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How the Fed's Rate Hikes Might Play Out - Duy - The U.S. economy is poised to deliver on the Federal Reserve’s economic forecast for this year. That means a baseline outlook for three interest-rate increases remains in play -- though not the way market may be anticipating. Think of it as two rate hikes, one each in June and December, with an option for a third in September.The data continue to be generally supportive of the economic forecasts outlined in the Fed’s December Summary of Economic Projections. The first employment report of the year set the stage with a solid jobs gain but an uptick in unemployment. The latter indicates that there remains slack in the labor market, and Fed Chair Janet Yellen would like to let the economy run strong enough to squeeze it out.Surveys of manufacturing and nonmanufacturing activity also point toward firming activity. In addition, housing starts and permits remained strong in January as December numbers were revised higher. Moreover, the recent decline in the value of the dollar should help support a move higher in the Fed’s preferred inflation measure toward the 2 percent target. Altogether, the economy seems to be tracking at a fairly brisk pace. When the members of the Fed sit down for their March conclave, they will likely conclude that they remain ahead of the curve on inflation and can take a pass on raising rates. They will prefer to squeeze additional gains from the labor market before acting again to tighten policy. And they will take note that they have plenty of time to raise rates later in the year. If the data turns sharply stronger than anticipated, they can raise rates just six weeks later at the May meeting. And there are some strategic benefits to a move in May. Yellen can prime the markets for a May hike during the March press conference and prove that the Fed can move at meetings without a regularly scheduled news conference, which is more likely to happen anyway if the Fed is changing rates more than once a year. Most importantly, if data strengthens further and prompts the Fed to pull forward a hike to March or May, markets should reset policy expectations to a baseline of three hikes with an option on a fourth. A move earlier than June suggests a risk that the Fed would be in danger of overshooting its targets without a bit more aggressive action in 2017. And if I am wrong, and the Fed is indeed behind the curve? In that case, markets would be looking at four hikes with an option on a fifth.
FOMC Minutes: "Might be appropriate to raise the federal funds rate again fairly soon" --From the Fed: Minutes of the Federal Open Market Committee, January 31-February 1, 2017 . Excerpts: In discussing the outlook for monetary policy over the period ahead, many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the Committee's maximum-employment and inflation objectives increased. A few participants noted that continuing to remove policy accommodation in a timely manner, potentially at an upcoming meeting, would allow the Committee greater flexibility in responding to subsequent changes in economic conditions. Several judged that the risk of a sizable undershooting of the longer-run normal unemployment rate was high, particularly if economic growth was faster than currently expected. If that situation developed, the Committee might need to raise the federal funds rate more quickly than most participants currently anticipated to limit the buildup of inflationary pressures. However, with inflation still short of the Committee's objective and inflation expectations remaining low, a few others continued to see downside risks to inflation or anticipated only a gradual return of inflation to the 2 percent objective as the labor market strengthened further. A couple of participants expressed concern that the Committee's communications about a gradual pace of policy firming might be misunderstood as a commitment to only one or two rate hikes per year and stressed the importance of communicating that policy will respond to the evolving economic outlook as appropriate to achieve the Committee's objectives. Participants also generally agreed that the Committee should begin discussions at upcoming meetings about the economic conditions that could warrant changes in the existing policy of reinvesting proceeds from maturing Treasury securities and principal payments from agency debt and mortgage-backed securities, as well as how those changes would be implemented and communicated.
Some Fed Members Back Quicker Move on Rates - The American economy appears to be avoiding the kind of winter swoon that has become an annual event in recent years, a turn for the better that could encourage the Federal Reserve to start raising its benchmark interest rate sooner. At the Fed’s most recent meeting, on Jan. 31 and Feb. 1, “many participants” wanted to increase the benchmark rate “fairly soon” if the economy continued to grow, according to minutes published Wednesday. But the minutes stopped short of suggesting a rate increase was likely at the Fed’s next meeting, in mid-March. They said that a core group of Fed officials remained cautious about the economic outlook, seeing balanced risks of faster and slower economic growth.“The committee has been quite patient, and I believe that has served us well,” Jerome H. Powell, a Fed governor, said in separate remarks on Wednesday. But now, the risks seem more in balance, he said, and “I see it as appropriate to gradually tighten policy as long as the economy continues to behave roughly as expected.”The minutes of the Fed meeting, published after a standard three-week delay, portrayed an economy that appears to be gaining strength, although it is still far from booming. The unemployment rate was little changed in the last year, standing at 4.8 percent in January, even as the economy added an average of 190,000 jobs a month in the second half of 2016, indicating that more people were returning to work. The minutes also cited “a high level of optimism” among business executives, which was attributed to “the expectation that firms would benefit from possible changes in federal spending, tax and regulatory policy.” For the most part, however, companies were still waiting for Washington. Although a few companies had reported increased capital spending, the minutes said that most, “while optimistic, intended to wait for more clarity about federal policy initiatives before adjusting their capital spending and hiring.”Financial markets also remained calm. Things were so quiet that some Fed officials had turned to fretting about the lack of excitement. By some measures, financial conditions are easier now than before the Fed raised its benchmark rate in December.
Whom to Listen to in the Fed Minutes - Tim Duy - When it comes to the meetings of the Federal Open Market Committee, not all central bank policy makers are created equally. There are “participants” -- all the policy makers in the room -- and there are “members,” those who have a vote. It is important to keep this distinction in mind when reading the minutes of the FOMC meetings -- especially because many of the more hawkish members of the Fed are participants, not members. Expectations of a rate hike in March hardly budged after the release of the most recent Fed minutes. This was a key line: Participants generally indicated that their economic forecasts had changed little since the December FOMC meeting. Little change in the economic forecast implies little change in the rate forecast, too. So the median projection of three 25 basis-point rate hikes for 2017 remained intact. And I tend to view that median as really two hikes with an option on a third. The most likely outcome then would be rate hikes in June and December, with maybe another in September. Given that officials see little change in the economic forecast, this schedule remains reasonable. One could, however, focus on this: many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the Committee's maximum-employment and inflation objectives increased. A few participants noted that continuing to remove policy accommodation in a timely manner, potentially at an upcoming meeting, would allow the Committee greater flexibility in responding to subsequent changes in economic conditions. What is “fairly soon”? And at what “upcoming meeting”? My interpretation is that a sizable contingent of participants see a rate hike before June, with a few as early as March. This indeed sounds fairly hawkish. Here, however, it is important to examine how members rather than participants viewed the situation: Many members continued to see only a modest risk of a scenario in which the unemployment rate would substantially undershoot its longer-run normal level and inflation pressures would increase significantly. These members expressed the view that inflation was likely to rise toward 2 percent gradually, and that policymakers would likely have ample time to respond if signs of rising inflationary pressures did begin to emerge. “Many” members saw little risk of undershooting the unemployment target or overshooting the one for inflation. And even if such a risk did emerge, they have time to alter policy accordingly. Hence, although a group of participants may be looking for a hike sooner rather than later, the voting members are not in any rush.
Long Run Fed Targets - John Cochrane -- What should the Fed's long-run interest rate target be? The traditional view is that the glide path should aim at 4% -- 2% real plus 2% inflation. One big question being debated right now is whether the "natural'' real rate of interest -- r* or "r-star" in econspeak -- has declined below 2%. Over the long run, the Fed cannot control the real rate of interest -- that comes from how much people want to save and what opportunities there are for investment, i.e. the marginal product of capital. So, if the real rate of interest is now permanently lower, say 1%, then one might argue that the glide path should aim for 3% long-run interest rate -- 1% real plus 2% inflation target -- not 4%. Janet Yellen recently came to Stanford and gave a very interesting speech that talked in part about a lower r-star, and seemed to be heading to something like this view. See the picture: (She also talked a lot about Taylor Rules, seeming to move much closer to John Taylor's view of how to implement monetary policy. See interesting coverage on John Taylor's blog. On r*, see Measuring the Natural Rate of Interest Redux by Thomas Laubach and John C. Williams for a central paper on r*. Henrike Michaelis and Volker Wieland have an interesting post on r* and Taylor rules, also commenting on Ms. Yellen's speech.) Of course, cynics will say that it's just the latest excuse not to raise rates. But these are serious arguments which should be considered on their merits. Should the glidepath head to 3% interest rates? Maybe not. How about zero?
Kashkari: "The Fed Really Has A Third Mandate And It Is Financial Stability" --After years of veiled suggestions by market skeptics that the Fed's two core mandates, inflation and employment, are just a cover for its real "third" mandate, namely supporting asset prices, today the president of the Minneapolis Fed came confirmed just that when during a meeting of the Financial Planning Association of Minnesota in Golden Valley, Minnesota, he said that “really we have a third mandate and the third mandate is financial stability.”Kashkari also said that “at some point in probably the not too distant future” the central bank will begin to allow balance sheet to shrink via roll off although he added that “it probably won’t be as small as it was before because the U.S. economy continues to grow, but it will be smaller than it is today.”Kashkari also said that “we are keeping our eyes open for asset prices to try to look for signs of bubbles” but admitted that it is "very hard to see asset bubbles in advance."The regional Fed president also said that while wages have come up "they're not at alarming levels." Of course, if one looks at real, inflatiob-adjusted wages, they are actually down for the first time in years.Preempting what are likely to be major changes in the Fed's structure under president Trump, Kashkari said that "protecting Fed independence is enormously important."He also noted that "high student loan debt levels are a concern" and added that "we have to wait and see on new Fiscal policies." Catch him speaking live in the livestream below.
Central Banks Are Secretly Buying Up The World’s Corporations -- “FINANCE is the new form of warfare — without the expense of a military overhead and an occupation against unwilling hosts. It is a competition in credit creation to buy foreign resources, real estate, public and privatized infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary wealth and asset appropriation) simply by financial means?” — Dr. Michael Hudson, Counterpunch, October 2010. When the US Federal Reserve bought an 80% stake in American International Group (AIG) in September 2008, the unprecedented $85 billion outlay was justified as necessary to bail out the world’s largest insurance company. Today, however, central banks are on a global corporate buying spree not to bail out bankrupt corporations but simply as an investment, to compensate for the loss of bond income due to record-low interest rates. Indeed, central banks have become some of the world’s largest stock investors. Central banks have the power to create national currencies with accounting entries, and they are traditionally very secretive. We are not allowed to peer into their books. It took a major lawsuit by Reuters and a congressional investigation to get the Fed to reveal the $16-plus trillion in loans it made to bail out giant banks and corporations after 2008. What is to stop a foreign bank from simply printing its own currency and trading it on the currency market for dollars, to be invested in the US stock market or US real estate market? What is to stop central banks from printing up money competitively, in a mad rush to own the world’s largest companies? Apparently not much. Central banks are for the most part unregulated, even by their own governments. As the Federal Reserve observes on its website: [The Fed] is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. As former Federal Reserve Chairman Alan Greenspan quipped, “Quite frankly it does not matter who is president as far as the Fed is concerned. There are no other agencies that can overrule the action we take.”
Central bank independence is losing its lustre - Wolfgang Munchau -- You would struggle to find a more potent symbol of the changes that await our liberal economic order than a letter written by Patrick McHenry to Janet Yellen. The vice-chairman of the US House of Representatives financial services committee questioned the right of the chair of the Federal Reserve to negotiate financial stability rules “among global bureaucrats in foreign lands without . . . the authority to do so.” Rarely has opposition to financial globalisation been so concisely expressed.The letter raises two questions. Do the political conditions for central bank independence remain in place in the US and globally? If so, what should its scope be?My answer to the first question is: yes and no. The conditions for central bank independence are no longer in place in all countries, and where they are still in place, one should ensure that independence is strictly confined to the bank’s core mandate. This differs across jurisdictions. The Federal Reserve Act defines the Fed’s role as one of maximising employment, securing price stability and moderating long-term interest rates. The primary mandate of the European Central Bank is to achieve price stability, while the Bank of England targets a headline rate of inflation. We should remember that central bank independence is not the natural order of things. Most central banks used to be government agencies until not too long ago, and were subject to political instructions, usually from the finance minister. They became independent after a period of price instability in the 1970s and 1980s produced a consensus in many countries about what a central bank should do. If almost everyone agrees on the goal of a technically complex policy, then, so the argument in favour of central bank independence goes, we are better off in leaving the implementation of the policy to experts. The primary argument for central bank independence, then, is not that it delivers better results as such, but that we agree on what it should do. In most countries this consensus still holds, including in the US. But Mr McHenry’s letter is also telling us that support for a broad definition of central bank independence is not as strong as it used to be.
How will President Trump reshape the Fed? - President Trump has an almost unprecedented opportunity to reshape the key personnel and legal basis of the Federal Reserve in the next 12 months, essentially rebuilding the most important economic organisation in the world in his own image, if he so chooses.The President may be able to appoint five or even six members to the seven-person Board of Governors within 12 months, including the Chair, Vice Chair for monetary policy, and a new Vice Chair for banking supervision. He may also be able to sign into law a bill that alters aspects of the Fed’s operating procedures and accountability to Congress, based on a bill passed in 2015 by the House of Representatives.Not surprisingly, investors are beginning to eye these changes with some trepidation. Some observers fear that the President will fill the Fed with his cronies, ready to monetise the budget deficit if that should prove politically convenient. Others fear the opposite, believing that the new appointments will result in monetary policy being handed over to a policy rule (like the Taylor Rule) that will lead to much higher interest rates in the relatively near future. Still others think that the most important outcome will be a deregulation of the banking system that results in much easier credit availability, with increased dangers of asset bubbles and economic overheating. It is not difficult to see how this process could work out very badly indeed. But, at present, I am optimistic that a modicum of sense will prevail.
Money Shouldn't Choose the Next Fed Chair - Narayana Kocherlakota - Sometime in the coming year, President Donald Trump will nominate the next chair of the U.S. Federal Reserve, arguably the most powerful central bank on the planet. Impressed as he may be by Wall Street wealth, it should not be his key criterion.With the impending resignation of Daniel Tarullo, the Fed official who oversaw financial regulation, Trump will have the opportunity to appoint three people to the central bank’s board of governors, subject to confirmation by the Senate. In doing so, he should be prepared to later promote one to chair the board: If he intends to replace current chair Janet Yellen when her term ends in early 2018, and if she decides to remain on the board (as the Fed’s rules allow), the three will be the only Trump appointees who can take over.Whom, then, should Trump appoint? Filling the shoes of Yellen and Ben Bernanke won’t be easy. The right candidate must, of course, have a strong understanding of the economy and financial markets, and how they interact. He or she must communicate superbly with the public, Congress and financial markets. No less important, the person must have the leadership skills to run an organization of 20,000-plus employees, including the group of strong-minded individuals who comprise the policy-making Federal Open Market Committee.Tough as the requirements may be, qualified candidates exist. When I served on the Federal Open Market Committee, I worked closely with Fed governors Lael Brainard and Jeremy Stein. (Brainard is still a governor; Stein has returned to academia.) I certainly didn’t agree with them on every occasion, to put it mildly. Yet I recognize that both have the deep economic wisdom, communication skills and the leadership capabilities to be worthy of consideration as a potential Fed chair. My guess, however, is that Trump will go in another direction. Both Brainard and Stein have doctorates in economics and distinguished records of academic and public service. Such qualifications have received short shrift in the current administration. Trump has put a lot more weight on Wall Street success in making key economic appointments. There’s no reason, so far, to believe that he will treat the Fed chair position any differently.
"There's Something Weird Going On": Jeff Snider On The Global Dollar Shortage - The first time we explained that one of the biggest risks facing a world in which the dollar is the reserve currency is a global USD shortage, was in mid-2009, when we wrote "How The Federal Reserve Bailed Out The World."Since then the shortage, which some have dubbed a potential multi-trillion dollar margin call, has only grown and became a prominent issue back in March of 2015, when this phenomenon was used to explain why the cross-currency swap had plunged to multi-year lows. As JPMexplained at the time, "the fx basis reflects the relative supply and demand for dollar vs. foreign currency funds and a very negative basis currently points to relative shortage of USD funding or relative abundance of funding in other currencies. Such supply and demand imbalances can create big shifts in the fx basis away from its actuarial value of zero." Fast forward a year and a half later, when none other than the Bank of International Settlements, or the "Central canks' central bank", warned last November that it was no longer the VIX that was the widely accepted barometer of market "fear", it was now the dollar's turn to become the global fear gauge: "just as the VIX index was a good summary measure of the price of balance sheet before the crisis, so the dollar has become a good measure of the price of balance sheet after the crisis. The mantle of the barometer of risk appetite and leverage has slipped from the VIX, and has passed to the dollar."Shortly thereafter we once recapped the main risks emerging from this increasingly more prominent threat to global financial stability, and wondered at what point would the Fed finally address this risk pointed out not only by this website for nearly 8 years, but also by the BIS, in a post which piggybacked on the recent work by ADM ISI's Paul Mylchreest, who has made tracking the global dollar shortage one of his primary objectives.
Fumbling Towards Collapse -- Kunstler --In all the smoke and fog emitted by Trump and his adversaries, it must be hard to make out the actual issues dogging this society, and even when you can, to find a coherent position on them. This was nicely illustrated in Paul Krugman’s fatuous column in Monday’s New York Times, “On Economic Arrogance” — the title describes Krugman’s own attitude to a T. In it, Krugman attempts to account for the no-growth economy by marshaling the stock-in-trade legerdemain of academic economics: productivity, demographics, and labor metrics. Krugman actually knows zip about what afflicts us in the present disposition of things, namely the falling energy-return-on-energy-investment in the oil industry, which is approaching the point where the immense activity of getting oil out of the ground won’t be worth the cost and trouble of doing it. And since most of the things we do and produce in this economy are based on cheap oil — with no reality-based prospect of replacing it with so-called “renewables” or as yet undiscovered energy rescue remedies — we can’t generate enough wealth to maintain anything close to our assumed standard of living. We can’t even generate enough wealth to pay the interest on the debt we’ve racked up in order to hide our growing energy predicament. And that, in a nutshell, is what will blow up the financial system. And when that department of the economy goes, the rest will follow. So, the real issue hidden in plain sight is how America — indeed all the so-called “developed” nations — are going to navigate to a stepped-down mode of living, without slip-sliding all the way into a dark age, or something worse. By the way, the Ole Maestro, Alan Greenspan, also chimed in on the “productivity” question last week to equally specious effect in this Business Insider article. None of these celebrated Grand Viziers knows what the fuck he’s talking about, and a nation depending on their guidance will find itself lost in a hall of mirrors with the lights off. So, on one side you have Trump and his trumpets and trumpistas heralding the return of “greatness” (i.e. a booming industrial economy of happy men with lunchboxes) which is not going to happen; and on the other side you have a claque of clueless technocrats who actually believe they can “solve” the productivity problem with measures that really only boil down to different kinds of accounting fraud.
Chicago Fed: Economic Growth Decreased in January - "Index shows economic growth decreased in January." is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report: Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.05 in January from +0.18 in December. Three of the four broad categories of indicators that make up the index decreased from December, and two of the four categories made negative contributions to the index in January. [Link to News Release] The previous month's CFNAI was revised upward from 0.14 to 0.18. November was also revised upward. The Chicago Fed's National Activity Index (CFNAI) is a monthly indicator designed to gauge overall economic activity and related inflationary pressure. It is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed's website. The index is constructed so a zero value for the index indicates that the national economy is expanding at its historical trend rate of growth. Negative values indicate below-average growth, and positive values indicate above-average growth.The first chart below shows the recent behavior of the index since 2007. The red dots show the indicator itself, which is quite noisy, together with the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of the actual trend for coincident economic activity.
Most Forecasters See Stronger US GDP Growth In Q1 -- The US economy is headed for a firmer expansion in this year’s first quarter, according to a range of forecasts. The outlook for a moderately stronger pace of economic activity follows a sluggish increase in GDP in last year’s fourth quarter. The futures market, however, continues to price in a high probability that the Federal Reserve will leave interest rates unchanged at next month’s monetary policy meeting. IHS Markit’s implied estimate for Q1 GDP growth via yesterday’s February update of US Composite Output Index is 2.5%, modestly above the 1.9% increase for last year’s Q4 (seasonally adjusted annual rate). Markit noted, however, that economic activity slowed, ticking down from January’s 14-month peak. The consultancy’s survey data for this month “suggest that the post-election upturn has lost some momentum,” said Chris Williamson, chief business economist at IHS Markit. “Growth of business output, new orders and hiring all waned, as did inflationary pressures.” He added that the latest survey data “remains at a level broadly consistent with the economy growing at a 2.5% annualized rate in the first quarter.” Economists surveyed by The Wall Street Journal this month are looking for a slightly softer growth rate in Q1 – 2.2%, based on the average forecast. The estimate is unchanged from last month’s projection. Meanwhile, The New York Fed’s model continues to offer one of the more optimistic Q1 predictions – 3.1% (as of Feb. 17). But in the wake of the slightly softer survey figures published by Markit, it’s reasonable to wonder if the New York Fed’s outlook will be trimmed in the next update. At least one Fed policymaker thinks the economy is strong enough to support a rate hike at the March 14-15 FOMC meeting. Earlier this week Reuters reported: Philadelphia Fed President Patrick Harker told reporters on Tuesday he would support an interest rate increase at a mid-March policy meeting as long as inflation, output and other data until then continue to show the U.S. economy is growing. The futures market, however, isn’t persuaded that a new round of tightening is imminent. Fed funds futures are pricing in an 82% probability that the central bank will leave the Fed funds target rate unchanged at a 0.50%-to-0.75% range, based on CME data for Feb. 21.Nonetheless, “the data continue to be generally supportive of the economic forecasts outlined in the Fed’s December Summary of Economic Projections,” writes Tim Duy, an economist at the University of Oregon who analyzes monetary policy at his Fed Watch blog. “Altogether, the economy seems to be tracking at a fairly brisk pace,” raising the question: Is the Fed falling behind the curve on inflation? Not yet.”
The Big Question for the Economy: Is There Room to Grow? - The most important issue for the United States economy in 2017 and beyond is whether it’s near its speed limit.It has taken eight years of glacial expansion, but the nation is closing in on what economists believe to be its full productive capacity. It’s nearing that level of activity in which nearly everybody who wants a job has one, and factories and offices are cranking at full speed. If the economy grows just 2.5 percent this year, gross domestic product will reach the Congressional Budget Office’s estimate of the nation’s economic potential by the end of the year. If the Trump administration succeeds at achieving the 4 percent growth the president has said he seeks, we’ll be there by the Fourth of July. If there is in fact more room to grow beyond the budget office’s estimate of “potential G.D.P.,” an economic boom remains possible. If there isn’t, higher growth will translate into inflation, not higher output and incomes. The question for the Trump administration, the Federal Reserve and every American who wants a higher paycheck is how much slack there really is in the economy. Economic slack takes the form of empty warehouses and office parks; of machines that run eight hours a day when they were built to run for 12; and, most important, millions of Americans who might be coaxed to work in a booming economy but who aren’t even looking for a job now.
How Tennessee Could Be About To Start A Constitutional Crisis -The State Senate of Tennessee has laid the legislative groundwork for something that hasn't been done in the United States of America since the Constitutional Convention of 1787 in Philadelphia. With a vote of 27-3, the Tennessee Senate has voted to call a "convention of the states" in order to draft and pass an amendment to the Constitution that would require balanced budgets to be passed every year. For those who are little fuzzy on their high school U.S. history knowledge, the Tennesseanexplains that the U.S. Constitution can be amended in two ways. The first would require a two-thirds majority vote in both chambers of Congress, an unlikely outcome in today's hyper-partisan political arena. The second, on the other hand, requires that two-thirds of the states (34 in total) pass a resolution calling for a Constitutional Convention. There are two ways to propose amendments to the Constitution. The first and more traditional method is through a two-thirds majority vote in both the House of Representatives and the Senate. Then the amendment is sent to the state legislatures, where it needs ratification by three-fourths or 38 states in order to become law. Nearly all 27 amendments have followed this path. But the Constitution also provides a second, more populist path to amending the document. If two-thirds or 34 states pass a resolution calling for a Constitutional Convention, delegates from all 50 states will meet to draft an amendment. This is what the Tennessee lawmakers are calling for in their resolution. Of course, calls for a convention to pass a balanced budget amendment started in the 1970s and have failed each time. That said, with Republicans now controlling 32 state legislatures, this latest effort initiated by Tennessee seems to have the best chance of succeeding so far.
Trump`s Deficit Spending Plan Will Bankrupt United States - We discuss giving more wasteful government defense contracts to private corporations, and lower taxes and the damage done to the growing and out of control National Debt in this video. Corporations are already paying a much lower effective tax rate, they need to be paying more taxes in my opinion. Especially given the mergers and acquisitions that the government has let go over the last 30 years which creates massive system and sector monopolies and oligopolies that lead to non competitive industries, and is ultimately bad for competitive market environments and consumers. First of all, the President of the United States should not be cozying up to any CEOs or Corporations this just leads to massive conflicts of Interests, shoot several Corporations have made me sign massive Anti-Bribery Documentation Agreements to avoid this very type of conflict of interest. This is just bizarre theatre under the guise of Job Creation. But we need to downsize all Military Spending given our unsustainable National Debt profile, the interest portion of servicing this National Debt is very troubling for the future economic health of the United States. Sure Donald Trump might get a short-term, and I mean very short-term jump in GDP with deficit spending programs, but any increase in Military Spending with an already out of control government expenditure of the overall budget on this category is just pure stupid fiscal policy. And to lower Corporate Taxes at the same time as raising Defense Spending and government spending overall is just more "short-termism" government policy that has dire consequences down the line in just two years time for our federal deficit, national debt, interest on the debt and economic prosperity.Donald Trump we don`t need the Boeing or Lockheed Jet program, we need to cut defense spending given what waste and inefficiencies there are already are in this budget expenditure. The overkill factor alone regarding what the United States spends on the Military versus all of our nearest competitors combined is mind-numbing economic stupidity at its finest. No wonder we cannot balance our budget, pay our bills, and have an unsustainable 20 Trillion Dollars in National Debt. The Rate of Change on the National Debt is just beyond alarming, going from 8 Trillion to 20 Trillion in ten years. Let me restate this: Going from 8 Trillion to 20 Trillion in ten years.
"It's Absolutely Out Of Control": Did Trump Just Spoil The Deficit-Spending Party? Seemingly reassuring conservatives, especially his fiscally hawkish former Tea-Party member Budget Director, President Trump warned that America's "[spending] was out of control," as officials gathered to discuss the budget, adding that there is "enormous work to do on the national debt." While stocks did not blink, Trump's comments definitely angled more fiscal hawk than free-spending deficit dove. There is a "moral duty" to taxpayers, President Trump says at White House budget lunch, "we must do a lot more with less." "Our budget is absolutely out of control" he added, and in the future "will reflect our priorities." The hiring freeze for non-essential workers will remain. "We have enormous work to do on the national debt" There will be "no more wasted money, we will spend in a careful way." Additionally, President Trump confirmed that the Obamacare plan was "moving very well" and would be undertaken before the tax plan. Notably swap spreads are definitely showing concerns about the looming debt ceiling deadline as the Treasury cash balance begins to fall...
White House May Change Calculation Of US Trade Deficit, Boosting Trade War Odds -- In the latest surprising announcement to emerge from the Trump White House, the WSJ reports that the Trump administration is considering changing the way the U.S. trade deficit is calculated, a shift that would make America's trade gap appear even greater than it has been in recent years, potentially making future trade skirmishes and wars with America's export-heavy trade partners far more likely. According to WSJ sources, the White House is considering not counting re-exports from the US trade balance: i.e., excluding from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged. Such an approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out. As the WSJ notes, data on trade balances and surpluses, widely followed by Congress, are at the center of a political battle over whether existing trade agreements should be retained, renegotiated or tossed out altogether. Should the change be implemented, it would have a stark effect on data involving countries that have free trade deals with the U.S., and in some cases the new methodology would even change a trade surplus into a trade deficit. As the charts below show, the total impact of the "redefinition" would amount to roughly $250 billion per year, and would have the most acute impact on Nafta partners, Mexico and Canada, which are the top two destinations for US re-exports.
Don't like the data? Change it! -- From the WSJ: Trump Administration Considers Change in Calculating U.S. Trade Deficit - The Trump administration is considering changing the way it calculates U.S. trade deficits, a shift that would make the country’s trade gap appear larger than it had in past years ... The leading idea under consideration would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged, these people told The Wall Street Journal. Economists say that approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out, known as re-exports. I'm all for constantly evaluating methods, and improving data collection and reporting, but this - as reported - doesn't seem to make sense. If a car is imported to the U.S., and then is unchanged and exported to a third country, it seems there would be two choices: 1) Count it is an import AND an export, or 2) don't count it as either an import or export (it is just passing through). But counting the import and not the export makes as much sense as counting the export, but not the import. Crazy.
Democrats Go There: Invoke 25th Amendment Unless Trump "Gets A Grip" -- After questioning President Trump's sanity earlier in the week, it appears Democrats have found another narrative to cling to - invoke the 25th Amendment unless Trump "gets a grip."With a growing number of Democrats openly questioning President Trump’s mental health. Rep. Earl Blumenauer (D-Ore.) in a floor speech this week called for a review of the Constitution's procedures for removing a president. He warned the 25th Amendment of the Constitution falls short when it comes to mental or emotional fitness for office.Sen. Al Fran ken (D-Minn.) during a weekend interview with CNN’s “State of the Union” said that “a few” Republican colleagues have expressed concern to him about Trump's mental health.And Rep. Ted Lieu (D-Calif.) plans to introduce legislation that would require the presence of a psychiatrist or psychologist in the White House.Justifying their questions by pointing to Trump’s habit of making demonstrably false claims.“It’s not normal behavior. I don’t know anybody in a position of responsibility that doesn’t know if they’re being rained on. And nobody I work with serially offers up verifiably false statements on an ongoing basis,” And now that narrative has grown louder as CNN's State of The Union just discussed invoking the 25th Amendment unless President Trump "gets a grip"
If Trump is Impeached, it Might Be the End of America - It’s hard to overstate just how many Trump supporters there are, how many have lost faith in the system, and how many have become reactively charged against it. The heavily pro-Trump subreddit r/The_Donald has become one of the most powerful forces on the Internet, with almost 400,000 highly-active subscribers and tens of millions of readers each day. The heavily pro-Trump Drudge Report is the third most-visited media site on the Internet (behind only ESPN and MSN [the automatic homepage for many PCs]), and is one of a small handful of sites to have broken the 1 billion hits per month mark. The ultra-pro Trump Alex Jones is perhaps the most listened-to radio personality in America, consistently beating even other conservative giants like Rush Limbaugh. These numbers aren’t that significant on their own. There are plenty of liberal-leaning and anti-Trump news sites that get similar numbers. What’s shocking is how far outside of the mainstream narrative these sources run. On the top of r/The_Donald, for example, you’ll consistently find conspiracy theories linking the Clinton Foundation to pedophile rings and photos of Muslim men marrying underage girls. Drudge is tamer, but his links paint a consistent picture of a corrupt mainstream media working actively to destroy Trump at the behest of a class of immoral elites who are so hellbent on maintaining power that they’ll do anything to get him out of office. And Alex Jones…well, according to Jones the elites are getting their orders from off-world masters living in another dimension. So yeah…Trumpians ain’t watching no CNN.My point is that if you think Trump supporters are going to accept an impeachment of Trump, no matter how rational the basis might be, you’re dead wrong. The leaders of the Trump movement (the real leaders) are so disconnected from the media that most of us read every day, and from the information provided by the government, that they might as well be living in one of Jones’ alternate dimensions. To them, it’s 100% fiction, just shadows flickering on the wall of Plato’s cave. And, like the liberated cave dwellers, they’ve seen the outside, and they’ll never believe the shadows again, no matter how factual they may be.
