Trump and his fossil fuel cronies taking power, it’s clear where policymakers are headed. Natural gas and oil barons will be calling the shots for at least the next four years. This is dangerous and devastating on far too many levels to possibly capture here. So let’s just examine this mindless dash to building pipelines: One of the attractions is the beauty and charm of the mountains and backcountry roads. We worry some of this appeal may vanish in the not-too-distant future as pipeline companies start to blast their way through the Monongahela National Forest, the George Washington National Forest and many other scenic parts of the state. Energy development, especially natural gas projects, appear certain to get a huge boost in the Trump era, especially if many of the existing regulations are gutted, as expected. Some of this would have happened even under a Clinton-Kaine administration. Both Democratic candidates supported fracking and both received substantial campaign contributions from the natural gas industry. Watching recent TV coverage of the brutal crackdown on Native Americans in South Dakota, we were reminded that in eastern states at least 10 new pipeline corridors are on drawing boards. At least five of them would transverse parts of West Virginia. These include the $5 billion Atlantic Coast pipeline, Mountain Valley pipeline, Western Marcellus pipeline, Leach Xpress/Columbia pipeline and the Access South pipeline and possibly others. With oil and gas prices likely to remain at low levels, most of these pipelines are simply not needed in the short term. Most could be scrapped or delayed without any serious consequences. The “Say No to Pipelines” campaign, underway long before the election, is an encouraging development. And formation of the Appalachian-Blue Ridge Alliance to fight corporate interests and greed is good news, too.

Pipelines crucial to fulfill our energy needs: Until a few years ago, most Americans weren’t used to hearing about oil and natural gas pipelines on the nightly news. But then came the Keystone XL Pipeline, which the president disallowed. More recently, the Dakota Access Pipeline is big with the media. Opposition to these pipelines, fueled by the anti-oil and anti-gas crowd, has found a sympathetic ear in the Obama administration. But these pipeline protesters have forgotten some simple truths: Pipelines remain the safest and most efficient means to move the oil and natural gas that power our country. But sensing a weak link in the fossil-fuel system, opponents seized upon infrastructure — specifically, oil and natural gas pipelines — to hamper the production and use of these fuels. So, across the country, needed pipelines, such as the Atlantic Coast Pipeline right here in West Virginia, are facing surprising opposition. These pipelines represent billions of dollars in investment, thousands of good jobs and even reduction in our energy costs. Pipelines are the arteries of our energy system. They move the natural gas, which heats half of our homes, generates the largest share of the nation’s electricity and provides much of the feedstock for our petrochemicals. Oil and gasoline pipelines fuel our vehicles. We already have a network of more than 200,000 miles of liquid pipelines and 3 million miles of natural gas transmission pipelines in this country. The need for new pipeline capacity is being driven by our resurgent domestic oil and natural gas production. Thanks to “fracking” (hydraulic fracturing) and the shale revolution, the U.S. has become the world’s largest combined oil and natural gas producer. As production has grown over the past decade, the need for new pipelines has grown as well.Increasingly, oil and natural gas production are coming from places that don’t have the pipeline networks to move the energy to population centers. Just because we are producing more oil at home doesn’t mean we get to reduce our dependence on foreign producers if we don’t have the infrastructure to move that oil to refineries.The need for new natural gas pipelines is even greater. Thanks to our low-cost and abundant supply of natural gas, demand for this gas has soared. New pipelines are needed to get gas from areas of production, such as West Virginia, Ohio and Pennsylvania, to major population centers where demand for natural gas is growing fastest.

Pipeline resistance gathers steam from Dakota Access, Keystone success - When President-elect Donald Trump takes office next month, his pro-drilling, anti-climate action energy policy will buoy the oil industry. But it will also face staunch resistance from a pipeline opposition movement that gathered momentum, particularly with this year's successful showdown over the Dakota Access pipeline, and shows no signs of slowing. Local grassroots action, governments' environmental concerns and market forces have stopped or delayed dozens of fossil fuel projects since the high-profile Keystone XL pipeline was cancelled in November 2015, and activists are continuing to oppose at least a dozen oil and gas pipelines around the country.   "There have been people fighting pipelines since pipelines first went into the ground," but awareness of the issue has grown due to the Keystone XL and Dakota Access, said Cherri Foytlin, director of the advocacy group Bold Louisiana.Opposition to pipelines has united environmentalists, Native Americans and rural landowners of all political backgrounds, many of whom resent the pipeline companies' use of eminent domain to seize their land. This "Keystone-ization" effect, along with low oil prices, has created a hostile environment for fossil fuel expansion projects. The election of Trump, who favors building the Keystone as well as the Dakota Access, will put advocates back on the defense—but they say they are ready for the challenge. Environmentalists have prioritized stopping pipelines because every pipeline is a decades-long investment in fossil fuels, locking in demand and hampering a transition to cleaner fuels. Successfully blocking them limits companies' ability to move their product to market, which feeds into a strategy of "making life more difficult for the fossil fuel industry going forward," said Adam Rome, a history professor at the State University of New York at Buffalo who studies the environmental movement.

 EIA sees natural gas production up nearly 4% a year to 2020 -The US Energy Information Administration's Annual Energy Outlook 2017 is projecting growth in natural gas production from now until 2050, and sees gas exports helping drive the US to switch to being a net energy exporter by 2026. Gas production "is actually going to go up quite a bit, with relatively low and stable prices," supporting higher levels of domestic consumption, especially in the electric and industrial sectors, EIA Administrator Adam Sieminski said in a briefing on the annual report Thursday. EIA's outlook examined eight cases in making projections for energy markets, this year extending those out to 2050. It looked at a reference case that assumes current regulation and central views of economic forecasters, as well as some improvement in known technologies. It also examined cases that assumed low and high economic growth, low and high oil prices, low and high oil and gas resource and technology, and one case that assumed no Clean Power Plan to rein in CO2 emissions from the power sector. In the reference case, natural gas production would grow at nearly 4% annually from 2016 to 2020, before rising at a lower rate as net export growth eases, domestic gas use becomes more efficient and prices slowly rise, the report said. After 2020, the reference case puts gas production growth at a 1% annual average. Gas prices would rise modestly from 2020 through 2030, in the reference case, as electric power consumption rises. After that, prices would stay relatively flat at about $5/MMBtu from 2030-2040 because of technology improvements, before rising again in the following decade, the outlook said. Under the high oil and gas resource and technology case, which assumes major improvements in production technology and greater resource availability, EIA projected increased production at lower prices, in turn boosting domestic consumption and exports.

 Court delays appeal over Obama’s fracking rule -- A federal court on Wednesday delayed oral arguments in the Obama administration’s appeal to reinstate its hydraulic fracturing regulation for federal lands for two months. The Denver-based Court of Appeals for the Tenth Circuit made its decision without a request by a party in the case. It means that attorneys working for President-elect Donald Trump will be in charge of the federal government’s appeal. Oral arguments will now take place the week of March 20, when litigants will have an hour to present their cases to the three-judge panel. The court in November had scheduled a half-hour of arguments on Jan. 17, three days before Trump takes office.The Justice Department filed the appeal in June on behalf of the Interior Department’s Bureau of Land Management (BLM), which wrote the fracking rule in 2015. It challenges a decision from Judge Scott Skavdahl. The Wyoming-based federal judge ruled that the BLM is specifically prohibited under a 2005 law from regulating fracking on federal land. Federal lawyers said in court filings that Skavdahl’s “crabbed view of BLM’s authority is wholly unprecedented and manifestly incorrect.” A group of conservative states and oil and natural gas industry groups filed the original lawsuit and is challenging the government’s appeal. On the campaign trail, Trump promised to roll back President Obama’s restrictions on fossil fuel development, including fracking. The Trump administration could direct attorneys to stop pursuing the regulation’s appeal, but environmentalists and others involved in the case could keep it going. Trump could also have his Interior Department work to repeal the rule. The rule sets standards in three areas: well casing integrity, storage of waste fluids and public disclosure of the contents of fracking fluid used.

 US Coast Guard Responding To Fire On Oil Platform Off Louisiana Coast --The US Coast Guard said on Thursday morning it was responding to a fire on an oil platform in the Gulf of Mexico off the coast of Louisiana. A Coast Guard news release says the fire was reported around 2:30 a.m. Thursday on an oil platform about 80 miles south of Grand Isle, Louisiana. It was not immediately clear whose platform it was. The Coast Guard says four people aboard the platform evacuated and were rescued by a supply vessel. No injuries have been reported.Four vessels are fighting the fire and the cause is under investigation. The USCG said a Clean Gulf oil spill response organization is enroute to platform Developing story.

Halliburton hiring in West Texas - According to FuelFix, Halliburton is set to hire 200 workers in the Permian Basin in West Texas and New Mexico. The Current-Argus reported that Halliburton spokeswoman Emily Mir said in late December there will be job opportunities throughout the Permian, including in Artesia. As the oil industry begins to see a small upswing, local businesses are crossing their fingers that local economies will see a positive effect as well. While the rest of the industry is still struggling to recover from rock-bottom oil prices in early 2016, hitting $28.36, the lowest price since 2003. Yet innovation and greater efficiency have helped to trim the excess cost from drilling, making oil profitable at a lower price. In June of last year, Forbes reported the breakeven price in the Permina was $61, far above the price of oil at the time. However, that estimate was drastically lower in an IHS Markit study, citing $50 as closer to the mark.We at IHS Markit found that the Delaware Basin’s multiple company sub-plays are delivering impressive economics at a $50 per barrel reference, and we attribute that to two primary considerations—early entrance into the play and extensive geologic knowledge,” said analysis author Sven Del Pozzo, CFA, director of energy company and transaction research at IHS Markit.Most experts now agree that drilling is profitable in the area at anywhere from $45-50.Shannon Carr, development  coordinator with the Department of Development in Carlsbad, New Mexico, attributed growth in the region to the new OPEC agreements to cut production. She also told the Current Argus “Our incoming president is pro-e nergy and pro-gas, which is great,” Carr said. “The industry is very complicated and hard to predict, but the prices are right and the companies are looking to expand.” So it’s possible that the hiring spree by Halliburton may be extended to other companies throughout the oil and gas industry. Carr is hopeful that the increase in activity will translate into a recovering Carlsbad economy, hopefully replicated throughout other areas where drilling activity has significantly decreased.’

Anti-Fracking Movement Alarmed at Trump's Focus on Fossil Fuels - Earl Hatley, a descendant of the Cherokee/Delaware tribe, has witnessed the consequences of using hydraulic fracturing or "fracking" on his native land to produce shale gas. "Fracking is harmful to water supplies, wildlife, and property values. It has caused earthquakes where there were none. Since 2007, it began to tremble more and more near the wells. I can smell the foul emissions, which make me sick," the founder of Local Environmental Action Demanded (L.E.A.D.), a non-governmental organisation based in Oklahoma, told IPS. Hatley has property in Payne, Oklahoma, in the Midwest, which he says he cannot visit anymore because of the toxic emissions from the wells. "The oil and and gas industry flares their escaping gas and also do not monitor leaks, as there are no regulations in Oklahoma demanding they do. We had the opportunity to test a few wells and found all of them were bad," he said. In the state of Oklahoma there are about 50,000 active natural gas wells, of which some 4,000 use fracking. At least 200 of them are in Payne. With similar scenarios in other states, the anti-fracking movement in the US is especially worried about what President-elect Donald Trump will do after he takes office on Jan. 20, since he pledged to give a boost to the fossil fuel industry, despite its impact on global warming. Trump "is sending signals of the support the industry will receive, which will exacerbate the already-known impacts of fracking, such as water pollution and methane emissions,"  For the fracking industry, good times will return when Trump is sworn in. In May he launched a plan for the first 100 days of his administration, which included giving a strong boost to the sector, despite the denounced environmental, social and economic impacts.

How much will really change for the West's oil and gas industry under Trump? -  The election of Donald Trump has thrilled many people across the West’s oil and gas industry who say his promises to roll back regulations will free it from unfair and unnecessary obstacles imposed by President Obama. “If the Trump administration does nothing but stop being hostile to us, we’ll be happy,” said Kathleen Sgamma, president of Western Energy Alliance. Yet how much will things really change under a Trump administration? Even as some in the oil and gas industry are optimistic — and as conservation groups gird for protests and court fights to protect public lands — experts say blaming government, or giving it too much credit, for restricting oil and gas is mostly missing the point. If another Western energy boom is around the corner, they say, it will be because prices rise, not because regulations decline. “The market is the elephant in the room,” said Michael Lynch, president of Strategic Energy & Economic Research, an industry consulting firm. “All this other talk about access to public lands and such for oil and gas, it’s a pretty minor issue.”  Although the Obama administration is often criticized by the fossil fuel industry, it presided over a boom that saw domestic oil and gas production soar. The administration allowed a broad and controversial expansion of hydraulic fracturing, or fracking, which infuriated many conservation groups while it transformed parts of North Dakota, Oklahoma, Texas and the Rockies into meccas for energy workers and the United States became a powerful new global energy player.  “For a Democrat, he’s really been pro-oil,” Lynch said of Obama. “He’s been a lot nicer to oil than some Republicans.”   But the boom helped deflate itself by driving up supply and driving down prices for oil and gas. Around the same time, the administration began paying more attention to climate change — limiting emissions from power plants and methane from oil and gas production, removing certain public lands from energy development, and rejecting or withholding decisions on projects such as the Keystone XL and Dakota Access oil pipelines.

Russia carried out disinformation campaign against oil and gas frackiing -  Around the same time that the federal government’s intelligence community reported that #Russia ran an operation attempting to influence the outcome of the 2016 election for Donald Trump, it has been revealed that Moscow has been running a disinformation operation against fracking. The Washington Examiner reports that Russia has been using its government controlled new agency RT to claim that fracking, the technique of forcing oil and natural gas out of shale formations by injecting them with fluid, is environmentally hazardous. The idea seems to have been to support environmentalist demands to get the practice banned in the West. The reason for the anti-fracking disinformation campaign is evident. Much of Russia’s trade consists of natural gas sales through its giant company Gazprom. Russia has, in the past, used its natural gas exports to influence the foreign policy of its neighbors, just as the Arab oil sheiks used to do in the 1970s and 1980s. Unfortunately for Russia, fracking has unleashed hitherto untapped reserves of oil and gas, making the United States a fossil fuel exporting country for the first time in many decades. The situation has tended to depress the price of oil and gas much to the detriment of Russia’s economic and political interests. It has also given oil and gas consumer nations and alternative source of fuel, degrading Moscow’s political influence.  The environmental movement, which has opposed fracking and indeed any oil and natural gas drilling, has some explaining to do. How much is the anti-fracking campaign being influenced by Russia and is serving Russia’s national interests and opposing American energy independence? 

US Court of Appeals Rules Against Standing Rock Tribe in Dakota Access Pipeline Case: The U.S. Court of Appeals for the District of Columbia Circuit on Sunday rejected the Standing Rock Sioux Tribe’s request for an injunction to halt construction of the Dakota Access Pipeline by Texas-based Energy Transfer Partners. The announcement was made public by the Standing Rock Sioux Tribe in a news release distributed within the past hour on Sunday evening. The decision comes as the Tribe is pursuing an appeal to stop construction while the rest of the case proceeds in U.S. District Court. “The Standing Rock Sioux Tribe is not backing down from this fight,” said Dave Archambault II, Chairman of the Standing Rock Sioux Tribe. “We are guided by prayer, and we will continue to fight for our people. We will not rest until our lands, people, waters and sacred places are permanently protected from this destructive pipeline.” The 1,168-mile pipeline crosses through the Standing Rock Sioux Tribe’s ancestral lands and within a half mile of the reservation boundary. Construction crews have already destroyed and desecrated confirmed sacred and historic sites, including burials and cultural artifacts. The original pipeline route crossed the Missouri River just north of Bismarck, the capital of North Dakota. The route was later shifted downstream, to the tribe’s doorstep, out of concerns for the city’s drinking water supply. “We call on Dakota access to heed the government’s request to stand down around Lake Oahe,” said Jan Hasselman, lead attorney from Earthjustice, which is representing the Tribe. “The government is still deciding whether or not Dakota access should get a permit. Continuing construction before the decision is made would be a tragedy given what we know about the importance of this area.”

 Standing Rock activists are looking to hit the Dakota Access pipeline’s finances to cement their win - Indigenous activists are focusing on the Dakota Access pipeline’s finances before Donald Trump takes office in an effort to further strain the oil corporation and cause continuing delays that they hope could be disastrous for the project.  After the Obama administration denied the company a key permit to finish construction, Native American activists warned that the win was only temporary and that Trump, an investor in the pipeline corporation, would seek to quickly advance the project next year.   Some indigenous advocates and environmental groups have focused their efforts to hurt the pipeline company’s profits on an approaching 1 January deadline that the operator, Energy Transfer Partners (ETP), cited in court records.  The firm wrote in a filing this year that the pipeline “committed to complete, test and have DAPL in service” by the start of 2017. And if the company did not meet its contract deadline, then its shipping partners had a “right to terminate their commitments”.  In asking a judge to speedily green-light the $3.8bn project, vice-president Joey Mahmoud claimed that the loss of shippers could “effectively result in project cancellation”, leading advocates and analysts to declare that a missed January deadline could be financially disastrous for ETP and a huge feat for Standing Rock.  But in emails to the Guardian, DAPL spokeswoman Vicki Granado claimed that January was just an “initial target” and not a “contractual date”, which is “much later”, though she refused to say when.

US Army Corps keeps oil pipelines in streamlined permitting rule over protests --  The US Army Corps of Engineers will not remove oil pipelines from the next five-year authorization of its streamlined permitting program, despite opponents of the Dakota Access Pipeline and historic preservation groups calling for more scrutiny in order to prevent spills. The agency released a final rule Thursday authorizing the program through March 2022. More than 53,000 of the 54,000 comments the Corps received about the wide-ranging program dealt with Nationwide Permit 12, or NWP 12, a provision that allows oil pipelines to avoid much of the federal scrutiny that interstate natural gas pipelines undergo. NWP 12 includes oil pipelines in its definition of utility lines that are eligible for streamlined federal permitting authorizing construction, maintenance and repair work in federally regulated waters. Some projects can begin work without prior approval from the Corps. Other projects with certain characteristics -- including those that cross a navigable river or run more than 500 feet in a single water body and those that may affect sensitive cultural resources or endangered species -- must get pre-construction authorization from the Corps' regional office that oversees that area of the pipeline and comply with a number of general conditions. The Corps decided not to make any major changes to the provision. Dakota Access Pipeline opponents like the Standing Rock Sioux Tribe in North Dakota amplified calls to modify or eliminate NWP 12, which would have made it more difficult for companies to site oil pipelines. Standing Rock Chairman Dave Archambault said NWP 12 was intended for projects with minimal effect on the environment. "However, as events across the country have shown, spills from oil pipelines occur with great frequency, often with devastating environmental effects, particularly when they occur in the aquatic environment," Archambault

Analysis: What Iraq reveals about Rex Tillerson - Iraq Oil Report: Rex Tillerson has never held a government position, but he does have a long track record of conducting foreign policy as the leader of ExxonMobil – one of the largest and most profitable oil companies ever. He's likely to be confirmed as the next U.S. Secretary of State after hearings next week before the U.S. Senate Foreign Relations Committee, which will probe how his experience as a business leader might make him qualified to serve as the world's most powerful diplomat. Exxon's activities in Iraq over the past decade provide a rich series of case studies that illuminate how Tillerson has negotiated with foreign leaders and pursued business interests aggressively – sometimes with little apparent regard for the political consequences. Ever since the country's oil sector opened to foreign investment, in 2009, Iraq Oil Report has covered Exxon's saga in detail. Each chapter shows the character of the company, where Tillerson has spent his entire professional career, and provides insight into the worldview of the man who stands to shape U.S. policy toward Iraq, and the world, in the Trump administration.In the country's first oil contracting auction, in 2009, Exxon won the West Qurna 1 oil field. Although international oil companies (IOCs) generally regarded the government's terms as stingy, Exxon – like many other western companies – wanted to establish a foothold in the oil-rich nation, betting that the relationship could lead to further, more lucrative opportunities. Just a year after Exxon got to work, West Qurna 1 hit a key production milestone that triggered additional payments for Exxon and its junior partner, Royal Dutch Shell. (Since then, it has taken the field to nearly 500,000 barrels per day (bpd) of production, or roughly 10 percent of the country's output.) The company was also tendering for engineering and design work for an important water injection project, Exxon's Iraq chief, James Adams, told Iraq Oil Report. Exxon appeared to be on track to becoming one of the Iraqi government's most important international partners. During this time, however, unbeknownst to government leaders in Washington or Baghdad, Tillerson and his team were getting ready to risk it all.

Natural Gas Storage Dives Under 5-Yr Average on Big Draw - The U.S. Energy Department's weekly inventory release showed a big decrease in natural gas supplies - the season's sixth successive withdrawal. Following the massive drop - the largest since February 2014 - natural gas storage has run into a deficit versus the five-year average, while price surged to a 2-year high. The Weekly Natural Gas Storage Report - brought out by the Energy Information Administration (EIA) every Thursday since 2002 - includes updates on natural gas market prices, the latest storage level estimates, recent weather data and other market activities or events. The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of natural gas. It is an indicator of current gas prices and volatility that affect businesses of natural gas-weighted companies and related support plays. Stockpiles held in underground storage in the lower 48 states fell by 237 billion cubic feet (Bcf) for the week ended Dec 23, 2016, just above the guidance (of 236 Bcf draw) as per the analysts surveyed by S&P Global Platts, a leading independent commodities and energy data provider. The past week's decline represents the sixth successive withdrawal of the 2016-2017 winter heating season after stocks hit an all-time high in November. Moreover, the decrease handily exceeded both last year's drop of 58 Bcf and the 5-year (2011-2015) average shrinkage of 80 Bcf for the reported week. Following the monster withdrawal, the current storage level - at 3.360 trillion cubic feet (Tcf) - is down 413 Bcf (11%) from last year and has now fallen 79 Bcf (2%) below the five-year average. Successive below-average builds in the recent past and now some big draws - with strong power sector consumption - has meant that the storage surplus has now turned into deficit. As a result, natural gas prices have rebounded strongly and more than doubled from the extreme lows it hit in Mar. The dramatic recovery has helped the commodity cross the key psychological level of $3.5 per MMBtu. With winter turning out cooler than expected, natural gas demand has picked up on the back of elevated power sector consumption due to air-conditioning use. What's more, the heating fuel is set to rise further with abnormally frigid weather predictions over the entire U.S. Currently at a 2-year high of around 3.8 per MMBtu, prices look set to break the $4 barrier if inventories continue to fall.

Natural Gas Falls on Warmer Weather Forecast - WSJ: Natural-gas futures had their worst day in nearly three years, as forecasts of mild weather replaced predictions of severe cold. Natural gas for February delivery fell 39.7 cents, or 10.66%, to $3.327 a million British thermal units on the New York Mercantile Exchange. That was the largest decline since Feb. 24, 2014, when natural-gas prices fell 11.25%. The selloff pummeled shares of natural-gas producers. Southwestern Energy Co. and Range Resources Corp. were the biggest losers in the S&P 500 on Tuesday, down 7.9% and 5.1%, respectively. Shares of Cabot Oil & Gas Corp. and EQT Corp., two big Pennsylvania drillers, also fell as natural-gas futures gave back last week’s big gains on forecasts for milder winter weather. Big swings in natural-gas prices have been common in recent months. Natural-gas markets have been volatile, changing course rapidly in response to shifts in the short-term weather outlook. Prices pushed to two-year highs at the end of December amid weather forecasts that predicted extreme cold would hit most of the country in January. Many have bet that between higher demand for natural gas to heat homes and fire power plants and lower production, even normal winter weather will rapidly eat up supplies. “The stakes are higher come winter time because weather is a bigger factor. Cold weather can really increase demand,”But the arctic blast is now expected to be briefer than many anticipated, with milder temperatures taking hold in mid-January. That could bring an end to a string of mammoth withdrawals of natural gas from storage, analysts said.

Natural Gas Prices Recover Losses - Natural gas prices closed higher for the second day in a row on Friday, reversing course after trading at a six-week low.  Futures for February delivery settled up 1.2 cents, or 0.4%, at $3.285 a million British thermal units on the New York Mercantile Exchange, after trading as low as $3.214/mmBtu earlier in the session. Warmer-than-average weather forecasts have sent natural gas tumbling at the start of the year, leading prices down nearly 12% year to date. On Friday, the steep decline led some investors to cash out on bearish bets and adjust positions, traders said. Natural gas is used to heat half of the homes in the U.S., and is largely influenced by changes in weather expectations. An MDA Weather Services report on Friday showed higher-than-normal temperatures spreading across more than half the U.S. in the 11-15 day forecast. “The market has suffered badly every time the weatherman changes his forecast,” said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading desk. However, Mr. Morton said much of the recent weakness is attributable to a pile-on of speculative positions, while natural gas consumption has remained steady despite fluctuating forecasts. On Thursday, the U.S. Energy Information Administration reported a inventory decline of 49 billion cubic feet for the week ended Dec. 30, which fell short of analyst expectations for a larger withdrawal from storage. However, some noted that the last report of the year may be a skewed portrayal of market demand. “Yesterday’s disappointing draw has many scratching their heads as to accuracy,” Mr. Morton said. “There’s still a lot of winter ahead of us.”