Why We Must Oppose the Kremlin-Baiting Against Trump - The bipartisan, nearly full-political-spectrum tsunami of factually unverified allegations that President Trump has been sedi- tiously “compromised” by the Kremlin, with scarcely any nonpartisan pushback from influential political or media sources, is deeply alarming. Begun by the Clinton campaign in mid-2016, and exemplified now by New York Times columnists (who write of a “Trump-Putin regime” in Washington), strident MSNBC hosts, and unbalanced CNN commentators, the practice is growing into a latter-day McCarthyite hysteria. Such politically malignant practices should be deplored wherever they appear, whether on the part of conservatives, liberals, or progressives. Ad Policy The allegations are driven by political forces with various agendas: the Hillary Clinton wing of the Democratic Party, which wants to maintain its grip on the party by insisting that she didn’t lose the election but that it was stolen by Russian President Vladimir Putin for Trump; by enemies of Trump’s proposed détente with Russia, who want to discredit both him and Putin; and by Republicans and Democrats stunned that Trump essentially ran and won without either party, thereby threatening the established two-party system. Whatever the motivation, the ensuing slurs against Trump, which are already producing calls for his impeachment, pose grave threats to US and international security and to American democracy itself. So far, no facts have been presented to back up the allegations. (Without facts, all of us are doomed to malpractice or worse.) An impartial investigation might search for such facts, if any exist, which should then be evaluated objectively—but neither may be possible in the current political atmosphere, only a witch hunt.
Senate Intel Committee Orders White House To Keep All Records For Russia Probe --The "Russia hacked the US election" is getting its second wind. One day after Reuters provided further details of the ongoing FBI probes - of which there are now reportedly three - into activities that are generally classified as the Kremlin's hacking of the US presidential election, the Senate Intelligence Committee has likewise escalated its probe into Russian interference, and is requesting that agencies preserve all materials that could tie into the committee's investigation into Russian interference in the 2016 presidential election. The Associated Press reported Sunday, citing a congressional aide, that the committee had sent formal requests to more than a dozen organizations, agencies and individuals, including at the White House, requesting the materials related to the probe into the Russian meddling be preserved. The intelligence panel's chairman, Richard Burr (R-N.C.), and vice chairman Mark Warner (D-Va.) sent letters out Friday, according to the AP. On Thursday, Senate Democrats wrote the White House and law enforcement agencies seeking assurances that they were preserving all materials related to contacts individuals associated with President Donald Trump had with Russians. Those letters asked for confirmation that the White House, FBI and Justice Department had instructed their employees to preserve all materials related to any contacts Trump's administration, campaign, transition team — or anyone acting on their behalf — have had with Russian government officials or its associates. "I think they're going to do their job. And they have to do that. Those are things that Richard Burr and that team have to do," White House chief of staff Reince Priebus said Sunday, a day after the disclosure by the congressional aide. "That doesn't mean that there's anything there. It just means they need to do some things that satisfy their committee, that they've looked into something. And then they can have meetings behind closed doors that they always do in the Intel Committee, and then they'll issue a report," Priebus told NBC's "Meet the Press." Also on Sunday, Priebus denied that members of President Trump's campaign had contact with Russia before Trump's victory.
GOP Senators Embrace Awkward Russia Probe That Could Hurt Trump - A Senate Intelligence Committee investigation of Russia’s effort to influence last year’s U.S. election is shaping up as an unexpectedly bipartisan effort that could take months to complete as it explores the most significant controversy shadowing the new Trump administration. The investigation, which will involve scouring highly classified material, is still in its early stages, but Republicans are so far joining Democrats on the panel in pledging to conduct it in a serious manner. The committee will examine the extent of contacts that President Donald Trump’s associates had with Russian officials before and after the Nov. 8 vote. In particular, it plans to look into conversations that Michael Flynn, who was ousted last week as Trump’s national security adviser, had with the Russian ambassador during the presidential transition. Negotiations are under way with spy agencies including the CIA over how much access committee aides will get to highly classified material, according to U.S. intelligence officials. It’s not unusual for the agencies and committees to work out approval for aides to review material that’s classified beyond their normal security clearance levels, as well as what material they can have access to. Senate Republicans don’t want to be seen engaging in a cover-up -- especially if leaks about additional contacts between Russians and people in Trump’s orbit continue to trickle out. But they also don’t want investigations to mushroom the way GOP efforts to probe the Benghazi attacks did during the Obama administration.
Russia, US should start with minor steps to restore ties — US expert - TASS --The United States and Russia should begin cooperating on lesser issues before moving on to the settlement of key issues if both countries want to normalize the currently strained relations, famous US political expert on Russia Thomas Graham told TASS. "I would imagine people are looking for progress on the big issues, Ukraine and Syria, for example," Graham said in an interview with TASS. "But those are tough ones and early progress is unlikely." Citing a saying in Russian language "less is more," Graham, who served as an adviser to former US President George Bush Jr., said: "If Moscow wanted to do something to restore normalcy to relations, I would suggest a few minor steps that would set a better tone for discussion of the bigger, more complex questions."Firstly, Graham said, "Stop the harassment of US diplomats in Russia, begin to receive (US Ambassador to Russia John) Tefft at high government levels and enable him to have meetings with local officials when he travels."As a second step, the US expert suggested for Russia to "cease the provocative buzzing of American ships and aircraft."Thirdly, he said, "tone down the anti-American rhetoric on Russian television, including RT.""Moscow should ask itself how it would like Washington to reciprocate and how long it is prepared to wait for Washington to reciprocate," Graham added.
Amid Russia scrutiny, Trump associates received informal Ukraine policy proposal - WaPo - President Trump’s personal lawyer and a former business associate met privately in New York City last month with a member of the Ukrainian parliament to discuss a peace plan for that country that could give Russia long-term control over territory it seized in 2014 and lead to the lifting of sanctions against Moscow. The meeting with Andrii V. Artemenko, the Ukrainian politician, involved Michael Cohen, a Trump Organization lawyer since 2007, and Felix Sater, a former business partner who worked on real estate projects with Trump’s company. The occurrence of the meeting, first reported Sunday by the New York Times, suggests that some in the region aligned with Russia have been seeking to use Trump business associates as an informal conduit to a new president who has signaled a desire to forge warmer relations with Russia. The discussion took place amid increasingly intense scrutiny of the ties between Trump’s team and Russia, as well as escalating investigations on Capitol Hill of the determination by U.S. intelligence agencies that the Kremlin intervened in last year’s election to help Trump. The Times reported that Cohen said he left the proposal in a sealed envelope in the office of then-national security adviser Michael T. Flynn while visiting Trump in the White House. The meeting took place days before Flynn’s resignation last week following a report in The Washington Post that he had misled Vice President Pence about his discussions in December of election-related sanctions with the Russian ambassador to the United States. Cohen, speaking with The Post on Sunday, acknowledged that the meeting took place and that he had left with the peace proposal in hand.
Report: Putin’s Psychological Profile of Trump Calls Him ‘Naïve’ - President Donald Trump likes risks, but can be naïve, according to a psychological profile being assembled for Russian president Vladimir Putin as he prepares for his first meeting with Trump. NBC News spoke with former Russian Deputy Foreign Minister Andrei Fedorov, who provided details of the dossier, and suggested that Trump “doesn’t understand fully who is Mr. Putin.” “Very serious preparatory work is going on in the Kremlin, including a paper — seven pages — describing a psychological portrait of Trump, especially based on this last two to three months, and the last weeks,” Fedorov told NBC News. This type of profile on another foreign leader is uncommon, NBC News says, but Moscow knows what’s at stake when Putin and Trump finally meet. Trump has suggested his openness to lifting sanctions on Russia, and the Kremlin is reportedly taking steps to ensure that happens. Among the preparations are regular updates to the profile on the American president, who many in the Kremlin think views the “presidency as a business,” NBC News says. While Putin prepares to meet with Trump, Moscow is watching Washington closely as U.S. lawmakers push for further investigations into Trump’s ties to Russia. These moves have the Kremlin worried Trump will lose the political capital needed to lift sanctions or otherwise smooth relations with Russia, NBC News says. Others in Moscow think the situation for their guy in D.C. is even more dire. Kremlin-friendly activist Sergei Markov, who called Trump’s election a “great day for American democracy,” is now angry at how the president is being treated. As he told NBC News, the intelligence community wants “to overthrow President Trump in a coup.”
How Putin Might Yank Away Trump’s Control Over America’s Nuclear Weapons - Here people ponder the risk that Donald Trump, as president, might launch nuclear weapons against ISIS terrorists, as he threatened last March, or use one simply because we have them. We don’t yet know. But it seems plausible that some crisis — or two or three — could involve Trump taking the bait of an unfriendly foreign power, perhaps out of basic frustration or humiliation. Nuclear arms raise the stakes of any international confrontation. Foreign policy hawks tend to believe the greatest risks begin with appeasement. Doves usually worry more about provocation. Trump has elicited concerns about both, in roughly equal measure. The volatile new president and his senior advisers say they want friendlier ties with Russian president Vladimir Putin. One potential crisis — a growing number of seasoned foreign policy hands, Democrat and Republican alike, fret that sooner or later, Trump must grapple with Putin publicly outflanking him. Michael Flynn — who served just 24 days as Trump’s national security adviser before resigning amid controversy last week — is now under FBI and congressional investigation for contacts with Russian officials during the 2016 campaign and transition. Before his abrupt departure, Washington Post columnist Richard Cohen even compared Flynn to Dr. Strangelove’s “paranoid ultra-nationalist” bomber-wing commander, Brig. Gen. Jack D. Ripper, saying “he cannot be the last one to whisper in Trump’s ear about some crisis.” Trump himself was reportedly surprised to learn from news reports that an executive order he signed gave his incendiary chief strategist, Stephen Bannon, a principal role on the National Security Council. Time magazine has since dubbed Bannon “The Great Manipulator.”
Mike Pence Vows "Unwavering Support" For NATO, Pledges To Hold Russia "Accountable" -- One day after John McCain made a questionable diplomatic outburst when as part of a US diplomatic tour meant to reassure Europe, and NATO, of Trump's support, the Senator told participants at a Security Conference in Munich that the Trump administration is in "disarray",on Saturday morning Vice President Mike Pence did his best to return to conventional foreign policy after he vowed that the United States will "hold Russia accountable." In an address to the Munich Security Conference, Pence assured European allies that the U.S. "strongly supports" NATO and will be "unwavering" in its commitment to trans-Atlantic institutions like NATO.Pence also said the U.S. would demand that Russia honor a 2015 peace deal agreed upon in Minsk, Belarus, to end violence in eastern Ukraine between government forces and Russia-backed separatists. "Know this: The United States will continue to hold Russia accountable, even as we search for new common ground which as you know President Trump believes can be found," Pence said.
Bannon Breaks With Pence, Delivers Warning To Europe -- Two days ago, when describing the two opposing foreign policy tracks emerging within Trump's administration (which led to disappointment inside Russia, which was hoping for a more aggressive detente between the Trump administration), we said that "there are two clear axes developing within the Trump administration: a Pence/Mattis/Haley foreign policy and a Trump/Bannon/Miller foreign policy." As a reminder, over the weekend first Secretary of Defense Jim Mattis and then Vice President Mike Pence assured participants at the Munich Security Conference that Trump would "hold Russia accountable" and vowed "unwavering support" to both NATO and EU. Today, confirming that there is indeed a schism when it comes to the administration's diplomatic objectives, Reuters writes that in the week before VP Mike Pence visited Brussels and pledged America's "steadfast and enduring" commitment to the European Union, Trump's chief strategist Steve Bannon met with the German ambassador and delivered a different message. Bannon, according to Reuters' sources, signaled to Germany's ambassador to Washington that he viewed the EU as a flawed construct and favoured conducting relations with Europe on a bilateral basis. In other words, Bannon voiced the same conerns made by others about the sustainability of the European experiment, if not in polite company, and was preparing how to address Europe's "failure" through bilateral trade treaties, the same as the recently "free" UK is doing currently with all of its former trading partners. There was some push back to the Reuters report: a White House official who checked with Bannon in response to a Reuters query confirmed the meeting had taken place but said the account provided to Reuters was inaccurate. "They only spoke for about three minutes and it was just a quick hello," the official said. However, Reuters' sources described a longer meeting in which Bannon took the time to spell out his world view.
John McCain Makes "Unusual" Secret Trip To Syria As Trump Prepares Plans To Defeat ISIS -- In an unusual move for a sitting senator, John McCain (R-AZ) secretly traveled to northern Syria last weekend to speak with American military officials and Kurdish fighters at the forefront of the push to drive Islamic State out of their de facto capital of Raqqa. The short visit came in the middle of a regional trip that took McCain from Saudi Arabia to Turkey, where he discussed evolving plans to counter the Islamic State in the Middle East. Per the Wall Street Journal:U.S. officials familiar with Mr. McCain’s trip said that the senator traveled toKobani, the Syrian town on the Turkey border controlled by Kurdish forces since 2012.In a statement, Mr. McCain’s office confirmed that a trip took place, saying the senator “traveled to northern Syria last week to visit U.S. forces deployed there and to discuss the counter-ISIL campaign and ongoing operations to retake Raqqa.”Mr. McCain is believed to be the first U.S. lawmaker to travel to the Kurdish-controlled area of northeastern Syria since it became a hub for American special-operations forces who are aiding local forces in the fight against Islamic State. Of course, this trip came just a couple of weeks after Trump issued a Presidential Memorandum giving his new Secretary of Defense, James Mattis, 30 days to draw up a military plan to "defeat ISIS" declaring definitely that "it is the policy of the United States that ISIS be defeated."
Trump's ISIS Plan: Another US Invasion? - Ron Paul -- Just over a week into the Trump Administration, the President issued an Executive Order giving Defense Secretary James Mattis 30 days to come up with a plan to defeat ISIS. According to the Order, the plan should make recommendations on military actions, diplomatic actions, partners, strategies, and how to pay for the operation. As we approach the president’s deadline it looks like the military is going to present Trump with a plan to do a whole lot more of what we’ve been doing and somehow expect different results. Proving the old saying that when all you have is a hammer everything looks like a nail, we are hearing increasing reports that the military will recommend sending thousands of US troops into Syria and Iraq. This would be a significant escalation in both countries, as currently there are about 5,000 US troops still fighting our 13-year war in Iraq, and some 500 special forces soldiers operating in Syria. The current Syria ceasefire, brokered without US involvement at the end of 2016, is producing positive results and the opposing groups are talking with each other under Russian and Iranian sponsorship. Does anyone think sending thousands of US troops into a situation that is already being resolved without us is a good idea? In language reminiscent of his plans to build a wall on the Mexican border, the president told a political rally in Florida over the weekend that he was going to set up “safe zones” in Syria and would make the Gulf States pay for them. There are several problems with this plan.
- First, any “safe zone” set up inside Syria, especially if protected by US troops, would amount to a massive US invasion of the country unless the Assad government approves them. Does President Trump want to begin his presidency with an illegal invasion of a sovereign country?
- Second, there is the little problem of the Russians, who are partners with the Assad government in its efforts to rid the country of ISIS and al-Qaeda. ISIS is already losing territory on a daily basis. Is President Trump willing to risk a military escalation with Russia to protect armed regime-change forces in Syria?
- Third, the Gulf States are the major backers of al-Qaeda and ISIS in Syria – as the president’s own recently-resigned National Security Advisor, Michael Flynn, revealed in a 2015 interview. Unless these safe zones are being set up to keep al-Qaeda and ISIS safe, it doesn’t make any sense to involve the Gulf States.
Many will say we should not be surprised at these latest moves. As a candidate, Trump vowed to defeat ISIS once and for all. However, does anyone really believe that continuing the same strategy we have followed for the past 16 years will produce different results this time? If what you are hammering is not a nail, will hammering it harder get it nailed in?
Rand Paul Blasts McCain Over Perpetual War: "He Would Bankrupt The Nation" Senator Rand Paul blasted fellow Republican Senator John McCain over McCain’s perpetual warmongering on ABC’s “This Week”. Some are undoubtedly disheartened by political infighting, but this infighting is good. These are debates the country desperately needs to have. Earlier today Rand paul stated “We’re very lucky John McCain is not in charge.”Sen. Rand Paul (Ky.) ripped fellow Republican Sen. John McCain (Ariz.) on Sunday after McCain criticized President Trump’s escalating war of words with the media.He argued that the nation is “very lucky” that Trump is president and not McCain, who won the 2008 GOP nomination but lost to Barack Obama in the general election.Paul said that McCain’s recent criticisms of Trump are driven by his “personal dispute” with the president over foreign policy.He added that McCain and Trump are at odds because McCain supports the wide deployment of U.S. troops to protect and promote American interests abroad while he characterized Trump’s views as closer to a realpolitik approach to foreign policy.“Everything that he says about the president is colored by his own personal dispute he’s got running with President Trump, and it should be taken with a grain of salt, because John McCain’s the guy who’s advocated for war everywhere,” Paul said on ABC’s “This Week.”“He would bankrupt the nation. We’re very lucky John McCain’s not in charge, because I think we’d be in perpetual war,” Paul added. Paul argued that McCain has a history of being wrong major foreign policy questions.
‘Grand champions of currency manipulation’: Donald Trump ratchets up his attack on China | South China Morning Post: President Donald Trump declared China the “grand champions” of currency manipulation on Thursday, just hours after his new Treasury secretary pledged a more methodical approach to analysing Beijing’s foreign exchange practises. In an exclusive interview, Trump said he has not “held back” in his assessment that China manipulates its yuan currency, despite not acting on a campaign promise to declare it a currency manipulator on his first day in office. “Well they, I think they’re grand champions at manipulation of currency. So I haven’t held back,” Trump said. “We’ll see what happens.” During his presidential campaign Trump frequently accused China of keeping its currency artificially low against the dollar to make Chinese exports cheaper, “stealing” American manufacturing jobs.But Treasury Secretary Stephen Mnuchin told CNBC on Thursday he was not ready to pass judgment on China’s currency practises. Asked if the US Treasury was planning to name China a currency manipulator any time soon, Mnuchin said he would follow its normal process of analysing the currency practises of major US trading partners. The Treasury is required to publish a report on these practises on April 15 and October 15 each year. “We have a process within Treasury where we go through and look at currency manipulation across the board. We’ll go through that process. We’ll do that as we have in the past,” Mnuchin said in his first televised interview since formally taking over the department last week. “We’re not making any judgments until we go continue that process.”
Washington prepares to bring North Koreans to U.S. for talks: report | Reuters: Preparations are under way to bring senior North Korean officials to the United States for talks with former U.S. officials, the first such meeting in more than five years, The Washington Post reported on Sunday. The talks would be the clearest indication yet that North Korean leader Kim Jong Un wants to communicate with the new Trump administration. Planning for the "Track 1.5 talks" is still in a preparatory stage, the Post reported, citing multiple people with knowledge of the arrangements. That name, reflecting planned contact between former U.S. officials and current North Korean ones, is a reference to what are known as "Track 2" talks involving former officials on both sides. The U.S. State Department has not yet approved the North Koreans' visas for the talks, the newspaper said. A State Department spokesman commented to Reuters only that Track 2 meetings "routinely" take place on a variety of topics around the world and occur independent of the U.S. government. A White House official commented that the U.S. government had no plans to meet with North Korea.
The Foreign-Policy Establishment Defends Itself From Trump - Ben Rhodes, one of Barack Obama’s top advisers, once dismissed the American foreign-policy establishment—those ex-government officials and think-tank scholars and journalists in Washington, D.C. who advocate for a particular vision of assertive U.S. leadership in the world—as the “Blob.” Donald Trump had harsher words. As a presidential candidate, he vowed never to take advice on international affairs from “those who have perfect resumes but very little to brag about except responsibility for a long history of failed policies and continued losses at war.” Both men pointed to one of the Beltway establishment’s more glaring errors: support for the war in Iraq. Now the Blob is fighting back. The “establishment” has been unfairly “kicked around,” said Robert Kagan, a senior fellow at the Brookings Institution and former official in the Reagan administration. “We have large problems of perception,” Kagan continued, in reference to the establishment. “Trump says this, but he’s not the only one: ‘The last 30 years have been a disaster in American foreign policy.’ And my answer to that is: Really? Compared to which 30 years? ... Would you like the 30 years prior to World War I? Would you like the 30 years from World War I through World War II? Would you even like the 30 years following World War II, with the Cold War and [the wars in] Vietnam and Korea? Actually, the last 30 years have been pretty good in historical terms. And I think that what has been the American foreign-policy establishment’s bipartisan foreign policy since World War II has actually been one of the most successful foreign policies in history.”
Trump Chooses H.R. McMaster as National Security Adviser — President Trump appointed Lt. Gen. H. R. McMaster as his new national security adviser on Monday, picking a widely respected military strategist known for challenging conventional thinking and helping to turn around the Iraq war in its darkest days.Mr. Trump made the announcement at his Mar-a-Lago resort, where he interviewed candidates over the holiday weekend to replace Michael T. Flynn, who was forced out after withholding information from Vice President Mike Pence about a call with Russia’s ambassador. Unlike Mr. Flynn, who served as a campaign adviser last year, General McMaster has no links to Mr. Trump and is not thought of as being as ideological as the man he will replace. A battle-tested veteran of both the Persian Gulf war and the second Iraq war, General McMaster is considered one of the military’s most independent-minded officers, sometimes at a cost to his own career. The selection encouraged Republicans who admire General McMaster and waged a behind-the-scenes campaign to persuade Mr. Trump to select him. Key to the choice was Senator Tom Cotton of Arkansas, an Army veteran who once served under General McMaster and suggested him to the White House. A coterie of other national security conservatives, including a top aide to Senator John McCain of Arizona, also lobbied for him, and Defense Secretary Jim Mattis, who has worked with General McMaster, encouraged him to take the job.
Iconoclast McMaster Tapped as U.S. National Security Adviser -- Donald Trump’s pick of H.R. McMaster for national security adviser puts a key job in the hands of a decorated officer with a record for speaking his mind, reassuring administration critics who’ve been increasingly vocal about their differences with the U.S. president. Trump on Monday selected the Army lieutenant general to replace Michael Flynn, who resigned last week following revelations he misled the vice president about contacts with a Russian envoy. Keith Kellogg, who stepped in as acting national security adviser and was considered for the post, will remain as chief of staff for the national and homeland security councils. While Trump has tapped a number of military officers for key administration posts, the new national security adviser has a reputation for speaking truth to authority, a trait that hasn’t always been welcome in a White House where loyalty to the president is prized most of all. Scores of Republican foreign policy officials have been passed over for top jobs after signing letters or speaking out against Trump during the campaign.Trump’s decision prompted Senator John McCain of Arizona, who heads the Armed Services Committee and has been perhaps the president’s loudest Republican detractor on Capitol Hill, to call the 54-year-old McMaster “an outstanding choice,” adding that he gives “President Trump great credit for this decision.” Some Democrats also praised the pick. “Every time they add a grownup into that equation, we should all be happy,” Senator Sheldon Whitehouse, a Rhode Island Democrat, said.
Trump's new security advisor differs from him on Russia, other key issues | Reuters: U.S. President Donald Trump has shown little patience for dissent, but that trait is likely to be tested by his new national security adviser, Army Lieutenant General H.R. McMaster. McMaster is joining the White House staff with views on Russia, counterterrorism, strengthening the military and other major security issues that diverge not only from those of the Trump loyalists, but also from those the president himself has expressed. A military intellectual whose ideas have been shaped more by experience than by emotion, more by practice than by politics, and more by intellect than by impulse may also find himself in political terrain that may be as alien, and perhaps as hostile, to him as the sands and cities of Afghanistan and Iraq were. McMaster will not be alone, however. His prominent administration allies include Defense Secretary Jim Mattis; Marine General Joseph Dunford, the chairman of the Joint Chiefs of Staff; and Senator John McCain, chairman of the Senate Armed Services Committee; as well as many of the soldiers who have served with him. White House press secretary Sean Spicer said on Tuesday that Trump told McMaster "he's got full authority to structure the national security team the way he wants." Trump, however, already has taken the unusual step of adding Steve Bannon, his chief strategic adviser known for right-wing ideological views, to the White House National Security Council. "The real potential for flashpoints is with some of the people that Steve Bannon has brought into the administration ... people who see things very ideologically," said Andrew Exum, a former Army officer and Defense Department Mideast policy official and McMaster friend for more than a decade.
McMaster May Reorganize Trump’s Foreign Policy Team Once Again — Lt. Gen. H. R. McMaster, President Trump’s new national security adviser, is considering a reorganization of the White House foreign policy team that would give him control of Homeland Security and guarantee full access to the military and intelligence agencies. Just days after arriving at the White House, Mr. McMaster is weighing changes to an organization chart that generated consternation when it was issued last month. One proposal under discussion would restore the director of national intelligence and the chairman of the Joint Chiefs of Staff to full membership in a cabinet-level committee, according to two officials who discussed internal deliberations on the condition of anonymity.Another likely change would reincorporate the Homeland Security Council under the National Security Council, the way it was during the administration of President Barack Obama, the officials said. The decision to separate the Homeland Security staff, they said, was primarily a way to diminish the power of Mr. McMaster’s predecessor, Michael T. Flynn, who resigned last week. Now that Mr. Flynn is out and Mr. McMaster is in, both councils may report to him. Left uncertain is what, if anything, will happen regarding Stephen K. Bannon, the president’s chief strategist, who has played a major role in shaping foreign policy. Under the original organization plan last month, Mr. Bannon was invited to attend any National Security Council meeting led by the president and was made a regular member of the so-called principals committee of cabinet secretaries. One senior official supportive of Mr. Bannon’s position said it would not change under any reorganization. Sean Spicer, the White House press secretary, said this week that Mr. McMaster would have full authority to organize his staff, but that any change in Mr. Bannon’s status would have to be approved by the president.
Bannon Out Of NSC? McMaster Prepares To Reorganize Foreign Policy Team --The arrival of Mike Flynn's replacement, Gen. H.R. McMaster as Trump's new national security advisor could mean sweeping changes of the White House foreign policy team, giving him control of Homeland Security and guarantee full access to the military and intelligence agencies. In a report by the NYT, Mr. McMaster is said to be weighing changes to an organization chart that generated consternation when it was issued last month. According to one proposal, McMaster would restore the director of national intelligence and the chairman of the Joint Chiefs of Staff to full membership in a cabinet-level committee. Another likely change would involve the Homeland Security Council which would reform under the National Security Council, the way it was during the administration of President Barack Obama. The NYT notes that they were only left out because the Trump team copied a Bush-era organizational chart without realizing that President Obama had made both positions full members of the committee: "Mr. Trump’s team did not intend to reduce the role of the intelligence director or Joint Chiefs chairman, officials said. In crafting their organization order, the officials said, Mr. Trump’s aides essentially cut and pasted language from Mr. Bush’s organization chart, substituting the national intelligence director for the C.I.A. director, who back then was the head of the nation’s spy agencies." The decision to separate the Homeland Security staff, they said, was primarily a way to diminish the power of McMaster’s predecessor, Michael T. Flynn, who resigned last week. Now that Flynn is out and Mr. McMaster is in, both councils may report to him.
The War Hawks Rolled Donald Trump - President Trump's first National Security Advisor Mike Flynn got kicked out of office for talking with Russian officials. Such talks were completely inline with Trump's declared policies of détente with Russia. (I agree that Flynn should have never gotten the NSA job. But the reasons for that have nothing to do with his Russian connections.)Allegedly Flynn did not fully inform Vice-President Pence about his talk with the Russian ambassador. But that can not be a serious reason. The talks were rather informal, they were not transcribed. The first call is said to have reached Flynn on vacation in the Dominican Republic. Why would a Vice-President need to know each and every word of it?With Flynn out, the war-on-Russia hawks, that is about everyone of the "serious people" in Washington DC, had the second most important person out of the way that would probably hinder their plans.They replaced him with a militaristic anti-Russian hawk:In a 2016 speech to the Virginia Military Institute, McMaster stressed the need for the US to have "strategic vision" in its fight against "hostile revisionist powers" — such as Russia, China, North Korea, and Iran — that "annex territory, intimidate our allies, develop nuclear weapons, and use proxies under the cover of modernized conventional militaries."General McMaster, the new National Security Advisor, gets sold as a somewhat rebellious, scholar-warrior wunderkind. When the now disgraced former General Petraeus came into sight he was sold with the same marketing profile. Petraeus was McMaster's boss. McMaster is partially his creature:
Angst in GOP over Trump's trade agenda | TheHill: Republican lawmakers are concerned about where President Trump is headed on trade and are asking who in the administration is in charge of policies that could affect their home-state economies. Their biggest worries are what will replace the Trans-Pacific Partnership — the largest trade deal in U.S. history until it was scrapped by President Trump — and the future of NAFTA, which the president has called “the single worst trade deal in history.” Trump talked tough on trade during the campaign, pledging to renegotiate deals that he said have ripped off American workers. But many lawmakers on Capitol Hill are confused about what comes next amid crosstalk from different voices in the administration. Another trade-related concern is Speaker Paul Ryan’s (R-Wis.) push for a 20-percent across-the-board tax on imports that some Republicans fear could play havoc with export markets. The Trump administration has sent mixed signals on that idea as well. Texas, the most populous Republican state in the country, is heavily dependent on trade with Mexico; a trade war could cause significant disruptions to its economy. “I talked to group of people from Texas today, from San Antonio, and I said the two things that concern me the most about the Texas economy are the negotiation of NAFTA and the border adjustment tax,” Senate Republican Whip John Cornyn (Texas) told reporters this past week.
The Trade Deficit Is Nearly 15% of GDP (“Alternatively Defined”)! -- If we count only the import side and not the export side of re-exports, as some in the Administration have suggested, we might as well go “whole hog” and redefine the trade balance completely: Let’s count imports, but not exports. One must admit that the Trump Administration has been breathtakingly fast in infecting the public discourse with “alternative facts”. Nonetheless, I did not expect the Administration to so rapidly try to overturn the economic statistical gathering apparatus. From The Hill: the leading idea is to count “re-exports” — goods that are imported to the U.S., and then exported to a third country unchanged — as imports, but not exports. To quote Bill McBride at Calculated Risk: “Crazy”. Imagine what real GDP growth looks like if we incorporate imports, but not exports. It’d be “a mess”! (Update 9pm: if we didn’t count those “fake” exports, “alternative” GDP would 1.9 trillion less than reported (Ch.2009$ SAAR)!) Personal Note: Nearly a year ago, I was offered the opportunity to work on secondment to the USG for at least a year (extending into the new administration). It could have been a rewarding experience, but the potential prospect of having to work for people who would even countenance distorting the data in this way makes me glad that I didn’t take the post. Every day, I feel for the career staff that are being told to write “up” is “down”, and “left” is “right”.
Why the Proposed Border Tax Adjustment Is Unlikely to Promote U.S. Exports - New York Fed - There has been much debate about the proposed border tax adjustment, in which U.S. firms would pay a 20 percent tax on all imported inputs and be exempt from paying taxes on export revenue. The view among many economists, including proponents of the plan, is that the U.S. dollar would appreciate by the full amount of the tax and thus completely offset any relative price effects. In this post, we consider the implications of an alternative scenario where the U.S. dollar only appreciates part of the way. This could happen, for example, as a result of the uncertainty surrounding the policy response from other countries. As the proposed tax is effectively equivalent to an import tax combined with an export subsidy, it is possible that there could be retaliation from other countries in the form of taxes on U.S. exports or litigation with the World Trade Organization. If the U.S. dollar does not appreciate by the full amount of the tax, we argue that the effect of the tax will be to lower both U.S. imports and exports in the short to medium run. The reason for our conclusion is that pricing for the vast majority of contracts governing U.S. international trade, both imports and exports, is preset in U.S. dollars.
U.S. Manufacturing Exports—Excluding NAFTA—Are Surprisingly Small - Brad Setser -- Take out U.S. exports of manufactures to Canada and Mexico, and the United States manufacturing exports to the world are about 3 percent of U.S. GDP.* Non-NAFTA manufacturing imports are over 7 percent of U.S. GDP. These calculations are based on the North American Industry Classification System (NAICS) data for manufacturing trade, but exclude refined petrol. I cannot bring myself to count “product” as a manufacture. The division between the petrol and the non-petrol balance has long been central to my understanding of trade. Within NAFTA manufacturing exports and imports are roughly balanced—about 2.5 percent of GDP in both directions.** This supports Greg Ip’s view that China’s entry into the WTO—viewing WTO entry as short-hand for China’s increased integration into the global economy—in the 2000s had a materially different impact on the U.S. economy than NAFTA. By all measures, U.S. trade within NAFTA is much more balanced than U.S. trade with the world.* But the large deficit in manufactures—a deficit that increased by about a percentage point of U.S. GDP over the last three years, almost entirely because non-NAFTA manufacturing exports have fallen as a share of GDP by a percentage point over that period—highlights why working class support for trade in manufacturing-heavy communities has fallen. The winners from globalization in the U.S. are not so much those making goods to meet world demand as those selling debt (and real estate) to the world, those whose jobs are insulated from global competition and thus benefit from low-priced imports, and firms that have (often not taxed, or lightly taxed) large offshore profits.
Trump is right to criticize NAFTA—but he’s totally wrong about why it’s bad for America – EPI - Donald Trump’s promise to renegotiate or tear-up the 1994 North American Free Trade Agreement was a major reason why he won the support of working class voters in the Midwestern states that were crucial to his election. It’s also a trap. As US president-elect, Trump quickly scored some points with his Rust Belt constituency after claiming to get the Carrier and Ford corporations to reduce the number of jobs they are sending to Mexico. He also clearly exaggerated the effect of his personal persuasiveness: Carrier was moved by a $7 million tax break from the state of Indiana and Ford might well have made its decision before Trump intervened. In any event, as the Wall Street Journal reports, other companies, such as Rexnord, Caterpillar, and Nucor continue to send jobs south of the border. Renegotiating NAFTA is therefore the first real test of Trump’s pledge to create good new jobs by negotiating better trade deals. Will he deliver on this pledge? No. But the reason is not, as the conventional economic wisdom has it, because outsourcing work to low-wage countries is the inevitable result of immutable global forces that no president can reverse. The problem for American workers is not international trade, per se. America has been a trading nation since its beginning. The problem is, rather, the radical new rules for trade imposed by NAFTA—and copied in the myriad trade deals signed by the US ever since—that shifted the benefits of expanding trade to investors and the costs to workers.
The “Unsustainable” US-Mexico Trade Deficit -- Menzie Chinn --From CNNMoney, President Trump: “With Mexico we have $70 billion in deficit. … It’s unsustainable. … We’re not going to let it happen, can’t let it happen,” Here is actual data on the US-Mexico trade balance:To further elaborate on the (relative ijn)significance of the imbalance, note that the balance in value added is even smaller. The US-Mexico trade deficit in value added is noticeably smaller than the gross trade deficit. This infographic highlights the deep integration of Mexican producers into the North American supply chain. Some back of the envelope calculations of the impact of some proposed measures here.
Mnuchin Tells IMF He Expects A "Frank And Candid" Exchange Rate Analysis --With the Trump administration having gone radio silent in recent weeks on the issue of currency manipulation and whether it sees the dollar, or other currencies, as under- or over-valued, there was a notable if vague update from U.S. Treasury Secretary Steven Mnuchin who spoke to the IMF's Managing Director Christine Lagarde on Tuesday and told her that he expects the IMF to provide "frank and candid" analysis of exchange rate policies.There was no elaboration of what the apriori US stance was coming into the conversation.The spokesperson said that in a phone call with Lagarde, Mnuchin also "noted the importance that the administration places on boosting economic growth and jobs in the United States, and looked forward to robust IMF economic policy advice on its member countries and tackling global imbalances."The readout from the a Treasury Spokesperson of Secretary Mnuchin’s Call with International Monetary Fund Managing Director Christine Lagarde is below: U.S. Treasury Secretary Steven Mnuchin spoke by phone today with Christine Lagarde, Managing Director of the International Monetary Fund (IMF).In his conversation with Madame Lagarde, Secretary Mnuchin welcomed the key role the IMF plays in promoting global economic growth and stability and in preventing and responding to economic crisis. He noted the importance the Administration places on boosting economic growth and jobs in the United States, and looked forward to robust IMF economic policy advice on its member countries and tackling global imbalances. Secretary Mnuchin also underscored his expectation that the IMF provide frank and candid analysis of the exchange rate policies of IMF member countries. Needless to say, a full transcript of the conversation would have been far more useful for all those wondering if the dollar is set to continue its recent growth spurt or if Mnuchin hinted that Trump would be happier with a lower dollar going forward.
Mnuchin Praises Strong Dollar, Adds To Currency Confusion -- Following today's more dovish than most expected minutes, the dollar tumbled and its main carry counterpart, the yen spiked. However, shortly after 4pm, the USDJPY resumed its levitation, a time when the traditional trust bank intervention on behalf of the BOJ was not yet in play. The reason for the updraft in the dollar was the publication of an interview in the WSJwith Treasury Secretary Steven Mnuchin, his first since being sworn in as Treasury Secretary last week, in which he appeared to advocate a "strong dollar", and said the strong U.S. currency "is a reflection of confidence in the U.S. economy", adding that its performance compared with the rest of the world and was a “good thing” in the long run. “I think the strength of the dollar has a lot to do with kind of where our economy is relative to the rest of the world, and that the dollar continues to be the leading currency in the world, the leading reserve currency, and a reflection of the confidence that kind of people have in the U.S. economy,” Mr. Mnuchin said.Mnuchin's remarks are notable because like in his confirmation hearing in January, he contradicts many other White House officials, including not only Trump's key trade advisor Peter Navarro, but President Donald Trump himself, both of whom have suggested in the past that they favored a weaker currency to support the U.S. trade position.The dollar has appreciated by 23% over the past three years and added to those gains since Mr. Trump’s November election; recent US export weakness and numerous disappointing corporate earnings results have been blamed on the stronger dollar. A stronger dollar goes against the very basis of Trump's desire to make the US into an export powerhouse. “For longer-term purposes, an appreciation of the dollar is a good thing, and I would expect longer-term, as you’ve seen over periods of time, the dollar does appreciate,” Mr. Mnuchin added.
Ryan Makes Emphatic Plea for Tax Plan Seen ‘on Life Support’ -- Not long after House Speaker Paul Ryan offered a full-throated affirmation of his tax-overhaul plan, an influential conservative group announced a grassroots campaign against it and a Senate leader said a key part of the proposal is “on life support.” Senate Majority Whip John Cornyn was diagnosing Ryan’s plan to replace the U.S. corporate income tax with a new, “border-adjusted” levy on U.S. companies’ domestic sales and imports. The proposal has stirred sharp divisions among businesses: Retailers, automakers and oil refiners that rely on imported goods and materials oppose it, while export-heavy manufacturers support it. So far, the opponents are winning, interviews with lawmakers, lobbyists and tax specialists show. As Congress prepares to depart Washington for a one-week break, Cornyn said he didn’t see the votes lining up for the House leaders’ plan.“The hard reality is the border tax is on life support, and given the imperative of 51 senators and 218 House members and one president, I think we need to look for other options,” he said. Some House Republicans have already expressed reservations about the plan. And President Donald Trump, who has promised to produce the outline of his own “phenomenal” tax plan within weeks, hasn’t taken an official position on border adjustability. Without Trump’s enthusiastic support, the plan’s opponents have a distinct advantage, according to several lobbyists on either side of the issue, who asked not to be named because of the issue’s sensitivity.
Mnuchin Says to Expect Complete Tax Overhaul by August - NBC News: Treasury Secretary Steven Mnuchin said Thursday that he wants to see "very significant" tax reform passed before Congress' August recess, in what could prove a tough task as lawmakers work through a complex agenda. "We want to get this done by the August recess. We've been working closely with the leadership in the House and the Senate and we're looking at a combined plan," he told CNBC in his first television interview since assuming office. President Donald Trump has repeatedly drilled pledges for tax reform and regulatory cuts since he took office, injecting optimism into business executives and investors. He has promised to detail a tax plan in the coming weeks, without saying much about whether it is a version of his proposal outlined during the campaign or if it will resemble House Republicans' plan. Mnuchin said the administration is "primarily focused on a middle income tax cut and a simplification for business." He reiterated what he told CNBC in November that he is focused on any tax cuts for the wealthy getting canceled out with closed loopholes. The new Treasury secretary also said the administration still aims for "sustainable growth of 3 percent or more." He said he expects to hit that mark more toward the end of next year. He also addressed so-called border adjustment, a key provision of the House Republican tax plan. He said that "we're looking at it," noting that the plan has "interesting aspects" but also said "there are some concerns."
Trump says Republican border tax could boost U.S. jobs | Reuters: U.S. President Donald Trump on Thursday spoke positively about a border adjustment tax being pushed by Republicans in Congress as a way to boost exports, but he did not specifically endorse the proposal. Trump, who has lashed out at U.S. companies for moving operations and jobs to countries such as Mexico, had previously sent mixed signals on the proposal at the heart of a sweeping Republican plan to overhaul the tax code. "It could lead to a lot more jobs in the United States," Trump told Reuters in an interview, using his most approving language to date on the proposal. Trump sent conflicting signals about his position on the border adjustment tax in separate media interviews in January, saying in one interview that it was "too complicated" and in another that it was still on the table. The proposal has divided American businesses. Critics say the planned 20 percent tax on imports could be passed along in higher prices to consumers, including manufacturers that rely on imported goods to make their products. Some critics have warned of a potential global trade war which would sharply curtail U.S. and world economic growth. Advocates say U.S. exporters will gain as their revenues will be excluded from federal taxes. They say the tax on imports will encourage domestic production and cause the already strong dollar to rise, offsetting upward pressure on import prices.
In Campaign-Style Rally, Trump Promises New Immigration Action, Obamacare Replacement - Addressing an adoring crowd of supporters in Melbourne, Florida, on Saturday, President Donald Trump promised new action to restrict immigration next week, and a plan to replace the Affordable Care Act soon after that.“I’ve ordered the construction of a great border wall, which will start very shortly. And I’ve taken dramatic action to keep radical Islamic terrorists the hell out of our country,” Trump said at the rally in a hangar at the Orlando-Melbourne International Airport, drawing some of the loudest cheers of his speech.Trump acknowledged, however, that a federal appeals court had halted his earlier attempt to ban refugees and citizens of seven Muslim-majority nations from entering the country. After criticizing the ruling by the panel of three judges on the U.S. Court of Appeals for the 9th Circuit, he announced his intention to proceed with alternative plans.“We will do something next week. I think you’ll be impressed,” Trump said. “Let’s see what happens. Here’s the bottom line: We’ve got to keep our country safe.”It was not clear if Trump meant that his administration will try to challenge the 9th Circuit’s ruling at the Supreme Court, or if he’ll instead issue a modified executive order that might avoid some of the legal challenges of the directive he issued late last month.Trump went on to cite alleged instances of refugee-perpetrated crimes and terrorism in Europe as evidence that the U.S. should adopt a more restrictive refugee policy. Naming a host of different European countries and cities, Trump suggested that there had been a terror attack in Sweden the previous night.“You look at what’s happening in Germany, you look at what’s happening last night in Sweden. Sweden. Who would believe this? Sweden,” he said. “They took in large numbers. They’re having problems like they never thought possible.” Many observers promptly pointed out that no such attack had occurred in the Scandinavian nation.
Steve Bannon: Trump is ‘maniacally focused’ on executing promises - Trump is “maniacally focused” on fulfilling his campaign pledges, Bannon warned, predicting a daily fight against the media he has branded as the opposition party. “The mainstream media ought to understand something: all those promises are going to be implemented,” Bannon told a gathering of thousands of conservatives near Washington on Thursday, who feted him and White House chief of staff, Reince Priebus. Bannon is a liberal bete noire whose confrontational, populist brand of Republican politics also upends decades of conservative orthodoxy. He has emerged as Trump’s most powerful aide and been dubbed “Trump’s Rasputin” or, in Twitter speak, #PresidentBannon. On Thursday, he stepped out of the shadows to make rare public remarks. He painted a picture of the White House at war with vested interests in the media. “The corporatist, globalist media are adamantly opposed to an economic nationalist agenda that Donald Trump has.”“He’s going to continue to press his agenda and as economic conditions get better, as more jobs get better, they’re going to continue to fight.. “Every day is going to be a fight. That is the promise of Donald Trump ... All the people who’ve came in and said you’ve got to moderate. Every day in the Oval Office he tells Reince and I: ‘I committed this to the American people, I promised this when I ran, and I’m going to deliver on this.’” The crowd at the Conservative Political Action Conference (CPAC) erupted in cheers and applause, with some delegates standing and punching the air.
Trump's revised travel ban targets same 7 Muslim-majority countries, official says - A draft of President Donald Trump's revised immigration ban targets the same seven countries listed in his original executive order and exempts travelers who already have a visa to travel to the U.S., even if they haven't used it yet.A senior administration official said the order, which Trump revised after federal courts held up his original immigration and refugee ban, will target only those same seven Muslim-majority countries — Iran, Iraq, Syria, Yemen, Somalia, Sudan and Libya. The official said that green-card holders and dual citizens of the U.S. and any of those countries are exempt. The new draft also no longer directs authorities to single out — and reject — Syrian refugees when processing new visa applications. The official spoke on condition of anonymity to discuss the order before it's made public. The official noted that the draft is subject to change ahead of its signing, which Trump said could come sometime this week.
Trump's New Travel Ban Revealed: Phase-In Period; Green-Card Holders Spared - Deciding not the see the 9th Circuit court of appeals "in [Supreme] court" after all, last week the White House announced it would unveil a revised immigration order banning travel to the US over the next few days. On Saturday, Homeland Security Secretary John Kelly previewed what it would look like, when he told a Munich Security Conference gathering that the travel ban will no longer stop green card holders or travelers already on planes from entering the United States, in hopes of avoiding another round of legal challenges. “The president is contemplating issuing a tighter, more streamlined version of the first Executive Order. And I will have, this time, the opportunity to work (on) a rollout plan, in particular to make sure that there's no one in a sense caught in the system of moving from overseas to our airports, which happened in the first release." Kelly said in a panel discussion in Munich. Asked whether green card residency permit holders would be allowed in, Kelly said: "It's a good assumption and, as far as the visas go, ... if they're in motion from some distant land to the United States, when they arrive they will be allowed in" and explained that it would be a temporary ban as the government reviewed the vetting procedures regarding people from the banned countries. “I can tell you right now they’re not very reliable,” he said of the seven mostly Muslim countries the administration defined as terrorism threats and listed on the initial, temporary travel ban. Courts have suspended the ban, prompting the Trump administration to work on a new executive order. President Donald Trump has criticized the courts for their decisions, saying they threatened national security. Kelly said the judicial rulings surprised him, but that he would not criticize them. “I don’t criticize it,” Mr. Kelly said. “I don’t know enough about what they think.” However, his German peer had less qualms about lashing out at Trump. Onstage with Kelly, his German counterpart, Thomas de Maizière, criticized the idea. “To ban whole countries perhaps could create more collateral damage and perhaps does not produce more security,” Mr. de Maizière said.
Trump’s Travel Ban Won’t Hit the U.S. Economy, At Least This Year - The U.S. economy should be able to weather President Donald Trump’s temporary travel ban, economists say, though any broadening of immigration and visa restrictions could hurt the labor force and productivity. Two-thirds of economists surveyed by Bloomberg said the ban, which has for the moment been temporarily suspended by the courts, will have "little to no effect" on 2017 gross domestic product. Nine said it would have a moderately negative impact and only one said it would have a significantly negative effect. Trump issued the executive order on Jan. 27, temporarily banning immigration from seven Muslim-majority countries and blocking for 120 days all refugees in a bid to keep potential terrorists from entering the U.S. Many of the economists surveyed simply don’t see the ban "sticking," in the words of Mikhail Melnik from Kennesaw State University in Georgia. The ban already has been put through the judicial wringer, having been granted a temporary delay by a judge in Seattle earlier this month and facing several other lawsuits around the country. Trump said Feb. 16 that a new order will be issued this week, tailored to address the objections of the federal appeals court that upheld the Seattle decision. The new order will almost certainly trigger a fresh round of legal challenges and the legality of the ban is expected to ultimately be decided by the Supreme Court. "It is doubtful that the ban will stick," Melnik said. "But if it does, it will have a rather limited economic impact." Measuring the economic impact of the Trump administration’s immigration policy promises to be a complicated and ongoing affair, particularly with the courts’s suspension. In the meantime, many economists have tried to gauge potential impacts, including Brian Schaitkin of the Conference Board, who outlined the current role that immigrants targeted in Trump’s order play in the U.S. economy.
Trump Delays New Travel Ban To Next Week, No Reason Given Why - A White House official said on Wednesday that Donald Trump is pushing back the release of his revised executive order on travel and refugees until next week. Trump had said that a revamped executive order, tailored to address legal issues that blocked his original travel ban, would be released this week. No explanation was given for the delay, and it remains unclear how the White House will tweak the travel ban to prevent future legal challenges.“Fundamentally you’re going to have the same basic policy outcome for the country,” White House policy adviser Stephen Miller said on Fox News on Tuesday night. He said the new order will largely resemble the old one, but that the changes will be “mostly minor technical differences.”During a speech at the White House last Thursday Trump said that "new order is going to be very much tailored to what I consider a very, very bad decision. We can tailor the order to the decision to get just as much.” White House officials have been scrambling to draft a new executive order, after initially threatening to take the 9th Circuit court of appeals to the Supreme Court, while stressing they are taking steps to ensure a smoother rollout than the last one. After chaos ensued when the original ban was handed down on Jan. 27, resulting in hundreds of travelers being stranded at airports around the country amid confusion about whether the policy applied to people in transit and legal permanent residents, various legal challenges were filed against the order. The Department of Homeland Security days later clarified the order did not apply to permanent residents. But that did not stop a federal judge in Washington from issuing a nationwide restraining order halting the ban, which was later upheld by a three-judge panel of the Ninth Circuit Court of Appeals. The White House has signaled it intends to continue the legal fight even though Justice Department lawyers said in a court filing the administration planned to rescind the initial order.
Travel Ban Aside, Trump Has Vast Legal Arsenal for Deporting Millions - Whether President Donald Trump’s ban against travelers from seven Muslim majority countries is saved by revision or scrapped by the courts, he’ll still have a vast legal arsenal at his disposal for limiting immigration into the U.S. and deporting millions of undocumented people. The law vests the president with broad authority over immigration, said Austin Fragomen, whose Manhattan-based Fragomen, Del Rey, Bernsen & Loewy is the biggest U.S. law firm focused on immigration. Trump hasn’t wasted time tapping his power. The administration said Tuesday it will try to deport almost all undocumented immigrants caught in the U.S., hire thousands more border patrol and immigration agents and begin building a wall along the Mexican border, enacting an immigration crackdown the president sought in a Jan. 25 executive order. Trump’s Jan. 25 directive, entitled “Enhancing Public Safety in the Interior of the United States,” signed two days before his travel-ban directive, could result in hundreds of thousands, if not millions, of immigrants being rounded up for deportation, according to Kelly Lytle Hernandez, an immigration historian at the University of California, Los Angeles. The order directs federal agencies to vigorously enforce existing immigration laws and vows to withhold federal funds from jurisdictions that don’t comply. “We are living in a new reality and that order is the beginning,” said Hernandez, a Trump critic. “We could quickly begin to see neighbors disappear.” The Department of Homeland Security oversees almost two dozen agencies that determine who enters and leaves the U.S., including Immigration and Customs Enforcement, Customs and Border Protection and Citizenship and Immigration Services. The agency has an annual budget of $41 billion and more than 229,000 employees. Trump has broad discretion to use the money and employees as he sees fit without seeking approval from Congress.
Memos signed by DHS secretary describe sweeping new guidelines for deporting illegal immigrants -WaPo - Homeland Security Secretary John F. Kelly has signed sweeping new guidelines that empower federal authorities to more aggressively detain and deport illegal immigrants inside the United States and at the border. In a pair of memos, Kelly offered more detail on plans for the agency to hire thousands of additional enforcement agents, expand the pool of immigrants who are prioritized for removal, speed up deportation hearings and enlist local law enforcement to help make arrests. The new directives would supersede nearly all of those issued under previous administrations, Kelly said, including measures from President Barack Obama aimed at focusing deportations exclusively on hardened criminals and those with terrorist ties. “The surge of immigration at the southern border has overwhelmed federal agencies and resources and has created a significant national security vulnerability to the United States,” Kelly stated in the guidelines. He cited a surge of 10,000 to 15,000 additional apprehensions per month at the southern U.S. border between 2015 and 2016. A White House official said the memos were drafts and that they are under review by the White House Counsel’s Office, which is seeking some changes. The official, who spoke on the condition of anonymity because the process is not complete, declined to offer specifics.
Trump administration widens net for immigrant deportation - BBC News: The Trump administration has issued tough guidelines to widen the net for deporting illegal immigrants from the US, and speed up their removal. Undocumented immigrants arrested for traffic violations or shop-lifting will be targeted along with those convicted of more serious crimes. The memos do not alter US immigration laws, but take a much tougher approach towards enforcing existing measures. There are an estimated 11 million illegal immigrants in the US. White House Press Secretary Sean Spicer said on Tuesday the new guidelines would not usher in mass deportations, but were designed to empower agents to enforce laws already on the books. "The president wanted to take the shackles off individuals in these agencies," Mr Spicer said. "The message from this White House and the Department of Homeland Security is that those people who are in this country, who pose a threat to our safety, or who have committed a crime, will be the first to go."
Trump Team Maps Sweeping Deportations for Undocumented Migrants - The Trump administration outlined a sweeping crackdown on undocumented immigrants Tuesday, proclaiming that it would seek to swiftly deport many more people without court hearings and target migrants charged with crimes or thought to be dangerous, not just convicts. Department of Homeland Security Secretary John Kelly said in a pair of memos describing the plan that, with few exceptions, the U.S. "no longer will exempt classes or categories of removable aliens from potential enforcement." Immigration officers should seek to deport undocumented people who have engaged in fraud or "willful misrepresentation in connection with any official matter before a governmental agency" or have "abused" any government benefit, in addition to criminals, Kelly wrote. Immigration authorities also could seek to deport people based on their own judgment that the immigrants represent a risk to public safety or national security, he said. He ordered the department to hire 15,000 more border patrol and immigration agents and to begin building a wall on the Mexican border to enact executive orders signed by the president on Jan. 25. Kelly’s memos don’t cover Trump’s Jan. 27 ban on the entry of foreign travelers from seven predominantly Muslim nations, which was halted by a federal appeals court.
New DHS Memos Reveal That Almost Anyone Living In The US Illegally Is Now Subject To Deportation --The Department of Homeland Security released on Tuesday documents translating President Trump’s executive orders on immigration and border security into policy, providing details on how it will prosecute undocumented immigrants and criminal immigrants, repealing nearly all of the Obama administration's guidances, and bringing a major shift in the way the agency enforces the nation’s immigration laws.As the WSJ notes, "almost everybody living in the U.S. illegally is now subject to deportation, and more undocumented arrivals at the southern border would be jailed or sent back to Mexico to await a hearing rather than released into the U.S." according to the new guidance.“The Department no longer will exempt classes or categories of removable aliens from potential enforcement,” the enforcement memo says. “Department personnel have full authority to arrest or apprehend an alien whom an immigration officer has probable cause to believe is in violation of the immigration laws.” Secretary John Kelly's two memos expand raids and the definition of criminal aliens, while diminishing sanctuary areas and enlisting local law enforcement to execute federal immigration policy. The memos still outline priority groups, starting with serious criminals. But the priorities are much broader and include people charged with crimes who haven’t been convicted, people guilty only of immigration-related crimes such as using false documents, and anybody who an immigration officer believes is a risk to public safety. While DHS officials said they wouldn’t target otherwise law-abiding undocumented immigrants and don’t plan roundups of illegal immigrants, and said their limited resources would still require a focus on those people who pose a public-safety risk, they also said that people who don’t fall into a priority group aren’t exempt from deportation, and the DHS memo says exceptions would be made on a case-by-case basis.
DHS Chief Vows "No Military Force" On Deportations After Trump Describes "Military Operation" --With each passing day it's becoming increasingly difficult to ignore the apparent breakdown in communications between the Trump White House and his various agency chiefs. Now, we learn the latest communication mix-up came from two very contradictory comments, one from DHS Secretary John Kelly and the other from President Trump, earlier today on exactly how law enforcement officials would implement plans to roundup and deport criminal illegal aliens currently residing the U.S.Speaking in Mexico City earlier today, Kelly, in an attempt to assuage tensions created by Trump's immigration policies, told Mexican diplomats that the administration's new immigration rules would not result in "mass deportations" and vowed that his department would not use "military force" to implement domestic policies. Per The Hill:Homeland Security Secretary John Kelly on Thursday pledged the military would not be used to expel undocumented immigrants from the U.S.Speaking in Mexico City, Kelly pledged the Department of Homeland Security’s (DHS) sweeping new immigration enforcement rules would not result in “mass deportations.”“Let me be very very clear, there will be no, repeat, no mass deportations,”he said. “Everything we do in DHS will be done legally and according to human rights and the legal justice system of the United States.” "There will be no, no use of military force in immigration,” Kelly said, telling the news media only "half of you get that right.”
U.S. Homeland Security employees locked out of computer networks: sources | Reuters: Some U.S. Department of Homeland Security employees in the Washington area and Philadelphia were unable to access some agency computer networks on Tuesday, according to three sources familiar with the matter. It was not clear how widespread the issue was or how significantly it affected daily functions at DHS, a large government agency whose responsibilities include immigration services, border security and cyber defense. In a statement, a DHS official confirmed a network outage that temporarily affected four U.S. Citizenship and Immigration Services (USCIS) facilities in the Washington area due to an "expired DHS certificate." Reuters first reported the incident earlier Tuesday, which a source familiar with the matter said also affected a USCIS facility in Philadelphia. Employees began experiencing problems logging into networks Tuesday morning due to a problem related to domain controllers, or servers that process authentication requests, which could not validate personal identity verification (PIV) cards used by federal workers and contractors to access certain information systems, according to the source. Some employees were able to access systems through a virtual private network. It was not clear if other branches of DHS were affected. The source characterized the issue as one stemming from relatively benign information technology missteps and a failure to ensure network redundancy. There was no evidence of foul play, the source said, adding that it appeared the domain controller credentials had expired on Monday when offices were closed for the federal Presidents Day holiday.
Poll: Americans overwhelmingly oppose sanctuary cities | TheHill: An overwhelming majority of Americans believe that cities that arrest illegal immigrants for crimes should be required to turn them over to federal authorities. The poll shows that President Trump has broad public support in his effort to crack down on sanctuary cities. A survey from Harvard–Harris Poll provided exclusively to The Hill found that 80 percent of voters say local authorities should have to comply with the law by reporting to federal agents the illegal immigrants they come into contact with.As it stands, hundreds of cities across the nation — many with Democratic mayors or city councils — are refusing to do so. Trump has signed an executive order directing Homeland Security Secretary John Kelly to find ways to starve these sanctuary cities of federal funding. A Reuters analysis found the top 10 sanctuary cities in the U.S. receive $2.27 billion in federal funding for programs ranging from public health services to early childhood education. Kelly is expected to hire thousands of new immigration enforcement agents with broad authority to detain and deport those in the country illegally, potentially setting up a showdown between the federal government and sanctuary cities. The Harvard–Harris Poll survey found strong support for an overhaul of the nation's immigration laws, with 77 percent saying they support comprehensive immigration reform against only 23 percent who oppose.