U.S. on Track to Become Net Energy Exporter by 2026 - The amount of energy Americans use and the pollution they emit from using coal, oil and natural gas are not likely to change radically over the next 30 years, even as the U.S. becomes a major energy exporter, according to the U.S. Energy Information Administration’s Annual Energy Outlook, published Thursday. The outlook, which does not factor in any policies from the incoming fossil fuel-friendly Trump administration, shows that the U.S. is unlikely to make significant gains in reducing greenhouse gas emissions to meet its obligations under the Paris Climate Agreement, even though zero-carbon renewables are expected to grow faster than any other energy source over the next three decades. Electricity generation is expected to remain the largest single use of energy in the U.S., but crude oil use for transportation is expected to be largest source of energy-related carbon emissions. Carbon emissions from transportation surpassed those from electric power generation for the first time in U.S history in 2016. The U.S. is likely to become a major exporter of energy because it is expected to produce about 20 percent more energy than it does today through 2040 while using only about 5 percent more energy, said EIA administrator Adam Sieminsky.

Through 2050, US To Be Net Exporter Of Energy -- EIA -- January 5, 2017 --From EIA's annual energy outlook 2017: EIA's AEO2017 projects the United States as a net energy exporter in most cases.This is the first time that EIA is publishing projections through 2050 in the AEO tables. The United States becomes a net energy exporter in most AEO2017 cases as petroleum liquid imports fall and natural gas exports rise. Exports are highest, and grow throughout the projection period, in the High Oil and Gas Resource and Technology case, as favorable geology and technological developments combine to produce oil and gas at lower prices.  The High Oil Price case provides favorable economic conditions for producers while restraining domestic consumption, enabling the most rapid transition to net exporter status. In all cases but the High Oil and Gas Resource Technology case, which assumes substantial improvements in production technology and more favorable resource availability, U.S. production declines in the 2030s, which slows or reverses projected growth in net energy exports.   "The variation across the analysis cases of projected net energy export levels—as well as other findings in AEO2017— demonstrates the importance of considering the full set of AEO cases.” Alternative cases incorporate different key assumptions, reflecting market, technology, resource, and policy uncertainties that may affect future energy markets. Other key findings:

  • Energy consumption is consistent across all AEO cases, bounded by the High and Low Economic Growth cases. In the Reference case, total energy consumption increases 5% between 2016 and 2040. As a significant portion of energy consumption is related to economic activity, energy consumption is projected to increase by approximately 11% in the High Economic Growth case, over 2016-40, and remain nearly flat in the Low Economic Growth Case. In all AEO cases, the electric power sector remains the largest consumer of primary energy.
  • Energy production ranges from nearly flat in the Low Oil and Gas Resource and Technology case, to nearly 50% growth over 2016-40 in the High Resource and Technology Case. Unlike energy consumption, which varies less across AEO cases, projections of energy production vary widely. Production growth is dependent on technology, resource, and market conditions. Total energy production increases by more than 20% in the Reference case, from 2016 through 2040, led by increases in crude oil and natural gas production.
  • Energy related carbon dioxide emissions decline in most AEO cases, with the highest emissions projected in the No Clean Power Plan case. All of the AEO2017 cases except the No Clean Power Plan case include the Clean Power Plan (CPP).

Exporting oil and natural gas will import economic growth - President Barack Obama opened the door to exporting U.S. oil and natural gas; the Trump administration is likely to drive a tanker through it. As part of the $1.1 trillion spending bill that passed in December 2015, Obama agreed to end the 40-year ban on U.S. crude oil exports. The president opposed the repeal, but the bill also extended the wind and solar energy tax credits, so he took the compromise. In addition, the U.S. Department of Energy has finally begun approving construction of terminals to export U.S. liquefied natural gas (LNG) — 10 so far (in Texas, Louisiana, Maryland and Georgia) with most of them still under construction. When completed, we should see natural gas production and export increase exponentially. In the first five months of the year, the U.S. exported half a million barrels of crude oil per day to 16 countries — including several in Europe, South and Central America, Israel and even China — according to the U.S. Energy Information Administration.In the first six months of the year, some 50 billion cubic feet (Bcf) of natural gas has been exported. One energy analyst estimated shortly before the presidential election that the U.S. will be exporting about 7 Bcf per day by 2020 and 17 Bcf/day by 2040. The U.S. currently produces about 80 Bcf/day. Given the incoming Trump administration’s embrace of fossil fuel production — and given the individuals nominated to run the Environmental Protection Agency and the Department of Energy — those Forbes estimates are likely on the low side. The nascent energy export industry is important for several reasons. First, the EIA projects the U.S. will become a net gas exporter in the second half of 2017. The U.S. needs markets for that abundance of natural gas. Second, exports enhance economic efficiency. For those who wonder why U.S. companies would export crude oil when the country still imports 24 percent of its oil, the answer has to do with efficiency and refining. Most U.S. refineries are set up to process very heavy oil. But most of the oil coming from shale formations, comprising about 52 percent of total production, is what’s called light sweet crude, which requires a different, less-intensive refining process. While some refineries are starting to adapt to the lighter crude slate, that refining transition isn’t quickly or cheaply made. Third, U.S. exports could help meet the energy needs of some or our allies — especially those dependent on oil and natural gas from countries like Russia, which use energy supplies as a geopolitical hammer. Finally, exporting crude oil and natural gas will jump start economic growth and reduce the U.S. trade deficit.

Solar Farms Expected to Outpace Natural Gas in U.S. - 2016 is shaping up to be a milestone year for energy, and when the final accounting is done, one of the biggest winners is likely to be solar power.  For the first time, more electricity-generating capacity from solar power plants is expected to have been built in the U.S. than from natural gas and wind, U.S. Department of Energy data show. Though the final tally won’t be in until March, enough new solar power plants were expected to be built in 2016 to total 9.5 gigawatts of solar power generating capacity, tripling the new solar capacity built in 2015. That’s enough to light up more than 1.8 million homes.  The solar farms built in 2016 were expected to exceed the 8 gigawatts of natural gas power generating capacity and the 6.8 gigawatts of wind power slated for construction this year. No new coal-fired power plants were planned in 2016.

Canada's Oil Sands Downturn Hints at Ominous Future - It was a dark year for Canada's tar sands. Plunging oil prices caused companies to cancel or delay nearly three dozen projects. Extensive wildfires forced producers to shut down operations for weeks. And after a decade that saw little action on climate change policy, Canadian officials began shaping plans to cap the tar sands' emissions and set a national price on carbon with an eye to meeting the country's commitment to the Paris climate agreement. Now the question is whether the downturn is just a blip or is the start of a trend away from the expensive and carbon-intensive fuel.  Since oil prices tanked in 2014, energy companies have delayed or canceled at least 64 projects in Alberta's oil sands, according to data from JWN Energy. Across the industry, producers have slashed billions of dollars from their balance sheets, with the latest a December divestment of oil sands assets by Norway's Statoil. In October, ExxonMobil said it may wipe 3.6 billion barrels of tar sands oil from its reported reserves early next year in its annual filing to the Securities and Exchange Commission. The announcement came amid investigations by state attorneys general and reportedly the SEC into whether the company misled investors about the business risks of climate change and the value of its holdings. Reserves measure the amount of oil that a company can profitably extract, and Exxon had long resisted calls to reduce its reserves figure as oil prices fell. Some economists and advocates have argued that Canada's oil sands, because of high operating costs and high emissions, should be among the first reserves abandoned as the world phases out fossil fuels. A 2015 article in the journal Nature examined the carbon content of remaining coal, oil and gas reserves and compared that to the emissions cuts required to keep global warming below 2 degrees Celsius. The authors concluded that about 75 percent of Canada's oil reserves should be left in the ground, compared to a third of oil globally.

AltaGas to start construction on West Coast Canada propane export terminal - Canada's AltaGas has reached a final investment decision for a British Columbia propane export terminal after receiving approval from federal regulators and will begin construction early this year, the company said Tuesday. The Ridley Island terminal near Prince Rupert would be the first propane export facility on the Canadian West Coast -- a 10-day voyage to Asia. By comparison, cargoes to Asia from the US Gulf Coast take about 25 days via the Panama Canal. "The brownfield site also benefits from Canadian National railway access and a marine jetty with deep water access to the Pacific Ocean," AltaGas said in a statement. The facility, slated to come online in the first quarter 2019, will be able to ship 1.2 million mt/year of propane and cost about $450 million-500 million, AltaGas said in a statement."My that product is all headed to Japan [and] in discussion with time charter freight to supply it," a shipbroker said. "I don't think you'll see many, if any, spot sold ex-Ridley." The company already has a memorandum of understanding with Japan's Astomos Energy for the purchase of at least 50%, or 600,000 mt/year, of the total planned output. US LPG exports, the bulk of which is propane, have increasingly been sent to Asia, with China, Japan, South Korea and Singapore combined making up roughly 40% of US LPG exports in October, which averaged 1.07 million b/d, US Energy Information Administration data shows. US Gulf Coast exports of propane averaged 778,000 b/d in October, near the record high 799,000 b/d in May, and up from just 28,000 b/d 10 years ago, according to the EIA. The Ridley Export Terminal will initially be 100% owned and operated by Altagas, the company said, adding it is keeping options open to sell 30% stake in the planned facility.

Mexicans Rage, Protest After Gas Prices Surge, And Now The Drug Cartels Are Involved --Even as Mexico has reasons to be concerned about the upcoming presidential inauguration of Donald Trump, who has vowed to make life, and especially trade relations, for Mexicans far more "complicated" under his administration, the population of Mexico has far more pressing problems at this moment, because just days after the finance ministry announced on December 27 that it would raise the price of gasoline by as much as 20.1% to 88 cents per liter while hiking diesel prices by 16.5% to 83 cents, the hikes went into effect on January 1, welcoming in the new year with a surge in the price of one of Mexico's most important staples and leading to widespread anger, protests and in some cases violence. As Telesur reports, the people of Mexico "are entering the New Year in a state of rage and anxiety" with protests planned for Sunday to strongly denounce the government's huge hike in gasoline prices. The sharp rise in gasoline prices has been called the "gasolinazo" in Spanish, which roughly translates to "gasoline-punch." On Sunday, the day the price hikes went into effect, Excelsior reported that angry citizens protested in several spots of the capital, Mexico City, blocking roads, demanding a return to lower gas prices. But before readers blow this off as just another protest by an angry population which fails to grasp the "global deflationary collapse" while focusing on "fringe, outlier events"  - at least in the words of central bankers -  things suddenly got serious when none other than the country's powerful Jalisco New Generation cartel has entered the fray, threatening to burn gas stations in response to the price hikes, according to Jalisco authorities cited by TeleSur.

Looting erupts amid protests over Mexico gas price hike - France 24: (AFP) - Looting broke out at several stores in Mexico on the sidelines of protests against a gasoline price increase as authorities detained dozens of people. Mexicans have blocked service stations, disrupted highway traffic and held protests since the government increased fuel prices by 20.1 percent on January 1. But acts of vandalism and looting erupted, prompting Interior Minister Miguel Angel Osorio Chong to instruct the National Security Commission to support local authorities. The government of the State of Mexico, which surrounds the capital, said in a statement that 161 people were detained for "various acts of vandalism and thefts at shops" in six municipalities. The statement said "some groups of people have seized on the situation to commit thefts and acts of vandalism under the pretext of protesting the liberalization of the price of gasoline." In Mexico City, around 20 people were detained after some shops were looted, the local government's secretary general, Patricia Mercado, told Radio Formula.

600 Hundred Arrested And 1 Dead As Mexican Gas Price Protests Intensify --Some 600 people have been arrested, one policeman killed and around 300 stores looted as protests intensify in Mexico following the weekend decision to hike fuel prices by 20 percent, the Associated Press reports. Citing Mexican business chambers, the news agency said that supplies of basic goods and fuel are under threat as protesters blockade highways, ports and terminals and the situation intensifies to chaos on the streets and looting.As one of the more difficult to implement parts of the government’s sweeping energy reforms, deregulation required a 20 percent increase in fuel prices that has enraged the population.On New Year’s Day, when the policy took effect, the cost of a gallon of standard-grade unleaded fuel was US$2.95, up 14 percent from the price of US$2.60 on 31 December. The price of premium fuel rose by up to 20 percent, according to the LA Times.This situation is critical for Mexican President Enrique Peña Nieto, who had promised that fuel prices would go down with the energy sector reforms. Protests were easily sparked by opposition politicians who fed on the sudden removal of decades of set fuel prices and heavy subsidies for a population that is not accustomed to fuel price increases.The government only announced the deregulation of gas prices on 27 December, as part of the wider reforms being implemented to end the oil and gas monopoly enjoyed for decades by corruption-scandalized state-run Pemex.The reforms will allow foreign companies to operate in Mexico’s lucrative oil and gas sector for the first time. The Mexican president is calling for calm but has so far failed to convince the protesters that the alternative to fuel deregulation would have been much more painful for the economy. The government says that by March the market will be allowed to dictate fuel prices.

Record number of oil and gas firms go bust as renewable energy revolution begins to bite - A record number of oil and gas companies became insolvent last year, according to a new study which environmentalists said highlighted the need for the UK to prepare for the move to a low-carbon economy. They warned that the loss of jobs in the sector when it becomes clear that fossil fuels can no longer be burned because of the effect on global warming would lead to “desolate communities” unless people were retrained to work in the “new industries of the 21st century”. The study by accountancy firm Moore Stephens found 16 oil and gas companies went insolvent last year, compared to none at all in 2012. First commercial flight powered by renewable energy takes to skies After oil prices fell from about $120 a barrel to under $50 for most of the past year, smaller firms in the sector were unable to cope, Moore Stephens found.Jeremy Willmont, who carried out the research, said: “The collapse of the price of oil has stretched many UK independents to breaking point. “The last 15 years has seen a large increase in the number of UK oil and gas independents exploring and producing everywhere from Iraq to the Falkland Islands. “Unless there is a consistent upward trend in the oil price, conditions will remain tough for many of those and insolvencies may continue.”

EU’s gas dependence on Russia hits new record - The share of Gazprom’s gas in the balance of non-CIS countries receiving Russian gas in 2016 reached 33.5%, after (reaching) 31% in 2015. Gazprom Export’s December corporate bulletin Blue Fuel notes a steady increase in the company’s share of gas on European market, it has already reached approximately 1/3. According to the Interfax news agency, in 2016 Gazprom will supply to non-CIS countries about 179 billion cubic meters of gas (in the past year, the volume was 159.4 billion cubic meters). At the same time, the European market grew by 4-5%, Gazprom’s gas supply to it increased by 13%. The deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev noted that the EU had to increase the purchase of gas from Russia, despite the desire to be less dependent on Gazprom, due to the sharp growth in demand for gas. The choice in favor of large purchases from Russia is explained by the stability of Gazprom as a supplier, despite Europe’s political problems with Moscow. “Over the past 15 years they have not managed to find alternative suppliers of pipeline gas. Supplies of Azerbaijani gas by the TANAP and TAP pipelines will not exceed 11 billion cubic meters by 2025, and it is not much for the European market. Expectations for the North African, Nigerian gas though Algeria were not fulfilled due to resource constraints in the region, and the war in Libya. In fact, the Russian gas competes only with LNG,” Alexey Belogoriev noticed.

Energy Prices in Europe -- A few days ago a link to a UK government report called Quarterly Energy Prices landed in my in box. At the end was a series of interesting charts comparing liquid fuel, natural gas and electricity prices across Europe. This post presents these charts alongside some simple but rather interesting observations. Let me begin by taking a look at liquid fuel. Some key observations:

  • Diesel is marginally more expensive than petrol
  • The cost of the raw product (ex tax) is pretty well uniform across countries, thus what little variation there is in price comes from different tax levels
  • There is little variation in price between countries with the ratio of most expensive / least expensive = 1.4 (petrol) and 1.5 (diesel).
  • Luxembourg has the cheapest diesel and petrol while the UK is about the mid point for petrol but has the most expensive diesel.

The relative uniformity of price throughout The Common Market presumably discourages motorists crossing borders bargain hunting. Natural gas and electricity prices have two main tariffs, one for domestic users and one for industrial users, the industrial tariff being much lower than the domestic tariff.

  • The Netherlands and Denmark, the two gas exporters, have the lowest raw prices.
  • Otherwise it is difficult to rationalise the variations since the pattern of raw price variations for domestic and industrial varies.
  • Excluding the high and low outliers, the mean ratio of domestic / industrial price = 2.1±0.25 (1SD)
  • The main trend in domestic prices is caused by progressive higher tax levels.
  • Surprisingly, The Netherlands, with the EU’s largest gas resource also has the second and third highest prices owing to high tax levels.
  • The UK has the third and fourth lowest gas prices.

Wave of US LNG heads to northeast Asia as prices surge - As many as nine cargoes of US LNG are currently headed for the world's key LNG demand center in northeast Asia, according to cFlow, Platts trade flow software, as higher spot LNG prices in Asia incentivize the journey for vessels carrying US LNG through the Panama Canal. Since mid-September when Asian LNG spot prices were around $5.50/MMBtu, prices have risen sharply due to trips at liquefaction plants including Gorgon in Australia. Platts assessed the JKM LNG Asian benchmark price at $9.75/MMBtu on Tuesday, a considerable jump from as low as $4/MMBtu in April 2016.Before December, only one US LNG cargo had sailed to northeast Asia out of some 33 sailings from Sabine Pass -- the Maran Gas Apollonia delivered what was said by sources to be a "test" cargo to China in August. But now nine more vessels are on their way to the region -- home to the major demand centers of Japan, South Korea, China and Taiwan. China took its second US LNG cargo in December, but Beijing is set to receive a number of the vessels currently headed to the region, according to cFlow. South Korea -- the second biggest LNG buyer globally -- received its first ever cargo of US LNG on December 23 aboard the Maria Energy, which was the 42nd cargo of LNG to load from Sabine Pass. Japan has yet to receive any US LNG cargoes, but at least one of the vessels en route to the region currently is expected to offload in Japan.

Turkmenistan halts gas flow to Iran in arrears row: Turkmenistan halted gas supplies to Iran Sunday amid tensions between the two countries over arrears, the Iranian National Gas Company was quoted by oil ministry news agency Shana as saying. "The gas company of Turkmenistan has cut gas exports to Iran, contrary to the agreement reached, by demanding immediate payment of arrears," Shana cited an official statement as saying. The two countries have been holding discussions but have not yet reached agreement on the payment and amount of arrears Iran owes to Turkmenistan. The Islamic republic uses Turkmen gas in the populated north of the country while its main gas fields are in southern Iran. The National Iranian Gas Company asked consumers to "pay attention to consumption", but added that with domestic production rising, the country did not need to import gas and could cope by making savings. Turkmenistan currently exports up to 10 billion cubic meters of gas to Iran, its third largest trading partner after China and Turkey. Ten years ago, Turkmenistan abruptly stopped its gas exports to Iran in the middle of winter, and demanded a ninefold increase in the price. According to an oil ministry official, Iran currently produces 700 million cubic meters of gas daily, and imports from Turkmenistan represents only 1.5 percent of domestic consumption. Turkmenistan's total gas reserves are estimated to be the fourth largest in the world behind Qatar, Russia and Iran.

Oil Hits 18 Month High On Reports Kuwait, Oman Cut Crude Output --Oil prices hit 18-month highs on the first full trading day of 2017, following reports by Al-Ansa newspaper that OPEC member Kuwait has cut output by 130,000 barrels a day to about 2.75 million a day, according to Kuwait Oil Co. Chief Executive Officer Jamal Jaafer. Meanwhile, Oman was sait to cut 45,000 barrels a day from 1.01 million, the Oil Ministry’s Director of Marketing Ali Al-Riyami said on Oman TV. And so, the surge which made oil the best performing asset class of 2016, driven by expectations of an OPEC production cut, continued following reports that this production cut was being implemented, if only for the time being by nations close to Saudi Arabia, and this unlikely to challenge the Vienna deal: the real question is whether the more "rogue" OPEC members will comply with their part of the bargain and certainly how the non-OPEC members will react.“The new year sees the start of the output cuts that were agreed between OPEC and some non-OPEC producers,” Hamza Khan, head of commodities strategy at ING Bank NV in Amsterdam, told Bloomberg.As a result of the favorable production cut news, West Texas Intermediate gained as much as $1.52 to $55.24 a barrel on the New York Mercantile Exchange and was at $55.05 as of 9:37 a.m. London time. Total volume traded Tuesday was 7% above the 100-day average.  Brent for March settlement climbed $1.33 to $58.15 on the London-based ICE Futures Europe exchange, trading at a $2.22 premium to WTI for the same month. The global benchmark contract rose 52 percent last year, the most since 2009.

Oil Markets Optimistic As Oil Turns Lower - Oil prices have started off the year on a positive note, surging by several dollars per barrel in the first trading days of 2017. WTI was up to $55 per barrel and Brent was edging closer to the $60-threshold, topping $58 per barrel on Tuesday morning, but the rally couldn't last long and oil prices reversed on Tuesday afternoon as result of a dollar breakout. The OPEC deal is now in effect, but it will take a few weeks to assess the progress of the oil cartel in cutting output. But the markets are feeling highly optimistic at the start of the year, a marked difference at this point in 2016. The new session of Congress takes effect today, and with Republicans in full control of both chambers and an ally soon to take the White House, their agenda is chalk full with Republican priorities. While higher-profile controversies will dominate the headlines, such as the repeal of Obamacare, some energy items could move forward quickly and with less fanfare. Nominations to the key agencies will come early on, but other issues are slated to see action as well: a withdrawal from Paris Climate accord; scrapping a suite of Obama-era environmental regulations; and the approval of the Keystone XL and Dakota Access Pipelines, among other items. After spending more than $50 billion to acquire BG Group last year, Royal Dutch Shell says that it will take a breather in 2017 and try to trim its size. The BG purchase was a very large wager on LNG export potential in Australia and East Africa, investments that will take years to come to fruition. It was also a play on offshore oil drilling in Brazil. But the price tag was hefty, and Shell’s total debt has mushroomed to $78 billion, much more than its competitors. As a result, Shell is now in a bind, and while company executives would argue that its growth prospects look good, they also feel the need to cut its debt pile, unload unwanted assets, and reassure investors that its dividend is not at risk. It should be much quieter year this year for the Anglo-Dutch oil major. Issuing new equity can be a risky move. Diluting shareholder value tends not to be received well and it also can be a sign of a company in need of cash. However, companies that issued new shares during the oil bust beat out much of the sector with higher returns for shareholders. The WSJ reports that more than 70 North American oil and gas companies issued about $57 billion in new equity in 2015 and 2016, and while some companies ultimately went bankrupt, the ones that survived offered the juiciest returns. Companies who sold shares over the past two years gained $13 billion in value in 2016, the WSJ reports.

Oil ends at 2-week low; natural-gas prices sink nearly 11% - Oil futures made a sharp turn lower Tuesday, giving up their highest levels in about 18 months to mark their lowest settlement in about two weeks , with traders anxious to find out whether OPEC and other major oil producers will stick to their pledge to cut back output. Natural-gas futures, meanwhile, dropped by nearly 11% on the back of warmer weather forecasts to mark their biggest single-session percentage loss since February 2014. February West Texas Intermediate crude fell by $1.39, or 2.6%, to settle at $52.33 a barrel on the New York Mercantile Exchange, the lowest finish since Dec. 20, according to data from Dow Jones. It had traded as high as $55.24, which would have marked the highest settlement level since July 2015. March Brent on the ICE Futures exchange in London shed $1.35, or 2.4%, to $55.47 a barrel after touching highs above $58. Prices saw a sharp reversal from an early rally and at least part of the reason for the move was technical, Tyler Richey, co-editor of The 7:00’s Report, told MarketWatch. “There was a roughly $1 ‘gap’ between Friday’s primary session close and this morning’s 9 a.m. open and fast money traders chased it lower to ‘fill the gap’,” he said. Strength in the U.S. dollar has also been cited as part of the reason for oil’s losses, he said. A stronger dollar can pressure prices for oil because it is traded in the greenback.