Could Trump's Immigration Ban Cause Another Housing Crash? --How important are immigrants to the U.S. housing market? At least according to University of Washington economist Jacob Vigdor they could own roughly 12.5% of the housing stock in the U.S. worth about $3.7 trillion in aggregate. Here's the math...there are roughly 320 million people in the U.S. and 125 million houses, or about 2.5 people per household. Since there are 40 million immigrants living in the U.S., that implies they could own around 16 million homes. Using an average home price of $225,000 would imply an aggregate household value of ~$3.7 trillion for immigrant families alone. PerBloomberg:Fueling housing demand, immigrants replace baby boomers retiring from the labor force, according to University of Washington economist Jacob Vigdor.By his reckoning, the country’s 40 million immigrants add $3.7 trillion to total housing wealth. In Houston’s home county, the newcomers boosted the value of the typical home by $25,000 during the decade ended in 2010. Between 2015 and 2065, according to a Pew Research projection, future immigrants and their descendants will account for 88 percent of the U.S. population increase, or 103 million people.The question, of course, is whether or not Trump's immigration crack down, on both illegal immigrants and H1-B visa holders, will reduce demand from immigrant families to such an extent that it actually drives down home prices? In San Francisco, an Indian software engineer on a work permit canceled plans to bid on a $900,000 home. In Washington, a Brazilian nonprofit executive passed on a fixer-upper near her office. And, in Mesa, Arizona, a 24-year-old son of undocumented Mexican immigrants won the trust of a bank -- a green light for a mortgage -- but now fears deportation. President Donald Trump’s immigration policies threaten to crack a foundation of the American economy: the residential real estate market. Legal and otherwise, immigrants, long a pillar of growth in homebuying, are no longer feeling the warm welcome and optimism necessary for their biggest purchase.
New Study Finds That Trump's Immigration Crack Down Could Cost $5 Trillion In GDP Over 10 Years --Earlier today we wrote about the impacts that Trump's immigration policies may have on the U.S. housing market (see "Could Trump's Immigration Ban Cause Another Housing Crash?"), but that's just the beginning of the story. No matter where you come down on the immigration debate, like it or not, there are millions of low-skill jobs in this country, particularly in the Southwest, that our pampered, snowflake millennials wouldn't touch with a 10-foot pole and are thus filled by "undocumented" workers primarily from Mexico and other portions of South America. Courtesy of a recent study from the National Bureau of Economic Research (NBER), we know that the industries that employ the highest percentage of migrant workers are, quite unsurprisingly, industries like Agriculture, Construction and Leisure and Hospitality, all of which require either back-breaking work in the blistering sun and/or low pay. In fact, per the NBER study, nearly 20% of all agricultural labor in the United States is performed by illegal aliens while 13% of construction jobs are filled by illegals....jobs that most entitled American youth are unlikely to fill at almost any price.Meanwhile, as we pointed out last fall, the seasonality of agricultural jobs makes them even more unattractive to domestic laborers. Per the chart below, the total number of people working in the ag industry in California spikes by about 33% starting in May every year and remains elevated for about 6 months through October. Ask any farmer in California how tight the labor market is during those summer months and you'll quickly understand that, even with the 1,000's of illegal migrants working in the state, that farmers find it almost impossible to fully staff their operations during the peak harvesting seasons.
The Unintended Consequences of Deporting Unauthorized Immigrants - Recent moves by the new Trump Administration to make almost all undocumented/unauthorized immigrants subject to deportation could have an unintended impact on the United States economy. In this posting, I want to take a brief look at how many unauthorized immigrants there are living in the United States, what industries they work in and the economic impact of removing them all from American soil. According to a study by Pew Research, the number of unauthorized immigrants peaked at 12.2 million in 2007, falling back to the 2014 level of 11.1 as shown here: This accounts for roughly 3.5 percent of the U.S. population, down from 4 percent in 2007. Obviously, all of these unauthorized immigrants are not in the workforce. Here is a graphic showing the estimated number of unauthorized immigrants in the U.S. labour force since 1995: In 2014, approximately 5 percent of the total workforce consisted of unauthorized workers, down from 5.4 percent in 2007. Interestingly, in 2014, about two-thirds of the unauthorized adult immigrants had been in the United States for at least ten years with only 14 percent living in the U.S. for five years or less. As well, in 2014, unauthorized adult immigrants had been living in the United States for a median of 13.6 years. Unauthorized immigrants tend to make up a higher share of the workforce in certain occupations as shown on this graphic: Here is a detailed table showing the total size of the workforce for major occupation groups, breaking the total into the number of U.S.-born, lawful immigrants and unauthorized immigrants:As you can see on the bottom part of the table, certain occupations have an over-representation of unauthorized immigrants compared to U.S.-born workers; only in construction and farming jobs do unauthorized immigrant workers outnumber lawful immigrant workers. As well, unauthorized immigrants were over-represented in production jobs including manufacturing, food processing and textile manufacturing were they comprised 9 percent of the total workforce. Now, let's look at the economic impact of unauthorized immigrants on the U.S. economy. According to a study by the Center for American Progress, the average annual nationwide loss in GDP if all unauthorized workers were removed from the United States would be $434.4 billion. Here is a table showing the financial losses by industry over both the short- and long-term:Here is a table showing the reduction in GDP contribution for each industrial sector over both the short- and long-term: The economic impact of a mass deportation of unauthorized immigrants would grow over time as shown here:If all unauthorized immigrants were deported, over the period from 2017 to 2026, the cumulative reduction in GDP would total $4.749 trillion or 2.0 percent of GDP.
Rex Tillerson, John Kelly Head to Mexico - Secretary of State Rex Tillerson and secretary of Homeland Security John Kelly are due to arrive in Mexico Wednesday, in the highest profile U.S. diplomatic mission to visit the country since Donald Trump became president. Mexican President Enrique Pena Nieto abruptly canceled a January meeting in the United States with Trump, amid a dispute between the two leaders that spilled over into social media. Tillerson and Kelly's meetings are slated "to allow the new U.S. Cabinet members to establish relationships and coordinate on bilateral issues" with Mexican officials, CNN reports, and perhaps to repair damage. But the United States' relationship with its southern neighbor, traditionally a strong ally, seems likely to remain precarious: Mexico has been a focal point of criticism of Trump's since day one of the then-candidate's campaign for president. The president and his team have continuously promised that the construction of a larger literal, physical barrier -- a wall -- between the countries is imminent; Mexico's government opposes the project. Further, Kelly on Tuesday made public memos that detail sweeping plans to ramp up deportations of those in the U.S. lacking documentation, many of whom are of Mexican origin. The meetings are scheduled to spill over into Thursday. Kelly will first travel to Guatemala, where he will meet with President Jimmy Morales, after which, he will join Tillerson in Mexico, DHS said in a statement on Monday. "During their visit, the two secretaries will meet with President of Mexico Enrique Peña Nieto and the Mexican ministers of Interior, Foreign Relations, Finance, National Defense, and Navy. The group will discuss border security, law enforcement cooperation, and trade, among other issues," the statement reads.
Mexico bristles at 'hostile' Trump deportation rules before U.S. talks | Reuters: Mexico reacted with anger on Wednesday to what one official called "hostile" new U.S. immigration guidelines hours before senior Trump administration envoys began arriving in Mexico City for talks on the volatile issue. The U.S. Department of Homeland Security unveiled plans on Tuesday to consider almost all illegal immigrants subject to deportation, and will seek to send many of them to Mexico if they entered the United States from there, regardless of nationality. The tension over the timing of the rules mirrors an outcry when President Donald Trump said on Twitter Mexico should pay for his planned border wall shortly before Mexican President Enrique Pena Nieto was due at a Washington summit in January. However, White House spokesman Sean Spicer said in Washington U.S.-Mexico ties were "phenomenal right now" and that he expected a "great discussion." Other senior officials also put on a brave face, telling reporters the trip was aimed at building a close working relationship. Trump, who took office last month, campaigned on a pledge to get tougher on the estimated 11 million illegal immigrants in the United States, playing on fears of violent crime while promising to build the wall and stop potential terrorists from entering the country. U.S. Secretary of State Rex Tillerson landed in Mexico City on Wednesday afternoon. He was joined by Homeland Security Secretary John Kelly later for talks the White House said would "walk through" the implementation of Trump's immigration orders. Kelly signed the guidelines issued by his department on Monday.
"Fuming, Defiant" Mexican Politicians Meet With US Officials Over "Hostile" Immigration Policies -- Top US officials arrived in Mexico Wednesday to find a "defiant, fuming" Mexican government refusing to accept President Donald Trump’s tougher immigration and deportation policies. U.S. Secretary of State Rex Tillerson landed in Mexico City on Wednesday afternoon. He was due to be joined by Homeland Security Secretary John Kelly later for talks the White House said would "walk through" the implementation of Trump's immigration orders. Kelly signed the guidelines issued by his department on Monday. Mexico's lead negotiator with the Trump administration, Foreign Minister Luis Videgaray, said there was no way Mexico would accept the new rules, which among other things seek to deport non-Mexicans to Mexico. Quoted by the WSJ, Mexico’s Foreign Minister Luis Videgaray said at a ceremony on Wednesday “I want to make it emphatically clear that neither Mexico’s government or the Mexican people have any reason to accept provisions that have been unilaterally imposed by one government on the other.” He added that “we won’t accept it because we don’t have to,” he added, in reference to U.S. plans to return illegal migrants to Mexico, regardless of their nationality. "We also have control of our borders and we will exercise it fully," he said, adding that Mexico was prepared to go the United Nations to defend the freedoms and rights of Mexicans under international law. He said the issue would dominate the talks, taking place on Wednesday and Thursday. Mexico will insist that the United States proves the nationality of any person it wants to deport to Mexico, he said. Videgaray’s declaration spelled trouble for Tillerson and Kelly, who a White House official said were sent to “talk through the implementation” of Mr. Trump’s guidelines.
Mexico Prepares Plan To Ditch U.S. Grain Imports As NAFTA Showdown Looms - America's Midwest farmers can't seem to catch a break. First, an epic collapse of grain prices over the last couple of years have threatened to wipe out family farmers (see "Midwest Farm Bubble Continues Collapse As Farm Incomes Expected To Crash In 2017") and now, thanks to the pending NAFTA showdown threatened by President Trump, Mexico, the single largest importer of U.S.-grown corn, has announced plans to find alternative grain sources in South America. Per Bloomberg:The Consejo Coordinador Empresarial, one of the nation’s top business chambers, is examining countries such as Brazil and Argentina to add new sources for soy, corn and wheat, according to Juan Pablo Castanon, the group’s president. Exports from those countries could help Mexico adjust to the difficulties that a Nafta renegotiation might present, he said.“The renegotiation might bring increased costs to imports, and our own exports might be hurt, so we need to find new markets,” he said in a phone interview, adding that the group’s efforts are still in the initial stages. The chamber, established in 1976, represents the country’s main agricultural, industrial and financial industry organizations, among others."We’d like to keep the trade deal as it is, but right now we have to look for alternative producers and Brazil and Argentina could work,” Castanon said,. Of course, any move by Mexican businesses to import raw materials from other countries could hit U.S. farmers hard. Mexico is the largest buyer of U.S.-produced corn, spending $2.5 billion in the 2015-2016 season, ahead of Japan’s $1.8 billion, according to the U.S. Grains Council. Moreover, Mexico has spent $800 million on U.S. corn so far in the current season.
Kasich: Repealing Medicaid expansion is ‘a very, very bad idea’ - Ohio Gov. John Kasich says he won't "sit silent" and watch the Affordable Care Act's Medicaid expansion get "ripped out" as Republicans work to repeal the law.Kasich, a second-term Republican who sought the GOP's presidential nomination in 2016, told CNN's Jim Sciutto on "State of the Union" that he wants Republicans to continue coverage for Americans insured by President Barack Obama's health care law -- and to be sure not to repeal the Medicaid expansion without an alternative."That is a very, very bad idea, because we cannot turn our back on the most vulnerable," Kasich said."We can give them the coverage, reform the program, save some money, and make sure that we live in a country where people are going to say, 'at least somebody's looking out for me,'" he said. "It's not a giveaway program -- it's one that addresses the basic needs of people in our country." His comments come as Capitol Hill Republicans work to iron out their plan to replace Obamacare's expanded coverage. President Donald Trump told attendees at a rally Saturday that he will offer his own plan in a couple of weeks. Kasich said 700,000 Ohio residents now receive care who did not before Obamacare became law, including "a third of whom have mental illness and need to be treated or drug treatment, which is a problem throughout the country.""To turn our back on them makes no sense," he said.
Prospects For A Quick Obamacare Repeal Are Fading Fast --Back on January 12th, 8 days before Trump even officially moved into the White House, the prospects of a quick repeal and replacement of Obamacare were looking really good when the Senate voted 51-48 to instruct key committees to start drafting legislation to do away with Obama's crowning "achievement". In fact, that early January budget resolution required lawmakers to submit repeal proposals for consideration by January 27th, a lofty goal, but welcome news to conservative voters around the country that were eager for a quick unwind of the controversial legislation.Alas, today, nearly a full month after the original deadline of January 27th, no replacement plan has been officially introduced and even Trump admits "maybe it will take till sometime into next year, but we are certainly going to be in the process...it's very complicated."Speaking to a crowd in Florida over the weekend, President Trump said that a replacement plan would be introduced within "a couple of weeks" but steered clear of commentary on when such a plan could be expected to be implemented. Per The Hill:"We are going to be submitting in a couple of weeks a great healthcare plan that's going to take the place of the disaster known as ObamaCare,"he said at a campaign rally in Melbourne, Fla. "It will be repealed and replaced.""Just so you understand, our plan will be much better healthcare at a much lower cost," he added. "OK? Nothing to complain about."
Repeal, Replace, Repair, Rename? Here Is The Latest On Obamacare, And Why It's Bad For Stocks - In a nutshell, Congressional Republicans hope to pass legislation by April to repeal and at least partially replace the health insurance coverage expansion under the Affordable Care Act. However, none of the several approaches that have been floated appear able to win a majority in the Senate. One base case, pitched by Goldman Sachs, is that Congress will enact ACA legislation in Q2 that modifies the tax credits under the law for health insurance coverage and increases state flexibility under Medicaid. However, this process is likely to take longer than expected, which is likely to delay the upcoming debate over tax reform; this in turn will have adverse consequences for the market, which has already largely priced in substantial passage of Trump's tax reforms even if no details are known yet. More importantly, as Goldman writes in an overnight note, the difficulty the Republican majority is having addressing a key political priority suggests that lawmakers might ultimately need to scale back their ambitions in other areas as well, such as tax reform. Here are the details on why Trump may have suddenly found himself trapped on next steps when it comes to both Obamacare, and tax reform, courtesy of Goldman's Alec Phillips: The outcome of congressional Republican plans to repeal and replace the Affordable Care Act (ACA) is as hard to predict as any legislative issue we can recall. For the last several years, congressional Republicans have sought to repeal the law, and now have the potential to do so.However, despite holding a majority in both chambers of Congress, Republicans appear to lack a majority for any particular option currently under consideration. The disagreement relates to substance—whether to continue the expansion of subsidies under the ACA but in different form or to substantially reduce subsidized benefits to the pre-ACA level—and process—whether to repeal first and enact a replacement program later, or to do both in the same legislation. The original Republican strategy was to address the law in two phases. The first phase was to repeal most of the fiscal provisions via the reconciliation process, which allows passage in the Senate with only 51 votes, and therefore potentially only with Republican support. These provisions would take effect with a delay, preserving the status quo for perhaps two years. In the second phase, Congress would enact a replacement program to provide some continuation of the coverage provided under the ACA, with the details to be determined during the two-year transition period. This two-stage approach would theoretically have two advantages over addressing the issue in one piece of legislation.
Questions Republican Healthcare Reformers Must Answer – Ed Dolan - Republicans do not yet have a full replacement for the Affordable Care Act (ACA or “Obamacare”), but the outlines of one are emerging. The Policy Brief on Repeal and Replace issued by House Republicans on February 16 points the way toward a three-tier system. It promises to provide “coverage protections and peace of mind for all Americans—regardless of age, income, medical conditions, or circumstances,” while ensuring “more choices, lower costs, and greater control over your health care.” Those are lofty aspirations, but reformers will have to address many difficult questions before they can be met. To find realistic answers, they will have to overcome divisions within the party, ideological constraints, outside pressures, and some hard realities of healthcare economics. The new policy brief, and similar plans put forward by Rand Paul, Mark Sanford, Paul Ryan, and others, include many common elements. Together, they point to a three-tier system that, in broad outline, would look like this:
- Central tier, for individuals and households with incomes well above the poverty line in which no member suffers from a serious chronic health condition. Such people account for roughly 70 percent of the population and roughly 25 percent of personal healthcare spending. Members of this tier would be served by conventional commercial health insurance. The cost of premiums would be covered by a combination of individual payments, advanceable healthcare tax credits (HCTCs), and employer contributions.
- Low-income tier, for individuals and households with incomes close to or below the official poverty line in which no individual suffers from a serious chronic health condition. Such people account for roughly 20 percent of the population and roughly 10 percent of all personal healthcare spending. Their coverage would be funded entirely, or almost entirely, from government sources. Some proposals use Medicare block grants as the model for this tier.
- High-risk tier, for individuals in the 10 percent of the population with chronic health conditions who account for roughly 65 percent of all personal healthcare spending. Average healthcare costs for this group exceed median household income. Their conditions are uninsurable due to the high cost of care and the chronic nature of their conditions. They would receive coverage from Medicare or some kind of high-risk pool, funded entirely, or at least in large part, from government sources.
In principle, such a system could ensure that 100 percent of the population had access to quality healthcare at an affordable cost—the aspirational goal set, but not fully achieved, by the ACA. However, the devil is in the details. Unless each element of the three-tier system is well thought out and adequately funded, and unless the parts fit together seamlessly, a Republican replacement could easily end up costing families more than the ACA and leaving a greater number of people without coverage.
Here are some questions that need answers before it will be possible to assess the workability of a Republican replacement for the ACA.
Boehner: Full Repeal And Replace Of Obamacare "Is Not Going To Happen" --Back on January 12th, 8 days before Trump even officially moved into the White House, the prospects of a quick repeal and replacement of Obamacare were looking really good when the Senate voted 51-48 to instruct key committees to start drafting legislation to do away with Obama's crowning "achievement". In fact, that early January budget resolution required lawmakers to submit repeal proposals for consideration by January 27th, a lofty goal, but welcome news to conservative voters around the country that were eager for a quick unwind of the controversial legislation.Alas, today, nearly a full month after the original deadline of January 27th, no replacement plan has been officially introduced and even Trump admits "maybe it will take till sometime into next year, but we are certainly going to be in the process...it's very complicated."But, at least according to comments made by John Boehner at a healthcare conference earlier today, the reason for the delay in the repeal and replacement of Obamacare isn't that complicated at all and revolves around the GOP's inability to reach a consensus on the key components of a replacement bill. Per Politico: On Thursday, Boehner said the talk in November about lightning-fast passage of a new health care framework was wildly optimistic.Boehner, who resigned in 2015 amid unrest among conservatives, said at an Orlando health care conference that the idea that a repeal-and-replace plan would blitz through Congress is just “happy talk.”“[Congressional Republicans are] going to fix Obamacare – I shouldn’t call it repeal-and-replace, because it’s not going to happen,” he said.“I started laughing,” he said. “Republicans never ever agree on health care.”
Poll: ObamaCare support hits new high | TheHill: Public support for ObamaCare has reached the highest level since the healthcare law’s creation in 2010, according to a new poll. Fifty-four percent of U.S. adults approve of the Affordable Care Act in the Pew Research Center survey released Thursday, while 43 percent disapprove and 3 percent have no opinion. The results found ObamaCare achieving majority approval for the first time amid a concerted GOP effort to repeal and replace the massive healthcare law. Twenty-five percent of those who disapprove of ObamaCare say Republicans should focus on modifying it, while 24 percent say they should scrap the law entirely.Pew said Americans were more split in its last poll on ObamaCare in December, with 48 percent approving, 47 percent disapproving and 5 percent not knowing or having no take. President Trump has pledged that repealing and replacing ObamaCare is an early priority of his administration, but Republicans have yet to unite around a plan. GOP lawmakers are encountering rising frustration from their constituents regarding their repeal efforts at town halls during this week’s congressional recess. Pew conducted its latest survey of 1,503 U.S. adults via cell and landline telephone interviews from Feb. 7-12. It has a 2.9 percent margin of error.
Leaked GOP Obamacare replacement shrinks subsidies, Medicaid expansion -- A draft House Republican repeal bill would dismantle the Obamacare subsidies and scrap its Medicaid expansion, according to a copy of the proposal obtained by POLITICO. The legislation would take down the foundation of Obamacare, including the unpopular individual mandate, subsidies based on people’s income, and all of the law’s taxes. It would significantly roll back Medicaid spending and give states money to create high risk pools for some people with pre-existing conditions. Some elements would be effective right away; others not until 2020. The replacement would be paid for by limiting tax breaks on generous health plans people get at work — an idea that is similar to the Obamacare “Cadillac tax” that Republicans have fought to repeal. Speaker Paul Ryan said last week that Republicans would introduce repeal legislation after recess. But the GOP has been deeply divided about how much of the law to scrap, and how much to “repair,” and the heated town halls back home during the weeklong recess aren’t making it any easier for them. The key House committees declined to comment on specifics of a draft that will change as the bill moves through the committees. The speaker's office deferred to the House committees.
Republican Health Proposal Would Redirect Money From Poor to Rich - Republicans in Congress have been saying for months that they are working on a plan to repeal and replace Obamacare in the Trump era. Now we have the outline of that plan, and it looks as if it would redirect federal support away from poorer Americans and toward people who are wealthier. A white paper drafted by House leadership and the staff of the House and Senate committees that oversee health policy details a structure that could replace large sections of the Affordable Care Act. Crucially, the proposal largely contains provisions that could be passed through a special budget process that requires only 50 Senate votes, and fulfills President Trump’s promise that the repeal and replacement of the law would take place “simultaneously.” The plan would make major changes in how health care is financed for Americans who don’t get coverage from work. It would greatly expand the number of Americans who could benefit from federal help in buying health insurance, but it would change who benefits most from that support. Obamacare, as the A.C.A. is known, extended health coverage to 20 million Americans through two main mechanisms. It expanded Medicaid coverage to Americans below or just above the poverty line in states that participated, and it offered income-based tax credits for middle-income people to buy their own insurance. Obamacare was a redistributive law, transferring money from rich to poor.
Inside Ivanka Trump’s Campaign for a $500 Billion Child-Care Plan - Ivanka Trump has urged lawmakers writing a tax overhaul to include a deduction for child care expenses, but with a price tag of as much as $500 billion over a decade she may have trouble finding support in Congress. Members of the House and Senate met with the president’s eldest daughter in the Roosevelt Room at the White House last week to discuss her proposed child care tax benefit, according to a person with knowledge of the meeting. President Donald Trump said earlier this month that he would soon propose a comprehensive tax overhaul, without offering any details. Ivanka Trump’s involvement in tax negotiations between the White House and congressional Republicans is a signal of her influence with her father despite having no formal role in his administration. Dina Powell, the former Goldman Sachs Group Inc. executive who is an economic adviser to the president, is helping Trump to ensure a tax overhaul includes both the child care benefit and a requirement that employers provide paid maternity leave, policies that she pressed her father to embrace on the campaign trail last year. "Ivanka is really pushing that none of it gets passed unless it includes the child care tax plan,” said Sheila Marcelo, founder of www.care.com, a website to find babysitters and other caregivers. "She and Dina Powell are really pushing to make sure it gets included." It’s not clear whether Ivanka Trump is finding much appetite on Capitol Hill for her proposal. A deduction for child care expenses is both costly and regressive because it would favor wealthier families with two working parents. The deduction would cost the federal government $500 billion in revenue over a decade, according to an estimate by the Tax Foundation, a politically conservative, nonprofit research group.
Bernie Sanders just proposed a law to save millennials’ retirements - President Donald Trump’s new budget chief thinks Social Security is a scam. But some progressive members of Congress aren’t giving up the fight to save it. On Friday, Sen. Bernie Sanders (I-Vt.) and Rep. Peter DeFazio (D-Ore.) introduced a bill to make Social Security solvent for generations while also expanding benefits. The bill would lift the payroll tax cap on highest earners and extend the life of the program through 2078. Currently, Social Security is funded through a 6.2% payroll tax that only applies to the first $127,200 a person earns in a year. The Sanders plan is similar to one he proposed during his presidential campaign and would lift the cap on all income above $250,000. Sanders proposed his legislation on Thursday because it was Social Security Day of Action. That's the day of the year — not even two months in — that millionaires stop contributing money from their paychecks into Social Security because of the $127,200 cap. Trump vowed on the campaign trail not to make any cuts to Social Security, but members of his cabinet may have other plans. Mick Mulvaney, Trump's recently confirmed head of the Office of Management and Budget, refused to walk back his position that Social Security a "Ponzi scheme," during his confirmation hearings.
Trump to seek jobs advice from firms that offshore U.S. work | Reuters: President Donald Trump, who has vowed to stop U.S. manufacturing from disappearing overseas, will seek job-creation advice on Thursday from at least five companies that are laying off thousands of workers as they shift production abroad. Caterpillar, United Technologies Corp, Dana Inc, 3M Co and General Electric, are offshoring work to Mexico, China, India and other countries, according to a Reuters review of U.S. Labor Department records. Executives from the five companies are among a group of business leaders due to meet with Trump on Thursday to discuss how to help the president deliver on his promise to increase factory employment, according to the White House. About 2,300 U.S. workers at these five companies stand to lose their jobs within the next two years as a result of offshoring, according to the Labor Department's Trade Adjustment Assistance Program, which provides retraining benefits to workers displaced by global trade. Reuters obtained the information through a Freedom of Information Act request. The companies confirmed the planned job cuts to Reuters. It is not clear whether the other 19 executives due to meet with Trump on Thursday are currently offshoring work, as the TAA program does not cover all workers who lose their jobs due to global trade. The lost jobs amount to a small fraction of the hundreds of thousands of U.S. workers employed by those involved in the meeting. General Electric, for example, employs 125,000 U.S. workers, financial filings show.Trump has painted globalization as a zero-sum game that has enriched low-wage countries while leaving the United States littered with abandoned factories and underemployed workers, and he has threatened to tax companies that offshore U.S. jobs.
Trump Vows to Put CEOs to Work Restoring U.S. Manufacturing - President Donald Trump summoned some of America’s most prominent corporate executives to the White House Thursday and told them he intends to put them to work restoring manufacturing jobs and U.S. dominance in trade. “They share our commitment to bring manufacturing back and to create jobs in this country,” Trump said as he sat with the 24 business leaders, who included Dow Chemical Co. Chief Executive Officer Andrew Liveris, General Electric Co. CEO Jeffrey Immelt, Lockheed Martin Corp. CEO Marillyn Hewson, and Caterpillar Inc. Chairman Doug Oberhelman. Trump used the public portion of the meeting to reiterate some of his campaign themes, blasting what he called “unbelievably bad” trade deals and singling out trade deficits with Mexico and China. He vowed to punish companies that move jobs outside the U.S. and promised to squeeze more money out of government contracts, citing his talks with Hewson, which he said cut the cost of Lockheed’s F-35 fighter jet by more than $700 million. Before meeting with Trump, the executives split into working groups to explore policy changes on topics such as taxes and trade, regulation, infrastructure and the future workforce. Joining them in the breakout sessions were administration officials, including Vice President Mike Pence; Gary Cohn, director of the National Economic Council; Treasury Secretary Steve Mnuchin; and Trump’s son-in-law, Jared Kushner. Campbell Soup Co. CEO Denise Morrison, Harris Corp. CEO Bill Brown, Johnson & Johnson CEO Alex Gorsky and David Farr, CEO of Emerson Electric, were among those who took part in the working group sessions with administration officials, who also included budget director Mick Mulvaney. In a meeting with Cohn and Transportation Secretary Elaine Chao, business leaders including Corning Inc. CEO Wendell Weeks and Nucor Corp. president John Ferriola discussed indexing gasoline taxes to provide more money for transportation projects. Liveris, who is leading the panel, said afterward that he and the other executives were “very encouraged” by the pro-business approach being taken by the administration. Taking part in a session on the workforce of the future, Liveris said there must be a “systemic fix” to address the shortage of workers prepared for jobs requiring skills in science, technology, engineering and mathematics.
Manufacturing CEOs Push Border Tax During Meeting With Trump -- The chieftains of U.S. manufacturing pressed their case to President Donald Trump Thursday that imposing taxes on imports would lead to higher employment. He got their message loud and clear. Just after meeting with the CEOs of Dow Chemical Co., General Electric Co. and other industrial giants, the president told Reuters he would “support a form of tax on the border” because it will “lead to a lot more jobs.” The president didn’t go as far as endorsing the tax reform plan backed by House Speaker Paul Ryan that has divided corporate America between importers and exporters. “We spent time talking about a tax code that creates a level playing field for American companies,” Ken Frazier, chief executive officer of Merck & Co., said after the meeting, part of which was closed to the press. Frazier is part of the group of CEOs who sent a letter to congressional leaders this week in support of Ryan’s plan and its “border-adjustment tax.” Republican leaders in the House argue a border-adjustment tax would benefit American manufacturing while providing revenue to make up for losses from reducing corporate tax rates. Trump has called it “too complicated” and said the White House would release its plan in coming weeks. Several Senate Republicans have also raised doubts. Opponents, including net importers like Wal-Mart Stores Inc., warn it will raise taxes on American consumers.
Stephen Miller’s and Trump’s Gross Re-Politicization of DOJ --There was some legitimate concern about inappropriate machination of the Department of Justice when Trump named and confirmed Jeff Sessions as his Attorney General. Typical discussion followed this by Isaac Arnsdorf at Politico: Donald Trump suggested on the campaign trail that he could use the Justice Department to fulfill his political agenda, taunting Hillary Clinton by threatening to throw her in jail over her email scandal. Now, Sen. Jeff Sessions, Trump’s pick for attorney general, will have to decide whether to follow his predecessors by vowing to not let politics drive the DOJ’s decision-making. That was one, and a serious, level of concern. Today we find said concern not close to being deep enough as to how the Trump White House would try to run Justice as merely a lever of their extreme politics. But, via the New York Daily News, comes a little noticed, and truly frightening report of just how renegade and ridiculous the “fine tuned machine” the Trump White House is determined to be in politicizing the DOJ. In an article captioned “Stephen Miller called Brooklyn U.S. Attorney at home and told him how to defend travel ban in court”, comes the stunning news that: In the chaotic hours after President Trump signed on a Friday afternoon the sloppily written executive order meant to fulfill his Muslim ban campaign promise, Stephen Miller called the home of Robert Capers to dictate to the U.S. Attorney for the Eastern District how he should defend that order at a Saturday emergency federal court hearing. That’s according to a federal law enforcement official with knowledge of the call, which happened as Department of Justice attorneys cancelled plans, found babysitters and rushed back to their Brooklyn office to try and find out what exactly it was they were defending and who was being affected by it — how many people were already being held in America, how many were being barred from arriving here and the exact status of each person.
NSC Official Fired For Criticizing Trump -- After the premature resignation of Michael Flynn over his alleged conversations with the Russian ambassador, the Trump administration has made it clear it will not tolerate any dissent within the ranks. Case in point: Craig Deare, who was recently appointed the U.S. National Security Council’s senior director for Western Hemisphere Affairs, was removed from the agency days after criticizing President Trump and senior White House officials, including son-in-law Jared Kushner and daughter Ivanka Trump at a private event hosted by a Washington think tank, Politico reported. What makes the Deare resignation notable is that he is not a holdover from the Obama administration, but came to the NSC after Trump's inauguration from National Defense University, where he had served as the dean of administration and was selected for the role by Michael Flynn, who resigned as Trump’s national security adviser on Feb. 13, resulting a state of "controlled chaos" among Trump's top security advisors, and leading in a scramble to find a replacement. According to Politico, at a private, off-the-record roundtable hosted by the Woodrow Wilson Center for a group of about two dozen scholars earlier in the week, Deare harshly criticized the president and his chief strategist Steve Bannon and railed against the dysfunction paralyzing the Trump White House, according to a source familiar with the situation. "He complained in particular that senior national security aides do not have access to the president - and gave a detailed and embarrassing readout of Trump's call with Mexican president Enrique Pena Nieto." Some have speculated that he may have been the source of the leaked conversation between Trump and the Mexican president which led to a media furore several weeks ago.
White House hand-picks select media outlets for briefing | TheHill: The White House blocked a number of news outlets from covering spokesman Sean Spicer’s question-and-answer session on Friday afternoon. Spicer decided to hold an off-camera “gaggle” with reporters inside his West Wing office instead of the traditional on-camera briefing in the James S. Brady Press Briefing Room. Among the outlets not permitted to cover the gaggle were news organizations President Trump has singled out for criticism, including CNN. The New York Times, The Hill, Politico, BuzzFeed, the Daily Mail, BBC, the Los Angeles Times and the New York Daily News were among the other news organizations not permitted to attend. Journalists from several right-leaning outlets were allowed into Spicer’s office, including Breitbart, the Washington Times and One America News Network. A number of major news organizations were also let in to cover the gaggle. That group included ABC, CBS, NBC, Fox, Reuters, Bloomberg, the Wall Street Journal and McClatchy. Reporters from The Associated Press and Time magazine were allowed into the gaggle but refused to attend. “AP believes the public should have as much access to the president as possible,” the organization's communications arm tweeted.
As US Attorney, Trump Labor Secretary Nominee Enabled Drug and Biotechnology Executives’ Impunity - The new Trump administration nominee for US Secretary of Labor is a former US Attorney for the southern district of Florida. In that role, he seemed to uphold the ideas that certain big corporations, particularly big pharmaceutical and biotechnology corporations, are too big to jail, and that top executives of big corporations should not be held accountable for their corporations’ actions. He had central involvement in three big settlements of charges of corporate misbehavior which held no individuals accountable for enabling, authorizing, directing or implementing the bad behavior. The settlements imposed only monetary penalties on the corporations as a whole, accompanied at times by corporate integrity agreements. In some cases, the failure to charge any individuals at the corporation occurred despite the corporations’ history of previous bad behavior. In each case, the penalties seemed unable to deter more bad behavior by the corporations going forward. It was not obvious that any of the corporate integrity agreements were enforced. Thus, he enabled the continuing impunity enjoyed by the leadership of large health care organizations. The three cases, all discussed here on Health Care Renewal, were, in approximate chronologic order:
- 2005 – GlaxoSmithKline Settled Charges of Overbilling Medicare and Medicaid for Zofran and Kytril
- 2007 – Bristol Myers Squibb Settled Charges of Kickbacks to Physicians and Fraudulent Marketing of Abilify
- 2007 – Sanofi-Aventis Settled Charges of Overcharging Medicare for Anzemat
SEC Nominee Has Represented 8 of the 10 Largest Wall Street Banks in Past Three Years -- Pam Martens - President Trump’s nominee to head the Securities and Exchange Commission, Walter J. (Jay) Clayton, a law partner at Sullivan & Cromwell, has represented 8 of the 10 largest Wall Street banks as recently as within the last three years.Clayton’s current resume at his law firm is somewhat misleading. It lists under “Representative Engagements” in “Capital Markets/Leveraged Finance” the following:
- 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.
All three of the above IPOs occurred in 2014 – less than three years ago. A quick check of the prospectuses for the IPOs that were filed with the Securities and Exchange Commission shows that Clayton, as a law partner at Sullivan & Cromwell, was representing the underwriters in the offering, which include the largest Wall Street banks. Put the three deals together and you have 8 of the 10 largest banks on Wall Street being represented by the SEC nominee within the past three years. These are the same banks that are serially charged by the SEC for increasingly creative means of fleecing the public. If that’s not enough to conflict Clayton out of consideration to Chair the SEC post, then conflicts of interest have lost all meaning within the legal lexicon of the United States.
Dem senator predicts Gorsuch will be confirmed | TheHill: Sen. Kirsten Gillibrand(D-N.Y.) is predicting Supreme Court nominee Neil Gorsuch will be confirmed. “Ultimately, yeah, I believe he will be,’’ Gillibrand said during an interview with NY1 when asked if she thinks Gorsuch will be confirmed. Gillibrand, who is opposed to Gorsuch's nomination, said she is "very troubled by the fact that he believes corporations have free speech rights and religious freedom rights." "I think this country is looking for a president that's going to bring the country together, not push it further apart, and this is the kind of nominee that does exactly that," she said during the interview."Because he is so ultra-right wing conservative." Gillibrand said she hopes her colleagues will look at Gorsuch's record and "vote their conscious and decide up-or-down whether this nominee is worthy of this very high responsibility." "I hope we do vote him down, but make no mistake, if we do hold the line with 60 votes, Mitch McConnell will change the rules the next day," she said. "So it will be Mitch McConnell's decision. I do not have any hope that he won't change the rules the minute he doesn't get his way."
The GOP’s Long-Term Structural Senate Advantage - These days, Republicans have a structural advantage in the fight for the House because of how district lines were drawn earlier in the decade. But the party’s current structural advantage in the Senate may be even more important, since it doesn’t depend on state legislators drawing favorable lines, and the Senate has responsibilities that the House doesn’t. The GOP’s structural Senate advantage is simply a matter of numbers – the number of states that are reliably Republican or Democratic. Currently, I would rate 21 states as reliably Republican and 14 states as dependably Democratic in federal races [see list below]. If each party “holds serve” in Senate seats in those states, the GOP begins with 42 Senate seats while Democrats hold only 28 – a substantial difference. (Readers surely will argue over my placement of some states, but disagreements about where Montana, Minnesota or Missouri should be placed does not dilute my point, and in some cases, strengthens it.) That advantage is particularly noteworthy because the 21 Republican states send 128 representatives to the House of Representatives, while the 14 Democratic states send 156 representatives to the House. In those 35 states, the Democrats represent more people but have fewer Senate seats. To be sure, neither party is guaranteed to win every Senate election in its state. But there is not now a single Democratic state with a Republican senator, and only three Republican states – Montana, West Virginia and North Dakota – currently send Democrats to the Senate, the result of cycle-specific and race-specific factors that surely played a substantial role in those outcomes.
Obama lawyers form 'worst-case scenario' group to tackle Trump - POLITICO: Top lawyers who helped the Obama White House craft and hold to rules of conduct believe President Donald Trump and his staff will break ethics norms meant to guard against politicization of the government — and they’ve formed a new group to prepare, and fight. United to Protect Democracy, which draws its name from a line in President Barack Obama’s farewell address that urged his supporters to pick up where he was leaving off, has already raised a $1.5 million operating budget, hired five staffers and has plans to double that in the coming months. They’ve incorporated as both a 501(c)(3) and 501(c)(4), allowing them to operate as a nonprofit but participate in some forms of political advocacy as well. While other Trump opponents focus on taking the president to court over the travel ban and deportations, the new group plans to drill into issues that aren’t already hitting the headlines, like potential intervention in and intimidation of regulatory agencies by West Wing staff. “When people hear concerns about democracies declining into authoritarianism, they expect that moment to come in a singular thunderclap where everyone can see that this is the time,” said Ian Bassin, who’s leading the new group. “In reality, often times, democracies decline over a period of years that happen through a series of much smaller steps.”
Trump transition moves from detente to trench war FT - Over the past two weeks, I have found that meetings and calls are prolonged by about a quarter of the original time by anxious and inconclusive chatter about the White House and its public adversaries. Everyone wants reassurance that is not, realistically, on offer. It reminds me of being in Washington during the last months of the Nixon administration, but less fun and more distressing. One odd difference is the way the intelligence community is no longer a shadowy half-presence, but a large lobby with systematic media management. Financiers do not face President Donald Trump’s administration in televised scrums at the White House, or high-decibel congressional hearings. But the circus atmosphere and visible incompetence is wearing and annoying for all. I see three distinct patterns to the way Wall Street and corporate America are interacting with the new Washington: collaboration, friendly inaction and open warfare. The easiest for everyone is the collaborationist live-and-let-live attitude of the financial industry and its regulators. They have moved beyond the post-financial crisis cold war bitterness to an early stage of detente. But the centrist Democrats who, for the most part, staff the financial regulatory agencies, had come to believe that it was time to ease off on adding rules. And there is no interest in high-profile international financial regulation. In particular, the Washington lobbyists for US banks say that American participation in the discussions for the Basel III international regulatory framework for banks has effectively come to a halt. With the resignation of Daniel Tarullo, a member of the Fed’s board of governors, there is no one in a position to act as the lead US negotiator in setting global financial rules. The new administration is unlikely to be interested in agreeing any more global regulations. On the contrary, its appointees will be asking whether the existing international financial rules are really in the interest of the US. In some cases, their answer is likely to be no. This may come as a relief to financial industry supervisors in other countries, who believed US officials tended to be a bit overbearing.
Repealing Dodd-Frank and Basel III - James Hamilton of Econbrowser --One of the responses to the financial turmoil of 2008 was new legislation and regulation intended to prevent such a disaster from recurring. These measures include the Dodd-Frank Act of 2010 and the third international accord from the Basel Committee on Banking Supervision of 2010-11. But today there are powerful voices seeking to amend or overturn these measures. President Donald Trump said on December 12: We have to end Dodd-Frank…. The head of the banks, they’re petrified of the regulators….I mean, unless you have 5 time what you want to borrow, they don’t lend you any money. They’re afraid to loan people money and those are the people that should be able to borrow.And Representative Patrick McHenry (R-NC), Vice Chair of the Financial Services Committee, wrote on January 31: Agreements like the Basel III Accord … turned into domestic regulations that forced American firms of various sizes to substantially raise their capital requirements, leading to slower growth here in America. Here I review the motivations for Dodd-Frank and Basel III and some of the proposals to amend or replace them.
Latest version of Dodd-Frank reversal bill would exempt a third of public companies from giving auditor warning - The sweeping package to reform the Dodd-Frank bank reform law introduced in Congress has a provision that would curtail the reporting of accounting problems from about a third of issuers.Rep. Jeb Hensarling, the Texas Republican who chairs the House Financial Services Committee, has suggested modifications to his legislation introduced last September, according to a memo leaked last week to journalists, that would uproot Dodd-Frank to raise the limit for companies to comply with the requirement for an outside auditor’s opinion on a company’s internal controls over financial reporting, or ICFR.That requirement was originally mandated by Section 404(b) of the Sarbanes-Oxley Act of 2002. In the memo, referred to by several new outlets who obtained a copy as Choice 2.0, Hensarling doubles the permanent exemption threshold from the original bill of last September, to $500 million in market capitalization from $250 million. The current exemption is $75 million. In Hensarling’s legislation, the exemption was also extended to depository institutions with less than $1 billion in assets.A spokesman for the House Financial Services Committee did not respond to requests for comment.MarketWatch analyzed data provided by research firm Audit Analytics of filings by all companies who received an ICFR opinion in 2015 from their external auditor to see how many companies and banks would be exempt from the requirement under the CHOICE Act 2.0 proposal. There were 113 non-banks that reported adverse opinions on ICFR that would have been exempt from conducting the management assessment and audit review of these controls and reporting their negative results to investors and the SEC. Here are the sorts of disclosures that would be excluded under the proposed bill:
Would weakening regulators' edge in court backfire on banks? - Banks have long been eager to see regulators knocked down a peg in the courts, but now that it might actually happen under President Trump, some are beginning to wonder if it might ultimately boomerang against the financial services industry. At issue is a judicial principle called the Chevron doctrine, named after a 1984 Supreme Court ruling that said courts should defer to government agencies when in doubt about an interpretation of a law, specifically in cases where the law is vague.
Citigroup Sets Up D.C. Team to Prep for Trump's Regulatory Overhaul - Citigroup Inc. is establishing a global regulatory affairs team in Washington as Wall Street firms prepare for the possibility of widespread changes to financial rules under the Trump administration. The new group, which will work alongside the bank’s lobbyists and focus on policy at U.S. and overseas regulators, is being run by Kevin Bailey, a former longtime official at the Office of the Comptroller of the Currency. Citigroup also promoted Julie Bell Lindsay to be his deputy. Bailey will “assess the impact of existing and proposed regulations on our franchise, clients and customers,” according to an internal memo about his hiring last month. “He will also drive Citi’s advocacy efforts across critical regulatory reform areas and ensure that our efforts are coordinated and consistent.” President Donald Trump has pledged to cut what he sees as unneeded regulations and has taken particular aim at the Dodd-Frank Act, which put new strictures on the financial industry after the 2008 credit crisis. While many banks have called for some revisions, the prospect of a major overhaul has unnerved some large firms, especially those that have spent tens of millions of dollars to comply with the law. Citigroup’s move puts it in line with rivals like JPMorgan Chase & Co. and Goldman Sachs Group Inc. that have groups dedicated to monitoring and shaping financial regulations. Among the biggest issues for the industry is the Federal Reserve’s stepped-up supervision for systemically important firms, including stress tests and rules governing capital levels.
Four ways to make the regulatory regime better -- Almost 200 years of U.S. history has taught us that a serious level of bank regulation and supervision is mandatory. The “wildcat” banking system of the early 19th century was an experience no one would want to recreate, particularly with today’s interconnectivity and volatility embedded in a modern, technologically sophisticated global economy. A blind rollback would not be productive. But there are some prudent changes to bank regulation and supervision that would reduce the burden on financial institutions while maintaining safety and soundness. Here are four ideas that this, or any administration, could consider:
- Penalty-free right to appeal all regulatory and enforcement actions. In a free-market economy and a country that prides itself on freedom and civil rights, it is essential that everyone be granted a fair right to be heard before an impartial reviewer of the facts and relevant rules.
- Streamline the regulatory agencies. The multitude of agencies that regulate, examine and/or enforce rules against banks increases the risk of regulatory redundancy, to say nothing of the complexity of having to deal with multiple bodies.
- Simplify Volcker Rule compliance. I believe that even my friend Paul Volcker — the former Federal Reserve Board chairman and original architect behind banning banks’ proprietary trading — would agree that the regulatory compliance burden associated with the Volcker Rule is too complex. Simplification of these rules could achieve the statute’s goals while minimizing burden.
- Put loss reserve calculations back in the hands of banks. As I have long said, the allowance for loan and lease losses (ALLL) is a key safety tool that the accounting profession, in essence, took from the banks in the late 1990s. Regulators and bankers alike understand that this has hurt bank safety and soundness. It is inexcusable that this transparent bank regulatory tool was turned into a wooden accounting mechanism.
It's Like the Financial Crisis Never Happened - It’s 10 years since the U.S. subprime crisis began, and everything’s wonderful on Wall Street. A decade after the world began to notice the losses on derivatives linked to the toxic waste of structured subprime mortgages, American stocks have produced such big returns that the biggest crash in generations barely registers.The 10-year average compound return on U.S. shares was 4.9% a year above inflation at the start of 2016, only slightly below the average for world stocks since the end of the Gilded Age in 1900, according to calculations for Credit Suisse. The same isn’t true for the rest of the world. British stocks made only 3% above inflation, including dividends, in the past decade, while real Japanese returns were barely positive and French shares delivered less than 2%. German stocks weren’t quite so bad thanks to its export powerhouses, and their 4.3% return over inflation is in line with the very long-term return from the world outside the U.S. This global divergence is covered up by the record highs of global stocks in the past week. On Wednesday morning in London the MSCI All-Country World index was setting another new high, after breaking the 2015 high a week ago. Look below the headline, and the high is all about the U.S., which makes up more than half the market value of the global benchmark. Japanese, European and emerging-market stocks all remain below their postcrisis highs, let alone their precrisis highs, in both dollars and local currency. Delve into the figures and American shares lose some of their shine—although the rest of the world still looks worse. U.S. stocks only beat bonds by 0.3 percentage point a year over the past decade, with dividends and coupons reinvested, far below the long-run global average of 3.2 points a year. That’s a paltry reward for the extreme volatility of holding on to risky shares through a crash that wiped out more than half the S&P 500’s value.
Yes, Mr. President, Banks Are Lending - Gretchen Morgenson - This is the party line: Banks aren’t lending nowadays because the regulatory burden they face is too onerous. And that is hurting the economy and job creation. Articulating this view, President Trump has vowed to slash financial regulations to fix the problem.“Frankly, I have so many people, friends of mine, that have nice businesses and they can’t borrow money,” he said in early February. “They just can’t get any money because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank,” the Wall Street reform law of 2010.Anecdotes can be compelling, of course. So many people with nice businesses who can’t borrow money. That sounds very bad.But the actual figures tell a different story.Indeed, a look at recent bank results shows that lending among the big institutions is rising, not falling. In the fourth quarter of 2016, the most recent period, Bank of America, Citigroup, J. P. Morgan and Wells Fargo all reported increases in their average loan figures. Some of these increases were greater than others, of course. J. P. Morgan’s average core loans were up 12 percent, year-over-year in the quarter, while at Citigroup loans grew by 1 percent. Wells Fargo’s loans rose by 6 percent, as did Bank of America’s, once you remove the dwindling Countrywide loan portfolio from the calculation. So banks are not lending less.
Populists push to roll back rules -- In Arizona, it is an offence to tint eyebrows without a license that requires 600 hours of training and passing an exam. It was only in 2015 that hair braiders in Texas won the right to practise without taking a government-approved course and installing a mandated number of sinks in their salons, and they had to fight the state through the courts to do it. In the UK, labels on some food products have to explain that cod and salmon are fish, to comply with EU rules on warnings for consumers with allergies. British companies have occasionally added the warning “may contain nuts” to packets of nuts, even though the Food Standards Agency, the regulator, has said that is unnecessary. Everyone has a favourite anecdote about excessive regulation, and many have offered solutions for addressing it. What is much less widely understood is just what a complex issue it is. President Donald Trump, who has set a goal of striking down 75 per cent of US regulations, is also pursuing the idea. In one of his first executive actions, he signed an order stipulating that “it is important that for every one new regulation issued, at least two prior regulations be identified for elimination”. He has also threatened to “do a number” on Frank-Dodd banking regulations aimed at preventing another financial crisis. Worldwide, the trend to deregulate business has been gathering momentum. The World Bank counted 283 deregulatory reforms in 2015-16 across 137 countries, up 20 per cent from the previous year. Research published by the World Bank supports the anecdotal view that excessive regulation impedes economic growth. A 2012 paper looking at 172 countries found that each regulatory reform measure on average raised economic growth by 0.15 percentage points. Simply pushing for universal deregulation, however, may not be a universally successful strategy. While “one in, one out” and similar approaches are appealingly simple and easy to communicate, they can miss or obscure the issues that are central to regulatory policy. Ryan Bourne of the Cato Institute, a free-market think-tank, has argued that while the UK’s effort to focus regulators’ minds on the cost of new rules was probably a net positive, “the results are widely acknowledged to be mixed”.
Half Of Small Businesses Say Regulations Are A Problem - Roughly half of all small business owners say regulations are a “very serious" or “somewhat serious problem," according to new research. Said NFIB President and CEO Juanita Duggan: Small business owners are drowning in regulations imposed by every level of government. It’s a major problem affecting millions of businesses, and the federal government is the biggest contributor. According to the survey, 25 percent of small employers say regulations are a “very serious problem." Another 23 percent say regulations are a “somewhat serious problem." While regulations affect small businesses of every size, firms with 20 to 249 employees seem to be struggling the most. Among that cohort, 38 percent described regulations as a “very serious problem." Another 26 percent said regulations are a “somewhat serious problem." Said NFIB Research Director Holly Wade: Some regulations exempt firms with fewer employees. Regulations are a problem for employers in every size cohort, but the pain gets more intense with more employees. This creates a clear disincentive to add jobs, and overregulation should be the first consideration for policymakers. Twenty-eight percent of small employers cited cost as their biggest regulatory problem. Other problems cited were: “understanding how to comply" (18 percent); “extra paperwork" (17 percent); and “time delays" caused by regulations (10 percent). Slightly more than half of small firms said the number of regulations with which they must comply has increased in the last three years. Within that figure, 65 percent of firms with 20 to 249 employees said their regulatory burdens have increased in the last three years.
In sweeping move, Trump puts regulation monitors in U.S. agencies | Reuters: President Donald Trump signed an executive order on Friday to place "regulatory reform" task forces and officers within federal agencies in what may be the most far reaching effort to pare back U.S. red tape in recent decades. Trump signed the directive in the Oval Office with chief executives of major U.S. corporations standing behind him including Dow Chemical Co (DOW.N), Lockheed Martin Corp (LMT.N) and U.S. Steel Corp (X.N). The sweeping order directs every federal agency to establish a task force to ensure each has a team to research all regulations and take aim at those deemed burdensome to the U.S. economy and designate regulatory reform officers within 60 days and must report on the progress within 90 days. "Excessive regulation is killing jobs, driving companies out of our country like never before," Trump said before signing the order. "Every regulation should have to pass a simple test; does it make life better or safer for American workers or consumers?" The effort is part of a Republican push to undo many of the actions of former President Barack Obama, who left office last month after two four-year terms.Trump's order requires agencies to "measure and report progress in achieving the president’s directives." Each task force will make recommendations on which regulations to repeal or simplify, Trump said. The order says agencies should seek to repeal regulations that "inhibit job creation," are "ineffective," impose costs that exceed benefits or "create a serious inconsistency or otherwise interfere with regulatory initiatives and policies." Trump on Friday said the United States does not need "75 percent of the repetitive, horrible regulations that hurt companies, hurt jobs."
Trump Gives Pen to Dow Chemical CEO After Signing Executive Order to Eliminate Regulations - President Donald Trump has signed another executive order aimed at eliminating regulations that he claims are damaging to the U.S. economy, but some worry that the measure will roll back critical environmental protections. The order, called "Enforcing the Regulatory Reform Agenda," directs each government agency to create a task force to evaluate existing federal regulations and recommend whether they should be kept, repealed or modified. A White House official told POLITICO that the task forces will "focus on eliminating costly and unnecessary regulations." The new order also directs agency heads to appoint "regulatory reform officers" to ensure that agencies are carrying out the president's other executive orders, such as his recent 2-for-1 rule that requires federal agencies to repeal two old regulations for every new one. "Excessive regulation is killing jobs," Trump said during the signing ceremony. "Every regulation should have to pass a simple test: Does it make life better or safer for American workers or consumers? If the answer is no, we will be getting rid of it." "We will stop punishing companies for doing business in the United States," Trump added. "It's going to be absolutely just the opposite. They will be incentivized to doing business." The president was flanked by leaders of major U.S. corporations, including Lockheed Martin, Johnson & Johnson, Dow Chemical Co. and Campbell Soup. Dow Chemical Co. chairman and CEO Andrew Liveris, who leads Trump's advisory council on manufacturing and received the presidential signing pen. Just yesterday , Liveris praised the Trump administration for being "the most pro-business administration since the Founding Fathers."
Hensarling's leverage ratio plan won't work without stress tests – American Banker - Bank regulatory capital requirements have become way too complex, and Rep. Jeb Hensarling, chairman of the House Financial Services Committee, wants to simplify them. His idea (as part of the proposed Financial Choice Act) is to permit a big bank to maintain a 10% leverage ratio to qualify for exemption from many of the other prudential banking rules. A bank that meets this 10% ratio would be relieved of the various capital surcharges and many other regulatory complexities to which big banks now are subject. Hensarling has the right basic idea but the wrong benchmark. The bill appears to establish the 10% leverage ratio as the mark of a bank whose strength is beyond dispute. Ten percent is indeed a higher leverage ratio than large banks have maintained historically. But it tells us nothing about the riskiness of the bank’s business or the size of its exposure to economic downturns. Indeed, standing alone, a leverage ratio based on historical financial statements tends to induce banks to take extra risks of the sort that cause losses in economic downturns, especially downturns that severely affect real estate values. Rep. Jeb Hensarling's bill allowing banks to choose a tougher capital standard in exchange for regulatory relief is the right basic idea, but it uses the wrong capital benchmark. Bloomberg News The Federal Deposit Insurance Corp. has used leverage ratios as its key capital data for many years, but its experience demonstrates that a capital regime based on historical data does not work, in part because it does not look at what happens to the bank’s assets in a severe downturn. By contrast, a regime based on forward-looking, stress-tested capital has been successful in the short time that it has been in effect. And it works logically to take account of the particular risks and capital level of each individual bank without preconceived risk weights or assumed business plans. Before 2008, the capital ratios banks maintained — based on historical financial statements — may have appeared to be adequate. But history becomes irrelevant in a bad recession when capital is most needed. Regardless of what amount of capital a bank may have had in good times, it must maintain a ratio in bad times that is high enough for the market not to lose confidence in the bank and create a run. And it is exactly in those bad times when a bank cannot raise more capital at a reasonable price, and when assets formerly thought to be liquid become difficult to sell without significant loss.
Inside the global elite's bag of financial tricks - Satyajit Das - Too much of economic growth and the accompanying bull market in stocks is the result of financial engineering. Increasingly, companies seek to improve earnings or increase their share price by means that are not necessarily directly linked to their actual business. Companies have increased the use of lower-cost debt financing, taking advantage of the tax deductibility of interest. In private equity transactions, the level of debt is especially high. Complex securities have been used to arbitrage ratings and tax rules to lower the cost of capital. Mergers and acquisitions as well as various types of corporate restructurings (such as spin-offs and carve-outs) have been used to create “value.” Given the indifferent results of many such transactions, the major benefits appear to have accrued financially to corporate insiders, bankers, and consultants. Share buybacks and capital returns, sometimes funded by debt, have been used to support share prices. In January 2008, prior to the global financial crisis, U.S. companies were using almost 40% of their cashflow to repurchase their own shares. Ominously, that position is similar today. Tax arbitrage, especially by international companies operating in multiple jurisdictions, has increased post tax earnings. The use by many companies of special vehicles in low tax jurisdictions, like Ireland, evidences this trend. Some companies have used trading to increase earnings. Oil companies can make money from trading or speculating in oil, for example. Accordingly, they can make money irrespective of whether the oil business is good or bad or the price of crude is high or low, profiting from uncertainty and volatility. It is not even necessary to produce, refine, or consume oil to benefit from its price fluctuations. Even Berkshire Hathaway headed by traditional investor and legendary stock-picker Warren Buffett, enjoys significant gains through financial engineering, including the use of leverage and derivative contracts. Berkshire uses the insurance premiums received as “free float” to finance investments. In the last decade, the company has sold long-dated options on international stock indices, credit default swaps on U.S. corporate credits, and insurance against municipal bonds. The premiums received boost its investment capital.
A Bull Market For Junk Bonds As Interest Rates Rise - Federal Reserve official are considering another interest-rate hike, according to yesterday’s release of minutes for the Jan. 31-Feb. 1 monetary policy meeting. The hawkish tone offers another reason to remain cautious on Treasuries. But while the outlook for bonds generally is challenged as interest drift higher, one corner of fixed-income has been immune: junk bonds.In sharp contrast with the slump in the prices for Treasuries, high-yield bonds remain in a powerful bull market. A review of four ETFs tells the story. Over the past 12 months, SPDR Bloomberg Barclays High Yield Bond (JNK) has surged more than 20%. Meanwhile, iShares 3-7 Year Treasury Bond (IEI) has eased 1% during that period and iShares 7-10 Year Treasury Bond (IEF) is off 3%. Long-term Treasuries have taken the biggest hit: iShares 20+ Year Treasury Bond (TLT) is down 6% vs. the year-earlier price.The headwind for Treasuries is unambiguous: higher yields are taking a toll. The policy sensitive 2-year yield is currently 1.22% (as of Feb. 22 via daily data published by Treasury.gov) — close to the highest level since the recession ended. The benchmark 10-year yield has climbed recently, too, although the current 2.42% rate reflects a milder ascent compared with the 2-year yield’s dramatic pop. The increase in bond yields (and the commensurate decline in bond prices) has weighed on fixed-income securities generally – with the glaring exception of junk bonds. The fuel powering the rally in high-yield securities is the ongoing compression in spreads for these bonds vs. Treasuries. The BofA Merrill Lynch US High Yield Option-Adjusted Spread (which compares junk yields to Treasury rates) has slipped to a mere 3.78% (as of Feb. 22), which is near the lowest level since the recession ended in mid-2009.