The End Of The Rally- Oil Reverses, Natural Gas Trounced -- After rallying like a mad thing to start the day (month, and year...), crude prices have reversed course, weighed down by a stronger dollar. Natural Gas starts the year with a 12% (!) plunge as weather forecasts predict much warmer winter weather. Volatility looks set to be the theme for this quarter, with prices being pushed and prodded around by OPEC / NOPEC compliance; prices are already getting shaken up like a snow globe. Hark, here are five things to consider in oil and energy markets today:

  • 1) The first few signs of production cut compliance from OPEC members are starting to filter through, with Kuwait and Oman seemingly putting their best foot forward. According to reports citing the Kuwait Oil Company's CEO, it has cut production by 130,000 barrels per day, while Oman has also cut its output. To counter this bullish-tilted news, Russian output in December is said to have held at record highs, while Libyan production is up to 685,000 bpd in recent days, more than double what it averaged in Q3 of last year. As our ClipperData illustrate below, as with most of Arab Gulf producers, Kuwaiti crude exports predominantly head to Asia (>75 percent). South Korea is the leading recipient of Kuwaiti crude, followed by China. The U.S. is also a key destination, with nearly 230,000 bpd of Kuwaiti crude making its way to U.S. shores in 2016.
  • 2) There's been a fairly decent dollop of economic data out, as is the way with a new month. China kicked things off last night, with its manufacturing PMI coming in at its highest since mid-2014 at 51.9. U.S. manufacturing followed suit, coming in mucho better than expected at 54.7. As we know all too well, all paths lead back to energy, hence as oil prices rise, preliminary German inflation data has reached its quickest pace since 2013.
  • 3) Over the past two years, more than 70 North American energy companies have sold some $57 billion in shares, helping them to stave off bankruptcy. These companies have issued stock to help pay down debt and cover costs until oil prices have recovered, ultimately buoying their stock prices.
  • 4) The chart below highlights how the how the Russian economy is inextricably linked to the fortunes of crude oil. Russia relies on oil and gas for approximately half of its fiscal revenues. Hence, as oil prices have risen from a decade low early last year, Russia's default risk has dropped to a two-year low:
  • 5) Finally, the chart below illustrates how the price of solar energy will likely be the lowest-cost option for electricity across the globe within the next decade, dropping below the price of coal.

 Iraq begins cuts to oil production: oil minister -  Iraq began reducing its crude oil production from the turn of the year in line with its OPEC commitments, oil minister Jabbar al-Luaibi said in a statement Thursday. "Iraq reaffirms its commitment to the decision by OPEC, which was adopted at the last meeting in Vienna by putting in place a deliberate plan to reduce output from the country's fields with the beginning of the New Year, and that Iraq is dealing wisely with this issue", Luaibi said in a statement on the oil ministry website. The statement did not provide any further details on current production r how the cuts will be spread across Iraq's numerous oil company partners and the autonomous Kurdistan Regional Government. Iraqi prime minister Haider al-Abadi said Tuesday the KRG was exporting more than its allocated share of oil, despite Baghdad's efforts to comply with the OPEC's decision in November to hold the group's total production at 32.5 million b/d. S&P Global Platts estimates Iraq produced at an average of around 4.6 million b/d in December, up 50,000 b/d from November.

OPEC Deal Non-Compliance Begins: Iraq Accuses Kurds Of Pumping More Than Permitted -- Back on December 15, two weeks ahead of the day the OPEC production cut agreement was set to begin, which was supposed to remove 1.2 million barrels per day in oil production from OPEC member states, a report emerged that contrary to its mandated production cut of 210Kbpd, Iraq was actually preparing to boost its exports by 7%. As the WSJ first reported, instead of cutting its crude production by 4% as it "promised" it would do in the Vienna November 30 meeting, Iraq instead planned to increase crude-oil exports in January, according to government records, immediately raising questions about its commitment to the OPEC’s landmark production agreement. Iraq’s national oil company, the State Organization for Marketing of Oil, or SOMO, had plans as of December 8, nine days after agreeing to cut production, to instead increase deliveries of its Basra oil grades by about 7% compared with October levels, according to a detailed oil-shipment program viewed by The Wall Street Journal. Those oil shipments represent about 85% of Iraq’s exports. And while that story quietly disappeared, and was promptly replaced with the more optimistic narrative of OPEC production cut compliance by Kuwait, which as noted earlier today reportedly cut output by 130,000 barrels a day to about 2.75 million a day, while Oman was said to cut 45,000 barrels a day from 1.01 million, it appears that the Iraq overproduction "issue" isn't going away; it does, however, have an interesting narrative to go with it. As Reuters reports, while Iraq's Prime Minister Haider al-Abadi refused to indicate if his country had cut production in compliance with the Vienna deal, he did accuse the autonomous Kurdish region of exporting more than its allocated share of oil "as the country seeks to comply with an OPEC output cut." As a reminder, as part of the deal, Iraq, OPEC's second largest producer, agreed to reduce output by 200,000 bpd to 4.351 million bpd.However, a hurdle has emerged: Kurdistan."The region is exporting more than its share, more than the 17 percent stated in the budget,” Abadi said.Oil exports from the Kurdish region have long been a point of contention with Baghdad, which claims sole authority over sales of all the country's crude, however which is unable to implement caps on Kurdish production, in effect having to deal with a "rogue, non-OPEC" producer within its borders.

This "Rogue" Oil & Gas Nation Just Set A Slew Of Output Records - With 2016 now closed out, we’re getting the first looks at year-end data. And numbers from one nation in the energy space have been particularly eye-catching this week. Over the last 15 years, Russia vaulted upwards in oil and gas production — challenging for the world’s top producer of crude. A fact that’s especially critical given this big producer is a “rogue” nation that lies outside the purview of OPEC. And 2016 was another big year for Russian oil output. With stats showing the country’s production rose again this past year — to an average 10.96 million barrels per day, up from 10.72 million barrels per day in 2015. That came on the back of strong national production in December, where Russian producers pumped 11.21 million barrels per day — marking the highest output level in nearly 30 years. That’s a very important data point for energy markets, showing that Russian supply is continuing to surge even as other big producers like Saudi Arabia are seeking production cuts. And it isn’t just oil where Russia is having a major impact on global markets. Recent stats show the nation also had a banner year for natural gas output. Russian natgas giant Gazprom said this past week that it increased 2016 production levels to 419 billion cubic meters, or 14.8 trillion cubic feet. A mark that exceeded Gazprom’s own forecasts for the year by 2.7 percent.That rising production translated into higher exports, with Gazprom shipping 179 billion cubic meters to Europe during 2016 — marking a record yearly total.It’s not just pipeline gas that’s surging either. Russia’s burgeoning LNG exports also saw a1.1 percent rise during 2016, to 14.69 billion cubic meters, according to government reports this week.In fact, Russian LNG has been picking up speed even in the past few weeks, with December exports up 10.8 percent, to a total 1.47 billion cubic meters. That puts Russia’s LNG shipments on pace for a 20 percent rise this coming year.

Why Russia Expects $40 Oil This Year --Budget deficit is a fascinating thing. It can turn around economies if it’s large enough or it can highlight their resilience, if it turns out to be not as large as expected. The thing is, no government can be 100 percent certain in advance what budget deficit it will have to contend with in any future fiscal year.Russia is a case in point as it recently approved its 2017 budget, which envisages a deficit of 3.2 percent of GDP – a figure comparable to the United States’ 2.6 percent estimated for 2017. According to some analysts, however, such as Mauldin Economics’ Jacob Shapiro, this 3.2 percent is enough to make life difficult for Moscow over the next 12 months, which is why the Kremlin should hope for higher oil prices.In fact, Shapiro says Russia needs oil prices to be 30 percent higher just to break even.But Moscow is in no rush, and indeed appears unfazed. Finance Minister Anton Siluanov said at the end of last year that under the three-year budget plan approved by the Duma and the President, Russia should break even in 2019, as long as oil prices remain at between $40 and $45. The 2017 budget even stipulated an oil price of $40 a barrel, with $45 per barrel earmarked for 2019.  Of course, it’s generally unwise to take government officials’ words at face value, but given that Russia survived 2016 with a deficit of 3.7 percent and that non-oil exports apparently compensated for much of the lower oil revenues, chances are it will also survive 2017 without emptying its reserve fund. In fact, this is what seems to be the consensus of 47 analysts polled by Bloomberg, as cited by TASS. The consensus stance is that inflation in Russia will fall to 5.1 percent from 2016’s 5-6 percent, and the budget deficit will fall to 3 percent. The analysts also believe GDP growth will be 1.1 percent this year, up from a contraction of 0.5 percent, according to data from the Economic Development Ministry.

Goldman Sachs: Oil Prices To Remain Under $60 In H1 2017 -- On the back of OPEC cuts, Goldman Sachs expects WTI oil prices to rise to US$57.50 in the first half this year as reduced supply would move the market into deficit and draw down the current large oversupply, ZeroHedge reports, citing Goldman’s Allison Nathan view of “what keeps Goldman up at night” about this year’s commodity and currency markets and global political and economic policy developments.Brent prices are seen peaking at US$59 per barrel in the first half with the cuts implemented. The cuts would also push the oil market to a deficit in the first quarter, Goldman says, expressing a more optimistic view on the drawdown of oversupply than OPEC, which expects the market to rebalance in the second half, than the International Energy Agency (IEA) which sees the cuts likely moving the market into deficit in the first half by an estimated 600,000 bpd. In Goldman’s view, the deficit in the first quarter would move the market into backwardation by the summer. However, U.S. shale is also expected to respond to higher oil prices, which implies limited upside above the high-$50s, Goldman Sachs says. Commenting on U.S. production, the bank said: “We continue to believe shale productivity gains allow for substantial US production growth at oil prices of $50-$60/bbl and that E&P companies reaping these production gains are not being sufficiently rewarded.”

API Reports A Major Crude Oil Draw | The American Petroleum Institute (API) has reported a sizable draw on U.S. crude oil inventories, down 7.4 million barrels over the previous week—a much larger draw that expected, and the fifth draw in seven weeks. Analysts expected a draw of around 1.7-2.2 million barrels for the week, and right ahead of the API data dump, oil prices responded upwards nearly 2 percent, in anticipation of a draw on a smaller scale. Last week, the Energy Information Administration (EIA) showed a build of 4.25 million barrels of crude. This week’s 7.4-million-barrel draw is the biggest draw since September. It’s not all good news, though. On the flip side of this, gasoline and distillates experienced massive stockpile builds—the biggest in a year. Gasoline saw a 4.25-million build, against an expected build of only 1 million barrels. Distillates stockpiles were up even more—reporting a 5.24-million-barrel build.At Cushing, crude oil inventories were up, but less than expected, with a 482,000-barrel build, against the anticipated 900,000-barrel build.Crude oil prices would have responded more wildly to the massive draw-down in inventory, however, the huge builds in gas and distillates negatively offset this picture.Tuesday saw oil prices crash again, then slightly recover at the open of trading today and then dipping once again until climbing back up right before and after the API crude inventory data release. Just before the API release, West Texas Intermediate was around US$53.20. Immediately after the release, WTI was at US$53.36 and Brent was at US$56.49. Oil prices were also responding to increasing news indicating that the top oil exporters in the world not cheat on output cuts promised in the 30 November OPEC deal.

Crude Confusion As Gasoline, Distillates See Biggest Inventory Build In A Year - Crude prices remain lower since last week's inventory data indicated a surprise (albeit small) build (but bounced today). With expectations for a 2mm draw this week, API reported crude inventories plunged 7.431mm last week - the most since September. However,Gasoline and Distillates saw huge inventory builds (biggest since Jan 2016) and WTI prices whipsawed. API:

  • Crude -7.431mm (-2mm exp)- biggest draw since Sept 2016
  • Cushing +482k (+900k exp)
  • Gasoline +4.25mm (+1mm exp)- most since Jan 2016
  • Distillates +5.244mm (-800k exp) - most since Jan 201

Crude kneejerked higher on the print but dropped quickly on the product builds only to rebound to unch...

Oil prices fall on big build in U.S. gasoline, distillate stocks | Reuters: Oil prices slipped on Thursday after a surprisingly large increase in U.S. inventories of gasoline and distillates, slamming the brakes on an early rally on news that Saudi Arabia had started talks with customers about reducing crude sales. U.S. crude stocks fell sharply to end the year, the Energy Information Administration said, with a draw of 7 million barrels, but stocks of gasoline and distillates surged as refiners ramped up production to reduce crude inventories, a typical year-end practice to avoid higher taxes. Refining runs increased sharply, particularly on the U.S. Gulf Coast, the main refining hub in the United States. While end-year refinery activity tends to increase, this was larger than expected. "The magnitude of the products changes were much larger than expected and overwhelming somewhat supportive crude data," said Scott Shelton, energy specialist at ICAP in Durham, North Carolina. The big boost in product inventories was seen as bearish, wiping out a rally that had pushed U.S. crude prices to a high of $54.12 on the day, and dropped U.S. gasoline margins to two-week lows. As of 11:42 a.m. ET, West Texas Intermediate crude was down 24 cents, or 0.5 percent, to $53.02 a barrel. Brent crude was off 20 cents, or 0.4 percent, to $56.30 a barrel, after hitting a high of $57.35 earlier in the session. Oil has rallied 23 percent since mid-November and speculators have jumped on the bandwagon, loading up on long positions in crude futures in recent weeks in anticipation of OPEC's supply cuts. U.S. government data showed futures speculators as of last week had a bigger net long position in U.S. crude than at any time since mid-2014. Some analysts suggested the rally could fizzle out soon, particularly if the Organization of the Petroleum Exporting Countries struggles to meet expected production cuts. OPEC output in December was substantially higher than the level from where it agreed to lower output by 1.2 million barrels a day, according to a Reuters survey. That could make it harder to reach its target.

The Oil Supply Glut Is Here To Stay In 2017 -- It has become painfully obvious that the much-hyped OPEC agreement to reduce global oil production by close to 2 million bpd won’t have the effect that its initiators had hoped for. True, crude has jumped above US$50 but failed to pass the US$55 barrier and move closer to US$60, which would have solved a lot of problems for some of the world’s biggest producers. This price increase, however, has spurred optimism among some producers and motivated them to plan output ramp-ups, which will in turn dampen the upward potential of crude more effectively than growing doubts about top producers’ willingness to stick to their commitments under the historical agreement. Let’s look at shale boomers, for instance: according to Tom Kloza, the global chief of energy analysis at the Oil Price Information Service, shale producers can add as much as half a million bpd to their output this year. They don’t even have to want to add so much – they may well have to, prompted by their lenders. Then there is that doubt that the parties to the production cut agreement will be tempted to cheat and won’t be able or willing to resist the temptation. The three most likely cheaters seem to be Iraq, Iran, and Saudi Arabia. Iraq, because it is still locked in its fight with the Islamic State and needs all the petrodollars it can get its hands on. Iran, because it is in a rush to revive its energy industry and has made it clear repeatedly it has no intention to dance to any tune that Saudi Arabia plays. Then there is Saudi Arabia itself, which spearheaded the latest attempt by OPEC to give prices a big push upwards. Saudi Arabia and Iran are regional archrivals. Now, with most sanctions lifted, Iran is eager to re-enter global oil markets, targeting some of Saudi Arabia’s biggest clients, such as China and India. It’s hard to believe, as Osama Rizvi noted in an article for Oilprice, that Riyadh will sit idly by, watching Tehran take a bite out of its market share. Of course, markets also have to contend with the two exempted OPEC members, which are both doing their best to increase their output. Libya says it’s close to reaching a milestone of 900,000 bpd, on track to restore its production to pre-war levels. By the end of 2017, Libya plans to pump 1.1 million bpd. Nigeria is also slowly but surely raising production even though it is still fighting with militants in the Niger Delta and the Boko Haram terrorist group. The country, however, has managed to raise its output to 1.6 million bpd and, according to President Buhari, should further improve it to 2.2 million bpd.

OilPrice Intelligence Report: Oil Gains On Early Signs of OPEC Compliance: Oil prices are set to end the week slightly up from where it started, following a few rocky days of trading. After a sharp correction earlier in the week, oil regained ground on a steep fall in crude oil inventories. Still, the gains would have been much larger if not for the fact that U.S. gasoline stocks rose sharply. Nevertheless, oil is starting off the year on a positive note, and early signs of OPEC compliance (more below) are buoying the market. The EIA released its Annual Energy Outlook 2017, with projections out through 2050. The report estimates that the U.S. will become a net-energy exporter in the years ahead under most of its possible scenarios. That is largely due to falling oil imports and rising natural gas exports. The higher energy prices go, the quicker the U.S. becomes a net-exporter.   Saudi Arabia offered encouragement to oil traders this week when it announced that it is lowering its output to 10.058 million barrels per day (mb/d) in January, complying with its promised cuts laid out in the November OPEC deal. OPEC members are required to bring their six-month average production levels to the targeted range, but Saudi Arabia said it will meet that level immediately. The announcement adds credibility to the deal and raises the likelihood that other members will comply with their targets.  The second quarter of 2017 appears to be the period of time in which the global oil market will experience its tightest conditions: Other OPEC members will ratchet down their production levels to comply with the deal; non-OPEC countries including Russia will lower output; U.S. refineries will begin to ramp up operations to meet summer driving demand; Middle East countries such as Saudi Arabia and Iraq burn more oil in warmer months; inventories will decline as supply drops; plus underlying growth in oil demand continues to soak up excess supply. Many oil analysts expect oil prices to rise the most in the first two quarters of 2017, with the market easing in the second half of the year, potentially leading to lower prices in late 2017.   Oil speculators continued to add bullish bets on oil prices at the end of 2016. For the week ending on December 27, bullish positions rose by 7 percent to 358,573, with the current makeup the most net-long since 2014. Long bets outnumbered short positions by a factor of 35 to 1, the WSJ reports. That sets up the market for downside risk if bearish news emerges in the coming weeks. If speculators get spooked, they could begin to unwind their positions rapidly, leading to a sharp correction in oil prices.

Will OPEC Deliver Its Output Cut Deal? Here’s How We’ll Know -- The promise of production cuts from OPEC and its partners sent oil rallying in 2016. Now traders want proof they’re delivering on those vows. It won’t come easy. The challenge: Building a coherent picture from the morass of data that emerges at each step along the process, from the wellheads where the oil is produced, to the tankers that carry it, and the depots that store it. Unlike in the U.S., where output is published weekly, members of the Organization of Petroleum Exporting Countries can take months to disclose their production. Beyond that, their data can be at odds with independent surveys, and countries have been known to cheat on such deals. With a rising U.S. rig count offering a bearish undertone, each new hint on the accord’s implementation can be expected to swing prices. "The market could be whipsawed more by data and headlines than in the past,". "Data lags will be the primary problem in tracking cuts." Brent crude, the global benchmark, has surged 23 percent since Nov. 29, the day before the deal was sealed among OPEC’s members. The grade rose 21 cents to $57.10 a barrel Friday, the highest close since July 2015. Future price increases for crude will depend on a wide variety of signposts. Here’s a breakdown on what to look for: 1. Upstream The first indications will come at the start of next month, when media outlets such as Bloomberg, Thomson Reuters and Platts publish surveys of production. Estimates from institutions such as the International Energy Agency and U.S. Energy Information Administration arrive a week or two later. As “no one’s counting barrels at Abqaiq,” the Saudi oil-processing facility, these have to be modeled on computers, Barclays’ Cohen says. “While we consider official production data published by OPEC governments, we come up with our own estimates,” said Lejla Villar, an analyst who estimates OPEC output at the EIA, part of the U.S. Energy Department. “We look at crude oil loadings, estimated domestic consumption and refinery runs, storage, and whatever else might be relevant.”

U.S. Rig Count Rises To Highest Point In 1 Year - Oilfield services provider Baker Hughes is ringing in the new year with a 7-rig increase this week to the number of active oil and gas rigs in the United States, bring the total number of active oil and gas rigs in the United States to 665, with the oil rig count up to its highest point in a year.This week marks 11 straight weeks of oil rig increases, and 9 straight weeks of gas rig increases.The final week of 2016 saw the number of oil and gas rigs increase by 7, with oil rigs accounting for 4 of the 7. That week saw 525 total oil rigs in production compared to 536 oil rigs operating in the last week of 2015, erasing almost completely the substantial losses earlier in the year when the oil rig count plummeted to 316 in May. Although the recovery in the last quarter of 2016 erased earlier losses from earlier in the year, the oil rig count is still tragically below 2014 figures, when the number of oil rigs sat comfortably above 1,500. 2016’s rig count recovery was largely inspired by OPEC’s successful drive to lift oil prices out of the doldrums to near $55 by promising to curb production, with U.S. drillers equally enjoying higher oil prices—although the term “higher” is relative, with oil prices still well below the over-$100 per barrel price tag last seen in mid-2014.Drillers in the United States have been slowly increasing the number of active drilling rigs, commiserate with the rebounding oil price, most notably since the OPEC agreement on November 30 that saw OPEC agree to cut back production to 32.5 million bpd. WTI was trading up .52% at $54.04 an hour before the data release, with Brent at $57.10, up 0.37%. Immediately after the rig count release, WTI was sitting at US$53.97, and Brent at US$57.

Permian Basin again drives rig count growth -  West Texas’ Permian Basin again led the growth of the nation’s drilling rig activity, with Texas and New Mexico each adding three more rigs to oil fields. The Permian extends into southeastern New Mexico.The total rig count started 2017 by tacking on seven more rigs nationwide — four primarily seeking oil and three drilling for gas — with oil prices now hovering near $54 a barrel in the U.S. The growing Permian activity accounts for more than half of all the nation’s active oil rigs with 267 rigs drilling in the basin, according to weekly data collected by the Houston-based Baker Hughes oilfield services firm.However, the Granite Wash basin in the Texas Panhandle and Oklahoma lost five rigs, keeping the total rig count from growing more.The Gulf of Mexico added one offshore rig, while Louisiana represented two of the three gas rigs brought on thanks to more activity in the Haynesville Shale.The total rig count is now at 665 rigs, up from an all-time low of 404 rigs in May, according to Baker Hughes. Of the total tally, 529 of them are primarily drilling for oil.After the Permian, the next most active area is Texas’ Eagle Ford shale with just 47 rigs. Despite this week’s jump, the oil rig count is down 67 percent from its peak of 1,609 in October 2014, before oil prices began plummeting. The price of U.S. oil hit a low $26.21 on Feb. 11 before beginning to rebound.

US crude settles at $53.99, up slightly this week as traders parse signs OPEC is cutting output - Oil traded higher on Friday as investors bought futures ahead of the weekend, but a strong U.S. dollar limited gains, as did lingering doubts about whether all OPEC producers would cut output in line with an agreement. Trading was choppy, and market players cited end-of-week position-squaring and relatively low volumes during the first trading week of the year. Brent crude futures, the benchmark for international oil prices, were up 11 cents at $57 per barrel at 2:35 p.m. ET (1935 GMT), having swung from a high of $57.47 to a low of $56.28. In the United States, West Texas Intermediate (WTI) crude futures settled up 23 cents at $53.99 a barrel, recovering from a session low of $53.32 and off a high of $54.32. The contract rose about 0.5 percent on the week, marking the fourth straight weekly gain. The dollar gained broadly against major currencies after the U.S. non-farm payrolls report showed a slowing in hiring in December but an increase in wages, setting the economy up for further interest rate increases from the Federal Reserve this year. A stronger greenback makes oil more expensive for holders of other currencies. Top crude exporter Saudi Arabia and fellow Gulf members Abu Dhabi and Kuwait showed signs they were cutting production in line with an agreement by OPEC and other producers, yet market watchers have doubts about overall compliance. Saudi Arabia's state oil producer Saudi Aramco has started talks with customers globally on possible cuts of 3 percent to 7 percent in February crude loadings.

Libya To Re-Open Last Major Oil Export Terminal --Libya is about to re-open the last major oil terminal that has been shut due to factions fighting in a move that would allow it to further increase oil exports, potentially putting pressure on oil prices and on fellow OPEC members that have just started cutting output in a bid to stabilize prices and speed up the drawdown of the inventory glut. Libya’s Zawiya export terminal is getting ready to restart its exports after the pipeline carrying crude to it was re-opened, Bloomberg reports, quoting an official at the National Oil Corporation (NOC). The imminent re-opening of the Zawiya export terminal means that all nine major oil ports in the country will be shipping oil. At the end of December, the NOC said that the pipelines connecting the Sharara oil field to Zawiya refinery, and the El-Feel (Elephant) oil field to the Mellitah complex, had been re-opened. The Sharara field - operated by a joint venture between NOC and a consortium of Repsol, Total, OMV and Statoil - has a production capacity of about 330,000 bpd, while El-Feel field is operated by a joint venture between Italy’s Eni and NOC with a production capacity of around 90,000 bpd.  Earlier this week, NOC said that Libya’s total crude oil output had hit 685,000 bpd as of the start of January, thanks to the resumption of pipeline operation from the Sharara and Elephant fields

Exclusive: Iran capitalizes on OPEC oil cut to sell millions of barrels - sources | Reuters: Iran has sold more than 13 million barrels of oil that it had long held on tankers at sea, capitalizing on an OPEC output cut deal from which it is exempted to regain market share and court new buyers, according to industry sources and data. In the past three months, Tehran has sold almost half the oil it had held in floating storage, which had tied up many of its tankers as it struggled to offload stocks in an oversupplied global market. The amount of Iranian oil held at sea has dropped to 16.4 million barrels, from 29.6 million barrels at the beginning of October, according to Thomson Reuters Oil Flows data. Before that sharp drop, the level had barely changed in 2016; it was 29.7 million barrels at the start of last year, the data showed. Unsold oil is now tying up about 12 to 14 Iranian tankers, out of its fleet of about 60 vessels, compared with around 30 in the summer, according to two tanker-tracking sources. The oil sold in recent months has gone to buyers in Asia including China, India and South Korea and to European countries including Italy and France, according to the sources and data. It was unclear which companies bought the oil. Iran is also looking to use the opportunity to push into new markets in Europe, including Baltic and other central and eastern European countries, said separate oil industry sources, though it was not clear if any oil had been sold there. The state-run National Iranian Oil Company (NIOC) could not be reached for comment. Tanker group NITC, which operates most of the country's fleet, could also not be reached. Tehran scored a victory when it was exempted from the OPEC deal agreed in November to reduce production by 1.2 million barrels per day for six months, an accord aimed at addressing the global oversupply and bolstering low oil prices. The country successfully argued it should not limit its production which was slowly starting to recover after the lifting of international sanctions in January last year.

Iran Sold Over 13 Million Barrels Of Oil Held On Tankers In Post-Deal Price Jump  -- Remember when back in April we showed a strange map of the Iranian oil tanker armada, which according to Windward data was storing as much as 50 million barrels offshore, yet which was just sitting on anchor going nowhere? As a reminder, Iran has lacked sufficient land storage facilities to store its oil and, to enable it to keep pumping crude, has relied on its tanker fleet to park excess stocks until it can find buyers. Well, we can now close the book on what happened to all those tankers full of oil, because according to Reuters, capitalizing on the run up in oil prices following the OPEC output deal which exempted Iran from a production freeze, Iran has sold more than 13 million barrels of oil that it had long held on tankers at sea as it scrambled to sell at higher price levels in its attempt to regain market share. Citing industry sources, Reuters notes that in the past three months, in the window provided since the Algiers deal, Tehran sold almost half the oil it had held in floating storage, which had tied up many of its tankers as it struggled to offload stocks in an oversupplied global market. As a result of the rush to dump its offshore-held oil, unsold oil is now tying up only 12 to 14 Iranian tankers, out of its fleet of about 60 vessels, compared with around 30 in the summer.Who bought it? Mostly China and Europe:The oil sold in recent months has gone to buyers in Asia including China, India and South Korea and to European countries including Italy and France, according to the sources and data. It was unclear which companies bought the oil. Having demonstrated good faith during the recent sales, Iran is now looking to cements its market share gains and is using the deal exemption to push into new markets in Europe, including Baltic and other central and eastern European countries. As part of the Vienna OPEC deal meant to address excess oil inventory, Iran was exempt from production cuts. The country successfully argued it should not limit its production which was slowly starting to recover after the lifting of international sanctions in January last year. While the deal did not come into effect until the beginning of 2017, industry sources said Tehran had already been offering aggressive discounts, aiming to coax buyers globally into stocking up for winter in anticipation of the OPEC cut. Reuters further notes that in another sign of the rising activity, Iran's oil ministry news agency SHANA reported in late December that the number of tankers able to berth at major terminal Kharg Island had reached a record in 2016 of 10 vessels at the same time.

Millennial princes snatch at power in Gulf | Reuters: - For ageing monarchs in the Gulf, handing more power to a younger generation of princes makes sense. The task of diversifying their economies away from dependence on oil exports and implementing tricky social reforms requires an infusion of vigour and fresh ideas. The overdue generational shift is already underway. Saudi Arabia’s octogenarian king set an example in 2015 when he sidelined an entire generation of older royals in favour of elevating his 30-something son, Deputy Crown Prince Mohammed bin Salman. After leapfrogging his older uncles, cousins and half-brothers in the House of Saud, the prince has pushed through the biggest shake-up in the kingdom’s economy in the last 50 years. Other ageing hereditary rulers in the region will have taken note. The prince’s grand economic plan, known as Vision 2030, aims to provide more jobs and opportunities for Saudis under the age of 25. Although this group accounts for over half the Saudi population, their opportunities have been restricted by a system that places too much value on seniority and experience ahead of promoting youth and new ideas, especially in the upper echelons of government. The monarchs and sheikhs of the Gulf Cooperation Council ignore the needs of their younger subjects at their peril. Youth unemployment in the oil-rich region is high partly due to a lack of opportunities outside the energy industry and a dependence on imported labour. Despite efforts to improve education and skills in the local workforce, joblessness among young people is twice the overall rate in the GCC, according to World Bank data. Allowing a large disaffected youth to fester without positive role models in positions of authority could be dangerous if that helps extremists, who often prey on the vulnerable.There are also dangers in thrusting a new generation of untested princes who lack sufficient experience into positions of power. Mohammed bin Salman’s necessary economic reforms have caused some unease in the kingdom, while his military adventures in Yemen and sabre-rattling towards Iran have looked rash.

How Finance Is Starving Yemen - Matthew Cunningham-Cook - The Yemenis have the misfortune of sitting at a key strategic chokepoint in global production: the Bab el-Mandeb at the southern base of the Red Sea, passing 13% of global oil production annually through its waters. The Bab el-Mandeb is just 25 miles across, making it difficult to navigate–and easy for a small group of “pirates” to disrupt. Directly west of Yemen sit Eritrea, Djibouti, and then Ethiopia–three countries that are active targets of US intervention. Djibouti features Africa’s only permanent US military base, Camp Lemonnier, which hosts over 1000 highly trained special forces. The region surrounding the Bab el-Mandeb–the Horn of Africa–is a hot spot at the center of global production, and a site of ongoing neoimperialist assault.  Nearly four years of upheaval culminated in a nationalist revolutionary militia, the Houthis, seizing the capital in 2015, demanding recognition as Yemen’s civil government. The Houthis have a primary demand: an end to US and Saudi imperialism in the Middle East. They have denounced the Saudi government, and particularly the Saudis’ family ties to al-Qaeda and Salafism-Wahhabism more broadly. The US has sold over $115 billion worth of arms to Saudi Arabia since 2009; the UK has sold over $4 billion worth of arms to Saudi Arabia since the war began. Over three million people have been displaced by the bombs, with 600 hospitals and health centers destroyed. Seven million people are on the brink of starvation, and as of December 15 all further wheat imports have been halted in a country dependent on imports for 90% of its food, due to the chicanery of the puppets at Yemen’s new central bank (the old central bank was shut down by the government-in-exile in September and moved from Sana’a to Aden in the South–much more on this below). It appears the Saudis have a plan for complete extermination. Their murderous campaign is being led by King Salman’s son, 31-year old defense minister and second deputy crown prince Mohamed bin Salman al Saud, who among other things happens to be buddies with both President Obama and the patron of leading ISIS/Al-Qaeda theocrat Mohamed AlArefe. While mass starvation deepens, the bombing continues apace, with the Saudis dropping cluster  bombs on Hajja governorate on December 26, according to Al-Manar. (Cluster bombs are a particularly nasty product of the military-industrial complex, with collateral damage a built-in feature.) This fall also notably featured the Saudi bombing of a funeral, with 140 civilians dead. It’s a cruel war with no beneficiaries outside the leaching fingers of the Saudi royal family and the boardrooms of Lockheed, Boeing, General Dynamics, and Raytheon–but those actors combined are far too powerful in today’s world to be stopped by a ragtag band of poverty-stricken Yemenis like the Houthis.

Pentagon Admits US Airstrike On Hospital "May Have Killed Civilians" -- Adding to concerns about the civilian toll of the US air war against ISIS targets, the Pentagon yesterday admitted that they carried out an airstrike against the parking lot of a Mosul hospital, conceding that they “may have killed civilians” in the attack. The Pentagon’s Combined Joint Strike Force said in a statement that they were after a van they suspected of carrying ISIS fighters, and they blew it up in the parking lot of what “was later determined to be a hospital.” The US has previously insisted all hospital sites in Mosul were well known and that they were taking extreme care not to hit civilians. Yet this is the second time this month the US-led coalition has bombed a hospital’s property, with a previous attack deliberately targeting the city’s main hospital complex at the behest of the Iraqi government. The Pentagon insisted at the time they “did not have any reason to believe” they killed any civilians, but conceded they had no idea if there were even patients at the hospital. The Pentagon has made a habit of dramatically underreporting civilian casualties in the ISIS war, with some reports suggesting that the actual toll of civilians killed by the US may be as many as ten times the “official” figures. This is the result of the Pentagon largely not investigating allegations of large figures they deem “not credible,” and revising downward the numbers slain in already well-documented incidents by the time they get around to putting them in the reports.

The U.S. dropped more than 25,000 bombs, mostly in Syria and Iraq, last year - The U.S. dropped 26,171 bombs last year, 3,027 more than 2015.According to an analysis of Defense Department data from the Council on Foreign Relations, a non-partisan think tank, the majority of the bombs were dropped in Iraq and Syria. The U.S. leads an international coalition fighting the Islamic State group in both countries and has carried out air operations in attempt to reduce the area controlled by the terrorist organization.  Nearly the same amount of bombs were dropped in Syria (12,192) and Iraq (12,095) last year. Despite pushes from within his administration to commit U.S. military forces to the civil war in Syria, Obama kept U.S. military action in the country focused on the Islamic State group. He was widely criticized for failing to follow through on the “red line” he set over Syrian President Bashar Assad’s use of chemical weapons against his own people.The U.S. dropped 79 percent of the anti-Islamic State group coalition bombs in Syria and Iraq, totaling 24,287. That figure, along with others analyzed by CFR, is likely lower than the actual number dropped because one airstrike can involved multiple bombs. Obama did authorize a troop surge in Afghanistan — a conflict he pledged to end during his campaign — where the U.S. dropped 1,337 bombs in 2016. There are currently 8,400 U.S. troops left in the country, more than Obama initially wanted to keep there at the end of his term. The U.S. only dropped 947 bombs in Afghanistan in 2015. The U.S. also dropped more bombs in Libya in 2016 than it did in 2015. Nearly 500 bombs were dropped in the North African country that has essentially been ungoverned since the fall of dictator Muammar Gaddafi in 2011.

More than 2,000 Iraqis a day flee Mosul as military advances | Reuters: More than 2,000 Iraqis a day are fleeing Mosul, several hundred more each day than before U.S.-led coalition forces began a new phase of their battle to retake the city from Islamic State, the United Nations said on Wednesday. After quick initial advances, the operation stalled for several weeks but last Thursday Iraqi forces renewed their push from Mosul's east toward the Tigris River on three fronts. Elite interior ministry troops were clearing the Mithaq district on Wednesday, after entering it on Tuesday when counterterrorism forces also retook an industrial zone. Federal police advanced in the Wahda district, the military said on Wednesday, in the 11th week of Iraq's largest military campaign since the U.S.-led invasion of 2003. As they advanced, many more civilian casualties were also being recorded, the U.N. said. Vastly outnumbered, the militants have embedded themselves among residents and are using the city terrain to their advantage, concealing car bombs in narrow alleys, posting snipers on tall buildings with civilians on lower floors, and making tunnels and surface-level passageways between buildings. "We were very afraid," one Mithaq resident said. "A Daesh (Islamic State) anti-aircraft weapon was positioned close to our house and was opening fire on helicopters. We could see a small number of Daesh fighters in the street carrying light and medium weapons. They were hit by planes."

ISIS Will Lose the Battle of Mosul, But Not Much Will Remain: Winners and losers are beginning to emerge in the wars that have engulfed the wider Middle East since the US and UK invaded Iraq in 2003. The most striking signs of this are the sieges of east Aleppo in Syria and Mosul in Iraq, which have much in common though they were given vastly different coverage by the Western media. In both cities, Salafi-jihadi Sunni Arab insurgents were defending their last big urban strongholds against the Iraqi Army, in the case of Mosul, and the Syrian Army, in the case of east Aleppo.The capture of east Aleppo means that President Bashar al-Assad has essentially won the war and will stay in power. The Syrian security forces advanced and the armed resistance collapsed more swiftly than had been expected. Some 8,000 to 10,000 rebel fighters, pounded by artillery and air strikes and divided among themselves, were unable to stage a last stand in the ruins of the enclave, as happened in Homs three years ago, and is happening in Mosul now.Isis is proving a tough opponent in Iraq and Syria and in December was able to recapture Palmyra, which the Syrian Army, strongly backed by Russia, had taken amid self-congratulatory celebrations in March. An important event that did not happen in 2016 was the defeat of Isis, whose continuing ability to set the political agenda was bloodily demonstrated when a stolen lorry mowed down people at a Christmas fair in Berlin on 18 December. A more substantive sign of Isis’s strength is the ferocity and skill with which it has fought for Mosul. The Iraqi army and Kurdish offensive started on 17 October, and Mosul city was reached on 3 November. Since then progress has been slow and at the cost of heavy casualties. The Iraqi security forces, including the Shia paramilitaries, lost 2,000 dead in November according to the UN. Isis is using hundreds of suicide bombers, snipers and mortar teams to slow their enemy’s advance, which has so far only taken 40 per cent of east Mosul. Some of the battalions in the elite 10,000-strong “Golden Division” are reported to have suffered 50 per cent losses. In the longer term, the Iraqi government will probably take Mosul, though by then it may not look much different from east Aleppo.

Does America Share Responsibility For the Rise of ISIS? --  Riaz Haq - Did the Obama administration enable ISIS, also known as Daesh, to unleash its reign of terror in Iraq and Syria? Have the policies of successive prior US administrations contributed to rising wave of global terrorism today? Is the American filmmaker Oliver Stone right when he says "we are not under threat. We are the threat"? Let's examine answers to these questions in light of available facts and evidence. A recently declassified DIA (Defense Intelligence Agency) document of August 2012 said that “the Salafist, the Muslim Brotherhood, and AQI (Al- Qaeda in Iraq) are the major forces driving the insurgency in Syria” being supported by “the West, Gulf countries and Turkey.” The document DIA declassified under the Freedom of Information Act (FOIA), analyzed the situation in Syria in the summer of 2012 and predicted: “If the situation unravels, there is the possibility of establishing a declared or undeclared Salafist principality in eastern Syria… and this is exactly what the supporting powers to the opposition want, in order to isolate the Syrian regime.” In an interview with Mehdi Hasan of Al Jazeera, former head of DIA and President-elect Donald Trump's National Security Advisor General Michael Flynn confirmed that it was a "willful decision" of the Obama White House to transfer arms to the Salfists and Al Qaeda in 2012 to defeat the Assad regime in Syria. Here's what General Flynn told Mehdi Hasan: "I don’t know if they turned a blind eye. I think it was a decision (US arms transfers to Salafis and Al Qaeda fighting in Syria in 2012). I think it was a willful decision....Well, a willful decision to do what they're doing, which, which you have to really – you have to really ask the President (Obama), what is it that he actually is doing with the, with the policy that is in place, because it is very, very confusing? I’m sitting here today, Mehdi, and I don’t, I can’t tell you exactly what that is, and I've been at this for a long time. ...I think it was a strategic mistake. I think history will not be kind. It was a strategic mistake"

Veteran misses simpler time fighting unwinnable war against enemy he unknowingly helped create — While US advisers slog their way across northern Iraq with sub-standard Iraqi forces and US troops once again deploy to the region, some veterans are reflecting on their own fighting of an un-winnable war against an ambiguous enemy they, unwittingly or otherwise, helped create. “Yes, I can grow a beard, start my own t-shirt, coffee, flip-flop, or humor website, or even become a Fox News analyst, but the grass isn’t always greener,” said Jared Glossner, an Operation Iraqi Freedom veteran who was honorably discharged in 2007 with a four-year engineering degree and nearly a dozen job prospects. “The days of executing vague strategic directives with little to no accountability or tangible benefit to most Americans are but a distant memory.” Glossner, a former platoon leader and executive officer with the 10th Mountain Division, has been gainfully employed the last nine years and admittedly happily married to his high-school sweetheart. While he tells everyone he meets he is “blessed,” Glossner told reporters that he secretly yearns to go back to fighting a faceless, nameless enemy for questionable-at-best reasons while being responsible solely for keeping his [containerized housing unit] swept. “Man, I wish I could arbitrarily distribute hundreds of millions of dollars in funds for infrastructure improvements that may or may have not been directly funneled to extremist groups,” said Glossner writing a check for one of his family’s multiple annual vacations. “Even if the money was going to Iran, or Syria, or Russia, or the CIA, my paycheck was still deposited into my checking account.” Read more:

 Turkey Threatens To Block US From Using Incirlik Airbase - In the immediate aftermath of the failed Turkish "coup" of July 2016, the immediate concern to the US was not the fate of the Erdogan regime, but whether the US would maintain access to Incirlik Air Base, a strategic output for the US airforce, allowing it fast and easy access to most of the Middle East and part of Russia even in the immediate absence of an aircraft carrier. It explains why when Erdogan said he felt snubbed by the US, he cut off the power to the US troops stationed at the airbase, and kept them in the dark for a considerable period of time, perhaps to remind Washington that in Turkey he is the boss. Fast forward to this week, when on Wednesday, Turkish officials again made a veiled threat to ground U.S. warplanes at Incirlik Air Base over the U.S. denial of air support for the Turkish military inside Syria. The officials questioned the value of having the U.S. fly missions out of Incirlik in southeastern Turkey against ISIS targets in Syria and Iraq while Turkish forces are struggling to take the ISIS-held Syrian town of El Bab. "This is leading to serious disappointment in Turkish public opinion," Turkish Defense Minister Fikri Isik said, adding that "this is leading to questions over Incirlik," Turkey's Anadolu news agency reported. He then once again treatened the US, when he said that to avoid repercussions that could affect Incirlik operations, the Defense Minister called on the U.S. to "start to provide the aerial support and other support that the [Turkish military] needs" to take El Bab, which would also drive a wedge between Syrian Kurdish militias supported by the U.S. in actions against the Islamic State of Iraq and Syria. U.S. Air Force Col. John Dorrian said Wednesday than any actions by Turkey to shut down or limit U.S. air operations out of Incirlik would be disastrous for the U.S. anti-ISIS campaign now focused in Syria on the drive by a mixed Syrian Kurdish and Arab force against Raqqa, the self-proclaimed ISIS capital. What he meant to say is that it would disastrous for the U.S., period, as it would deprive the US of one of its most critical military outputs in the MENA region.

China to become net importer of some rare earths --  China produces more than 85% of the global supply of rare earths and the country is also the largest consumer. After hitting the stratosphere in 2011 prices have been decimated. And a surge in exports from China since a ruling by the WTO deemed the country's export quotas illegal and particularly after the lifting of exports tariffs in May last year, caused a further slide. The price index for the 17 elements compiled by China's Rare Earth Industry Association hit six-year lows hit in September 2015 and have been bobbing around these levels since then. A new report by Adamas Intelligence, a rare metal research firm, says since 2011, the market has suffered large-scale demand destruction.According to the Adamas outlook for rare earth demand from 2016 through 2025 over the past five years upwards of 30,000 tonnes of annual rare earth oxide demand were lost due end-users’ growing concerns over supply security. On top of that more than 20,000 tonnes were lost as a result of the ongoing phase out of several mature technologies, such as fluorescent lamps, NiMH batteries, and hard disk drives used in PCs. According to the authors following the lengthy and painful adjustment, the REE market will return to strong global demand growth for a number of rare earth elements including neodymium, praseodymium, dysprosium, and lanthanum. The resulting rise in price will help "sustain the profitability and growth of today’s dominant producers, and incentivize continued investment in exploration and resource development globally":As China’s insatiable demand for rare earth elements continues to grow over the coming ten years, China’s domestic production will struggle to keep up in all scenarios examined herein, leading the nation to become a net importer of certain rare earths at the expense of the rest of the world’s supply security. In fact, by 2025 China’s domestic demand for neodymium oxide for permanent magnets alone is poised to exceed total global production of neodymium oxide by 9,000 tonnes in our base case scenario, highlighting the imminent need for additional sources of supply.

 Iron Ore Stocks At Chinese Ports Hit New Record Highs: Why This Is An "Ominous Sign" For Prices - As Axiom Capital's Gordon Johnson points out, Iron Ore stocks at Chinese ports just hit a new record high in the last week of 2016, even as the spot price of iron ore staged a dramatic comeback over 2016, closing near the highs of the year. However, as Johnson notes, if history is any precedent, such record stocks "carry an ominous sign for iron ore prices." Here's why. After jumping by the biggest 1-wk increase since Oct. ’15, +2.7% w/w, iron ore inventories at Chinese ports reached a new record high of 114.0Mmt on 12/30.Using implied consumption as a denominator (i.e., the latest data on daily pig iron output x 1.6), days of inventory for port stocks topped 38.6, the most in 2-yrs. While inventory restocking at China’s ports likely helped support prices, w/ an intense destock likely in the offing, Johnson sees "downside risk to prices as imminent." How much? Well, using the last big peak-to-trough cycle as a guide, 7/4/14-6/26/15, port stocks & avg. wkly spot prices fell 30.2% & 35.5%, respectively. Further, since the 7/4/14 peak, stocks/prices shared a 65% correl. Assuming stocks fall just half as much as in the last down cycle, using a simple regression, we est., ceteris paribus, prices could quickly fall back to $61/mt (Ex. 3). One of the reasons cited for the massive stockpiling of iron ore is that China is planning a vast expansion of its railway network to support growth, with new lines estd. to span >18K miles (link). However, as Axiom boldly notes, "China’s Massive Railway Expansion Plan ? a Panacea for Iron Ore or Steel Demand." While this would surely benefit jobs, Axiom estimates with a few assumptions, that the incremental benefit to aggregate steel demand would be a mere 4.8Mmtpa, or just 59bps over 806.7Mmt of estd. '16 production. How does it get here? Using publicly available data from WAB (NC) as a blueprint (link), assuming avg. weights for: (1) rails are 128lbs./yd., (2) joint bars are 90lbs./pair, (3) track bolts are 80lbs./yd., & (4) spikes are 59lbs./yd., Johnson estimates avg. steel demand of 448mt/mile of track (Ex. 4).

 Analysis: Manufacturing helps China oil demand post fastest growth in 15 months -  China's apparent oil demand surged more than 4% year on year in November, the fastest pace of growth in 15 months, buoyed by a sharp expansion in manufacturing activity, which helped to drive the country's appetite for gasoil to a year's high and LPG consumption to record levels. The surprise acceleration in manufacturing to hit the highest level in a year lifted demand for goods transport, pushing up gasoil consumption. LPG demand was driven by consumption by propane dehydrogenation plants. Together, it more than offset a 5% year-on-year drop in apparent demand for gasoline. "The positive growth momentum should continue on the back of fiscal support. With the economy having just emerged out of deflation, and with the recovery still looking quite uneven, policy support should remain in place until the recovery becomes more broad-based," HSBC said in a research note. The 4.1% year-on-year growth in total apparent oil demand to 11.44 million b/d in November was the second consecutive monthly increase since October when demand rose 1.1%, data compiled by S&P Global Platts using official numbers showed. November demand was also up 2.8% from October, and higher than the average of 11.07 million b/d over the first 11 months. Manufacturing investment grew at the fastest pace in a year at 8.4% in November, with broad-based recovery becoming increasingly visible in heavy industries, machinery and auto, data from the National Bureau of Statistics showed. Industrial production grew 6.2% year on year in November, compared with 6.1% in October. PMI also climbed to 51.7 in November from 51.2 in October. All this improved the outlook for oil demand.