When Speculators Prosper Through Ignorance - John Hussman - The relationship between the economy and the stock market is a study in contradiction. It’s precisely when economic optimism is strongest, when caution is seen as misguided, and when bullish enthusiasm is most exuberant, that the stock market reaches its speculative apex and becomes most vulnerable to collapse. It’s precisely when economic pessimism is most dismal, when hope is set aside, and when bearish consensus is most dire, that market plumbs its deepest lows and carries the greatest potential for future returns. If you think about the market as an equilibrium where every purchase has to be matched with a corresponding sale, this apparent contradiction vanishes. See, it’s precisely the untethered bullish enthusiasm of buyers, and the corresponding reluctance of sellers to part with their shares, that generates extreme overvaluation. Offensive valuation extremes could emerge no other way. Likewise, it’s precisely the wide-eyed fear of sellers, and the corresponding reluctance of buyers to absorb new shares, that generates extreme undervaluation. Understanding this, it’s essential to resist the popular but misinformed impulse to believe that economic optimism itself is a useful or valid basis on which to invest in securities. What’s required instead is an insistence on recognizing that the long-term total returns that investors actually achieve from their investments are tightly linked to the valuations that they pay. As we’ve detailed in scores of prior commentaries, the most reliable market valuation measures we’ve identified have correlations of 90-94% with subsequent S&P 500 10-12 year total returns. The chart below updates several of these measures as of last week. We continue to view recent market action as the likely final blowoff of one of the most extreme speculative episodes in U.S. history. The valuation measures we identify as most tightly correlated with actual subsequent S&P 500 total returns in market cycles across history range about 160% above (2.6 times) their historical norms, and more than 5 times the levels observed at points of secular undervaluation such as 1949 and 1982. This implies that a rather run-of-the-mill retreat to historical norms would now be associated with an expected market loss of about -60%, while a retreat even to a level still 25% above historical norms would be associated with a market loss exceeding -50%. That range of prospective market losses between -50% and -60% is in fact our expectation over the completion of the current market cycle, and neither would take reliable equity valuations below their long-term historical norms.
45 Trillion Reasons Why Gary Cohn Has Recused Himself From All Goldman Matters --Goldman's former President and COO, who was recently picked to be Trump's chief economic advisor as head of the National Economic Council, will recuse himself from any matters directly involving his former employer, the White House told the Financial Times.The topic emerged when the FT learned that the former "#2" at Goldman was spearheading Goldman's lobbying at the US derivatives regulator on rules prompted by the role swaps contracts played in the 2008 financial crisis. As president of Goldman Sachs, Cohn attended four meetings in 2015 and 2016 with top officials at the CFTC to discuss the swaps rules mandated by the sweeping Dodd-Frank reforms, according to meeting records. Why Goldman's interested in derivatives? Two reasons: the simpler, more innocuous one, as the FT points out and as we have shown repeatedly over the years, is that Goldman derives a higher proportion of income from trading than its peers and the global derivatives market, with a notional value of $500tn, is a vital engine of that business. The margin rules have made OTC swaps trading more capital intensive and pushed some clients towards less lucrative standardised products on exchanges.A Goldman spokesman said: “Our clients have concerns about changes to the rules governing the global swaps market, and we have conveyed those views to regulators so that they can create a more stable financial system that can effectively meet our client’s needs for risk management.”Actually it may not be Goldman's "clients" - it is much more likely Goldman itself: two people familiar with Mr Cohn’s CFTC meetings said the Goldman executive was concerned about the models used to calculate margin requirements and about which cross-border trades the requirements would apply to. The CFTC’s final rules were released in two batches in December 2015 and May 2016. As to Goldman's absolutely gargantuan exposure to derivatives, the answer is contained in thequarterly OCC report: as of September, the total notional amount of Goldman’s derivatives contracts — an indication of trading volume, according to the bank — stood at $45.8 trillion, roughly the same as Citi's $48.7 trillion and JPMorgan’s $51.5 trillion, and more than Bank of America's $35 trillion. There was one major difference: while JPM and Citi had total assets of $2.5 and $1.8 trillion respectively, Goldman had a tiny, by comparison, $880 billion: BofA? $2.2 trillion.
Why Did SEC Acting Chair Take an Ax to Enforcement Unit’s Subpoena Power? - The Trump administration assault on investor protections put in place following the 2007-08 financial crisis continues apace. The large issues get the attention, of course. These include repeal of much of the Dodd-Frank law and regulations of the biggest Wall Street banks, limiting or eliminating the Consumer Financial Protection Bureau, which actually helps individual customers abused by giant financial institutions, and preventing adoption of fiduciary standards for financial professionals recommending securities that line their pockets but are risky to customers. But Washington is not merely a swamp of self-interest with large, highly visible alligators munching on small fish to satisfy their insatiable greed. Another apt metaphor is a field of giant weeds — weeds of rules, processes and procedures that can be manipulated for the interests of the Fat Cats. Case in point: Although the SEC currently has three vacancies on its five-person commission, the designated temporary chairman, Republican Michael S. Piwowar, has quietly restricted the authority of the SEC’s civil servants in the Enforcement Division to issue subpoenas for witnesses and documents when investigating whether securities laws have been violated. A small number of news articles suggest this unwarranted reversal of an eight-year-old policy delegating authority to the supervisors in the Enforcement Division may remove Division discretion in its use of civil investigative powers completely. There is zero evidence that this power has been abused. Rather, reinstating a requirement that all investigations be approved in advance by the commissioners before a subpoena can be issued is simply an opportunity to allow the Wall Street lawyers (some of whom generally end up as chairman of the SEC and head of the Division of Enforcement, then return to the fold) to intervene to slow or kill an investigation deemed worthy by those who actually conduct the investigations and have long experience at the SEC.
Who Would Sell This Money Guzzling Product to Retail Clients? The Biggest Names on Wall Street. - By Pam Martens - There are now more than 1,000 articles on this website that address the failure of our Congress and regulators to rein in the serial and frequently, conspiratorial, abuses of Wall Street against the investing public. There are brilliantly written books on the fleecing and insatiable greed of Wall Street; there are movies and documentaries on how Wall Street’s reign of financial terror brought the U.S. to the brink of financial collapse in 2008. And yet, the public continues to play the role of sucker at the big trading houses on Wall Street. Just last week the Securities and Exchange Commission (SEC) provided a glimpse into more nefarious shenanigans on Wall Street that it has allowed to shrivel the life savings of retail clients for years. The SEC fined Morgan Stanley a meaningless $8 million for selling high risk, non-traditional Exchange Traded Funds (ETFs) to retail clients without adequate disclosures and safeguards, thus violating antifraud provisions of the Investment Advisors Act. The SEC Order focused on a product called a “single inverse ETF,” which, it turns out, was not the worst kind of non-traditional ETF that Morgan Stanley had sold to its clients. A single inverse ETF is a product that seeks to deliver the opposite performance of a benchmark index like the S&P 500 on a “single” basis meaning a 1-to-1 basis. The single nomenclature is necessary because there are also leveraged ETFs that seek to provide to 2-to-1 or even 3-to-1 performance of the index (inverse or regular). Based on a review of arbitration claims filed against Morgan Stanley and other big banks on Wall Street, leveraged and inverse ETFs have been savaging the life savings of retail investors for years, while the industry’s self regulator, FINRA, has allowed the parties in the arbitration claims to settle quietly. It has also agreed to expunge the charges from the broker’s official record in many of the cases.
Are Fossil Fuel Companies Telling Investors Enough About the Risks of Climate Change? - Prior to President Donald Trump taking office, there was a push to require oil and gas companies to inform their investors about the risks of climate change. As governments step up efforts to regulate carbon emissions, the thinking goes, fossil fuel companies’ assets could depreciate in value over time. The Securities and Exchange Commission, for example, was probing how ExxonMobil discloses the impact of that risk on the value of its reserves. And disclosure advocates have been pressing the agency to take more decisive action. Now that Republicans control Congress and the White House, will the SEC reverse course? The Trump administration’s apparent skepticism regarding climate change may portend such a change in direction. And Congress’ decision to roll back transparency rules for U.S. energy companies in the Dodd-Frank Act suggests transparency policy more broadly is being loosened. The terms of this debate, however, remain premised on the notion that investors don’t have enough information to accurately assess the impact of climate change on company value. A growing body of academic research, including our own, suggests they already do and that a compromise path that improves the terms and conditions for voluntary disclosure might be optimal. Last year, ExxonMobil announced that 4.6 billion barrels of oil and gas assets — 20 percent of its current inventory of future prospects — may be too expensive to tap. That would be the largest asset write-down in its history. So far, the company has written down US$2 billion in expensive, above-market cost natural gas assets. More write-downs — this time possibly oil sands — may be forthcoming. It’s not clear how much of that are tied to the risks of climate change, but some took it as evidence that the fossil fuel industry is not doing enough to inform investors about those risks.
Will big banks pay price for Dakota Pipeline? | American Banker — It took less than 24 hours after President Trump signed an order directing an expedited review of the Dakota Access Pipeline for Daily Action, a liberal activist group, to decide where its best hope of leverage was — calling on followers to divest themselves of the U.S. commercial banks involved in financing the project. The group, an affiliate of the political action committee Creative Majority, sent a directive Jan. 25 to more than 100,000 subscribers asking them to terminate banking relationships with Wells Fargo, Citigroup and others involved in the pipeline. “If you bank at Wells Fargo or Citi or SunTrust, it’s time to call and tell them that if they don’t reconsider their investment in DAPL as it currently stands, you’ll be moving your money elsewhere — and be prepared to actually do it,” the group said. Shailene Woodley, an actress and environmental advocate, summarized the approach during a Feb. 13 appearance on "The Late Show with Stephen Colbert" in which she called on viewers to make their voices heard — not only with protests and at the voting booth, but with their money.“The front lines can be wherever you are," Woodley said. "Protests are about creating awareness and about people coming together, and one of the biggest ways we’re going to defeat this pipeline ... is to divest from these big banks that are invested in the pipeline.”The tactic is not confined to individuals, either. On Feb. 7 the Seattle City Council unanimously approved a bill to terminate the city’s approximately $3 billion depository banking relationship with Wells Fargo, in part because of its business relationship with the company building the pipeline, as well as the bank’s cross-selling scandal and financial relationships with private prisons. The bill also will favor banks with “socially responsible banking and fair business practices performance” when an entity such as a city council begins a bidding process to find a new banking partner. The city council for Davis, Calif., followed suit later the same day, voting to divest its $124 million depository relationship with Wells Fargo by the end of the year. Ruth Breech, senior campaigner with Rainforest Action Network’s climate and energy team — one of the groups pressuring banks for their involvement in a $2.5 billion syndicated loan to Energy Transfer Partners, the company building the pipeline — said the move for individuals to divest themselves from banks whose activities they disagree with is gaining traction. “I think that’s what’s becoming really clear to the American public, is that these banks are complicit — when you put your money in these institutions, they’re taking that money and putting it into things like the Dakota Access Pipeline,” Breech said.
Bank collusion settlement: Citigroup pays $5.4m, makes witnesses available – Citigroup Inc. agreed to pay a penalty of almost R70 million ($5.4 million) to settle a South African antitrust investigation that said the U.S. bank participated in an alleged cartel to manipulate the value of the rand. Citigroup will make available witnesses to help prosecute other banks that participated in price fixing and market allocation in the trading of foreign-currency pairs involving the rand, the Pretoria-based commission said in an e-mailed statement on Monday. The agreement “was done to encourage speedy settlement and full disclosure to strengthen the evidence for prosecution of the other banks,” Commissioner Tembinkosi Bonakele said in the statement. The South African probe is the latest investigation into alleged rigging by the world’s biggest banks of the $5.1 trillion-a-day market for products tied to foreign exchange, which has resulted in more than $10 billion of penalties since Bloomberg first revealed manipulation in 2013. Former Citigroup trader Christopher Cummins and ex-BNP Paribas SA employee Jason Katz have pleaded guilty to allegations in the U.S. for rigging emerging-market currencies. Both were identified in the Competition Commission investigation. “There could well be other settlements now that it seems the parties are prepared to come forward,” Patrice Rassou, head of equities at Sanlam Investment Management in Cape Town, said in an e-mailed response to questions on Monday.
What JPMorgan and Citigroup Have in Common When It Comes to Crime - Jamie Dimon became the CEO of JPMorgan Chase on January 1, 2006. At that point, the bank was more than a century old and had never been charged with a criminal felony. In 2014, the Justice Department charged JPMorgan Chase with two felony counts in connection with their role in facilitating the Madoff Ponzi scheme. The bank was given a two-year deferred prosecution agreement. The very next year, in May 2015, JPMorgan Chase was hit with a new felony count for its role in rigging foreign currency markets as part of a banking cartel. That’s three felony counts in two years and yet Jamie Dimon kept his job. Before the felony counts there was a $13 billion settlement with the Justice Department and Federal and State regulators in 2013 for JPMorgan Chase’s role in selling toxic mortgage investments to investors as worthwhile products when the bank had good reason to believe they would blow up. “In April 2011, JPMC agreed to pay $35 million to settle claims that it overcharged members of the military service on their mortgages in violation of the Service Members Civil Relief Act and the Housing and Economic Recovery Act of 2008.
- “In March 2012, JPMC paid the government $659 million to settle charges that it charged veterans hidden fees in mortgage refinancing transactions.
- “In October 2012, JPMC paid $1.2 billion to settle claims that it, along with other banks, conspired to set the price of credit and debit card interchange fees.
- “On January 7, 2013, JPMC announced that it had agreed to a settlement with the Office of the Controller of the Currency (‘OCC’) and the Federal Reserve Bank of charges that it had engaged in improper foreclosure practices.
- “In September 2013, JPMC agreed to pay $80 million in fines and $309 million in refunds to customers whom the bank billed for credit monitoring services that the bank never provided.
- “On December 13, 2013, JPMC agreed to pay 79.9 million Euros to settle claims of the European Commission relating to illegal rigging of benchmark interest rates.
- “In February 2012, JPMC agreed to pay $110 million to settle claims that it overcharged customers for overdraft fees.
- “In November 2012, JPMC paid $296,900,000 to the SEC to settle claims that it misstated information about the delinquency status of its mortgage portfolio.
- “In July 2013, JPMC paid $410 million to the Federal Energy Regulatory Commission to settle claims of bidding manipulation of California and Midwest electricity markets.
- “In December 2013, JPMC paid $22.1 million to settle claims that the bank imposed expensive and unnecessary flood insurance on homeowners whose mortgages the bank serviced.”
Michael Corbat has been CEO of Citigroup since October 2012. Below is just a sampling of the regulatory charges against the bank under Corbat’s reign, including a guilty plea to a felony count in May 2015 which covered conduct that continued after Corbat took the helm.
- July 1, 2013: Citigroup agrees to pay Fannie Mae $968 million for selling it toxic mortgage loans.
- September 25, 2013: Citigroup agrees to pay Freddie Mac $395 million to settle claims it sold it toxic mortgages.
- December 4, 2013: Citigroup admits to participating in the Yen Libor financial derivatives cartel to the European Commission and accepts a fine of $95 million.
- July 14, 2014: The U.S. Department of Justice announces a $7 billion settlement with Citigroup for selling toxic mortgages to investors. Attorney General Eric Holder called the bank’s conduct “egregious,” adding, “As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits.”
- November 2014: Citigroup pays more than $1 billion to settle civil allegations with regulators that it manipulated foreign currency markets. Other global banks settled at the same time.
- May 20, 2015: Citicorp, a unit of Citigroup becomes an admitted felon by pleading guilty to a felony charge in the matter of rigging foreign currency trading, paying a fine of $925 million to the Justice Department and $342 million to the Federal Reserve for a total of $1.267 billion.
- May 25, 2016: Citigroup agrees to pay $425 million to resolve claims brought by the Commodity Futures Trading Commission that it had rigged interest-rate benchmarks, including ISDAfix, from 2007 to 2012.
- July 12, 2016: The Securities and Exchange Commission fined Citigroup Global Markets Inc. $7 million for failure to provide accurate trading records over a period of 15 years.
Are Big Banks’ Dark Pools Behind the Run-Up in Bank Stock Prices? - Pam Martens -- The biggest banks on Wall Street, both foreign and domestic, have been repeatedly charged with rigging and colluding in markets from New York to London to Japan. Thus, it is natural to ask, have the big banks formed a cartel to rig the prices of their own stocks? This time last year, Wall Street banks were in a slow, endless bleed. Bank stocks never do well in a rising interest rate environment because their dividend yield has to compete with rising yields on bonds. As we contemplated a more rational basis for the heady uplift in Wall Street bank stock prices this year, we were forced to consider the fact that the Wall Street banks run their own Dark Pools — which are effectively unregulated stock exchanges. The chart above from Wall Street’s self-regulator, FINRA, shows that in the week of January 9, 2017 the Dark Pools of Wall Street’s banks made 49,487 trades in the stock of JPMorgan Chase. The biggest traders were UBS, which traded 1.7 million shares; Credit Suisse’s CrossFinder, which traded 1.2 million shares; and, shockingly, JPMorgan’s own Dark Pool, JPM-X, which traded 1.1 million in its own shares. In a rational world, we would be seeing handcuffs and perp walks for this kind of backroom dealing. Adding to the curiosity, in the same week that JPMorgan and its “competitors” were trading in its stock, JPMorgan’s Best Friends Forever were putting out buy recommendations on its stock. (That’s right. In addition to one-stop shopping for everything from credit cards to junk bonds to dicey derivatives, these same Wall Street banks are allowed to make buy, hold and sell recommendations to the public on publicly traded stocks, including those banks that are counterparties to their derivative holdings. They are allowed to issue this “research” despite being charged with craven research practices by the Securities and Exchange Commission in 2003.) On Wednesday of the week depicted on the Dark Pool chart above, Morgan Stanley reaffirmed its buy rating on JPMorgan’s stock. Its Dark Pool, indicated above as MSPL, traded over 400,000 shares of JPMorgan stock that week. Bank of America reaffirmed its buy rating also. Its Dark Pool, the Merrill Lynch Instinct-X, traded over 293,000 shares of JPMorgan stock that week. Deutsche Bank also reiterated its buy rating on JPMorgan stock and traded more than 584,000 shares of JPMorgan stock in its Dark Pool known as SuperX.
Wells Fargo Fires Managers, Denies Bonuses in Account Probe -- Wells Fargo & Co. fired the head of its consumer credit-card business and three other senior managers as the bank’s board examines how abusive sales practices spread through branches before spiraling into a national scandal last year. Shelley Freeman, the former Los Angeles regional president who went on to run consumer-credit solutions, was terminated, along with Arizona lead regional president Pam Conboy, former community bank risk chief Claudia Russ Anderson and Matthew Raphaelson, 55, who led community bank strategy and initiatives. The bank announced the moves in a statement Tuesday, saying the four won’t get bonuses for 2016 and will forfeit unvested equity awards and outstanding options. Wells Fargo’s leaders have been working since September to assuage public furor after authorities fined the bank $185 million for possibly opening more than 2 million retail bank accounts without customers’ approval. The board and management are each conducting reviews into how the practice proliferated, vowing to hold managers accountable as needed after the company fired 5,300 mostly low-level employees for their roles in recent years. Freeman and Conboy were among managers described by Bloomberg in a November story that profiled community banking supervisors who won promotions as the bank’s top brass focused on cross-selling, the practice of persuading individual customers to sign up for more Wells Fargo products. After overseeing operations in Los Angeles, Freeman went to run Florida, where she sent e-mails to branch workers urging them to sell and describing the kind of lifestyle they might hope to achieve, former employees said. She once mentioned her Super Bowl tickets and buying an $800 pair of sunglasses, one ex-manager recalled. Conboy, 57, who climbed the ranks in California, was sometimes sent to other regions to teach sales strategies, managers said.
TaxCast: Financial Transaction Taxes, Trump Hearts Kleptocrats – podcast - In the February 2017 Taxcast, our monthly podcast: how financial transaction taxes can protect us from finance sectors dragging our economies down. Plus: the Swiss referendum – taxpayers have refused to pick up the tab for corporate tax ‘reforms’. What does that mean for one of the world’s biggest tax haven players? Also, we discuss President Trump’s valentine gift for kleptocrats and the extractives industry as he repeals anti-corruption regulations – the criminal race to the bottom is on. And, the influence of dark money, the experts in distorting democratic debate and the results of the 2017 Transparify report. Featuring: Professor Avinash Persaud, chair of Intelligence Capital and author of Improving Resilience, Increasing Revenue: the case for modernising the UK’s stamp duty on shares, David Hillman of the Robin Hood Tax Campaign and John Christensen of the Tax Justice Network. Produced and presented by Naomi Fowler for the Tax Justice Network.
American Bankers Association starting group to train members to run for political office - The American Bankers Association wants the names of more members on election ballots. The group is forming a candidate school to groom more bankers to run for political office, including state legislatures. The two-day program, to be held in Washington, will debut in September.
Time to bring BSA into this century | American Banker -- As the Bank Secrecy Act approaches its 50th anniversary, legitimate questions have arisen about the efficacy of anti-money-laundering requirements and the burden of compliance. The pace of technological advances in the financial services industry, coupled with the negative consequences of skyrocketing compliance costs, make this a good inflection point to assess the current state of the regulatory regime and explore ways in which it could be improved. The BSA was enacted in 1970 primarily as a means to deter and prevent tax evasion. Since then, it has transformed into one of the main weapons in the fight against narcotics trafficking, money laundering and post-Sept. 11, terrorist financing. Dozens of regulations have been written to implement the statute, many of which have been part of banks’ compliance routine for years. The suspicious-activity reporting system, once viewed as a modern successor to the old criminal referral system, is itself more than 20 years old, and the current approach to reporting suspicious transactions seems rooted in 20th-century concepts and technology. In an era when funds can be moved around the world in the blink of an eye, it can take many months from the point of detection through investigation to making a decision about a SAR. Consequently, compliance with the BSA has become extremely expensive and burdensome. Large institutions spend upward of a $1 billion annually on BSA compliance, and employ thousands of BSA compliance specialists to review alerts. But the burden is felt disproportionately by smaller institutions that cannot afford sophisticated software or to hire an army of compliance specialists. Those institutions are faced with difficult choices that could influence their business strategies and ultimately affect their financial condition. This status quo should be acceptable to no one. The time has come to conduct a serious review of the current BSA regime, with an eye toward making changes that will result in providing better and timelier information to law enforcement, as well as meaningful reductions in the cost and burdens of BSA compliance to institutions.
Breaking Banks: Fintech charter; blockchain, credit scores and refugees – Podcast - In the first half of this episode, host Brett King, Marc Hochstein of American Banker, and Peter Renton, founder of LendAcademy, talk about the the proposed OCC fintech charter (and Marc plugs AB's upcoming webinar on digital identity).Sam Maule takes the helm in the second half, and talks to Zeina Shuhaibar from the International Rescue Committee, Ashish Gadnis, founder and CEO of BanQu Inc., and Aneesh Varma, founder of credit score startup Aire, about fintech solutions to help refugees regain some economic stability and c ontribute to the economies of their new domiciles. There are 65 million refugees in the world. That is 10% of the global population that had to flee war and drought, leaving behind homes, businesses and assets. In the long term, these people need financial services that allow them to rebuild credit, get banking services, pay for things and become part of the economies where they are now.
Virtual currency needs one regulator, not 50 -- As blockchain technology continues its rapid development with respect to the Internet of Value, the Internet of Things, smart contracts and the Internet of Energy (also known as the Enernet), government regulation faces the increasingly daunting challenge of trying to keep pace.But this challenge grows even more formidable when one considers that it is not just the federal government trying to keep up; several states have explored regulatory policy for blockchain and virtual currency as well. Government always lags technology. Bureaucracies have ingrained static thinking while the pace of innovation in the private financial tech sector is astonishingly dynamic. But in terms of IoV and other innovations to speed up the movement of money around the world, blockchain technology particularly defies the ability of state governments to regulate constructively and efficiently. Nearly every state has money transmitter licensing laws intended primarily to protect consumers, especially persons who do not have institutional banking relationships. Since there also are persons who do not want to have such relationships often for nefarious reasons, money transmitter licensing is also a law enforcement mechanism. Following the 9/11 tragedy and the launch of the war on terror and the promulgation of the Patriot Act, prosecutorial scrutiny of money transmission became more intense. However, the speed and protective anonymity of blockchains utilizing virtual currencies, which developed several years after the Patriot Act, added significant issues to that law enforcement focus. It is a fair question to ask whether there should be state regulation of virtual currency. Can states adequately monitor virtual currency companies, which have some similarities to more traditional money transmitters but also notable differences that may require more regulatory sophistication. For one thing, blockchain technology utilizes cryptographic digital assets, i.e. virtual currencies, as security devices. State money transmitter licensing statutes produce licensing fees but, generally, merely ape federal Bank Secrecy Act requirements such as anti-money-laundering and know-your-customer policies along with suspicious activity reporting. Accordingly, most states have taken a wait-and-see approach with regard to virtual currencies because distributed ledger technology is still evolving and its current applications are limited.
Why a clear answer to the data-sharing debate remains elusive - As debates swirl around who should have control over the customer data and how that data should be protected, an underlying question also has yet to be determined: How should that data best be shared? Screen scraping has been widely disparaged, yet many data aggregators and fintechs defend the practice. Application programming interfaces can be more secure, but some say the way banks are starting to execute them gives them too much power. This is a technology minefield banks will have to figure out as they decide how to respond to their customers’ decisions to use financial planning, robo-advisory, budgeting and other apps offered by fintech. Here’s a look at some of the data-sharing options and their pros and cons. Screen scraping — a process in which customers give third parties their online banking credentials so they can log in and import account information into other programs — is the most common method today. It’s basically a workaround that aggregators like Intuit, Plaid, Yodlee and MX provide for all the fintech companies so they can show consumers their complete financial picture by pulling in data from various financial institutions. The aggregators’ clients also include banks. (The aggregators also use APIs and other methods to obtain the data.) Screen scraping's opponents call it unsafe, a bad experience for the customers and a frustrating process for everyone involved. “The data aggregators are very lightly regulated. They don’t have a lot of the strict, hard obligations banks and other institutions have,” said Joseph Lorenzo Hall, chief technologist and director of the internet architecture project at the Center for Democracy and Technology in Washington. “That means there’s a lot of innovative stuff going on here, but lately the amount of data people are keeping around for big data uses has been troubling.” Giving online banking credentials to third parties exposes consumers to the risk that a fraudster posing as an aggregator will dupe them, that a hacker will break into an aggregator’s system and steal their credentials, or that a rogue employee at an aggregator will abuse the access.“Even if you trust the entity you’re sharing with, sharing your credentials is usually a very bad idea,” Hall wrote in a recent blog post. “It could not only give someone you don’t know the power to see sensitive details about your life, but also allow them to change that data by making transfers or deleting or altering — even inadvertently — sensitive records.”
How to solve the bank fee conundrum hurting consumers -- Overdraft protection is disproportionately used by those who rely on it heavily. According to Consumer Financial Protection Bureau research, less than 20% of account holders incur three or more overdraft fees annually, yet they pay over 90% of the overdraft fees triggered by debit cards, ACH transactions and checks. The ability to overdraw an account is much like taking out a payday or car title loan, but with the advantage that you don't have to do anything to get the credit. Overdraft is also less likely than a payday or car title loan to morph into a longer-term debt since it is repaid as soon as new funds hit the account. But if you are one of the regular and habitual overdrafters, you can end up in a similar financial situation to a payday borrower because your fees can be ruinously expensive. It is important to acknowledge that overdraft protection serves a significant need for a segment of the population who are living on the edge due to variable income and expenses. But the banking industry has made the situation worse for this segment of its customer base by prioritizing profit over customer financial health. Many banks engage in practices such as reordering transactions from high-to-low to make overdraft more likely, charging a high fixed fee (typically $35) unrelated to the size of the overdraft and boosting consumer costs by charging the fee each time for multiple overdrafts on the same day. Apart from concerns raised by the CFPB and other regulators, these practices should stop because they are just bad business — totally at odds with their customers’ interests and financial health. At a higher level, banks are also taking advantage of the latency in the U.S. consumer payments system. It is a fact that many customer overdrafts are caused by the lack in the U.S. of instant funds availability and the account transparency problems that creates for consumers. When a consumer looks at his or her account balance before taking cash from an ATM or buying something with a debit card, they get a false signal about how much money is in the account. The balance shown when the transaction occurs is no guarantee that there will be funds in the account that night. Any other transaction — like an old check or an ACH debit — that hits the account that day can change the outcome. This latency problem drives a large percentage of overdrafts — transactions described in the industry as “good when authorized, bad when settled.” It makes low-balance customers play financial roulette when they decide to pay for something with a debit card or take out cash for a meal. It's yet another case of banks not aligning their processes with their customers' interests.
February 2017: Unofficial Problem Bank list declines to 155 Institutions --This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for February 2017. Update on the Unofficial Problem Bank List for February 2017. During the month, the list dropped from 163 to 155 institutions after nine removals and one addition. Aggregate assets fell by $1.25 billion to $41.8 billion. A year ago, the list held 229 institutions with assets of $66.0 billion. Actions were terminated against Bank of Bartlett, Bartlett, TN ($359 million); Farmers & Merchants Bank, Eatonton, GA ($170 million); Solera National Bank, Lakewood, CO ($149 million Ticker: SLRK); Liberty Bell Bank, Marlton, NJ ($145 million Ticker: LBBB); Gulf Coast Community Bank, Pensacola, FL ($135 million); Colonial Co-operative Bank, Gardner, MA ($73 million); and American Patriot Bank, Greeneville, TN ($58 million).Several banks merged to find their way off the problem bank list including Polonia Bank, Huntingdon Valley, PA ($276 million Ticker: PBCP) and MBank, Gresham, OR ($158 million Ticker: MBNC).The addition this month was Ashton State Bank, Ashton, NE ($23 million). We anticipate for the FDIC on Tuesday to release industry results for the fourth quarter and updated figures for the official problem bank list.