China’s Factory Activity Remains in Expansionary Territory, Despite December Slide - WSJ: —A key gauge of factory output edged down last month, pointing to slowing momentum in China’s economy, though leaving it on target to hit the government’s growth target of at least 6.5% for 2016. China’s official manufacturing purchasing managers index fell to 51.4 in December from 51.7 the previous month, according to official data released Sunday, indicating the world’s second-largest economy continued to expand, though at a slower rate. The index has stayed above the 50 mark that separates an expansion of activity from a contraction for five straight months. “The momentum is becoming less strong, but it’s still in expansionary territory,” said HSBC economist Ma Xiaoping. “The momentum will weaken further, but not likely run into contraction in coming months.” The slightly weaker PMI reading for December comes as Beijing pulls back from the easy money policy it depended on much of the year to bolster the economy. Policy makers are confident the economy will reach the annual growth target of 6.5% to 7%, while they are growing increasingly concerned about rising corporate debt levels, economists said. China’s nonfinancial corporate debt is about 145% of gross domestic product, which is “high by any measure,” according to the International Monetary Fund. Components of the PMI showed stable demand, which would likely cushion any slowing of growth, economists said. A subindex measuring new orders held steady from 53.2 in November, while a production subindex decreased to 53.3 from 53.9, the government’s statistics bureau said.

A Socialist Market Economy With Chinese Contradictions - Adair Turner - The year 2016 ends with slightly higher forecasts for global growth and inflation. In part, that reflects expectations of a big new fiscal stimulus in the United States under President Donald Trump. But equally important is the strength of the Chinese economy, with buoyant industrial production fueling a sharp rise in global commodity prices. That strength has confounded expectations that China’s seven-year credit boom, during which the debt/GDP ratio rose from 150% to 250%, would inevitably end in 2016. Some Western investors foresaw a banking crisis, owing to enormous bad debts; others expected that President Xi Jinping, having consolidated his political position, would introduce structural economic reforms. But almost all non-Chinese economists anticipated a significant slowdown, which would intensify deflationary pressures worldwide. In fact, the opposite has happened. Central and local government borrowing in China has soared: bank and shadow-bank credit has grown rapidly: and the People’s Bank of China (PBOC) has increasingly issued direct loans to state-owned banks in a maneuver closely resembling monetary finance of government spending. These policies, moreover, are increasingly justified by assertions that China has policy options not available in Western economies. Sheng Songcheng, the PBOC’s head of statistics, argued that “the macro framework in a socialist market economy is superior to the Western economy,” because “the Chinese government has significant power in terms of both monetary and fiscal policy and is able to seek the optimal combination.” Shang Fulin, Chair of the China Banking Regulatory Commission (CBRC) reminded bank leaders in September that they “are primarily party members and party secretaries and secondarily bank chairman and presidents.” In a hybrid socialist market economy, it seems, credit-driven growth need not be constrained by concerns about debt sustainability.

Easing China’s Housing Bubble Has Unintended Side Effects -- In China’s two-speed property market, prescriptions for deflating big-city bubbles are having unintended side-effects in smaller towns. Soaring prices in megacities Beijing and Shanghai both snapped 20 months of gains in November after authorities tightened restrictions to reduce excessive speculation. Meanwhile, real estate in the northwestern rust belt cities of Jilin and Harbin also declined, posting their first drops in four months. Signs that prices stopped rising is good news for major cities as it shows policies are having the desired effect, but they’re less welcome in smaller towns still battling to fill millions of empty homes that weigh on prices. That disparity poses a new challenge for policy makers just as they pledge to ensure stability and step up the fight against speculation. "China’s property market has complicated, structural problems," said Wen Bin, a researcher at China Minsheng Banking Corp. in Beijing. "Bubbles in big cities have much to do with financial leverage, whereas oversupply in third- and fourth-tier cities epitomizes the lukewarm economy." Prices gained in November from the previous month in 55 of the 70 cities tracked by the government. They fell in 11 cities, six of which were in mid-sized markets that haven’t added any purchase restrictions and are still dealing with big surpluses of empty homes.

China Tries to Recalibrate Credit - WSJ: At the top of regulators’ agenda in China for 2017 is a campaign to wean the nation’s sprawling financial system off of cheap borrowing and rising credit levels. Years of easy money have helped fuel growth, but also have sparked a worrisome surge in asset prices and other financial risks. The latest target is the $9 trillion bond market, where the central bank has been gradually tamping down short-term credit to discourage the kind of borrowing many financial institutions use to make risky investments. This tightening also helps address China’s other big headache: keeping its currency stable to stem the flood of cash heading overseas. As much as $833 billion may have left China in 2016 through November, estimates French investment bank Natixis, compared with an outflow of $742 billion in all of 2015. The yuan is hovering around its weakest levels since 2008 and slid 6.5% against the U.S. dollar in 2016. The trouble is that the easy money is funding a huge tangle of investments by banks, insurers, brokers and speculators in everything from real estate and troubled infrastructure projects to corporate bonds and soybean-meal futures. Any tightening can threaten the debt-saddled corporate sector and potentially sow turmoil in unexpected places. This means that Chinese officials need to tread carefully in the coming months to tighten monetary conditions, curb risky investment practices and keep the yuan from depreciating too far while keeping China’s economy healthy. “It’s a difficult balancing act,” said Matthew Phan, a credit analyst at research firm CreditSights in London. “They want to prevent asset bubbles like with the stock market, the bond market and the property market, but at the same time they can’t tighten too much. They need to keep injecting liquidity, but prevent this liquidity from going places they don’t want.”

China Takes New Step to Downgrade the Dollar’s Prominence -- China took another step to degrade the dollar in defining the value of its currency, in an effort that cuts against its rival’s stubbornly strong hold on the global financial system.An arm of the People’s Bank of China, which last year started setting the yuan against a basket of currencies, on Thursday said it’s adding 11 units to that reference group. The move lowers the dollar’s weighting by 4 percentage points, to 22.4 percent -- little more than twice the share for South Korea’s won, a new entrant.While the logic of determining the yuan’s value against the currencies of its trading partners is clear, the problem is that the dollar is still the dominant reference in the perception of the public and the market. The U.S. currency is on one side of 88 percent of all foreign-exchange trading."The dollar-yuan rate will still be the benchmark that determines sentiment," “The basket is just a reference, so the change in the index’s composition and the efforts of keeping it stable will do little to boost confidence."  The yuan’s retreat against the CFETS RMB Index, the basket set by the China Foreign Exchange Trade System, has been more moderate this year than against the dollar, as the currencies of China’s trading partners have also declined. In recent weeks it’s even advanced.  That offers an image of stability that would appeal to a Communist leadership that’s striving to maintain economic growth in excess of 6.5 percent and reduce leverage, all while heading off any exodus of domestic capital.

China May Dump Treasuries To Keep Yuan Stable, Prepares More Capital Controls --In China, announcing new (and ever more ineffective) capital controls has become a daily thing.Last week, Beijing unveiled its latest set of capital controls according to which Chinese banks would be required to report all yuan-denominated cash transactions exceeding 50,000 yuan (around 7,100 US dollars) to the People's Bank of China (PBOC), down from the current level of 200,000 yuan. Cross-border transfers more than 200,000 yuan by individuals would also be subject to the report process.Then, overnight, China's currency regulator, the State Administration of Foreign Exchange (SAFE) added its own round of capital control limitations, when it announced it wanted to close loopholes exploited for purposes such as money laundering and illegally channeling money into overseas property. As a result, while the regulator kept existing quotas of $50,000 of foreign currency per person a year, citizens faced draconian new currency exchange disclosure requirements, requiring foreign currency buyers to indicate how they plan to use the money and when they plan to spend it. Additionally, mainlanders would be restricted from using the FX proceeds to buy overseas property, securities, life insurance or other investment-style insurance products. In fact, among the list of approved uses of funds are tourism, schooling, business travel and medical care. Which means any offshore asset purchases have been effectively limited.What made the above capital controls especially amusing is that as Xinhua reported over the weekend, "the policy stoked worries that the government is trying to impose capital control in a disguised form." And since the official admission of capital controls would only lead to even more panicked outflows, PBOC economist Ma Jun intervened, saying that the new cash transaction rules, i.e. capital controls, are "not capital control at all."

China Said to Consider Options to Back Yuan, Curb Outflows --  China has studied possible scenarios for the yuan and capital outflows this year and is preparing contingency plans, according to people familiar with the matter. The offshore yuan surged the most in a year. The authorities have used stress tests, models and field research, said the people who asked not to be identified as the studies haven’t been made public yet. Financial regulators have already encouraged some state-owned enterprises to sell foreign currency and may order them to temporarily convert some holdings into yuan under the current account if necessary, they added. The State Administration of Foreign Exchange didn’t immediately reply to a fax seeking comment. The reported plans come amid increasing pressure on the yuan from a resurgent dollar, rising capital outflows and concern that U.S. President-elect Donald Trump may make good on his threats to take punitive measures on China’s exports. Policy makers in Beijing have recently taken a slew of measures to tighten control of the currency market, including placing higher scrutiny on citizens’ conversion quotas and stricter requirements for banks reporting cross-border transactions.“China has been challenged by capital outflows and declining foreign-exchange reserves, and policy makers are taking measures to solve the problem,” said Eddie Cheung, a Hong Kong-based foreign-exchange strategist at Standard Chartered Plc, the most accurate forecaster for Asian emerging-market currencies according to a Bloomberg ranking. "Funds will continue to exit in the first half due to individuals’ purchases of the dollar and on concerns of U.S. political uncertainty.” The offshore yuan jumped 0.9 percent to 6.8958 per dollar as of 7:20 p.m. Hong Kong time. That’s the biggest increase since January 2016. The currency traded in Shanghai climbed 0.3 percent, the most since July, to 6.9400. The Bloomberg Dollar Spot Index fell 0.4 percent.

China's choices narrowing as it burns through FX reserves to support yuan | Reuters: As China's foreign exchange reserves threaten to tumble below the critical $3 trillion mark, the biggest fear for investors is not whether Beijing can continue to defend the yuan but whether it will set off a vicious cycle of more outflows and currency depreciation. Data this week is expected to show China's forex reserves precariously perched just above $3 trillion at end-December, the lowest level since February 2011, according to a Reuters poll. While the world's second-largest economy still has the largest stash of forex reserves by far, it has been churning through them rapidly since August 2015, when it stunned global investors by devaluing the yuan CNY=CFXS and moving to what it promised would be a slightly freer and more transparent currency regime. Since then, authorities have repeatedly intervened to support the yuan when it weakened too sharply, burning through half a trillion dollars of reserves and prompting them to sell some of their massive holdings of U.S. government bonds. They also have put a tightening regulatory chokehold on individuals and businesses who want to move money out of the country, while denying they were imposing new capital controls. Concerns over the speed with which China is depleting its ammunition are swirling, with some analysts estimating it needs to retain a minimum of $2.6 trillion to $2.8 trillion under the International Monetary Fund's adequacy measures. "There has been quite a bit of anxiety and speculation because the way many people in China talk about it is ‘will the government defend the 7-per-dollar level or the 3 trillion dollars',”

China Flags Off First Goods Train To London; Will Reach London In 18 Days -  China has launched its first freight train to London over 12,000 kilometres away as part of efforts by the world's second largest economy to expand rail links to different areas across the globe to improve its dwindling exports and stabilise slowdown. The train departed from China's international commodity hub Yiwu in Zhejiang Province on Monday. It will travel for about 18 days and more than 12,000 kilometres before reaching its destination in Britain, the China Railway Corporation said. Yiwu is known for producing small commodities, and the train mainly carried such goods, including household items, garments, cloth, bags and suitcases. It will pass through Kazakhstan, Russia, Belarus, Poland, Germany, Belgium and France before arriving in London, state-run Xinhua news agency reported. London is the 15th city in Europe added to China-Europe freight train services. The service will improve China-Britain trade ties, strengthen connectivity with western Europe, while better serving China's Belt and Road Initiative, an infrastructure and trade network connecting Asia with Europe and Africa along ancient trade routes, the CRC said. China's exports totalled to $2.27 trillion in 2015 slowing down from $2.34 trillion in 2014. Its economy grew at 6.9 percent in 2015, slipping below seven percent in a quarter of century.

Trump leaves open possible Taiwan meet, questions Russia hacking | Reuters: U.S. President-elect Donald Trump on Saturday left open the possibility of meeting with Taiwan's president if she visits the United States after he is sworn in on Jan. 20 and also expressed continued skepticism over whether Russia was responsible for computer hacks of Democratic Party officials. In remarks to reporters upon entering a New Year's Eve celebration at his Mar-a-Lago estate, Trump said, "We'll see," when pressed on whether he would meet Tsai Ing-wen, Taiwan's president if she were to be in the United States at any point after he becomes president. Taiwan's president will be in transit in Houston on Jan. 7 and again will be in transit in San Francisco on Jan. 13. Trump, citing protocol, said he would not meet with any foreign leaders while President Barack Obama is still in office. Beijing bristled when Trump, shortly after his Nov. 8 victory, accepted a congratulatory telephone call from the Taiwan leader and has warned against steps that would upset the "one-China" policy China and the United States have maintained for decades. Talk of a stop-over in the United States by the Taiwan president has further rattled Washington-Beijing relations. On another foreign policy matter, Trump warned against being quick to pin the blame on Russia for the hacking of U.S. emails."I think it's unfair if we don't know. It could be somebody else. I also know things that other people don't know so we cannot be sure," Trump said.

How a pair of US stopovers could reshape Taiwan's ties with US, China - —Taiwan President Tsai Ing-wen heads to Central America Saturday, to shore up support from four Central American countries that some worry may sever ties with Taiwan in favor of Beijing. But the more crucial test for Ms. Tsai may actually come during her stopovers en route – in Houston and San Francisco. There, against the backdrop of her controversial Dec. 2 phone call with US President-elect Trump, which generated a sharp-tongued reaction from China, all eyes will be on her meetings. Some speculate those could include Trump team leaders or senior US Republican Party figures. If such unusually high-level diplomatic contact goes ahead, it is sure to test both Taiwan's upbeat but fragile new ties with Mr. Trump and China’s resolve to squelch Taiwanese diplomacy around the world. A stronger Taiwan link may also signal that the US president will be bolder in handling China than past administrations, which have abided by the "One China" policy that recognizes Beijing as the sole government of China. Beijing views self-ruled Taiwan as a part of its territory that should ultimately be reunited with the mainland, an idea Tsai rejects. China’s reaction to Tsai’s pursuit of better US relations over time may depend on what type of links she tries to form, says Alan Romberg, East Asia Program director with the Stimson Center, a Washington-based think tank.“If they are economic ties that mainly are helping people in Taiwan to raise their living standards, that's one thing,” he says. “But if they are in the nature of pushing the envelope in ways seen as tending toward de jure or even, to some extent, de facto independence, the reaction will be significant.”

"This Would Cross Our Red Line" - Chinese Military Considering Measures To "Cripple" Taiwan --While Donald Trump is tweeting his new year's greetings to his friends, and especially enemies, China is thinking three weeks ahead to the day the president-elect is officially inaugurated, and is worried what that could mean for a suddenly empowered Taiwan, whose outreach to Trump now means that the long-standing "One China" policy is now a topic of negotiation.  As a result, Reuters reports that China's military, alarmed by Trump's support of Taiwan, is considering strong measures to prevent the island from moving toward independence.With China's only aircraft carrier demonstratively passing in close proximity to Taiwan last week, and currently in the contested area inside the South China Sea, it is not surprising that according to Reuters' sources, one measure being contemplated is conducting war games near the self-ruled island. More troubling is that as Reuters' sources add, another measure "was a series of economic measures to cripple Taiwan."And since Taiwan is among the main sources of global high-tech, semiconductor fabrication and production, an economically "crippled" Taiwan suddenly becomes a potential gray swan for a world reliant on instant access to technological components to grow.Adding to concerns of a potential "hot" conflict between China and Taiwan, while Reuters sources admitted that it was not clear if any decisions had yet been taken, the Taiwan issue had become a hot topic within the upper echelons of China's People's Liberation Army (PLA) in recent weeks."If Trump challenges 'one China' after becoming president, this would cross our red line," said another source, who has ties to China's leadership.

China Prepares For Trade War With Trump - Having warned U.S. President-elect Donald Trump yesterday, through Chinese state media, that he’ll be met with "big sticks" if he tries to ignite a trade war or further strain ties, China’s central government has reportedly "compiled possible countermeasures" against "well-known U.S. companies or ones that have large Chinese operations." As Bloomberg reports, China is prepared to step up its scrutiny of U.S. companies in the event President-elect Donald Trump takes punitive measures against Chinese goods and triggers a trade war between the world’s two biggest economies after he takes office, according to people familiar with the matter. The options include subjecting well-known U.S. companies or ones that have large Chinese operations to tax or antitrust probes, the people said, asking not to be identified because the matter isn’t public. Other possible measures include the launch of anti-dumping investigations and scaling back government purchases of American products, according to the people.The move illustrates how the fallout from escalating tensions between the two nations could spread to companies. Trump has made China a frequent target of his attacks and nominated trade-related officials that the Communist Party’s Global Times newspaper said would form an "iron curtain" of protectionism. While specific details of China’s options weren’t immediately clear, the retaliatory measures could affect companies related to agriculture, pharmaceuticals, technology and consumer industries, according to the people. China’s central government compiled the possible countermeasures after collecting opinions from various departments, the people said. The punitive steps would only be carried out if the U.S. acts first and after senior Chinese leaders sign off on them, they said.

An Angry Japan Responds To Trump's Toyota Taunts -- After Trump's Thursday morning twitter taunt targeted Toyota, when the President-elect warned Japan’s biggest carmaker that it will face heavy penalties if it chooses to make cars for the US market in Mexico, writing  "Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax", a tweet which sent shares of Japanese carmakers sliding on Friday with a 1.7% fall for Toyota, 2.2% for Nissan and 3.2% for Mazda, an angry Japanese government and corporate establishment pushed back against Trump’s criticism of Toyota as the attack on the country’s most powerful corporate name sent shockwaves across "Japan Inc."As the FT notes, CEOs of Japanese companies including Sony’s Kazuo Hirai and Nissan’s Carlos Ghosn weighed in, while analysts feared the president-elect’s targeting of Toyota would lead to a broader fallout on Japan-US trade relations, similar to concerns about an escalating trade war between the US and China.“Toyota is responsible for large employment at US plants such as in Kentucky. It’s questionable whether the new US president has a grasp of how many vehicles Toyota builds in the US,” said Taro Aso, Japan’s finance minister.  Hiroshige Seko, minister for trade and industry, added that the Japanese government would do its part to explain to the US administration about the contribution of the country’s car industry to the US economy. “Toyota is equivalent to Japan as a whole, so Mr Trump’s criticism could be interpreted as a message to the Japanese government,”

 Trump: North Korea intercontinental missile 'won't happen' - BBC News: Donald Trump has dismissed North Korea's claim to be developing missiles capable of striking America. In a tweet, the US president-elect derided the claim by North Korea's Kim Jong-un that preparations were in the final stage, saying: "It won't happen." It was not clear if Mr Trump was expressing doubts about Pyongyang's nuclear capabilities or was planning preventative action. Mr Trump also berated China for failing to help rein in its ally North Korea. "China has been taking out massive amounts of money & wealth from the U.S. in totally one-sided trade, but won't help with North Korea. Nice!" Mr Trump tweeted. "We would not agree with that assessment," US State Department spokesman John Kirby told reporters at a regular briefing on Tuesday. A spokesman for China's foreign affairs ministry said Beijing's efforts on Korean peninsula denuclearisation were "perfectly obvious". China had "proactively participated" in UN discussions and jointly passed several resolutions, the spokesman pointed out. Image copyright Twitter In a televised New Year message on Sunday, Mr Kim said North Korea was close to testing long-range missiles capable of carrying nuclear warheads. He said the country was now a "military power of the East that cannot be touched by even the strongest enemy".

Chinese newspaper says Korean peninsula most likely location of armed clash in 2017 --  Major Chinese news outlets named the Korean Peninsula on Jan. 3 as the most likely region for an armed clash to occur in 2017. In an editorial titled “Will The World Be More Chaotic in 2017?” the Global Times wrote, “From the perspective of war or new military clashes, the West Pacific is the most dangerous zone.” “The Korean Peninsula is the primary target,” it continued, adding that the possibility of US President-elect Donald Trump taking an extreme hard line on Pyongyang could not be ruled out. The editorial went on to say that while the US and China’s broad and complicated relationship has been bound by policy in the past, a more chaotic situation where anything could happen in the West Pacific region if Trump chooses to ignore those restraints. The editorial named the Taiwan Straits as the next most likely setting for a clash, predicting the region could be become more dangerous if current Taiwanese President Tsai Ing-wen becomes more overt about her pro-independence leanings. In contrast, it limited the likelihood of clashes in the South China Sea - where Beijing is currently enjoying a “honeymoon” with the administration of Philippines President Rodrigo Duterte - to situations involving the US. “The South China Sea seems to remain moderate, and the only cause of a military confrontation in the waters would be China-US rivalry,” the piece said. At the same time, it also hinted that the South China Sea issue could flare up into an all-out clash between the US and China. “Once [a confrontation] occurs, it will have an overall impact,” the piece said, noting the potential for such a situation to become a far-reaching shock.

Singapore GDP Surges Over 9% In Q4 - Most Since 2012 --Following Q3's 2% contraction, and with analysts' highest expectation at +5.1% (StanChart),Singapore GDP grew at a shocking 9.1% in Q4 QoQ. This is the biggest QoQ growth since Q1 2012... This was four standard deviations above average estimates. These are preliminary numbers based on the first two minths of the quarter but the rebound was seemingly based on China's exuberance...

  • Manufacturing +14.6% q/q;
  • Services +9.4% q/q
  • Construction -4.7% q/q;

Year-over-year, Singapore’s 4Q GDP grew 1.8% according to Ministry of Trade and Industry, smashing expectations of +0.3%. As The FT reports, Manufacturing experienced a big jump, growing 6.5 per cent in the fourth quarter from a 1.7 per cent year-on-year rate in the three months to September 30.“Growth was primarily driven by the electronics and biomedical manufacturing clusters, even as the transport engineering and general manufacturing clusters continued to contract”, MTI said.

A Stunned Wall Street Reacts To China's "Bear-Crushing" Yuan Carnage -- As we observed earlier, China’s currency gained 0.5% in offshore market to 6.8275 vs dollar, earlier surging as high as 6.78, extending its 2-day advance to 2%, the most on record, driven by a direct attack by the PBOC on shorts, whom it crushed overnight when it pushed the overnight offshore Yuan deposit rate to 80%, the highest in history. The epic squeeze took place almost a year after an identical moves a year ago: back then the abrupt market reversal almost exactly a year ago marked the beginning of a nearly 5 percent rally that lasted two months.Traders responded with deja vu shock: “Another extraordinary day in China,” said Gareth Berry, a foreign-exchange and rates strategist at Macquarie Bank Ltd. in Singapore. “It looks like a classic case of a consensus trade blowing up at the start of a new year.”"It’s painful to sit on short yuan positions now, given the soaring funding costs," said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd.  Did the PBOC intervene? Most likely. As Bloomberg reported, "Judging from the speed of the yuan’s appreciation, the PBOC may have intervened to prop up the exchange rate," said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. "The PBOC is expressing its strong determination to keep the currency stable and is seeking to restore confidence.”

Chinese Overnight Funding Rate Hits Unprecedented 105% -- It appears Chinese authorities are deadly serious about crushing shorts and halting speculative outflows as the liquidity freeze in Chinese markets has sent overnight deposit rates to a record 105% as one or more bank's utter desperation for funds looks like a giant fat finger. Today's spike is up 45 percentage points from yesterday's 60% rate... and at the same time, PBOC strengthened the Yuan fix by the most since 2005 to narrow the gap to the massive short squeeze move in offshore yuan...

China’s Growing Influence on Asian Financial Markets – As China’s economy slows and rebalances, its impact is being felt on an already fragile global economy, and particularly in the rest of the Asia region. Our recent study examines how China’s rebalancing is affecting Asian financial markets.  Because of its sheer size and integration into the global economy, China’s transition will certainly affect those around it. China is now the top trading partner of most major economies in the region, particularly in East Asia and the Association of Southeast Asian Nations (ASEAN). During 2000–15, exports to China increased dramatically from 3 percent to 9 percent of world exports and from 9 percent to 22 percent of Asian exports. According to IMF staff calculations, a 1 percentage point change in China’s real GDP growth is estimated to affect the real GDP growth of the median Asian economy by 0.15–0.30 of a percentage point.  Against this backdrop, some countries have felt the pinch. As China’s economy moves away from investment, its demand for raw materials used intensively in related activities, such as iron ore, copper, and coal, is declining contributing to lower commodity prices. Commodity exporters such as Australia, Indonesia, Malaysia, and New Zealand are likely to be hard hit. Beyond that, those economies that have been closely integrated with China through the global value chains, and which are heavily exposed to China’s investment activity, such as Korea and Taiwan Province of China, will be affected. Suppliers of technology like Japan and Korea, and providers of capital, such as Hong Kong and Singapore, will also feel the pain. Finally, financial connections are also growing. Financial spillovers from China to regional markets are on the rise, in particular in equity and foreign exchange markets, driven by greater trade links with China (see Chart 1). In addition, several economies, such as Korea, Singapore, and Taiwan Province of China, have significant financial links with China, both directly and through Hong Kong. Overall, financial markets are likely to become more sensitive to shocks from China as these links develop further, including with the ongoing internationalization of the renminbi and China’s gradual capital account liberalization.

 Russia Sends Two Warships To Philippines For Joint Naval Drills -- In a surprising move, confirming the ongoing pivot by the Philippines away from the US sphere of geopolitical influence, and toward the China-Russia axis, on Tuesday the Russian destroyer Admiral Tributs and sea tanker Boris Butomato arrived in the Philippines to conduct military training exercises in what the Russian media described as "an unprecedented navy-to-navy contact between the two nations." According to Reuters, Russia wants to hold maritime drills with the Philippines to help combat terrorism and piracy, sending two warships to Manila for the first official navy-to-navy contact, as President Rodrigo Duterte pivots to United States' traditional rivals. Admiral Tributs, an anti-submarine vessel, and a sea tanker Boris Butoma, arrived late on Tuesday for a four-day goodwill visit, with its crew expected to demonstrate anti-terrorism capability and hold talks, said Rear Admiral Eduard Mikhailov, head of the Flotilla of the Russian Navy Pacific Fleet. The warships arrived in the region on Tuesday as Russian Navy Rear Admiral Eduard Mikhailov proclaimed a joint mission between Manila and Moscow to target the region’s two most pressing security concerns, maritime piracy and terrorism. The Rear Admiral said that "we’re very sure in the future" Russia and the Philippines will "get such exercises, maybe just the maneuvering." Alternatively, "maybe just use some combat systems and so on," he noted, so as not to tip Russia’s hand concerning its regional naval strategy.

Duterte hopes Russia will become Philippines' ally and protector | Reuters: President Rodrigo Duterte said on Friday that he hoped Moscow, a rival of the Philippine's traditional ally the United States, would become his country's ally and protector as he toured one of the two Russian warships on a four-day visit to Manila. Duterte's remarks came a day after Russia's ambassador said his country was ready to supply the Philippines with sophisticated weapons and aims to become its close friend. "We welcome our Russian friends. Anytime you want to dock here for anything, for play, for replenish supplies or maybe our ally to protect us," said Duterte while shaking the hands of Rear Admiral Eduard Mikhailov, head of the Flotilla of the Russian Navy Pacific Fleet. Duterte has thrown the future of Philippine-U.S. relations into question with angry outbursts against the United States, a former colonial power, and some scaling back of military ties while taking steps to improve relationships with China and Russia. He is due to go to Moscow in April. The visit by the Russian warships was the first official navy-to-navy contact between the two countries. Last month, Duterte sent his foreign and defense ministers to Moscow to discuss arms deals after a U.S. senator said he would block the sale of 26,000 assault rifles to the Philippines due to concern about a rising death toll in a war on drugs launched by Duterte.

 Myanmar faces growing danger from ISIS supporters as persecution of Rohingya Muslims continues (Reuters) - Myanmar faces a growing danger of attacks by foreign supporters of Islamic State (IS) recruited from Southeast Asian networks in support of persecuted Muslim Rohingyas, Malaysia's top counter-terrorism official has said. Malaysian authorities have detained a suspected IS follower planning to head to Myanmar to carry out attacks, the head of the Malaysian police counter-terrorism division, Ayob Khan Mydin Pitchay, said in an interview. The suspect, an Indonesian whom he did not identify, was detained in Malaysia last month. The suspect was scheduled to be charged on Wednesday for possession of materials linked to terrorist groups, which carries a seven-year jail term or fine, Ayob Khan said. More militants are likely to try to follow his lead in support of the Rohingya cause, Ayob Khan said. "He was planning to perform jihad in Myanmar, fighting against the Myanmar government for this Rohingya group in Rakhine State," Ayob Khan said. A Myanmar army sweep since October in the north of Rakhine State, on its border with Bangladesh, has sent about 34,000 members of the Rohingya minority fleeing into Bangladesh, the United Nations says. Residents and rights groups accuse security forces in predominantly Buddhist Myanmar of summary executions and rape in the army operation, launched in response to attacks on police posts on Oct. 9 that killed nine officers. The government of Aung San Suu Kyi denies the accusations of abuse. Myanmar government spokesman Zaw Htay told Reuters an official report into October's violence in Rakhine state found no evidence of an IS presence there or that the attacks were linked to IS.

The Global War on Cash – India’s Demonetization DebacleJerri-Lynn Scofield -- December 30 has now come and gone– the last day for people to exchange old INR 500 (worth USD 7.36) and INR 1000 (USD 14.72) notes– that were no longer legal tender after Indian Prime Minister Narendra Modi launched his demonetization policy on November 8.  At a stroke, the policy withdrew 86% of Indian currency from circulation. Holders of old currency notes could exchange them for new currency, but only up to a limit of 4000 INR per person. Sums above that threshold had first to be routed through a bank account– in a country where only about half  the population has a bank account– and then withdrawn later, subject to weekly caps on such withdrawals. I have written about the policy in three previous posts, India Moves to Severely Restrict Use of Cash, Forcing Much of Economy Into Barter (November 10), India’s Cash Crackdown: Chaos Continues (November 16), and India’s Cash Crisis May Take Months, Not Weeks To Resolve (November 18). I include the links for interested readers but it’s not necessary to read these three previous posts to follow the discussion here. How has the Indian policy been a debacle? Let me count just some of the ways. It has failed to crack down on “black money”– its announced goal, as discussed further below. Demonetization has been poorly implemented: the Reserve Bank of India– India’s central bank– has failed to supply sufficient currency, in usable denominations, to support ordinary economic activity, and has further confused matters by issuing frequent, ad hoc, contradictory circulars on policy detail. The inability to secure cash has affected just about everyone– whether a national or visitor– who has been in India since demonetization was announced.  Consequences have ranged from mere inconvenience, to failure to be able to conduct ordinary business or economic activity, to in the most extreme cases, suffering and on one estimate, as many as 112 deaths.

India sees long bank queues as rupee deadline passes - BBC News: There have been long queues outside many banks in India as people tried to deposit discontinued banknotes ahead of a deadline that has now passed.An estimated 40% of cash dispensers are empty, meaning people are unable to withdraw new notes to replace the old ones they have handed in. There has been widespread disruption since Prime Minister Narendra Modi said in November that 500 and 1,000 rupee notes would no longer be legal. The move was meant to curb corruption.It has divided opinion, especially over how the ban was implemented.Early last month the government scrapped the 500 and 1000 rupee notes to crack down on undeclared money and fake cash. Deadlines for spending the notes or swapping them for new currency have already passed. Some people, including those of Indian origin living abroad, will be able to exchange the notes in branches of India's central bank until 31 March 2017 - but the process will be more complicated than going to a regular bank. Parliament is preparing laws that will make it a criminal offence to hold the old notes from 1 April 2017 onwards. Together the two notes represented 86% of the currency in circulation and there have been chaotic scenes in India ever since, with people having to spend hours queuing outside banks and cash machines which have been running out of money. ATM queues and cash withdrawal limits mean getting currency can still be tricky, and there have been several changes of the rules around how much money people can access or deposit. The government hopes the measures will encourage more people to have bank accounts and move towards a society less reliant on cash. But there are concerns that many poorer people and those in rural areas have yet to get bank accounts.

Indian Banks Slash Interest Rates As Cash Shortage Leads To Manufacturing Contraction, Economic Shockwaves --Over 50 days after Indian Prime Minister Narenda Modi stunned India's population when he announced on November 8 he would unexpectedly eliminate 86% of the existing currency in circulation in what was supposed to be a crackdown on the shadow economy, but instead has resulted in a significant hit to the broader, cash-based economy, overnight we noted the first official confirmation of how substantial the impact of Modi's demonetization has been, when the Nikkei India Manufacturing Purchasing Managers Index printed at 49.6 in December, the first contraction reading since December 2015, as the war on cash crippled demand. According to the report, output and new orders fall for first time in one year; companies reduced buying levels and payroll numbers; Input cost inflation accelerated, while charges rose at softer rate.Commenting on the report, IHS Markit economist Pollyanna De Lima said that “having held its ground in November following the unexpected withdrawal of 500 and 1,000 bank notes from circulation, India’s manufacturing industry slid into contraction at the end of 2016. Shortages of money in the economy steered output and new orders in the wrong direction, thereby interrupting a continuous sequence of growth that had been seen throughout 2016. Cash flow issues among firms also led to reductions in purchasing activity and employment. Looking at the upcoming timeline of cash exchanges, she noted that "with the window for exchanging notes having closed at the end of December, January data will be key in showing whether the sector will see a quick rebound.” As Bloomberg added, other recent data also mirror the stress. Motorcycle maker Bajaj Auto Ltd.’s total sales slipped 22 percent in December, the steepest fall in at least 21 months. Motorcycle sales, a key indicator of rural demand, declined 18%. India’s biggest automaker by volume, Maruti Suzuki Ltd., reported a 4.4 percent drop in domestic December sales, the first decline in six months, while overall sales fell 1 percent from a year earlier.

Modi Offers Subsidies for India’s Farmers as Cash Shortage Bites --In a televised speech that stretched close to three-quarters of an hour, Modi praised citizens for bearing the hardship caused by the cash clampdown, and announced the government will pay the interest cost on farm loans for a period of 60 days. He also offered 4 percent interest subsidy on home loans of up to 900,000 rupees ($13,242) and 3 percent for 1.2 million rupees. “Patience, discipline, resolve displayed by 1.25 billion Indians will play a critical role in shaping future of the nation for years to come,” Modi said in a special broadcast, defending his Nov. 8 move to withdraw 86 percent of the currency in circulation. “There is no precedent globally to what we have done’ Modi, who had pledged to end hardship caused by the withdrawal of the 500 rupee and 1,000 rupee notes within 50 days, in his address reassured people that the move would benefit the economy in the long term. His sops for the poor, small businessmen and farmers -- sections most affected by the cash withdrawal-- comes weeks before crucial state elections. Modi, in his speech on Saturday, didn’t give any details on the amount of unaccounted money seized by authorities during the drive, which was originally aimed at seizing illegal wealth. “It was like a poll-oriented speech,” The damage from the so-called demonetization -- on farmers, workers, small shopkeepers, low-income households and businesses -- is yet to ease. There continues to be queues at banks and daily stories of rural distress. The government will double the credit guarantee offered on loans offered to small businesses. Senior citizens will be offered an assured 8 percent interest rate on their bank deposits of up to 750,000 rupees, Modi said, Although Modi’s credibility has been dented, the jury is out on the long-term economic and political fallout. So far his public support remains strong, with some standing in lines waiting to access cash still voicing their approval of his decision to target unaccounted wealth. 

Why aam aadmi is not mad at NaMo despite DeMo - -- If you are someone who takes the respectable media seriously, you may have thought, or still think, that Narendra Modi has committed a huge blunder by delegitimising large notes, and that it would destroy him because most of India is furious. There have been reports of the poor losing jobs and of people dying in queues outside banks. Every time a rustic man committed suicide, it was relayed to us as a “farmer suicide”, of course, and the reason this time was not his disenchantment with genetically modified seeds (that spin has run its course) or drought (the season has changed), but cash crunch.There was a bit of exaggeration in the coverage because drama is an old friend of human-interest stories but most of the tales of misery were true. They are still trickling in. Yet there is evidence that the average Indian feels Modi is on to something. Or at least, for some reason, he is not angry with Modi. If the cash crunch continues for another month, the mood might change but as of now it does appear that Modi is going to be fine. The people standing in the queues suggest that. Even small traders, who are very important to Modi in some states, say that. One of them, in a newspaper interview, said that the trading community is hardwired to go with the flow and not against the flow. BJP has not been punished in the by-polls or civic elections that were held in several states after the demonetisation. In fact, the party fared well in seven states. And, there has not been a single incidence of rioting even though the political foes of Modi appeared to contemplate the prospect somewhat fondly.What is going on, and what does it say about India?Most of the poor seem to believe that the rich have been affected more than them. Cash is a powerful cultural symbol of wealth, hence the perceived fiefdom of the rich. Anarchy in the cash economy, their reasoning goes, would hurt the rich more. That is a significant political sentiment. It is a persistent and under-reported phenomenon across the world that the poor tend to hate the rich more than they hate their politicians. This is true even when the politicians themselves are rich and the rich, at least the refined rich, make so many sweet gestures

India - A Lot Of Pain For No Gain  Jayant Bhandari India’s Prime Minister, Narendra Modi, announced on 8th November 2016 that Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes would no longer be legal tender. Linked are Part-I, Part-II,Part-III, Part-IV, Part-V, Part-VI and Part-VII, which provide updates on the demonetization saga and how Modi is acting as a catalyst to hasten the rapid degradation of India and what remains of its institutions. Indians are celebrating that their economy has surpassed that of India’s former colonial master, the UK.So-called educated Indians have latched on to the above visual, with full support of the Indian government. It has been shared far and wide in the national media. When you remind them that India’s population is twenty-one times that of the UK and on top of that, the British pound has taken a huge pounding because of Brexit and associated fear in the financial markets, expect to be ignored. You will be seen as anti-Indian. Given the underlying irrationality and tribalism of India (read earlier updates for more on this), selected numbers are used to rationalize feelings and emotions. You see this everywhere in India: Science — very ironically — is used as a tool to rationalize superstitions and irrationalities.Who needs reality when we can exist in illusions? But even this illusion - that India has superseded the UK - might disappear once the reality of India’s demonetization sinks in and the rupee falls, which it likely will once the international media recognize that Modi went for demonetization not to reduce corruption, but to transform India into a police state. Modi’s interest was to increase tax collection, for the sake of tax collection, an approach in which rulers start to see themselves as all that matters, where citizens come to be seen as mere cogs in the service of the state. In Modi’s imagination, if you are not a part of the formal economy — as is the case with the vast majority of desperately poor Indians, perhaps close to a billion people — you don’t count. As they are not recorded as part of the formal economy, their pain and suffering does not count either. Indeed most of their suffering and pain goes unseen and unheard — it has for the last two millennia.

In big demonetisation blow to Narendra Modi government, almost all Rs 500, Rs 1000 notes deposited in banks - The Financial Express: Indians have deposited nearly all the currency bills outlawed at the end of the deadline last year, according to people with knowledge of the matter, dealing a blow to Prime Minister Narendra Modi’s drive to unearth unaccounted wealth and fight corruption, reports Bloomberg. Banks have received R14.97 lakh crore as of December 30, the deadline for handing in the old bank notes, the people said, asking not to be identified citing rules for speaking with the media. The government had initially estimated about R5 lakh crore of the R15.4 lakh crore rendered worthless by the sudden move on November 8 to remain undeclared as it may have escaped the tax net illegally. A full validation of the banknotes is a setback for Modi who had been relying on this move to burnish his administration’s corruption fighting credentials and boost its popularity ahead of key state elections. The anti-corruption measure has dented economic growth and forced millions into lengthy bank queues, though it remains broadly popular. “The prime minister had been ill advised and the government was not prepared to handle the situation,” said Nilakantha Rath, honorary fellow at the Indian School of Political Economy. “The government expectation has been belied.”

India's Cash Woes Are Just Beginning - “Give me 50 days, friends,” Indian Prime Minister Narendra Modi asked citizens after he canceled 86 percent of the country’s currency notes. After Dec. 30, if Indians saw his decision as flawed, he promised to “suffer any punishment.” But, he said confidently, if they could bear 50 days of disruption, they would have the “India of their dreams.” It is now January. While Modi’s deadline has passed, the pain hasn’t. Indeed, it may just be beginning: Measured by the purchasing managers’ index, or PMI, Indian manufacturing actually began to contract last month for the first time in all of 2016. This can’t be blamed on sluggish global demand; the equivalent measure from China suggested that manufacturing there is expanding quicker than expected. Indian companies are suffering from supply-chain disruptions and customers with no cash in their wallets. True, in some ways things aren’t as bad, at least in metropolitan India, as they were a few weeks ago. The lines at ATMs are shorter and the government even felt comfortable enough to raise the limits for ATM withdrawals from 2,500 rupees a pop to 4,500 rupees (from $37 to $66). But overall cash limits haven’t been eased; most Indians can still only withdraw 24,000 of their own hard-earned rupees -- a little over $350 -- a week, or 50,000 rupees if one has a business account. That’s simply not enough cash to keep supply chains going. Lines at ATMs thus aren’t the most useful indicator. Even if more cash is getting into the economy, the question is whether Indians are still artificially constrained in how much cash they can access. If so, things haven’t returned to “normal.” And the longer there’s a cash constraint, the larger the ripple effect on the economy.

 Politicians Can’t Use Religion, Caste to Seek Votes, Rules Supreme Court - The Supreme Court on Monday ruled that politicians cannot seek votes on the grounds of caste, creed or religion. The landmark judgment came while the court revisited a judgment from 1995 that equated Hindutva with Hinduism and called it a “way of life” and said a candidate was not necessarily violating the law if votes were sought on this plank. Several petitions filed over the years have challenged that verdict. “It is a fallacy and an error of law to proceed on the assumption that any reference to Hindutva or Hinduism in a speech makes it automatically a speech based on Hindu religion as opposed to other religions … (Hindutva and Hinduism) are used in a speech to emphasise the way of life of the Indian people and the Indian cultural ethos,” the 1995 judgment authored by Justice J.S. Verma had said. In its decision on Monday, a seven-judge constitution bench of the court ruled that the relationship between man and God is an ‘individual choice’ and the state cannot interfere in it, Economic Times reported. It added that an election is a secular exercise, and that should be reflected in the process that is followed. Four judges of the seven-judge bench headed by Chief Justice T.S. Thakur (who retires on Tuesday) ruled that “the constitution forbids state from mixing religion with politics”, Livemint reported. While Thakur and justices Madan B. Lokur, S.A. Bobde, and L. Nageswara Rao formed the majority and hence gave the ruling, the other three judges – Adarsh Kumar Goel, U.U. Lalit and D.Y. Chandrachud – dissented and said that the matter must be left to parliament.

UK, China, South Africa downgrade calls loom for Moody's | Reuters: Moody's is likely to make key rating calls on Britain, China and South Africa among others this year as rising political risk and debt levels push the number of countries on a downgrade warning back to a record high. From Europe's Brexit strains and looming elections to the battles of China, South Africa and Brazil to re-orientate their economies, not to mention Donald Trump's first months as U.S. president, the rating agency faces a daunting list of decisions. "A quarter of the sovereigns are on a negative outlook, which is the highest proportion we've had since 2012," the peak of the euro crisis, Alastair Wilson, Moody's managing director of sovereign risk told Reuters in an interview. The immediate pressure may not be quite so "acute" but the geographic spread of the negative ratings is now much wider, he said, adding: "I think in some ways (that) is more concerning." Top names on the watch list include Britain, which Moody's rates a notch below triple-A at Aa1 and euro zone heavyweight Baa2 Italy as well as Aa3 China, Baa2 South Africa, A3 Mexico and Ba2 Brazil. Moody's is due to review the UK on June 2 and then on September 22. By then formal EU divorce proceedings should have started and Wilson said the "mood music" of the talks should be enough to decide whether to strip London of its Aa1 rating. "Brexit is negative for the UK from a credit perspective, the question is how negative. We will only start to learn that over the next few months or year as the negotiations really pick up steam," he said. For Baa2 negative Italy, steps over the last couple of weeks to tackle its banking problems could be positive, though it may not be if more than the 20 billion euros set aside is needed

Colombia is not happy with video of UN staffers partying with FARC guerrillas : Colombians are getting fired up over a New Year’s Eve video that shows two UN staffers partying with the Marxist FARC guerrillas at a remote rebel camp in the arid northern part of the country. The video, which was shot by the EFE wire service and is now making national headlines, shows two men from the UN peace monitoring mission in Colombia, dressed in their trademark blue vests, dancing happily with female guerrillas. To some eyes, the video looks innocent and joyous—a celebration of peaceful times and a sign that the guerrillas are relaxing after five decades of war. But not everyone in Colombia sees it that way. The video has put the UN in hot water among conservative war hawks who are still grumbling over the peace deal and say the government is making too many concessions to the FARC. According to members of Colombia’s right-wing opposition, the dance video casts doubts on the UN’s ability to be an “impartial” observer of country’s peace process. In the coming months, UN teams will be tasked with collecting weapons from the guerrillas and making sure that the army and the rebels, stick to their ceasefire. “What a joke!” tweeted conservative congresswoman Maria Fernanda Cabal. “How can we trust in the UN’s delegates´ impartiality when they go partying with the FARC?”

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

Venezuela’s continuing currency crisis pushes country to the brink of collapse - An ongoing economic fiasco in Venezuela has left its population desperate. Lower oil prices and hyperinflation have had wide reaching consequences for the entire population. Here’s a summary of what Venezuela’s citizens have been dealing with in recent months:

  • Government imposed limits on food supplies mean that supermarket shelves are often empty
  • Food is transported by armed guard
  • Formal rolling electricity blackouts are the norm
  • Drought has hit the water supply, forcing some to steal it from local pools
  • Inflation will hit close to 500 percent by the end of 2016
  • The country is lacking 80% of the most basic medical supplies

Now a currency crisis is threatening to push the nation into further jeopardy — a remarkable situation given that Venezuela used to be known as the richest country in Latin America.  In early December, Venezuelan President Nicolás Maduro announced government plans to withdraw the largest banknote from circulation in an effort to stop “mafias” hoarding the currency. The 100 bolivar note – worth around three U.S. cents today – accounts for 77 percent of all currency in circulation. Maduro also closed the borders to stop people holding onto currency in neighboring countries. This decision caused widespread panic and confusion, as well as long queues at banks, ATMs and stores. Looting and violent clashes saw three people shot dead in one weekend alone.After protests, the government has backtracked, saying the 100-note will remain in circulation until January 20. It plans to deal with the crisis by introducing six new denominations, including a new 20,000 bolivar note.

In "Mysterious" Bond Sale, Venezuela Issues $5 Billion In Debt To Itself With China As Underwriter - While Venezuela CDS suggest the country's default odds remain well over 90%, and its currency on the black market continues to plunge into the abyss of hyperinflation, something odd happened today: Venezuela’s government issued $5 billion in dollar debt for the first time in more than five years, selling bonds in an opaque transaction to the state bank Banco de Venezuela SA and the central bank, Reuters and Bloomberg report. What makes this "unorthodox operation" particularly strange, is that the government is effectively selling debt, and raising dollar funds from itself - it owns both the Banco de Venezuela and the central bank; it is also strange in that the transaction, according to Reuters, does not immediately bring in new funds for the cash-strapped OPEC nation. State-run Banco de Venezuela bought the dollar-denominated notes issued on December 29, which had a 6.5% coupon and mature in 2036, in local currency at a heavily subsidized exchange rate of 10 bolivars per dollar, according to a Reuters source, meaning there was no net increase in hard currency for state coffers. The country's exchange control system sells dollars at 10 bolivars for preferential goods such as food and medicine and for 672 bolivars for other items. Dollars on the black market currently fetch close to 3,200 bolivars.

Venezuela's International Reserves Hit 21-Year End Low: -- Venezuela’s international reserves closed 2016 at $10.97 billion, the lowest year end close since at least 1995, reflecting the poor economic policies in 18 years of uninterrupted chavista government. Debt service of over $10 billion a year on a $125 billion foreign debt is what’s pushing the reserves down, Venezuelan economists say. “Basically, the government is burning through international reserves to pay for the debt,” tweeted economist Jesus Casique Thursday morning. Diminishing reserves, increasing foreign debt and liquidity have been concurrent, continuing and worrying trends during the 18 years of chavismo. Liquidity increased more than nine times between 2014 to 2016, from Bs1 trillion to almost Bs10 trillion. So, with rising liquidity due to high public spending, and low reserves, caused by service on very high debt, Venezuelans have less U.S. dollars backing more and more Bolivars. Venezuela started 2016 with reserves at $16.32 billion. That’s more than $5 billion gone in the past year, the majority of it from the sale of the gold (the same gold which Chavez made a big fuss about bringing back to Venezuela in 2011 and then had to be exported back to Switzerland). Venezuela started 2016 with $10.04 billion in gold. As of November, Venezuela reports that it had just $7.7 billion in gold left, and that is even with a year of rising gold prices. Venezuela's reserves are now down $31.25 billion from the high they reached at the close of 2008 of $42.226 billion during record high oil prices.