Obama’s fair lending policy was no overreach - In a Feb. 9 BankThink article discussing a path forward for the Department of Justice’s civil rights division under President Trump, Paul Hancock claims that the Obama administration pursued too many fair-lending claims against banks and lenders, exceeding the statutory bounds of fair lending enforcement. In his view, these cases lacked adequate proof. But his op-ed overlooked clear evidence that financial institutions’ methods targeted in these actions were discriminatory, and that the regulatory approaches to address this discrimination meet current legal standards.Particularly during Black History Month, everyone should be reminded that issues related to discrimination by lenders and how the government enforces fair-lending standards are not new, nor are they resolved. It took sustained efforts to enact laws that recognized systemic harms. Even today, enforcement actions are needed to ensure fair-lending compliance. For instance, in spite of decades of legal and regulatory action on the issue of interest rate markup in auto lending, the Consumer Financial Protection Bureau and the Department of Justice found that some lenders lacked a fair-lending compliance system for auto lending. The statistical tools the CFPB and DOJ used in the prior administration to look for fair-lending violations are statistically valid. Their legal approach is sound, and would withstand court scrutiny. The statistical analysis that the CFPB uses to determine the representation of borrowers of color within a particular set of loans and identify potential disparities is widely accepted in lending and in other markets as a means to scan for potential disparate impact of particular policies or decisions. In fact, in one of the settlements between the CFPB, DOJ and an auto lender, the number of actual claimants and the estimate gained from the statistical analysis used were virtually identical. That is evidence of a statistically sound approach. Evidence of widespread discrimination in auto lending dates back to at least the mid-1990s; a series of class action lawsuits pointed to how lenders provide dealers with the ability to add to the interest rate for compensation and how that interest rate markup led to significant disparities. More recently, CFPB and DOJ settlements with Ally Financial, American Honda Finance, Toyota Motor Credit and Fifth Third Bank indicate persistent differences between the additional interest paid by borrowers of color and that paid by white borrowers.
Fourth Federal District Court Looks Likely to Uphold Fiduciary Rule -- On February 3, Trump issued a Presidential Memorandum on Fiduciary Duty Rule, in which he directed the Department of Labor (DoL) to conduct an examination of the a new fiduciary rule, so- due to come into effect on April 10. This rule would impose a basic fiduciary duty standard on investment advisors, requiring them to act in a client’s best interest. The fiduciary rule replaces the previous suitability standard, which consumer advocates have criticised for allowing investment advisors to provide conflicted advice, motivated by fees. This suitability standard imposes costs estimated at $17 billion annually on investors and depresses investment returns on retirement savings by a percentage point. Brokerages and insurance companies rely heavily on commission-based compensation. As reported by The Wall Street Journal in an article entitled Brokers Spared From Fiduciary Rule:“Repealing the rule frees up brokers and insurance agents to go back to recommending what’s most profitable for them rather than what’s best for their customers,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “And it frees up firms to keep the toxic financial incentives in place that encourage and reward advice that is not in customers’ best interests.” Yet as spelled out in a National Law Review article, Status of the Fiduciary Rule, Contrary to popular perception, the Memorandum did not direct the Department of Labor (DOL) to delay the applicability date of the Fiduciary Rules. However, shortly after the Memorandum was signed by the president, the acting secretary of the DOL released a statement saying the DOL would be reviewing its legal options for delaying the applicability date. While the DoL might in the long run not rescind the rule after all, in the short term, it is widely expected that the agency will delay the rule’s April 10 compliance deadline. The situation has been further complicated by Andrew Puzder’s withdrawal of his nomination to be Labor Secretary. Trump moved quickly to nominate Alexander Acosta, a former member of the National Labor Relations Board and who served as a US Attorney for the southern district of Florida during the administration of President George W. Bush. Yet that nomination has yet to be confirmed by the Senate, and in the interim, business at the DoL will likely stall.
CFPB faces Catch-22 on pending arbitration rule — Republicans and the Consumer Financial Protection Bureau are playing a game of chicken over a proposal that would restrict banks, credit unions and other lenders from using mandatory arbitration clauses. Republicans stand ready to deploy a rarely used legislative process called the Congressional Review Act if the CFPB finalizes the arbitration plan, which would ban clauses that prevent consumers from filing class action lawsuits against financial services companies.
CFPB's first jury trial to test agency overreach -- The Consumer Financial Protection Bureau is set to face its first jury trial in April in what is shaping up to be a critical test of the agency's authority. The CFPB sued Nationwide Biweekly Administration, in Xenia, Ohio, and its founder Daniel Lipsky in 2015 for allegedly making misleading claims about a program to help consumers pay off their mortgage faster and reduce interest payments. But Nationwide has countered that the CFPB used tactics that resemble Operation Choke Point, a 2013 Justice Department initiative that critics say was overzealous and captured legitimate businesses in addition to shady ones.
How the CFPB Constitutionality Case Will Play Out: The Consumer Financial Protection Bureau's temporary legal victory on Thursday has lowered the odds that President Trump will seek to remove the agency's director, Richard Cordray, despite repeated calls by prominent Republicans for his ouster. The court agreed to an "en banc" review of the case, PHH Corp. v. CFPB, throwing out an earlier decision that said the CFPB director could be fired at will by the president. In setting a May 24 hearing, the appeals court is signaling it is not likely to make a decision until late summer at the earliest. Given the ongoing legal uncertainty, lawyers said it was unlikely that the Trump administration would seek to launch a separate court battle by attempting to fire Cordray "for cause," the only way a CFPB director can be fired under the Dodd-Frank Act. "All signs point to Trump waiting to see how this plays out," "It's sticky, it's complicated." If Trump doesn't attempt to fire Cordray, what happens next? Following is a guide to the possible ways the case might now play out:
- The full appeals court again strikes down the "for cause" provision: One outcome for the case would be for the court to strike language in the Dodd-Frank Act that allows the CFPB's director to be removed only "for cause." That remedy was suggested by a three-judge panel that ruled in October the CFPB's structure was unconstitutional.
- The appeals court goes after administrative judges. The appeals court surprised many lawyers with a question asking whether agencies can appoint their own administrative law judges or if they should be appointed by the president. Invalidating the ability of agencies to appoint administrative law judges would have a significant impact on many federal agencies, and likely would be appealed to the Supreme Court, lawyers said.
- Leave challenges to RESPA hanging in the balance, For years, the mortgage industry has relied on an interpretation by the Department of Housing and Urban Development that allowed the payment of fees in exchange for referrals as long as the payment was a reasonable value for the services provided. But the CFPB reinterpreted the definition of kickbacks in its case against PHH. The three-judge panel in October heavily criticized Cordray for his novel interpretation of the statute. But the full appeals court didn't ask any questions about RESPA, raising the prospect that it might choose to avoid dealing with that issue as well. That will create further uncertainty for many mortgage lenders.
Bank Workers Will Protest to Form Their First US Union — And The Whole World Is Watching - Behind the pristine business attire and impeccable offices, banks in the United States have a secret: Their public faces — tellers and salespeople — are harried working-class people. These bank employees don wide smiles and deliver well-rehearsed pitches in their daily dealings with customers, but they earn low wages, face job instability and contend with demands that make them choose between ethical practices and keeping their jobs.Now, bank tellers in the United States will ask for the same protections enjoyed by workers across the world: a union — and they're fighting not only to take care of themselves, but also to take care of their customers. On Tuesday, over 15,000 U.S. bank workers with the Spain-based bank Santander will declare their intent to establish this country's first bank workers' union. They'll deliver petitions, take over corporate lobbies and begin the long struggle to bring collective bargaining to an industry with predatory practices and lots of low-wage workers. And across the world, in European and South American countries with strong banking unions, hundreds of thousands of bank employees are expected to demonstrate in solidarity. "In every other developed economy in the world, bank worker unions are the backbone of the labor movement," Teresa Casertano, the global campaigns manager for the Committee for Better Banks. "They're strong unions with highest union density, and they usual have broad sectoral bargaining so that every bank worker is covered." The U.S. bank workers have three demands. The first is greater wages and greater share of the profits, and the second is stable, full-time jobs. Crisp uniforms and polished storefronts aside, bank tellers are solidly low-wage employees — and wages have only taken a downturn over the past decade; as of May 2015, the median annual wage for a bank teller was $26,410. The third demand isn't just about protecting workers or shoring up their jobs — it's about stopping predatory banking practices that pit bank workers against their own communities.
Voice recognition's surprise pitfall: aging customers -- The phone rings. It's your sister, and though you haven't spoken to her for a couple of years, you immediately know it's her. A voice-recognition system, however, might not. Data scientists at Pindrop, a provider of voice recognition and caller ID software, have found the human voice changes so much as we age that in as little as two years, a voice recognition system might not be able to identify an infrequent caller. The company presented its research on Friday at the RSA security conference in San Francisco. This is not superalarming — as we’ve written about many times, every form of biometric has its limitations, and biometrics need to be combined with other forms of authentication (device, geolocation, behavior, other biometrics, etc.) to be truly effective. Also, voice recognition technology can be adapted to take the effects of aging into account. But the research is worth considering as banks continue to deploy voice recognition to authenticate callers to their call centers. USAA, Wells Fargo, Eastern Bank, Tangerine, Barclays and HSBC are among those that use the technology. “Our muscles change with age,” he said. “There will be less mass, less strength and more body fat, and the respiratory system will become less efficient, this will make us speak slower.” Changes in cartilage affect pitch and volume. Changes to the nervous system that cause a person to shake affect the voice, as does hearing loss, which sometimes makes people speak louder.
Updated: Kushner's use of U.S.-backed apartment loans poses conflict risk -- Jared Kushner relinquished control of his family’s multibillion-dollar real-estate business in January to eliminate conflicts of interest when he became a top White House adviser to his father-in-law, President Donald Trump. Yet Kushner Cos. has apartment buildings from New Jersey to Maryland with more than $500 million in government-backed mortgages financed by Fannie Mae and Freddie Mac. That could put officials at those agencies in an awkward spot: If Kushner Cos. applies for a new loan, or wants to refinance, would Freddie turn them down? If Kushner Cos. fails to comply with the terms of a loan, will Fannie seek to foreclose on a property owned by the president’s in-laws? “It clearly represents a conflict-of-interest because the government or the president can take actions that would benefit his family,” said David Reiss, a professor at Brooklyn Law School who has written about issues related to Fannie and Freddie. Hope Hicks, a White House spokeswoman, said Kushner would comply with applicable ethics rules and would recuse himself from any discussions about overhauling Fannie and Freddie, which lawmakers have sought to do in recent years. Jamie Gorelick, an attorney who has represented Jared Kushner, didn’t respond to a request for comment. Kushner Cos. says Jared’s White House position won’t have any effect on the family business. “The election has not changed Kushner Companies’ relationship with Fannie Mae and Freddie Mac,” said Kushner Cos. spokesman James Yolles. “And we will respond to policy changes like any other private company in the marketplace.”
Hedge Funds Can't Sue Over Investments in Fannie and Freddie - Hedge funds largely failed in their legal challenge to the U.S. government’s capture of billions of dollars in profits generated by Fannie Mae and Freddie Mac after their bailout, sending shares of the mortgage guarantors plunging. Perry Capital LLC, the Fairholme Funds and other big investors lost a bid to overturn a judge’s ruling that said they can’t sue the government over the dividend change. The change known as the “net-worth sweep” forced the companies to send almost all their profits to the U.S. Treasury, leaving shareholders with nothing. The companies have been under government control since being bailed out during the 2008 financial crisis.The funds may still be able to pursue some contract-based claims. A split ruling by a federal appeals court in Washington Tuesday mostly rejecting the hedge funds’ appeal sent shares in the government-sponsored enterprises swooning. Fannie Mae fell 35 percent to $2.71 in New York trading, while Freddie Mac shares were down 38 percent to $2.47. Some classes of Fannie’s preferred shares were down more than 30 percent. The appeals panel allowed shareholders with valid contract-based claims to pursue that part of the lawsuit. The revived case likely returns to U.S. District Judge Royce Lamberth, who threw it out in 2014. “The institutional plaintiffs could still benefit from the damages claims brought by the class, assuming they fall within the definition of the class, which they likely do,” said Hamish Hume, a lawyer who represented some of the prevailing shareholders. The hedge funds can also ask for a rehearing by the full appeals court in Washington, or ask the U.S. Supreme Court to hear the case.
Fannie, Freddie shares dive after U.S. appeals court ruling | Reuters: Shares of Fannie Mae and Freddie Mac tumbled more than 30 percent on Tuesday after a U.S. appeals court shut down efforts by hedge funds and other investors to pursue numerous legal claims accusing the U.S. government of seizing their profits following taxpayer bailouts. By a 2-1 vote, the U.S. Circuit Court of Appeals for the District of Columbia said a lower court had correctly barred claims that the government overstepped its authority in 2012 by eliminating dividend payouts to various shareholders and requiring the companies to pay the U.S. Treasury an amount equal to their quarterly net worth. The court said Fannie Mae and Freddie Mac investors could still pursue some damages claims, including for breach of contract. The plaintiffs could also appeal the ruling, possibly sending the case to the U.S. Supreme Court. In an unusual joint majority decision, Circuit Judges Patricia Millett and Douglas Ginsburg said the government had the authority under a 2008 law that laid the groundwork for its seizure of the two companies. Both companies have since become profitable under the conservatorship of the Federal Housing Finance Agency. According to court papers, they have returned roughly $68 billion more to the government than they drew down during the financial crisis. Circuit Judge Janice Rogers Brown dissented, accusing the FHFA of improperly exercising a "stunningly broad view of its own power" as a conservator.
Ocwen Agrees to Big Penalties to Resume Business in California: Ocwen Financial has reached a deal with California authorities to resolve allegations that the mortgage servicing firm — a frequent target of regulators in recent years — again violated a range of state and federal laws. Under Friday's settlement, Ocwen will pay at least $25 million for borrower restitution and other costs, according to the California Department of Business Oversight. The West Palm Beach, Fla.-based firm also agreed to make loan modifications that provide $198 million in debt forgiveness to its customers. In return, California authorities are lifting a two-year-old prohibition on Ocwen acquiring new servicing rights for mortgages in the nation’s largest state. That ban was imposed by a January 2015 consent order between Ocwen and the state. "This is a fair and just settlement for California consumers," Jan Lynn Owen, commissioner of the Department of Business Oversight, said Friday in a press release. "The terms will hold Ocwen accountable for widespread violations of laws that harmed borrowers in our state." John Lovallo, an Ocwen spokesman, said that the company set aside reserves for the settlement last year. He also noted that as a result of the agreement, Ocwen will no longer have to pay for the services of an independent auditor that was appointed under the 2015 consent order. "Ocwen is pleased that we've entered this comprehensive settlement," Lovallo said. "It allows us to focus on our business going forward while reducing a significant expense by terminating the engagement of the independent auditor." For Ocwen, which is among the nation's largest mortgage servicers, the settlement is the latest chapter in a long-running series of run-ins with regulators. In December 2013, Ocwen agreed to pay up to $127.3 million and offer $2 billion in consumer relief to settle an investigation by the Consumer Financial Protection Bureau. A year later, Ocwen CEO William Erbey resigned as part of a legal settlement with New York authorities. Then last October, Ocwen disclosed that its mortgage servicing services were again under investigation by the CFPB.
Bankers Interest in MPF Program Grows Again After Long Hiatus: The Chicago Federal Home Loan Bank experienced a significant jump in mortgage originations in 2016 due to a "re-introduction" of its traditional Mortgage Partnership Finance loan product. The bank purchased $3.1 billion in mortgage loans in 2016, up 78% from the year prior. And 40% of the increase was due to traditional MPF products. "The re-introduction of the MPF traditional products contributed to this substantial increase," the bank said in a letter to its members. The increase in demand is primarily due to a successful marketing campaign that helped the bank net new members last year, according to a spokeswoman for the bank. She also credited attractive pricing and servicing income that members can earn as helping the increase. Alex Pollock, the then-president of the Chicago bank, launched it in 1997 to create a secondary mortgage market for members of the Home Loan Bank system. But the Chicago bank stopped offering the program in 2008 in the midst of the housing crisis due to a large concentration of mortgage products on its balance sheet. With home prices rising again, delinquency rates falling and banks looking for additional sources of fee income, the MPF traditional products was re-introduced in 2015. "As the bank's members seek ways to increase their non-interest income, the volume in the traditional MPF products has continued to grow as well,"
State Regulators Stepping Up Servicer Exams -- State mortgage examiners are focusing on systemic issues and using their broad authority under Dodd-Frank to enforce the Consumer Financial Protection Bureau's servicing rules. This is a sign that servicers "shouldn't assume there's an anti-regulatory environment," Nanci Weissgold, a partner at the law firm Alston & Bird, said at a Mortgage Bankers Association conference on Thursday. The number of examinations conducted by state regulators, both on an individual basis and by the Multistate Mortgage Committee, is on the rise. There were 16 examinations of 11 institutions by the MMC in 2015 and a similar number is expected this year, she said. The CFPB works with the MMC to coordinate examination targets, but the MMC can also operate on its own. Meanwhile, a number of states are stepping in with new regulations. Maryland is taking comments until March 6 on a proposal covering servicer record retention as well as the transfer of mortgage servicing rights, she said. States will be concentrating on the safety and soundness aspect for servicers. The Conference of State Bank Supervisors is expected to finalize standards for nonbank servicers during this year.
Thousands of Florida mortgages could be at risk because of insurance abuse - An Ohio insurance-rating company has warned that recent court rulings and skyrocketing losses from water-damage claims have created an “uncertain operating environment” for Florida’s property insurers and said that it will downgrade the financial stability of 10 to 15 Florida-based companies, potentially threatening the solvency of thousands of homeowner policies. Demotech Inc., a company that rates the financial strength of 400 companies nationwide including 57 in Florida, said Tuesday that the company is likely to reduce the financial stability rating of the Florida-based companies from A to B — below the level needed for federally backed mortgages — beginning in March. The decision could put the mortgages of thousands of homeowners in jeopardy because mortgages backed by Fannie Mae and Freddie Mac require property insurance to be A-rated or the policies could be in default. “My concern is these companies will not be able to write insurance on federally backed mortgages — which is the vast majority of property bought and sold in Florida,” said Sen. Jeff Brandes, R-St. Petersburg, chairman of the Appropriations Subcommittee on Transportation, Tourism and Economic Development. The driving factor behind the changing market conditions, Demotech said, is the widespread abuse of assignment of benefits, the practice in which policyholders who need repairs to their homes may assign their rights to seek reimbursement from the insurance companies to third-party contractors. Under the practice that began in South Florida and is now used widely in the Orlando and Tampa markets, contractors persuade homeowners whose pipes or appliances have ruptured to assign over the benefits (AOB) and, working with attorneys, file lawsuits against the insurer if the claims are denied or payments are reduced. Attorneys reap fees from the claims and contractors must get reimbursed by the insurance company, sometimes without the insurer even knowing about the claim until the work is done.
Fannie and Freddie: REO inventory declined in Q4, Down 33% Year-over-year -- Fannie and Freddie reported results last week. Here is some information on Real Estate Owned (REOs). Freddie Mac reported the number of REO declined to 11,418 at the end of Q4 2106 compared to 17,004 at the end of Q4 2015. For Freddie, this is down 85% from the 74,897 peak number of REOs in Q3 2010. For Freddie, this is the lowest since at least 2007. Fannie Mae reported the number of REO declined to 38,093 at the end of Q4 2016 compared to 57,253 at the end of Q4 2015. For Fannie, this is down 77% from the 166,787 peak number of REOs in Q3 2010. For Fannie, this is the lowest since Q4 2007. Here is a graph of Fannie and Freddie Real Estate Owned (REO). REO inventory decreased in Q4 for both Fannie and Freddie, and combined inventory is down 33% year-over-year. Delinquencies are falling, but there are still a number of properties in the foreclosure process with long time lines in judicial foreclosure states - but this is getting close to normal levels of REOs.
Black Knight: Mortgage Delinquencies Declined in January --From Black Knight: Black Knight Financial Services’ First Look at January Mortgage Data: Impact of Rising Rates Felt as Prepayments Decline by 30 Percent in January
• Prepayment speeds (historically a good indicator of refinance activity) declined by 30 percent in January to the lowest level since February 2016According to Black Knight's First Look report for January, the percent of loans delinquent decreased 3.9% in January compared to December, and declined 16.6% year-over-year.
• Delinquencies improved by 3.9 percent from December and were down 17 percent from January 2016
• Foreclosure starts rose 18 percent for the month; January’s 70,400 starts were the most since March 2016
• 2.6 million borrowers are behind on mortgage payments, the lowest number since August 2006, immediately following the pre-crisis national peak in home prices
The percent of loans in the foreclosure process declined 0.5% in January and were down 27.6% over the last year. Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.25% in January, down from 4.42% in December. The percent of loans in the foreclosure process declined in January to 0.94%. The number of delinquent properties, but not in foreclosure, is down 413,000 properties year-over-year, and the number of properties in the foreclosure process is down 178,000 properties year-over-year.
Increase in Delinquency Rate Just a Blip: MBA: The quarter-to-quarter increase in the mortgage delinquency rate is nothing to get excited about — yet, said a member of the Mortgage Bankers Association economics team. The seasonally adjusted delinquency rate for the fourth quarter was 4.8%, up 28 basis points compared with the third quarter and 3 basis points higher than the fourth quarter of 2015, the MBA's National Delinquency Survey found. While delinquencies increased in the fourth quarter, foreclosure starts and the percentage of loans in foreclosure declined on a year-over-year and a quarter-to-quarter basis. "In the grand scheme of things, it looks like a little blip," but it is too early to see if that could be the start of a larger trend, said Marina Walsh, MBA vice president of industry analysis, at the organization's servicing conference in Dallas on Feb. 16. The increase might be due to the normal mortgage loan aging process, with several post-crisis origination vintages being in or entering their peak default periods. Another factor was that the third quarter default rate was so low it was not a surprise that the rate increased in the following quarter, she said. The rate of foreclosure actions started was 0.28% in the fourth quarter, down 2 basis points from the previous quarter and 8 basis points than one year ago. This is the lowest rate of new foreclosures started since the fourth quarter of 1988, the MBA said. Meanwhile, there were 1.53% of loans in the foreclosure process at the end of the fourth quarter, down 2 basis points from the third quarter and 24 basis points lower than one year ago. This was the lowest foreclosure inventory rate since the second quarter of 2007.
US prime property is magnet for illicit wealth, warns Treasury - US real estate’s reputation as a favourite destination for international money launderers has grown after a Treasury investigation confirmed fears that top-end property in New York, Miami and other cities is being used to channel illicit wealth.The Financial Crimes Enforcement Network (FinCEN), a Treasury unit, found that one in three buyers who used shell companies for cash purchases of luxury property in leading cities had had the alarm raised about their financial dealings. The role of US mansions, penthouses and beachside residences as a haven for tainted wealth has been under increasing scrutiny in recent years as it emerged that buyers had included figures such as Colombian drug lord Pablo Escobar and the son of Equatorial Guinea’s president. FinCEN said on Thursday it had unearthed a string of dubious buyers using a new disclosure rule to probe all-cash deals undertaken through shell companies. The purchasers included some suspected of being involved in corruption in Asia and South America and one who engaged in $160m of suspicious activity, officials said. The US market in existing housing alone — which excludes commercial and newly built property — turns over $1.6tn a year, according to the National Association of Realtors. About a quarter of buyers pay cash, with the proportion rising to half of foreign buyers. These account for only 4 per cent of all purchases, but this means some $32bn a year flows into US real estate from abroad in cash transactions that, until a year ago, could be conducted anonymously.
FHFA House Price Index Up 0.4% in December, 1.5% in Q4 - The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index (HPI) for the most recent month. Here is the opening of the report:U.S. house prices rose 1.5 percent in the fourth quarter of 2016 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). House prices rose 6.2 percent from the fourth quarter of 2015 to the fourth quarter of 2016. FHFA’s seasonally adjusted monthly index for December was up 0.4 percent from November. [Link to report]The chart below illustrates the HPI series, which is not adjusted for inflation, along with a real (inflation-adjusted) series using the Consumer Price Index: All Items Less Shelter.
Mortgage Rates Inch Higher Ahead of Fed Minutes - Mortgage rates were just slightly higher today, leaving them roughly in the center of a range that's persisted since mid-November. During that time the average top-tier conventional 30yr fixed rate has been briefly as high as 4.5% and as low as 4.0%. Those are the exceptions. The range has predominantly been a narrower 4.125-4.375%. The average lender is quoting 4.25% today, though there are a few offering 4.125%. The outright numbers are less important here. They can vary quite a bit based on multiple variables. The fact that rates have been sideways for so long is more relevant. In fact, rates haven't merely been sideways. The range has been growing progressively more narrow over the past several months. While this type of "consolidation" is not uncommon in the wake of big market movement, it does mean that rates will soon be forced to choose a direction. Such breakouts tend to see extra momentum. In other words, we're increasingly due for a bigger move. If you roll the dice on that move being toward lower rates, there's additional reward for that risk. For most borrowers, however, that potential for reward is overshadowed by the increased risk of a big move toward higher rates.
MBA: Mortgage Applications Decrease in Latest Weekly Survey - From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey - Mortgage applications decreased 2.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 17, 2017. ... The Refinance Index decreased 1 percent from the previous week to the lowest level since January 2017. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier to the lowest level since November 2016. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 10 percent higher than the same week one year ago which included the President’s Day holiday. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased to 4.36 percent from 4.32 percent, with points increasing to 0.35 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. It would take a substantial decrease in mortgage rates to see a significant increase in refinance activity. The second graph shows the MBA mortgage purchase index. Even with the recent increase in mortgage rates, purchase activity is still holding up. However refinance activity has declined significantly since rates increased.
Prepayments Drop Amid Higher Rates: Black Knight: The monthly prepayment rate declined in January, an indication of the effects of higher interest rates. Black Knight Financial Services reported Thursday that the monthly prepayment rate fell 30% month over month to 0.95%. Still, the rate was 17% higher than a year earlier. Similarly, the total U.S. loan delinquency and foreclose presale inventory rates also dropped. The total loan delinquency rate was 4.25%, which was 4% lower than in December and 17% lower than a year earlier. The foreclosure presale inventory rate meanwhile was 0.94%, representing a 0.46% monthly decrease and a 28% annual decline. Total foreclosure starts rose 18% from December to 70,400, but remained 2% lower than January 2016.
Existing-Home Sales Jump in January - This morning's release of the January Existing-Home Sales increased from the previous month to a seasonally adjusted annual rate of 5.69 million units from an upwardly revised 5.51 million in December. The Investing.com consensus was for 5.54 million. The latest number represents a 3.3% increase from the previous month and a 3.8% increase year-over-year. Here is an excerpt from today's report from the National Association of Realtors. Lawrence Yun, NAR chief economist, says January's sales gain signals resilience among consumers even in a rising interest rate environment. "Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home," he said. "Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions." [Full Report] For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available from January 2013. It can be found here.
NAR: "Existing-Home Sales Jump in January" - From the NAR: Existing-Home Sales Jump in January:Existing-home sales stepped out to a fast start in 2017, surpassing a recent cyclical high and increasing in January to the fastest pace in almost a decade, according to the National Association of Realtors®. All major regions except for the Midwest saw sales gains last month.Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, expanded 3.3 percent to a seasonally adjusted annual rate of 5.69 million in January from an upwardly revised 5.51 million in December 2016. January's sales pace is 3.8 percent higher than a year ago (5.48 million) and surpasses November 2016 (5.60 million) as the strongest since February 2007 (5.79 million). In December, existing sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. With last month's slide, sales are only 0.7 percent higher than a year ago....
Total housing inventory at the end of January rose 2.4 percent to 1.69 million existing homes available for sale, but is still 7.1 percent lower than a year ago (1.82 million) and has fallen year-over-year for 20 straight months. Unsold inventory is at a 3.6-month supply at the current sales pace (unchanged from December 2016).This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in January (5.69 million SAAR) were 3.3% higher than last month, and were 3.8% above the January 2016 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 1.69 million in January from 1.65 million in December. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply.
Existing Home Sales Hit Decade High As Prices Jump More Than 7% --So much for concerns that rising rates would slam the US real estate market.According to the NAR, in January, Existing home sales jumped by 3.3%, well above the 1.1% consensus estimate, and more than reversing last month's revised -1.6% drop. The annuallized pace of sales rose to 5.69 million, above the 5.54 million estimate, and the biggest monthly jump since March 2016. January's sales pace was 3.8% higher than a year ago (5.48 million) and surpasses November 2016 (5.60 million) as the strongest since February 2007 (5.79 million).Praising the rebound in housing transactions, NAR's chief economist Larry Yun said January's sales gain signals resilience among consumers even in a rising interest rate environment. "Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home," he said. "Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions."And yet, there remains a glaring disconnect between the housing t ransactions, and mortgage applications, which as shown in the chart below, have tumbled in recent weeks far below prior years, as a result of rising rates.
A Few Comments on January Existing Home Sales A few key points:
1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus.
2) The contracts for most of the January existing home sales were entered after the recent increase in mortgage rates (rates started increasing after the election).
With the recent increase in rates, I'd expect some decline in sales volume as happened following the "taper tantrum" in 2013. So far that hasn't happened.
3) Inventory is still very low and falling year-over-year (down 7.1% year-over-year in January). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.
Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. In 2015, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply. Of course low inventory keeps potential move-up buyers from selling too. If someone looks around for another home, and inventory is lean, they may decide to just stay and upgrade. I expect inventory will be increasing year-over-year by the end of 2017. The following graph shows existing home sales Not Seasonally Adjusted (NSA). Sales NSA in January (red column) were the highest for January since 2007 (NSA). Note that sales NSA are in the slow seasonal period, and will increase sharply (NSA) in March
Update on lack of Chinese Residential Real Estate Buyers -- A few weeks ago I wrote Some Random Concerns and Observations .... One of my concerns was that stricter capital controls in China would negatively impact certain U.S. real estate markets. After that post, I spoke to an excellent source in San Marino (high end area of Los Angeles), and he told me that some Chinese owners were looking to sell (impacting prices). Here is an article today from David Pierson at the LA Times: Mega-mansions in this L.A. suburb used to sell to Chinese buyers in days. Now they're sitting empty for monthsThe turnaround in activity, industry officials say, is directly linked to policies in China. ... To defend against capital flight, Chinese regulators allow citizens to take out only $50,000 a year. But that’s been largely ignored and circumvented, often by asking dozens of friends and family to exercise their quota on someone else’s behalf. ... on Dec. 31, China’s State Administration of Foreign Exchange, which swaps Chinese yuan for dollars, issued some of its strictest guidelines yet. Customers now have to pledge not to invest in foreign property and provide a detailed account of how foreign funds will be used. They also prohibited customers from taking foreign currency out for someone else.The rules could have broad implications around the world for any city exposed to Chinese real estate investment such as Vancouver, Sydney and more recently, Seattle. If this continues, then this will impact certain areas - and have spillover effects to other areas.