Bank of Mexico Sells Dollars as Peso Reaches New Lows - WSJ: —The Bank of Mexico stepped into the exchange market Thursday for the first time in almost a year to support the peso, which hit new lows against the U.S. dollar on fears that protectionist measures by the incoming administration of U.S. President-elect Donald Trump could hurt the country’s trade and investment. The foreign-exchange commission, formed by central bank and Finance Ministry officials, said the dollar sales were to provide liquidity and ease the exchange volatility of recent days, and kept open the possibility of additional interventions. A central-bank official confirmed the bank was active in the exchange market early Thursday. The peso sank to a new all-time low against the dollar this week after Ford Motor Co. said it was canceling a planned $1.6 billion investment in a new assembly plant in Mexico that had been criticized by Mr. Trump. The decision led to concerns that other investments could be discouraged, limiting an important source of foreign income in Mexico. The Bank of Mexico last intervened in the exchange market in February 2016, when it sold $2 billion after the peso reached new lows on the decline in oil prices, which affect Mexico’s trade balance and federal government revenue. At that time, the central bank also raised interest rates and suspended its scheduled dollar auctions in favor of spot interventions. Mexico’s foreign reserves ended 2016 at $176.5 billion, little changed from the end of 2015. The amount of the dollar sales will be reflected in next week’s reserves report. Thursday’s decision to intervene was justified as the peso is excessively undervalued, Goldman Sachs economist Alberto Ramos said in a note. He estimated that the real effective exchange rate—which takes into account a basket of currencies, trade and inflation—has depreciated 41% since mid-2013.

Biggest Economies Face $7.7 Trillion Bond Tab as Bull Run Fades - Governments of the world’s leading economies have about $7.7 trillion of debt maturing in 2017, with most facing higher borrowing costs as a three-decade bull market for bonds shows signs of running out of steam. The amount of sovereign bills, notes and bonds coming due for the Group-of-Seven nations plus Brazil, Russia, India and China will climb more than 8 percent from approximately $7 trillion in 2016, according to data compiled by Bloomberg. The first substantial increase since Bloomberg started collating the data in 2012 is led by China, where $588 billion of expected redemptions represents a 132 percent jump from 2016.Money managers including Pioneer Investment Management Ltd. and Old Mutual Global Investors Ltd. said they are either bearish or less positive on government bonds as they expect U.S.-led reflation and fiscal expansion to gradually replace monetary policy as a growth driver and push up yields further. “We do expect higher bond issuance in 2017 as a result of either direct fiscal stimulus or budget deficit slippage,” said Cosimo Marasciulo, Dublin-based head of government bonds at Pioneer, which manages about $250 billion. “This increased bond supply will be a headwind for investors already facing a boost to economic activity and inflation from this increased fiscal spending. Bond valuations are already looking unattractive from a fundamental viewpoint. We think there are dark clouds on the fixed-income horizon.” While signs of economic growth and rising inflation expectations have driven up yields on longer-dated bonds, they are still close to record lows. Even as investors demand a higher premium to hold these securities, that may not deter governments from issuing more long-maturity debt this year, according to Commerzbank AG, one of the biggest primary dealers of German government bonds. Austria, Italy and Spain were among European countries which last year sold bonds with the longest maturities they have issued on record. In developed economies, maturing debt will increase in the U.S., Italy, and Germany and fall in Japan, France and the U.K. The numbers do not take into account fresh budgetary needs.

Total global debt tops 325 pct of GDP as government debt jumps: IIF | Reuters: Global debt levels rose to more than 325 percent of the world's gross domestic product last year as government debt rose sharply, a report from the Institute for International Finance showed on Wednesday. The IIF's report found that global debt had risen more than $11 trillion in the first nine months of 2016 to more than $217 trillion. The report also found that general government debt accounted for nearly half of the total increase. Emerging market debt rose substantially, as government bond and syndicated loan issuance in 2016 grew to almost three times its 2015 level. China accounted for the lion's share of the new debt, providing $710 million of the total $855 billion in new issuance during the year, the IIF reported. Higher borrowing costs in the wake of the U.S. presidential election and other stresses, including "an environment of subdued growth and still-weak corporate profitability, a stronger (U.S. dollar), rising sovereign bond yields, higher hedging costs, and deterioration in corporate creditworthiness" presented challenges for borrowers, the IIF said in its report. Additionally, "a shift toward more protectionist policies could also weigh on global financial flows, adding to these vulnerabilities," the IIF said. "Moreover, given the importance of the City of London in debt issuance and derivatives (particularly for European and EM firms), ongoing uncertainties surrounding the timing and nature of the Brexit process could pose additional risks including a higher cost of borrowing and higher hedging costs."

Israeli Police Enter Netanyahu's Home For Questioning Over Corruption AllegationsAs we detailed last week, on Monday, December 26th, Israeli police announced that they are absolutely convinced that a criminal investigation will be opened in the next few days due to new documents that were recently received in a special inquiry that began about 9 months ago. The offenses that Netanyahu allegedly will face will be bribery and aggravated-fraud. In June it was reported that police had recently started their secret investigation, with demand that no details be leaked to the media. And today, as The Telegraph reports...Benjamin Netanyahu, Israel’s prime minister, is being questioned by detectives on suspicion of illegally accepting valuable gifts from prominent businessmen in a scandal that is roiling Israeli politics.Police officers came to the prime minister’s official residence in Jerusalem on Monday evening to question him about claims that he took designer suits and overseas trips his son from at least two businessmen.Mr Netanyahu denies any wrongdoing and has not been charged but the criminal investigation into him is one of several probes swirling around him and his family.His wife, Sara, was questioned by police in a different case just weeks ago. Police probes against politicians are common in Israel and Mr Netanyahu’s predecessor, Ehud Olmert, is in prison for corruption. Ariel Sharon was questioned by police over accusations he accepted bribes but the case was dropped and he was never charged.

 Hundreds Of US Tanks Arrive In Europe To Support NATO Anti-Russian Buildup - As we reported yesterday, Lithuania confirmed the presence of U.S. special forces inside its territory, stating the deployment’s purpose is to train local forces and act as a deterrent against Russian aggression. Supposedly, the move is in response to a "escalation" by Vladimir Putin, who has been deploying nuke-ready missiles in the Russian province of Kaliningrad located in the heart of central Europe. This move has prompted the neighboring Baltic states to become “highly concerned” about Russian military activity. Furthermore, sometime during the spring of 2017, NATO is expected to send battalions of 800 to 1,200 troops to each of the Baltic States and Poland. The mainstream media has even dubbed NATO’s recent buildup the alliance’s “biggest military buildup on Russia’s borders since the Cold War.” Even Great Britain will be sending fighter jets, as well as troops to Romania in order to counter Russia in the region. Over the last several years, Russia has made it abundantly clear in the past that its deployment of missiles is a deterrent against NATO expansion along its borders, in what is effectively a cat-and-mouse game that continues to be played with catastrophic consequences, and which neither side can win. Meanwhile, as part of the latest conventional arms race, on Friday hundreds of U.S. tanks, trucks and other military equipment arrived by ship in Germany to be transported by rail and road to eastern Europe as part of a NATO buildup that has drawn Russia's ire. According to Reuters, two shiploads arrived in the northern port of Bremerhaven and a third was due in a few days, bringing the fleets of tracked and wheeled vehicles for use by around 4,000 U.S. troops being deployed for exercises in NATO states near Russia.

Building Totalitarianism in Europe – The Last Coup of Victoria Nuland - Victoria Nuland, the US Assistant Secretary of State, did not spend much time and energy with Christmas and New Year celebrations this year. She has another very urgent and pressing problem to solve, before leaving the State Department, and this is the “Cyprus conflict”. The way she wants to solve this conflict is by transforming a second member of the EU, after Greece, into a protectorate. As the proposed solution for Cyprus is highly unstable, powers outside the EU will be provided also with a bomb inside it, that is with the possibility of provoking a Bosnian-type conflict inside, not outside EU borders. In the same time she wants also to get Turkey admitted immediately to the EU, by the window of the “Cypriot settlement”. By virtue of the provisions of the “Cyprus settlement” under consideration now, Turkey is invested after January 12 with many of the rights and powers (and none of the obligations) of the member-states. It will also legalize in Geneva, its military presence and its right to intervene militarily inside the European Union. Such an outcome of the Geneva conference will have enormous strategic consequences for Europe and for the Middle East, transforming the whole “Eastern Mediterranean”, a sea lane of vital importance, into a kind of “Mare Nostrum” of the “Naval Forces”, excluding from there any “foreign” strategic influence (German, Russian or Chinese) and laying one more foundation for encircling Russia from the South with a kind of “security belt” and trying to hinder its access to the “warm seas”, a centuries long dream of British imperial planners. It will constitute the deeper change of the Mediterranean strategic landscape, since the eruption of the so-called Eastern Question or, at least, since the Greek national revolution, two centuries ago.

 Cyprus: Νuland and Anastasiades. What is going on? -- There is a number of articles published in the Cypriot, Greek and Russian media, claiming that the President of Cyprus Nicos Anastasiades himself is under “blackmail” from US Assistant Secretary of State, to adopt the position the US administration wants him to adopt in the Cyprus talks. Most of those publications are based on articles written by an American journalist, John Helmer, based in Moscow. We are not in a position to know the extent to which everything is accurate in the articles written by Mr. Helmer. But, as there was not any kind of serious answer to those allegations, in spite of publications asking for such an answer, and exactly for that reason, we reproduce here the last article of Helmer for our readers to be informed. We hope that some of the persons involved will explain what is happening here.

Embattled Bank of Cyprus pays off bailout loan – Bank of Cyprus, the Mediterranean island’s largest lender and one of the largest casualties of the financial crisis, yesterday (5 December) announced it had paid back in full the €11.4 billion in Emergency Liquidity Assistance it received in an international bailout. “Bank of Cyprus announces that it has today fully repaid the ELA funding it has been receiving from the Central Bank of Cyprus,” the bank said in a statement. It said it was “another significant milestone in the journey back to strength since 2013”. That €11.4 billion emergency aid was equivalent to over half the country’s gross domestic product. In March 2013, Cyprus clinched a €10 billion loan from the European Union and International Monetary Fund to bail out its troubled economy and oversized banking system.Under the terms of the deal, the government was required to close the island’s second-largest bank, Laiki, and impose a 47.5% haircut on deposits above €100,000 at Bank of Cyprus. That decision was at the heart of a European Court of Justice case last year, where disgruntled investors took the so-called troika (European Commission, International Monetary Fund and European Central Bank) to court. The Luxembourg judges dismissed the case but ruled that anyone who could prove that their fundamental rights had been infringed by austerity policies could sue the tripartite committee.

Erdogan Vows to ‘Destroy Threats’ After Istanbul Gunman Kills 39 - Turkey’s president vowed to “destroy threats” targeting the nation after a gunman opened fire inside a popular Istanbul nightclub, killing at least 39 people, including 15 foreigners -- an act of terrorism that has become grimly familiar in Turkey. The assailant escaped and a manhunt has been launched, Turkish Interior Minister Suleyman Soylu said on Sunday. No one has claimed responsibility for the attack, the latest in a string of assaults that have multiplied as Turkey steps up its war against Islamic State and Kurdish militants. Prime Minister Binali Yildirim said the gunman left his rifle at the scene before fleeing. The assailant killed a police officer guarding the entrance to the Reina nightclub in the Ortakoy entertainment district shortly after midnight, then raked the crowd of revelers with bullets, Soylu said in comments cited by state-run Anadolu Agency. Health Minister Recep Akdag said 65 people were wounded, with four in critical condition, of the hundreds enjoying a New Year’s Eve celebration. Foreigners killed included seven Saudis, four Iraqis, two Indians, two Tunisians and others from Canada, Israel, Syria and Libya among others, DHA news agency said. One victim was an Israeli girl in her late teens, the government in Tel Aviv said.

In Turkey, U.S. Hand Is Seen in Nearly Every Crisis - Turkish officials accused the United States of abetting a failed coup last summer. When the Russian ambassador to Turkey was assassinated last month, the Turkish press said the United States was behind the attack. And once again, after a gunman walked into an Istanbul nightclub early on New Year’s Day and killed dozens, the pro-government news media pointed a finger at the United States.“America Chief Suspect,” one headline blared after the attack. On Twitter, a Turkish lawmaker, referring to the name of the nightclub, wrote: “Whoever the triggerman is, Reina attack is an act of CIA. Period.” Turkey has been confronted with a cascade of crises that seem to have only accelerated as the Syrian civil war has spilled across the border. But the events have not pushed Turkey closer to its NATO allies. Conversely, they have drifted further apart as the nation lashes out at Washington and moves closer to Moscow, working with the Russian president, Vladimir V. Putin, to secure a cease-fire in Syria. One story in the Turkish press, based on a routine travel warning issued by the American Embassy in Turkey, was that the United States had advance knowledge of the nightclub attack, which the Islamic State later claimed responsibility for. Another suggested that stun grenades used by the gunman had come from stocks held by the American military. Still another claimed the assault was a plot by the United States to sow divisions in Turkey between the secular and the religious. Rather than bringing the United States and Turkey together in the common fight against terrorism, the nightclub attack, even with the gunman still on the run, appears to have only accelerated Turkey’s shift away from the West, at a time when its democracy is eroding amid a growing crackdown on civil society. All of this is a reflection, many critics say, of what they call the paranoia and authoritarianism of Turkey’s president, Recep Tayyip Erdogan, whose leadership has so deeply divided the country that, instead of unifying to confront terrorism, Turkish society is fracturing further with each attack.

Number Of Migrant Deaths 2016 Highest Ever Recorded: 2016 has turned out to be one of the deadliest years for migrants on the move between different regions of the world in recent history. According to the International Organization for Migration (IOM), 7,189 migrants and refugees lost their lives or remain missing on world migratory routes in total. One area of the world has proven most deadly: the Mediterranean. There alone, 4,812 people were killed this year. On average, 20 migrants died per day in 2016, which leads the IOM to believe that "the deaths of another 200-300 men, women and children well may be recorded worldwide before 2016 comes to an end." This chart shows the number of deaths among migrants on world migratory routes worldwide in 2016.

How the Attack Has Changed the Country - Der Spiegel - In the hours of uncertainty following the attack on the Christmas market at Berlin's Breitscheidplatz square on the evening of Dec. 19, two methods of viewing the incident quickly became apparent. There was the reflexive, impetuous reaction and the reflective, circumspect approach.  The impetuous took to their computers almost before the truck driver had finished cutting his deadly swath through the Christmas market stalls. Regardless of what was really going on in Berlin, those occupying a certain niche on the web were certain: "Islam-terror" had reached Berlin and a "Merkel Mohammedan" had killed innocent people. Muslims, it was claimed, were dancing for joy in the streets of immigrant neighborhoods like Hamburg-Wilhelmsburg and Berlin-Neukölln. Dec. 19, 2016 was the "beginning of the end" of the Christian West, they said, symbolized by the Christmas tree that had been run over in front of the Kaiser Wilhelm Memorial Church.  In those minutes -- during which the impetuous transformed hunch into certainty and certainty into rage -- the circumspect were just beginning to comprehend what had just happened on Breitscheidplatz. They saw the dead and injured next to a truck, which had been turned into a murder weapon. They knew absolutely nothing for sure. They knew it would take several days for even the most urgent questions to be answered with certainty -- and weeks, if not months, to clear up the underlying questions. And there was time needed to mourn the dead. "Pray?! Do Something!!" the impetuous tweeted. They aren't interested in facts. Emotions are enough. Even before the attack, bridging the gap between the circumspect and the impetuous had become difficult. The Berlin attack has now demonstrated just how little overlap there is between these two parallel worlds.

 Power & Profit Fuel War on Cash in Europe - Don Quijones - In the wake of the attack on the Christmas market in Berlin in December, the European Commission granted customs and police authorities sweeping new powers to seize cash or precious metals carried by “suspect individuals” entering the EU. People carrying more than €10,000 euros in cash already have to declare this at customs when entering the EU. The new rules would allow authorities to seize money (or precious metals or bitcoin) below that threshold “where there are suspicions of criminal activity.”It was the latest step in the War on Cash. The powers that want to kill off cash include private and central banks, fintech firms, Silicon Valley magnates like Tim Cook and Bill Gates, telecom behemoths, credit card giants, assorted NGOs, a bewildering alphabet soup of UN agencies and many national governments. They all have their own disparate motives for taking out physical money.They already have vital technological and generational trends firmly on their side, as well as the the added bonus of widespread public ignorance, apathy, and disinterest. As such, cash’s days as a commonly used payment method may well be numbered anyway. But it could take decades for it to die a natural death, if indeed it does. Cash’s enemies would much rather accelerate its demise.In Europe authorities continue to escalate their War on Cash by passing increasingly draconian laws that make it harder and harder for people — law-abiding or not — to hold or transact with physical currency. Early last year the European Central Bank announced its decision to end the production and issuance of the €500 note from 2018. Allegedly the currency of choice for organized crime outfits around the world, the so-called “Bin Laden bill” accounts for close to a third of the total amount of cash in existence in the Eurozone. In Greece, the government has taken a somewhat different tack, by fiscally punishing those who use cash for all their daily transactions and rewarding those who don’t. To qualify for tax credits each citizen must spend a certain fraction of his or her earned income using electronic money. For incomes of less than €10,000 the minimum threshold is 10%, though expenditure on utilities, rent, phone bills or loan repayment do not count. The limit rises to 15% for incomes of between €10,000 and €30,000 and reach as high as 20% for incomes of over €30,000. These kinds of (dis)incentive schemes are going to become an increasingly common tactic in the War on Cash.

Deutsche Bank chairman rules out European merger: Frankfurter Allgemeine | Reuters: Deutsche Bank Chairman Paul Achleitner has ruled out a European merger or a state bailout after the lender's mortgage settlement with the U.S. Department of Justice, Frankfurter Allgemeine Sonntagszeitung reported. The bank, Germany's biggest, last week announced a $7.2 billion settlement with the U.S. Department of Justice over its sale and pooling of mortgage securities in the run-up to the 2008 financial crisis. "The management board in principle looks at everything that could help the business," Achleitner said in an interview with the weekly newspaper published on Sunday. "At the moment, however, enthusiasm for a pan-European merger is muted as we have other priorities," he said, when asked why Deutsche does not merge with Italy's UniCredit (CRDI.MI) or another lender. Deutsche, which is trying to simplify its operations to make it more efficient, will keep its investment banking operations and ensure they comply with political and regulatory rules, Achleitner said. Supervisors including Germany's Bundesbank and the European Central Bank have called for more consolidation in the banking sector, saying there are still too many banks despite a steady fall in the number of branches since the 2008 financial crisis. Higher capital requirements would put European banks at a competitive disadvantage to their U.S. rivals, Achleitner said, referring to efforts by the Basel committee of supervisors to tighten bank capital rules to avoid a repeat financial crisis.

 German Inflation Unexpectedly Hits Three Year High, Driven By Rising Energy, Food Prices --  In what may be both good and bad news for the ECB,  German inflation jumped more than expected in December, hitting the highest level in more than three years, according to preliminary data. German consumer prices, harmonized with other European countries (HICP), rose by 1.7% on the year, more than double the November increase of 0.7%, the German Federal Statistics Office said. This was the highest annual inflation rate since July 2013 and stronger than the consensus forecast of 1.5%.  On a non-harmonized basis, German annual inflation picked up to 1.7 percent after 0.8 percent in November; prices rose 0.7% on the month, also higher than the 0.6% expected by consensus.Rising energy prices and higher food costs were the strongest drivers behind the overall increase, a breakdown of the non-harmonized data showed. The surge in energy p rices will only lead to more inflationary pressure now that the lowest prices of 2016 have been "anniversaried," A strong recovery in German inflation would give conservatives like Bundesbank's President and ECB rate-setter Jens Weidmann more scope to argue for winding down the ECB's bond-buying program more quickly, Reuters notes. For Mario Draghi it will be good news in the he can claim victory over deflation; on the other hand it will mean an even faster arrival of more tapering and potentially rate hikes, a process which would likely lead to the next deflationary slide following a spike in bond yields which price out ECB bond market intervention.

 Draghi’s German Problem Flares Up as Inflation Surge Stirs Anger --Mario Draghi’s German problem has come back to haunt him. In a week that revealed a jump in inflation in Europe’s largest economy, commentators are lining up to urge the European Central Bank president to end his ultra-loose monetary policy. From the allegation that savers face devastation to Bild newspaper’s call to “Raise rates now!” Draghi is once again facing the wrath of Germans fretting that the guardian of price stability will let them down. “The debate is going to get louder, particularly in Germany where people are bred to fear inflation,” said Stefan Kipar, an economist at BayernLB. “But one mustn’t forget that the ECB is setting monetary policy not only for Germany, but for the whole euro area, and that even in Germany the underlying price-pressure remains moderate and inflation should stay below 2 percent in the upcoming year.”As Germans started the new year, Tuesday brought a reminder of just how strong their economy is looking. The number of jobless fell more than forecast in December, with the unemployment rate holding at a low of 6 percent, and inflation posted a record increase to 1.7 percent from 0.7 percent. While surging energy costs drove much of the price gains, food and goods also got more expensive. Factory-orders data published Friday pointed to a revival of manufacturing demand. Within an hour of the inflation data, Clemens Fuest, president of the Munich-based Ifo research institute, called on the ECB to consider ending its bond-buying in March. The Governing Council decided last month to extend the program until at least the end of 2017.

 Iceland's 'crazy' year ends without a government - (AFP) - Iceland is ending an eventful year in a political quagmire, left without a government for two months after the Panama Papers scandal and a snap election reflecting deep divisions in the island nation. "In recent years we thought we were seeing the craziest, but we were proven wrong every time — Iceland found ways to be even crazier," a parliamentary assistant from the Icelandic opposition said on April 6, seeing a government in tatters hesitate on its next move. Former Prime Minister Sigmundur David Gunnlaugsson had resigned the day before over revelations of his holdings stashed away in a tax haven. This prompted demonstrations for six consecutive days with protesters shouting "Elections right away! Elections right away!" while striking metal fences in front of Iceland's parliament. The anti-establishment Pirate Party was pushing at the gates of power -- but they never opened. The government said it would wait six months to hold a snap election, triggered by the latest scandal in a country that had seen its share already after the 2008 financial meltdown. The outcome in October dashed the hopes of a clear-cut exit to the political crisis. Neither the left, the right, nor the center had a majority. Efforts to form a coalition were paralyzed by everyone's refusal to deal with Gunnlaugsson's centrist Progressive Party, which won eight of the 63 seats. Journalist Johannes Kristjansson, the only Icelander to have access to the Panama Papers, had been bewildered when he saw how many politicians were listed in the documents. Two months after the election he commented: "They were all re-elected." Icelandic Finance Minister Bjarni Benediktsson, who had set up an offshore company in the Seychelles, even saw his party, the Conservatives, win the most seats, with 21. Gunnlaugsson is still an MP.

In 7th Year Of Austerity, Greek Hospitals Have Become "Danger Zones" It is not a secret and it is not new that public hospitals in Greece collapsed. As Keep notes, the first budget cuts imposed with the first bailout agreement affected the public health. Seven years later, the situation goes from bad to worse in fast speed. The austerity freezing of hiring (1:7) ended up in severe shortages in medical and paramedical personnel. The sharp expenditure cuts deprive hospitals of spare parts and essential material. KTG reported many times in the past about the situation in Greece’s hospitals, the deficiencies in personnel and material, incl bed sheets, the never ending bureaucracy. Now doctors and workers at the public hospitals mention a new phenomenon: the increasing risk of death due to inner-hospital infections.Speaking to UK’s Guardian about the Greek public health meltdown, doctors and personnel say that hospitals have become “danger zones”.Alexis Tsipras’s austerity drive has seen hospitals become ‘danger zones’, doctors say, with many fearing worse is to come.“In the name of tough fiscal targets, people who might otherwise survive are dying,” said Michalis Giannakos who heads the Panhellenic Federation of Public Hospital Employees. “Our hospitals have become danger zones.”“Frequently, patients are placed on beds that have not been disinfected.Staff are so overworked they don’t have time to wash their hands and often there is no antiseptic soap anyway.”The report speaks of “rising mortality rates, an increase in life-threatening infections and a shortage of staff and medical equipment are crippling Greece’s health system as the country’s dogged pursuit of austerity hammers the weakest in society”.

German Ifo think tank chief says Italy risks quitting euro zone | Reuters: The head of Germany's Ifo economic institute believes Italians will eventually want to quit the euro currency area if their standard of living does not improve, he told German daily Tagesspiegel. "The standard of living in Italy is at the same level as in 2000. If that does not change, the Italians will at some stage say: 'We don't want this euro zone any more'," Ifo chief Clemens Fuest told the newspaper. He also said that if Germany's parliament were to approve a European rescue program for Italy, it would impose on German taxpayers risks "the size of which it does not know and cannot control." He said German lawmakers should not agree to do this. Italy is not seeking such a rescue program. The government in Rome is focusing on underwriting the stability of its banking sector, starting with a bailout of Monte dei Paschi di Siena

Marine Le Pen Wants France Out Of The Euro, Will Redenominate French Debt In New Currency -French presidential candidate and National Front leader, Marine Le Pen, said she wants to take France out of the euro, reiterating comments made the day before, and - taking a page out of the Yanis Varoufakis Grexit negotiating strategy playbook - added she wants to redenominate French government debt in a new national currency.“More and more European citizens realize their economies have been suffocated by the euro,” she told reporters on the sidelines of a press conference in Paris quoted by Bloomberg.Additionally, following the British example. Le Pen said that before leaving the euro, she would hold a referendum on France’s relations with the European Union and has pledged to hold such a vote within six months of an election victory.“A national currency could be linked to a common currency,” she added, without giving further details on the connection. She said she could see the EU setting up another currency like the ECU, or European Currency Unit, which the bloc used for internal accounting purposes before the euro was introduced in 1999.As Politico noted overnight, the National Front chief has long called for “Frexit,” a French withdrawal from the European Union. This would happen after a referendum on EU membership if she was elected next May (Le Pen has suggested that she would step down if the French rejected her preferred outcome).But this time she said that after a referendum, Europe should retain a common currency, the euro, in parallel to the French franc. It was the first time Le Pen had recognized, however implicitly, that withdrawing from the euro zone unilaterally could bring about currency fluctuations, which the ECU was designed to prevent. Most French voters do not support withdrawal from the European Union, according to polls in 2016. “I want a national currency with the euro as a common currency,” Le Pen said on BFMTV. “What was the ECU [European Currency Unit]?” Well, among other things, it was a fixed-exchange rate precursor to the Euro, so that may not be the best option.

Marine Le Pen asked to repay €9 million bank loan: reports - French National Front leader Marine Le Pen was told to repay €9 million of a loan from a Russian-based bank, according to media reports. The Russian Bank Deposit Insurance Agency is calling in part of the loan granted by the First Czech-Russian Bank, which has since been dissolved, Le Monde reports. The National Front is operating thanks to two loans — one for €9 million and one for €2 million — from the bank dating from 2014. The paper said that in late December, the insurance authority told Russian news agency RNS it had started legal proceedings for reimbursement, without specifying when such moves had begun. The far-right party has been struggling to raise the €20 million it needs to fund next year’s presidential and legislative election campaigns since the Russian-backed bank went under. Le Pen last month borrowed €6 million from a company owned by her father, Jean-Marie Le Pen, that will be used mostly to cover the costs of the presidential campaign.

French workers get 'right to disconnect' from emails out of hours - BBC News: France employees are getting the legal right to avoid work emails outside working hours. The new law, which has been dubbed the "right to disconnect", comes into force on 1 January. Companies with more than 50 workers will be obliged to draw up a charter of good conduct, setting out the hours when staff are not supposed to send or answer emails. France has a working week of 35 hours, in place since 2000. Supporters of the new law say that employees who are expected to check and reply to their work emails out of hours are not being paid fairly for their overtime, and that the practice carries a risk of stress, burnout, sleep problems and relationship difficulties. The measure is part of a set of labour laws introduced in May. It was the only one of the laws - which also made it easier for firms to hire and fire employees - that did not generate widespread protest and strikes.

Finland is giving 2,000 citizens a guaranteed income - Jan. 2, 2017: Finland has started a radical experiment: It's giving 2,000 citizens a guaranteed income, with funds that keep flowing whether participants work or not. The program, which kicks off this month, is one of the first efforts to test a "universal basic income." Participants will receive €560 ($587) a month -- money that is guaranteed regardless of income, wealth or employment status. The idea is that a universal income offers workers greater security, especially as technological advances reduce the need for human labor. It will also allow unemployed people to pick up odd jobs without losing their benefits. The initial program will run for a period of two years. Participants were randomly selected, but had to be receiving unemployment benefits or an income subsidy. The money they are paid through the program will not be taxed. If the program is successful, it could be expanded to include all adult Finns. The Finnish government thinks the initiative could save money in the long run. The country's welfare system is complex and expensive to run, and simplifying it could reduce costly bureaucracy. The change could also encourage more jobless people to look for work, because they won't have to worry about losing unemployment benefits. Some unemployed workers currently avoid part time jobs because even a small income boost could result in their unemployment benefits being canceled.

Finland introduces basic income for unemployed - Al Jazeera: Finland has become the first country in the world to pay a basic income to randomly picked citizens on a national level in an experiment aiming at dismissing poverty, motivate people to join work force and decrease unemployment.The experiment is conducted with 2,000 randomly picked unemployed participants between the ages of 25 and 58. For two years, participants from different parts of the country will receive an unconditional monthly tax-free basic income of 560 euros ($586).The plan aims to find ways to reshape the social security system in response to changes in the labour market, according to the website of the Social Insurance Institution or Kela, which manages the project. It also seeks to reduce the bureaucracy and simplify the complicated benefits system, Kela says. The scheme, which was launched on January 1, hopes to create an incentive for more Finns to work, since the fear of losing welfare benefits make many citizens act picky about the job they would accept.Many Finns stay out of the job market for years as they do not want to lose their welfare benefits.Professor Olli Kangas from Kela says that there are many incentive traps in the present system that are caused by a number of income-tested benefits paid on top of each other."In the current system with many strictly income-tested benefits, people may end up in situations where work does not pay enough, making them reluctant to get back to the job market with short-term or low-income jobs" he told Al Jazeera.

 Old lady denied exchanging life savings in old banknotes for new issue; could not prove innocence of money; dies - Ethel Hülst had saved for some old-age luxury all her life, cash-in-mattress style, and wanted to exchange her old-issue-note savings for new-issue banknotes. Faced with demands of proving where her cash came from, she could not produce receipts that would have been older than a decade. The Central Bank denied her an exchange of issue, having her life savings expire into invalidity. The Swedish Central Bank is in the middle of an exchange of issue, changing old-issue banknotes and coins for new issue. This is something that happens regularly in most or all monetary systems – an upgrading of the banknotes and coins in circulation, supposedly done via a fair and controlled process. But when Ethel Hülst, 91, tried to exchange her life savings in cash of 108,450 Swedish krona ($12,000; €11,300), she was denied the new issue in exchange for her old notes. The justification was that she was unable to prove that the money had been earned in an honest way, as defined by the government, with the burden of proof on old Ethel. These are rules against ordinary Joes and Janes supposed to prevent money laundering and terrorism, which accomplish mostly nothing at the same time as the biggest banks are the biggest perpetrators (in the scale of billions-with-a-B) – the same banks that are supposed to enforce these petty rules onto small savers. Of course, the rules weren’t in place when Mrs. Hülst started her life savings, so how could she possibly know she would have needed receipts from the time in question, twenty or forty or fifty years down the road? That was absolutely inconceivable at the time, that the government would not honor its own cash.  “She was asked if she’s been laundering money or involved in organized crime. I think our elderly, just like my mother, get rather offended by the government assuming them criminal”, says Anders, her next of kin. “She never afforded herself anything, not even a hearing new hearing aid. Saving what was possible for a rainy day was almost a reflex.”  Sadly, shortly after the bank had refused to honor her life savings, and the administrative court sided with the bank in the matter of refusing her now-invalid banknotes, she passed.

May Calls for Unity in 2017 as Divided U.K. Prepares for Brexit - Prime Minister Theresa May said opportunities for the U.K. are “greater than ever” and called for the country to unite in 2017 as she prepares to formally trigger two years of talks to withdraw Britain from the European Union. In a New Year’s message, the premier said she’ll bear in mind the interests of both the 52 percent of voters who backed Brexit and the 48 percent who opposed it when she negotiates a deal with her 27 EU counterparts. May quoted murdered opposition Labour Party lawmaker Jo Cox, who said: “We are far more united and have far more in common than that which divides us.”   “We all want to see a Britain that is stronger than it is today; we all want a country that is fairer so that everyone has the chance to succeed. We all want a nation that is safe and secure for our children and grandchildren,” May said in the video message. “When I sit around the negotiating table in Europe this year, it will be with that in mind -- the knowledge that I am there to get the right deal, not just for those who voted to leave, but for every single person in this country.”  May aims to invoke Article 50 of the EU’s Lisbon Treaty, the formal trigger for two years of divorce proceedings, by the end of March. Polls show few Britons have changed their minds on Brexit since the June referendum, and the prime minister is under pressure from “Leave” campaigners who want a clean break with the EU and “Remain” supporters who want to retain close ties with the bloc. May said she’ll aim to remove barriers to aspiration and secure a “better deal” for working people. At the same time, she said the country’s “shared interests and ambitions can bring us together.”

Sir Ivan Rogers quits: Britain’s EU ambassador attacks ‘muddled’ thinking over Brexit in scathing resignation letter --The UK's top diplomat in the EU has made a veiled attack on Britain's Brexit negotiations in a lengthy resignation email to staff. Sir Ivan Rogers urged his colleagues in Brussels to challenge "muddled thinking and...speak truth to power" as he quit just weeks before Theresa May is due to trigger the process of leaving the union. Sir Ivan called on his staff to challenge "ill-founded arguments" and said that "serious multilateral negotiating experience is in short supply in Whitehall". The ambassador also said that ministers needed to hear "unvarnished" and "uncomfortable" views from Europe. In what many will interpret as implicit criticism of Ms May, he went on to say in the final paragraphs of his email: "I hope you will continue to challenge ill-founded arguments and muddled thinking and that you will never be afraid to speak the truth to those in power. I hope that you will support each other in those difficult moments where you have to deliver messages that are disagreeable to those who need to hear them."His resignation has been branded a “wilful and total destruction” of expertise, amid fears he has been “hounded out” by hostile pro-Brexiteers. Politicians warned his expertise in Brussels would be very difficult to replace at such short notice.

Sir Ivan Rogers’ sudden departure is a hit to Theresa May’s Brexit plans -That he was due to leave in November does not soften the blow to Theresa May, nor diminish the embarrassment to her government. This year is all-important to her long-term Brexit strategy, and it has begun with an abrupt departure that she could well have done without.Consider: the PM and her ministers await the supreme court’s ruling on parliament’s right to debate article 50 – which she has repeatedly pledged will be triggered before the end of March. Before Christmas, she indicated to the Commons liaison committee that she would be setting out a framework for Britain’s departure from the EU in the first months of 2017 – presumably, though not necessarily, in a speech. Her new year message emphasised the need for national unity, as remainers and Brexiteers continue to squabble and fragment into groupuscules. Behind the scenes, No 10 officials have been engaged in heavy lifting to prepare for the official two-year negotiations with our soon-to-be former EU partners. To this end, the talented British ambassador to Brazil, Alex Ellis, takes over as director general in the Department for Exiting the European Union on 19 January. By temperament, May is a politician who likes smooth surfaces and calm deliberation. In this context, the sudden departure of Rogers is a brick thrown into the pond of her serenity.Westminster conspiracists are busily concocting elaborate theories about “Ivexit”. Some say that Rogers signed his own P45 when he told ministers last year that a new trade deal with the EU might take a decade to conclude. Others whisper that personality was more important in this case than policy: that Sir Ivan, appointed by Cameron in 2013, could not get on with the new No 10 and would never have lasted until November. The truth probably lies somewhere between the two. A diplomat so well-versed in the silken culture and mores of Brussels – and so at home there – was always going to clash with a government embroiled in the atavistic politics of Brexit.

UK diplomats flee ‘sinking ship’ in Brussels - It’s going to be a tough year for British diplomats in Brussels. Morale is low, and the ranks of the U.K.’s representation to the EU are increasingly threadbare. Planned new positions have been abolished, vacant positions are proving hard to fill and the two top jobs are now empty.Prime Minister Theresa May’s government has canceled at least 24 EU-related jobs since the referendum, including nine posts at its Brussels representation, also known as UKREP.But Brexit campaigners want more scalps. Douglas Carswell, UKIP’s only member of the British parliament, tweeted Wednesday: “I doubt that a single civil servant working at UKREP or the Foreign Office voted for Brexit.”Former UKIP leader Nigel Farage wants the resignation of Ivan Rogers, the U.K.’s ambassador to the EU, to be the first of many. And former cabinet minister Iain Duncan Smith told BBC radio that Rogers had leaked confidential information that embarrassed ministers, suggesting Rogers could no longer be trusted.The BBC reported in December that Rogers had warned London that Brexit could take as long as 10 years, and some Tories seized on this as proof he is not loyal.  At UKREP, Rogers’ resignation has left staff members “reeling,” according to one British diplomat. “The next appointee, whoever that will be, will have their work cut out with an extra layer of public pressure which won’t make it any easier,” the diplomat said. Another described the situation as “a sinking ship.” On Wednesday evening, Tim Barrow, a career diplomat, was named as Rogers’ replacement.

Cameron’s failure looms over May’s Brexit task -- As Theresa May gears up for the start of Britain’s exit talks from the EU, the travails of her predecessor are casting a long shadow over her task. Almost a year after David Cameron renegotiated Britain’s membership of the bloc — an effort that ultimately left voters unconvinced — the former prime minister’s perceived failure has taken on outsize influence over the UK’s negotiating strategy for Brexit. Driven by the regrets of Mr Cameron’s political aides and Mrs May’s own view of its flawed execution, a first take of history has emerged in Downing Street that draws three rough lessons: do not take no for an answer, do not bank on Germany, and do not worry too much about the City of London. Whether those conclusions are valid could have far-reaching implications. For now the view has been further reinforced in government by the abrupt resignation of Sir Ivan Rogers, Britain’s EU ambassador during the talks, criticising “muddled thinking” of ministers and some officials. Cast by critics as a tireless defender of Brussels’ legal dogma, Sir Ivan is accused of trimming Mr Cameron’s ambitions and leaving him with a deal that was unsellable to voters. Iain Duncan Smith, a Brexit-backing cabinet minister during the renegotiation, described Sir Ivan’s exit as “sour grapes” and called for a civil service able to “tear up the rule book”. Yet for many closely involved in the 2014-15 talks, the idea that Mr Cameron could have got more is treated with some derision. One senior negotiator at the time called such a notion “bunkum”. Asked whether more concessions were possible, Jean-Claude Piris, the EU’s former top lawyer, said “a gigantic No” for both political and legal reasons.

Single Market Access Not for Sale, Ex Top EU Official Warns U.K -- Britain must choose whether to be in or out of the single market when it pulls out of the European Union because piecemeal access isn’t “for sale,” said Jonathan Faull, who retired this month from his post as one of the bloc’s former top civil servants. “I don’t think it is a question of buying your way somehow into the single market,” Faull told BBC television’s “Newsnight” program in an interview aired late Thursday. “You’re a member of the single market either as a member of the European Union or the European Economic Area, or you’re a foreign country outside it and you conclude agreements with the European Union if you want to and it wants to regarding the way in which your goods, services, capital and people move around.” The warning from Faull, a Briton who served for almost four decades in the European Commission, emphasizes the conundrum facing Prime Minister Theresa May as she prepares to trigger two years of exit negotiations by the end of March. She’s said she wants maximum access to the single market coupled with control over immigration, a stance that’s at odds with the single market’s principles. Faull also said May won’t be able to sideline the EU’s top Brexit negotiator, Michel Barnier, and rely on cutting a political deal with German Chancellor Angela Merkel, pointing out that May’s predecessor, David Cameron, failed to secure her backing for the full set of EU reforms he sought to secure before the June referendum in which the U.K. voted for Brexit.

 London Rolls Out the Blood-Red Carpet for Kleptocrats -  Six years ago, the government of Kurmanbek Bakiyev nearly killed me. I remember it well, because it killed a man standing near me. It wasn’t specifically me, or him, they were trying to kill. They were simply firing live rounds at protesters. This was a forgotten massacre in an overlooked country. The killings took place in Bishkek, the rickety capital of the Central Asian republic of Kyrgyzstan, at the start of the 2010 revolution that overthrew Mr. Bakiyev’s autocratic rule. His regime had been about one thing: personal plunder. But the Kyrgyz people’s patience had finally worn out. That April I was among the crowd near the presidential palace chanting “Stop corruption now” when the guards started shooting. I ran for my life, but the Kyrgyz man nearby was not so lucky. I saw his bloodied, punctured body being dragged away by other protesters. As the regime teetered and fell, Mr. Bakiyev fled and found refuge in Belarus. Some days later I paid a visit to the Bishkek morgue to record how many people had been shot. I saw plenty. More than 40 protesters were killed. This is why it angers me that today, the dictator’s son and confidant, Maxim Bakiyev, lives in a mansion purchased in 2010 for $4.3 million in a London suburb less than 20 miles from my own family home.Of course, it was no surprise, because London has become a personal valet to men like him: It’s a dictators’ safe space, where billions of dollars are laundered through the London real estate market every year, contributing to what the National Crime Agency estimates to be an annual total of more $125 billion laundered in Britain.

London-based regulator for EU drugs fears staff exodus - The head of the EU’s London-based drugs regulator said the agency had lost an unprecedented number of senior staff since the Brexit vote and warned that as many as half could walk out unless its future is handled properly. For Guido Rasi, executive director of the European Medicines Agency, its probable relocation once Britain leaves the EU poses a unique challenge but is also a stark reminder of the broader administrative and logistical quagmire that is likely to follow Brexit. nThe EMA’s Canary Wharf headquarters plays host to 36,000 national regulators and scientists each year from across the continent who come to London to approve the safety and efficacy of drugs for the EU’s 500m people. London’s 890-strong secretariat plays a central role in coordinating that work.  Prof Rasi said seven senior executives had quit the agency since the referendum, more than in the past decade put together. A staff survey presented to the agency’s governing board last week showed that about 50 per cent would leave in the event of relocation to an undesirable city. For the majority still in place, morale has plunged to worrying depths, Prof Rasi adds: “That’s becoming worse and worse; the uncertainty, of course, is generating all the bad things you might expect. We are experiencing a lack of candidates in the selection procedures, we are experiencing many more people leaving the agency.”  The EMA is also likely to suffer a large loss of capacity because of the work the UK regulator does on its behalf. The Medicines & Healthcare Products Regulatory Agency punches above its weight and currently approves about a fifth of all medicines in the EU.

 U.K.’s Burgeoning Consumer Debt Raises Concerns Over Growth Outlook - WSJ: —British households are increasingly turning to debt, keeping the economy motoring but opening up a potential vulnerability as the U.K. government prepares for complex exit negotiations with the European Union. Britons’ unsecured borrowing hit a near 12-year high in November as consumers splurged on credit cards, dipped into their overdrafts and took out new personal loans, encouraged by record-low interest rates. The pickup in borrowing suggests that consumer spending continued to power economic growth in the final three months of 2016. But it has also stoked concern among many economists that the current household-driven expansion may not last, given lackluster wage growth, dwindling savings and accelerating inflation. U.K. consumer credit grew by £1.9 billion ($2.3 billion) in November, Bank of England data showed Wednesday, in the largest monthly increase since March 2005. Including new home loans, household borrowing rose by £5.1 billion in November, net of repayments, around £200 million more than in the previous month and the largest increase since mid-2016. The number of new mortgages also inched up in November, hitting an eight-month high.

£1.5trillion household debt is a terrifying black hole for 11 million Brits - debt hitting a staggering £1.5-trillion – that’s £1,500,000,000,000 – is a terrifying personal finance black hole for far too many families. When 11m people struggle to make ends meet, and savings for a rainy day are a luxury they simply can’t afford, it’s no wonder money worries keep them awake at night. Low wages and rising rents are hurting in particular the 18-to-34 bracket who not so long ago earned enough to buy a place of their own and have kids without fretting every hour about the expense. And when two-fifths fear this year will be worse than 2016, Tory PM Theresa May talks out of the rear of her £995 leather trousers by pretending life’s getting better for “ordinary” workers. We discuss and debate regularly the national debt clocked up by Governments, and the Tory record is far worse than Labour’s when we tot up how much was borrowed in the last 100 years. But families plunging deep into the red, living hand to mouth even when in work, is concerning in the world’s sixth largest economy. Blaming individuals for spending too much overlooks the bigger scandal: breadline earnings with low wages is a terrible British disease and the cost of living is increasing again.

Smash open your piggy banks — £433 million of pound coins stored at home will become worthless in 2017  — The government has urged the British public to raid their savings jars ahead of the launch of the new pound coin.  Chief Secretary to the Treasury David Gauke announced on Sunday that the new 12-sided pound coin will enter circulation March 28, 2017, meaning existing versions of the coin will become worthless on October 15.  The government estimates that £1.3 billion ($1.6 billion) worth of coins are stashed away in home piggy banks, around a third — or £433 million — of which are pound coins. These will have to be spent or returned to the bank before they expire as legal tender by the October deadline.  Gauke said: "Our message is clear: If you have a round one pound coin sitting at home or in your wallet, you need to spend it or return it to your bank before 15 October."  The new pound coin was unveiled in March 2016 and former Chancellor George Osborne described it as the "most secure circulating coin anywhere in the world." It is 12-sided and has a hologram-like image under the Queen's head which changes from a '£' symbol to the number '1' at different angles.  More than 1.5 billion new pound coins will be produced by the Royal Mint in Llantrisant, Wales, at a rate of up to 2,000 a minute. Some of the round pound coins returned by the public will be melted down and reused to make the new pound coin.  "This is a historic moment as it’s the first time we’ve introduced a new £1 coin since 1983, and this one will be harder to counterfeit than ever before," Gauke said.

Brexit, what Brexit? The British economy is 'exceeding all expectations' post-referendum - Every single sector of the British economy is now doing better than expected and has defied the forecasts of economists in December, according to the latest services PMI data from IHS Markit on Thursday. It completes a trilogy of much better than expected post-Brexit economic figures released this week, following strong growth in the manufacturing and construction sectors.  The services sector — which includes everything from banking to waitressing — drew a reading of 56.2 in the month, that's compared with a 55.1 reading in December, and ahead of the flash estimate of 54.7. That follows on from a big manufacturing beat on Tuesday, when the PMI rose to 56.1 in December from 53.6 in November. That was well above the 50-mark separating growth from contraction and beat forecasts for 53.1 by economists in a Reuters poll. Construction PMI was also higher than forecast when released on Wednesday, growing for a fourth consecutive month in December, continuing to shake off the recession that plagued the sector in early 2016.Thursday's services numbers from IHS Markit provided the best reading for the sector in 17 months. "Exceeding all expectations, the year ended on a high for the service sector, which rounded off the strongest quarter in 2016 as new business and employment levels continued to grow. The overall rate of activity growth accelerated for the third successive month to the fastest since mid-2015.   "Keeping up with levels of new work and increased activity, additions to the workforce were maintained for the fifth month running. Though, overall, 2016 proved to be the weakest year for employment growth since 2012.”

Brexit drives Irish passport applications from UK to record levels - Business Insider: There has been a surge in applications for Irish passports following the UK's vote to leave the European Union. The latest figures show that 733,000 passports were issued last year. This is an almost 10% rise on the previous year. Republic of Ireland Foreign Affairs Minister Charlie Flanagan said in a statement that Brexit was partly responsible for the rise, with a 41% increase in applications from Britain compared to 2015, and a 27% in applications from Northern Ireland. Overall, the department issued 67,972 passports to people from Northern Ireland and 64,996 from Britain. The Republic of Ireland will retain its status as a member of the EU when the UK leaves. Acquiring a passport from the Republic of Ireland would allow British citizens to retain their EU citizenship, leaving them free to travel and work on the continent after Brexit without visa restrictions.

A group of remote Scottish islands is exploring independence from the mainland after Brexit - Orkney, an archipelago in the Northern Isles of Scotland, is exploring options for independence from the UK, according to the Daily Telegraph.  13 of the island group's 21 councillors have backed a motion calling for an investigation into "greater autonomy or self-determination" following the Brexit vote and the renewed threat of Scottish independence.  The motion requests that the council's chief executive compiles a report considering "whether the people of Orkney could exercise self-determination if faced with further national or international constitutional changes, or indeed to decide if more autonomy might be beneficial for the well-being of Orkney."  Orkney, along with the neighbouring Shetland Islands, was ruled by Norway until the fifteenth century. Its residents have pushed for greater autonomy in the past, and they were promised more powers in the event of Scottish independence in the run-up to the 2012 referendum. Islanders are typically very hostile to Scottish independence, however, and have tended to favour a Westminster administration over a Holyrood one. Orkney voted against Scottish independence by 67% to 33% in 2014.Graham Sinclair, an independent councillor who tabled the motion, told the Telegraph: "I think the islands are more significantly different — both historically and culturally — from the rest of the country."  A 2013 poll found that just 8% of Orkney residents backed full separation from Scotland, even in the event of Scottish independence, with 82% against. Consequently, full autonomy remains highly unlikely.

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