Peak Renter -- It was six years ago that we started discussing the turnaround for apartments. Then, in January 2011, I attended the NMHC Apartment Strategies Conference in Palm Springs, and the atmosphere was very positive. The drivers were 1) very low new supply, and 2) strong demand (favorable demographics, and people moving from owning to renting). Demographics are now somewhat less favorable, and the move "from owning to renting" is mostly over. Multi-family construction peaked in June 2015 (as I noted at the time), however more supply than demand has still been coming online. The NMHC market tightness apartment survey has been indicating looser conditions for five consecutive quarters. Today, from Laura Kusisto at the WSJ: Banks Retreat From Apartment Market Swelling supplies of apartment units are prompting big banks to pull back from new projects, forcing developers to scramble for capital, in a sign that the U.S. apartment industry headed for a downturn. ... fresh supply is beginning to overwhelm demand. More than 378,000 new apartments are expected to be completed in 2017, a 30-year high, according to real estate researcher Axiometrics Inc. I expect the vacancy rate to increase and for rent increases to slow.
New Home Sales increase to 555,000 Annual Rate in January - The Census Bureau reports New Home Sales in January were at a seasonally adjusted annual rate (SAAR) of 555 thousand. The previous three months were revised down.. "Sales of new single-family houses in January 2017 were at a seasonally adjusted annual rate of 555,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.7 percent above the revised December rate of 535,000 and is 5.5 percent above the January 2016 estimate of 526,000."The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales over the last several years, new home sales are still fairly low historically. The second graph shows New Home Months of Supply. The months of supply was unchanged in January at 5.7 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal). Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973. The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.
January New Home Sales Up 3.7% MoM, Below ForecastThis morning's release of the January New Home Sales from the Census Bureau came in at 555K, up 3.7% month-over-month from a revised 535K in December. Seasonally adjusted estimates for October and November were also revised. The Investing.com forecast was for 570K.Here is the opening from the report: Sales of new single-family houses in January 2017 were at a seasonally adjusted annual rate of 555,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.7 percent (±18.5 percent)* above the revised December rate of 535,000 and is 5.5 percent (±25.4 percent)* above the January 2016 estimate of 526,000. The median sales price of new houses sold in January 2017 was $312,900. The average sales price was $360,900. [Full Report] For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here. We've included a six-month moving average to highlight the trend in this highly volatile series.
New Home Sales Disappoint As Median Home Price Rises 7.4% -- "Soft", survey and optimism-based, data may (still) be euphoric, but when it comes to "hard", actual economic data, moments ago the Census reported the latest disappointment when it comes to New Home Sales, which rose to 555K in January, missing expectations of 571K, and up 3.7% from a downward revised 535K in December. The data for all three prior months was revised lower (Dec from 536 to 535), November (598 to 575 and October 571 to 568), as US housing remains unable to capitalize on so-called economic recent strength. More troubling, however, is that one decade after the last housing peak, new home sales are well below half their peak hit in 2005.Despite the miss, both New and Existing home sales continue to rise, although if mortgage applications are any indication, sales of housing are due for a sharp pullback in coming months. Finally, what is notable is that while the Median Home Price dipped in January from $316,200 to $312,900, it was still 7.4% higher compared to a year ago, suggesting that somehow many Americans can still afford to keep chasing offers even without the benefit of new mortgages, which for us is a big red flag, that the Census Bureau is largely goalseeking trends and numbers, if only for the time being.
A few Comments on January New Home Sales - McBride - New home sales for January were reported at 555,000 on a seasonally adjusted annual rate basis (SAAR). This was below the consensus forecast, and the three previous months were all revised down. So overall this was a disappointing report. Sales were up 5.5% year-over-year in January, However, January and February were the weakest months last year on a seasonally adjusted annual rate basis - so this was an easy comparison.Note that these sales (for January) occurred after mortgage rates increased following the election. As I've noted before, interest rate changes impact new home sales before existing home sales because new home sales are counted when the contract is signed, and existing home sales at the close of escrow.This is just the second month of data after the rate increase, and we might be seeing a small dip in sales due to higher interest rates. However, so far, we haven't seen any impact on existing home sales. It will take several months of data to see the impact of higher mortgage rates - and this is the seasonally weak period - so we might have to wait for the March and April data.This graph shows new home sales for 2016 and 2017 by month (Seasonally Adjusted Annual Rate). Sales were up 5.5% year-over-year in January.New home sales averaged 559 thousand per month (SAAR) in 2016, so January was about at the average rate for last year. And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to close over the next several years. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through January 2017. This graph starts in 1994, but the relationship had been fairly steady back to the '60s. Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. The gap has persisted even though distressed sales are down significantly, since new home builders focused on more expensive homes. I expect existing home sales to move more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales.
AIA: Architecture Billings Index decreased in January -- Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From the AIA: Entering 2017, architecture billings slip modestly The Architecture Billings Index (ABI) dipped slightly into negative territory in January, after a very strong showing in December. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the January ABI score was 49.5, down from a score of 55.6 in the previous month. This score reflects a minor decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60.0, up from a reading of 57.6 the previous month. “This small decrease in activity, taking into consideration strong readings in project inquiries and new design contracts, isn’t exactly a cause for concern,” “The fundamentals of a sound nonresidential design and construction market persist.”
• Regional averages: South (54.2), Northeast (53.0), Midwest (52.4), West (48.8)
• Sector index breakdown: institutional (54.6), commercial / industrial (53.4), mixed practice (48.1), multi-family residential (48.1)
The Deadly Reality of Construction Work -- Construction worker deaths are rising in New York and Latinos are especially at risk. That’s according to a new report, released last month, by the New York Committee for Occupational Safety and Health (NYCOSH). Between 2006-2015, at least 464 construction workers died while on the job in New York. The study also found safety violations at more than 68 percent of construction site inspections. The penalties for such infractions are small. Released in the shadow of Donald Trump’s controversial executive orders on immigration, the report identifies the specific vulnerabilities of being a Latino construction worker. While Latinos made up just 30 percent of the construction workforce in 2015, they accounted for 57 percent of the fatalities due to falls.“[Latinos] are more likely than non-Latinos to die on the job due to cases of extreme employer recklessness and disregard for human life, and they are more likely to die from fatal falls,” the report reads. “They are also more likely to be victims of wage theft, experiencing dual exploitation by their employers.”The report also exposes the difference between union and nonunion job sites. As recently as the 1980s, almost all residential projects in the city were constructed with union labor. That is no longer true. A 2014 study showed that only 30 percent of mid- and high-rise residential and hotel projects used union concrete workers, exclusively. Some of the city’s largest firms have opened the door to using nonunion labor, including companies like Turner Construction Co. and Plaza Construction, according to the Wall Street Journal.
Michigan Consumer Sentiment: February Final Inches Up, Better Than Forecast -- The University of Michigan Final Consumer Sentiment for February came in at 96.3, down from the January Final reading of 98.5, but inched up from the February preliminary of 95.7. Investing.com had forecast 96.0. Surveys of Consumers chief economist, Richard Curtin, makes the following comments: While consumer confidence edged upward in late February, it remained slightly below the decade peak recorded in January. Overall, the Sentiment Index has been higher during the past three months than anytime since March 2004. Normally, the implication would be that consumers expected Trump's election to have a positive economic impact. That is not the case since the gain represents the result of an unprecedented partisan divergence, with Democrats expecting recession and Republicans expecting robust growth. Indeed, the difference between these two parties is nearly identical to the difference between the all-time peak and trough values in the Expectations Index - 64.6 versus 64.4. While the expectations of Democrats and Republicans largely offset each other, the overall gain in the Expectations Index was due to self-identified Independents, who were much closer to the optimism of the Republicans than the pessimism of the Democrats. (Note: the February Expectations Index was 55.5 among Democrats, 120.1 among Republicans, and 89.2 among Independents.) Since neither recession nor robust growth is expected in 2017, both extremes must eventually converge. Although the data indicate a growth rate of 2.7% in consumption during 2017, the data also indicate we can expect greater volatility and discretionary spending differences across subgroups.[More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
Chemical Activity Barometer increases in February Note: This appears to be a leading indicator for industrial production. From the American Chemistry Council: Chemical Activity Barometer Continues Steady Climb; Consumer and Business Confidence Strengthening The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted a strong gain in February of 0.4 percent, following a similar 0.4 percent gain in January. This follows a steady 0.3 percent gain every month during the third quarter of 2016. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB is now up was up 5.0 percent over this time last year, marking its strongest year-over-year performance since September 2010. In February all of the four core categories for the CAB improved, with the diffusion index strengthening to 71 percent. Production-related indicators were positive, with the housing report indicating slipping starts, but improving permits. This was coupled with an improvement in U.S. exports. Equity prices also improved at a robust pace, reflecting an improvement in consumer and business confidence. Overall the barometer continues to hint at gains in U.S. business activity through the third quarter. Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
ATA: Truck tonnage index rebounds in January - The seasonally adjusted For-Hire Truck Tonnage Index grew 2.9 percent compared with the previous month to a reading of 138.8, following a revised 4.3 percent decline in December, according to the American Trucking Associations.Domestic truck tonnage rebounded in January 2017, growing 2.9 percent compared with the previous month, following a revised 4.3 percent decline in December, according to the American Trucking Associations’ (ATA) advanced seasonally adjusted For-Hire Truck Tonnage Index. The seasonally adjusted index equaled 138.8 for the month, up 2.6 percent compared with January 2016, after slipping 0.2 percent year-over-year in December. ATA noted the all-time high index reading was 144 in February 2016. For the full year in 2016, tonnage rose 2.5 percent compared with 2015. The not seasonally adjusted index, which represents the change in tonnage hauled by fleets prior to any seasonal adjustment, equaled 131.6 in January, down 1.8 percent from 133.9 the previous month. “The freight economy is starting to show some signs of life and January’s truck tonnage numbers are a good step forward,” ATA Chief Economist Bob Costello said in a statement. “Hopefully the ups and downs in truck tonnage during 2016 will not be as pronounced in 2017. “Looking ahead, the most recent positive sign for truck tonnage is the large drop in the inventory-to-sales ratio during December,” he added. “The decrease put inventories throughout the supply chain, relative to sales, to the lowest level in two years. There is no doubt that the inventory glut was a drag on truck freight volumes last year.”
Auto Loan Bubble Bursting, And Lenders Know Where Your Car Is At All Times - epidemic is nothing new (one of many, student loans etc). Zerohedge has been writing about it for years, with the financial MSM catching on not too long ago. Even John Oliver had a segment about it on his popular show, Last Week Tonight. The new subprime lending epidemic, in the $1.1 Trillion market, which the experts tell us is contained and won't have the same effect as in the previous crisis, is where all it takes to buy a car at a dealership is the ability to fog a mirror. Cracks have been rearing their heads over the last few months, but nothing like we are seeing as of late. According to the latest data, auto loan delinquencies are now at levels not seen since the last financial crisis. But don't worry, economists are already coming out of the wood works to tell us that the idea there is an auto loan bubble is "a litte overblown." Good thing economists have a great track record, and CDS contracts exist. But what most people didn't know, especially these buyers, who have credit scores of less than 600 and are driving a new car with little to no money down, is that they have a gps tracker in their new/used car. About a year ago, a friend who owns a car stereo shop outside of Sacramento told me that almost every single car or truck they work on has a gps tracker in the dash. What was even more disturbing, was when he said some of the cars as old as a 1994 Honda Accord, or a 1991 Toyota Celica, which the owners had just financed from a local dealership, had trackers in them. Up until he told me about the use of trackers, no one had ever mentioned this gps tracking that is being done without the owners consent, or maybe they didn't read the 5 point font fine print when buying their car. Then this past Sunday, the New York Times had an Article titled "Federal Agency Begins Inquiry Into Auto Lenders' Use of GPS Tracking" where the article went into detail explaining that with the use of GPS trackers, financing companies are now more willing to lend to the lowest income Americans because if things go south, they'll know immediately where the car is and repo it. Using GPS trackers also allows lenders to find out exactly where the car is after customers/deadbeats miss their payments.
Here's Why Your Auto Insurance Rates Have Soared Nearly 20% In The Past Several Years - If you're among the millions of Americans that have noticed your auto insurance premiums skyrocketing in recent years then you may want to thank the people in your life who habitually text and drive. Since 2009, the average, annual U.S. car-insurance premium has risen over 17%, to $926 in 2016, according to trade group Insurance Information Institute. And, just like Obamacare, that rising premium is simply the socialization of added risks created by people making bad life decisions...like driving their cars at 80 miles per hour on a crowded freeway while simultaneously looking down at their phones to text about the latest Kardashian rumor. According to a note from the Wall Street Journal, 36% of drivers admitted to texting and driving in a State Farm survey in 2015, which we assume means that the real number is roughly double that. It’s “an epidemic issue for this country,” said Michael LaRocco, chief executive of State Auto Financial Corp., at an insurance-industry conference last month. State Farm Mutual Automobile Insurance Co., the largest U.S. auto insurer by market share, said 36% of the people it surveyed in 2015 admitted to texting while driving, and 29% said they access the internet, compared with 31% and 13%, respectively, in 2009. State Farm’s survey found that 52% of respondents in 2011 owned a smartphone, and 88% owned one in 2015. “Distracted driving was always there, but it just intensified as more applications for the smartphones became available," said Bill Caldwell, executive vice president of property and casualty at Horace Mann, in a recent interview. The insurer expects to raise rates 8% this year, on top of average 6.5% increases in 2016. Oddly enough, insurance payouts started to spike right about the same time the first iPhone hit the shelves in 2007.
US PMIs Tumble, Catch Down To 'Hard Data' Disappointment As "Post-Election Upturn Loses Momentum" -- Despite soaring 'soft' survey data from around the world, US manufacturing and services PMI printed disappointing drops in February - catching down to the 'hard' data declines since Trump's election. The Soft data hope is fading fast... (Manufacturing dropped from 55.0 to 54.3, Services slumped from 55.6 to 53.9). The composite PMI dropped 1.50 points - the biggest drop in a year. Digging into the details exposes some ugly realities...Manufacturers signalled that input cost inflation was at its highest level since September 2014. This was linked to increased prices for a range of raw materials, particularly metals and oilrelated inputs. However, factory gate price inflation was only marginal and slipped to a three-month low in February, thereby suggesting a continued squeeze on operating margins."Service sector job creation moderated to its slowest for three months in February"Growth of business output, new orders and hiring all waned, as did inflationary pressures.Some service providers commented on a greater degree of caution in terms of client spendingCommenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:“The drop in the flash PMI numbers for February suggest that the post-election upturn has lost some momentum. Growth of business output, new orders and hiring all waned, as did inflationary pressures. “February also saw a sharp pull-back in business optimism about the outlook over the next 12 months, which suggests companies have become more cautious about spending, investing and hiring.
Kansas City Fed Survey: February Activity Highest Since 2011 - The Kansas City Fed Manufacturing Survey business conditions indicator measures activity in the following states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico.Quarterly data for this indicator dates back to 1995, but monthly data is only available from 2001. New seasonal adjustment factors were introduced in January 2017 and slight revisions were made to previous data as a result.Here is an excerpt from the latest report:–The Federal Reserve Bank of Kansas City released the February Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded further with continued strong expectations. “This was the highest reading for our month-over-month composite index since June 2011,” said Wilkerson. “In addition, the future composite index was the highest since our survey switched to a monthly frequency in 2001.” [Full PDF release here] Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.
Kansas City Fed: Regional Manufacturing Activity "Expanded Further" in February -From the Kansas City Fed: Tenth District Manufacturing Activity Expanded FurtherThe Federal Reserve Bank of Kansas City released the February Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded further with continued strong expectations.“This was the highest reading for our month-over-month composite index since June 2011,” said Wilkerson. “In addition, the future composite index was the highest since our survey switched to a monthly frequency in 2001.”...The month-over-month composite index was 14 in February, its highest reading since June 2011, up from 9 in both January and December. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Activity in both durable and nondurable goods plants increased, particularly for metals, machinery, computer, and electronic products. Most month-over-month indexes improved moderately in February. The new orders, order backlog, and employment indexes all edged higher, and the new orders for exports index moved into positive territory for the first time in over a year. ... The future composite index moved higher from 27 to 29, its highest reading since the survey moved to a monthly frequency in 2001. The Kansas City region was hit hard by the decline in oil prices, but activity is expanding solidly again. The regional Fed surveys suggest a strong reading for the ISM manufacturing index for February.
Weekly Unemployment Claims: Up 6K, Worse Than Forecast - Here is the opening statement from the Department of Labor:In the week ending February 18, the advance figure for seasonally adjusted initial claims was 244,000, an increase of 6,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 239,000 to 238,000. The 4-week moving average was 241,000, a decrease of 4,000 from the previous week's revised average. This is the lowest level for this average since July 21, 1973 when it was 239,500. The previous week's average was revised down by 250 from 245,250 to 245,000. [See full report] Today's seasonally adjusted 244K new claims, up 6K from last week's revised number, was worse than the Investing.com forecast of 241K. Here is a close look at the data over the past few years (with a callout for the past year), which gives a clearer sense of the overall trend in relation to the last recession and the volatility in recent months.
Unemployment versus Underemployment: Assessing Labor Market Slack - Atlanta Fed's macroblog - The U-3 unemployment rate has returned to prerecession levels and is close to estimates of its longer-run sustainable level. Yet other indicators of slack, such as the U-6 statistic, which includes people working part-time but wanting to work full-time (often referred to as part-time for economic reasons, or PTER), has not declined as quickly or by as much as the U-3 unemployment rate. If unemployment and PTER reflect the same business-cycle effects, then they should move pretty much in lockstep. But as the following chart shows, such uniformity hasn't generally been the case. In the most recent recovery, unemployment started declining in 2010, but PTER started to move substantially lower beginning only in 2013. The upshot is that for each unemployed worker, there are now many more involuntary part-time workers than in the past. Regarding the above chart, I should note that I adjusted the pre-1994 data to be consistent with the 1994 redesign of the Current Population Survey from the U.S. Bureau of Labor Statistics This adjustment amounts to reducing the pre-1994 number of PTER workers by about 20 percent. The elevated level of PTER workers has been most pronounced for workers in low-skill occupations. As shown in the next chart, PTER workers in low-skill jobs now outnumber unemployed workers who left low-skill jobs. Prior to the most recent recession, low-skill unemployment was always higher than low-skill PTER. The increase in PTER workers is also mostly in the retail trade industry, as well as the leisure and hospitality industry, where low-skill occupations are concentrated. The PTER-to-unemployment ratio for the goods-producing sector (manufacturing, construction, and mining) has remained essentially unchanged. In those industries, unemployment and PTER move together.
Multiple Job Holders Represent a Still-Untapped Labor Reserve – Ed Dolan - The Office of Management and Budget is due to release tax and spending plans for the 2018 fiscal year soon. As reported recently by the Wall Street Journal, the plans are expected to be based on relatively optimistic growth forecasts of 3 to 3.5 percent per year, well above consensus estimates. The debate over the realism of the budget plan will turn, to a significant degree, on whether there are a sufficient reserves of untapped labor to support higher growth rates. Although the headline unemployment rate is approaching levels that the Fed and many other observers equate with "full employment," other indicators, not so well known, suggest that there are still significant untapped labor reserves. This post looks at one such neglected indicator, multiple job holders. (In a post earlier this month, I looked at another neglected indicator, nonemployment index, which also suggests the existence of hidden labor reserves.) The following chart shows that the share of all workers holding multiple jobs has a cyclical pattern that lags the business cycle. The multiple job rate did not reach its maximum until March 2009, 16 months after the official business cycle peak, and did not reach its cyclical low point until a full five years after the June 2009 trough of the recession. The BLS publishes multiple job data without seasonal adjustment. To highlight the cyclical trend, I have emphasized the twelve-month moving average, while showing monthly data as a dotted line.
Sun Sets on Big Oil Jobs - Earlier this month when Donald Trump cancelled legislation that required oil and gas companies to disclose taxes and other payments to foreign governments, the president said he was "bringing back jobs big-league." Once again though, the truth is somewhat different. Big Oil's jobs may never be back in the numbers that Trump dreams of. Since the oil price collapsed, some 440,000 oil industry jobs worldwide have been lost. Of those, the oil industry consultants, Graves, estimates that 40 percent have been in the U.S.; 28 percent in the UK and 10 percent in Canada. Some 100,000 oil jobs were lost in the capital of the oil industry itself, Texas. According to Bloomberg, somewhere between one-third to one-half of those jobs may never come back. No matter how many alternative facts Trump tries to spin. For example, some of the world's largest oil services companies—Schlumberger, Haliburton and Baker Hughes—spent more than $3 billion laying workers off in just two years. As OilPrice.com noted "now with prices and business on the mend, none of the services firms seem eager to repeat their mistakes by taking on too many people." Furthermore, costs have plummeted as the industry has found ways to produce more oil for less. The downturn has forced the industry to look at ways of cutting costs and chief amongst those are labor costs as computerization, automatic and even artificial intelligence takes over manual work. Oilprice.com quotes UBS which estimates that "the U.S. oil industry will only need about half as many workers to suck the same amount of oil out of the ground post-2017 versus pre-2015."
Robots Will Soon Do Your Taxes. Bye-Bye, Accounting Jobs - Tax season has arrived, as the Super Bowl recently reminded us: In the first half alone, two commercials encouraged viewers to trust computers to do our taxes, the first from H&R Block with its new partner Watson, and the second from TurboTax with its friendly talking tax bot. Machines won’t be able to automatically file taxes with the IRS for a few years. But do these commercials signal that robots can come close, requiring fewer human experts, mostly for sanity checks? Is another human profession on the verge of biting the dust? It sure seems that way. As my research shows, robots are best-suited to predictable tasks when the cost per error is low. As a task becomes less predictable and a robot makes more mistakes, the automation is worth it only if those mistakes don’t carry significant costs. For example, driverless cars make few errors, but those mistakes can be expensive and deadly. In contrast, most tax return decisions, especially the simpler ones, aren’t terribly risky, as they’re based on massive amounts of historical data on which the machine learns to anchor its decisions. Take the automobile analogy: Carmakers have gradually integrated more automation into sensing, braking, and acceleration decisions. Cars are taking over navigation with the expectation of that function becoming fully autonomous at some point. Similarly, humans are likely to get more and more comfortable with machines helping us with taxes. Eventually, many of us will probably trust them enough to compose the entire return for us to sign.
What happened when factory jobs moved from Warren, Ohio, to Juarez, Mexico - Money never used to be a problem for Chris Wade, 47, who owned a house with a pool back when he worked at Delphi Automotive, a parts manufacturer that for years was one of the biggest employers in this wooded stretch of northeastern Ohio. But 10 years after taking a buyout as part of Delphi’s ongoing shift of production out of the United States and into Mexico and China, the house and the pool were gone. Berta Alicia Lopez, 54, is the new face of Delphi. On a recent chilly morning, she woke before sunrise on the outskirts of Juarez, Mexico, and caught an unheated bus that dropped her an hour away at the Delphi plant. Lopez earns $1 an hour assembling cables and electronics that will eventually be installed into vehicles — the same work that Wade once did for $30 an hour. A farmer’s daughter who grew up in an impoverished stretch of rural Mexico, Lopez is proud to own a used Toyota sedan and a concrete block house. She frequently thanks God for the work, even if it is in a town troubled by drug violence, even if she doesn’t see many possibilities for earning more or advancing. The two workers live 1,800 miles and a border apart and have never met. But their stories embody the massive economic shift that has accompanied the rise of free trade. In the United States, that shift has contributed to the loss of jobs that once helped workers buy homes, pay for health insurance and send children to college. In Mexico, it brought jobs — though they didn’t create the kind of broad, middle-class prosperity they once had in America.
The Jobs Americans Do - Forget the images of men in hard hats standing before factory gates, of men with coal-blackened faces, of men perched high above New York City on steel beams. The emerging face of the American working class is a Hispanic woman who has never set foot on a factory floor. That’s not the kind of work much of the working class does anymore. Instead of making things, they are more often paid to serve people: to care for someone else’s children or someone else’s parents; to clean another family’s home. The decline of the old working class has meant both an economic triumph for the nation and a personal tribulation for many of the workers. Technological progress has made American farms and factories more productive than ever, creating great wealth and cutting the cost of food and most other products. But the work no longer requires large numbers of workers. In 1900, factories and farms employed 60 percent of the work force. By 1950, a half-century later, those two sectors employed 36 percent. In 2014, they employed less than 10 percent. For more than a century, since the trend was first documented, people have been prophesying a dire future in which the working class would no longer work. In 1964, a group of prominent liberals wrote President Johnson to warn of a “cybernation revolution” inexorably creating “a permanent impoverished and jobless class established in the midst of potential abundance.” Machines have taken the jobs of millions of Americans, and there is every indication that the trend will continue. In October, Budweiser successfully tested a self-driving truck by delivering beer more than 120 miles to a warehouse in Colorado. In December, Amazon opened a small convenience store near its Seattle headquarters that has no cashiers. Customers — for now, Amazon employees only — are billed automatically as they leave the store.
The Only Thing, Historically, That's Curbed Inequality: Catastrophe - Calls to make America great again hark back to a time when income inequality receded even as the economy boomed and the middle class expanded. Yet it is all too easy to forget just how deeply this newfound equality was rooted in the cataclysm of the world wars. The pressures of total war became a uniquely powerful catalyst of equalizing reform, spurring unionization, extensions of voting rights, and the creation of the welfare state. During and after wartime, aggressive government intervention in the private sector and disruptions to capital holdings wiped out upper-class wealth and funneled resources to workers; even in countries that escaped physical devastation and crippling inflation, marginal tax rates surged upward. Concentrated for the most part between 1914 and 1945, this “Great Compression” (as economists call it) of inequality took several more decades to fully run its course across the developed world until the 1970s and 1980s, when it stalled and began to go into reverse. This equalizing was a rare outcome in modern times but by no means unique over the long run of history. Inequality has been written into the DNA of civilization ever since humans first settled down to farm the land. Throughout history, only massive, violent shocks that upended the established order proved powerful enough to flatten disparities in income and wealth. They appeared in four different guises: mass-mobilization warfare, violent and transformative revolutions, state collapse, and catastrophic epidemics. Hundreds of millions perished in their wake, and by the time these crises had passed, the gap between rich and poor had shrunk.
False fraud cases against unemployment claimants may hit 50,000: -- Over a two-year period, Michigan’s Unemployment Insurance Agency may have may made false fraud allegations against close to 50,000 people -- more than twice as many as previously disclosed -- based on new findings the agency disclosed Friday. The agency said it is reviewing about another 31,000 cases in which claimants were accused of fraud between October 2013 and October 2015. An earlier review of more than 22,000 fraud determinations during that period found that 93% of the claimants had not committed unemployment insurance fraud, but were wrongly accused. Based on about 7,000 additional cases reviewed so far, the error rate is about the same, agency spokesman Dave Murray told the Free Press late Friday. The difference between the two batches is that the 22,427 fraud findings reviewed earlier -- of which 20,965 were ultimately determined not to involve fraud -- involved automated findings made by a computer with no human involvement. The additional 31,206 cases now under review from the same time period featured some involvement by agency staff and/or contact with the claimant following an automated finding by a computer -- the Michigan Integrated Data Automated System (MiDAS). Now the agency has worked its way through about 7,000 of those cases, and "the percentage of cases overturned is so far about the same as was determined during the first phase," Murray said, adding he didn't have the exact numbers. In total, the agency made 53,633 fraud determinations before it stopped using the MiDAS system to make the determinations in the latter part of 2015. If 93% of those fraud determinations turn out to be false, that's nearly 50,000 false fraud findings.
The Opioid Epidemic and the Face of Long-Term Unemployment - Yves Smith - UserFriendly flagged a must-read story at Bloomberg, This Is the New Face of American Unemployment. It seeks to give a better picture of long-term un and underemployment through five profiles, each chosen to illustrate a widely-reported impediment: low mobility, criminal records, disability, labor shortage, and “mature workers”. However, when you read the stories carefully, they actually depict two overarching problems: discrimination and the far-ranging impact of the opioid epidemic. And separately, the story has buried in it a factoid that indicts the performance of our ruling classes: “Nearly half of U.S. children now have at least one parent with a criminal record.” The most gripping story is the first, that of Tyler Moore of Mingo, West Virginia, who is meant to stand as the poster child of “low mobility”. But the reason it would be better if he could get out of Mingo is that the town and area are collapsing due to the closure of coal mines, which had been the anchors of the economy. And it isn’t that Moore is not willing to go, even though he would prefer to remain near his aging father. It’s that the only thing that has kept him alive is family and community safety nets. Even though the story doesn’t dwell on it, it is not hard to discern that Mingo is awash in drugs and despair. From Bloomberg: The 23-year-old had run out of options. He’d applied for dozens of jobs within an hour and a half of his hometown of Lovely, once a coal-mining stronghold. Instead of opportunities, he had found waiting lists. “Minimum-wage jobs, fast-food restaurants, Wal-Mart, anything like that, a lot of them has already been took,” he says in an Appalachian drawl, explaining that the backlog just to interview was as long as a year. “There are no jobs.”.. Moore lost his job in late 2013 after smoking marijuana and failing a drug test. Though he found temporary work as a remote customer service representative, he lost that one when his mother died of a drug overdose in 2014 and he had to plan her funeral. Deeply depressed and unemployed, he moved into an old Airstream camper propped on cinder blocks behind his father’s house, at the entrance to the litter-strewn trailer park that the older man owns in the misty hills of Lovely. There, surrounded by long-unemployed neighbors and rampant drug use, Moore began to abuse his medical prescriptions.
Our Miserable 21st Century – The opioid epidemic of pain pills and heroin that has been ravaging and shortening lives from coast to coast is a new plague for our new century. The terrifying novelty of this particular drug epidemic, of course, is that it has gone (so to speak) “mainstream” this time, effecting breakout from disadvantaged minority communities to Main Street White America. By 2013, according to a 2015 report by the Drug Enforcement Administration, more Americans died from drug overdoses (largely but not wholly opioid abuse) than from either traffic fatalities or guns. The dimensions of the opioid epidemic in the real America are still not fully appreciated within the bubble, where drug use tends to be more carefully limited and recreational. In Dreamland, his harrowing and magisterial account of modern America’s opioid explosion, the journalist Sam Quinones notes in passing that “in one three-month period” just a few years ago, according to the Ohio Department of Health, “fully 11 percent of all Ohioans were prescribed opiates.” And of course many Americans self-medicate with licit or illicit painkillers without doctors’ orders. Most well-informed readers know that the U.S. currently has a higher share of its populace in jail or prison than almost any other country on earth, and know that well over 2 million men were in prison or jail in recent years.4 But only a tiny fraction of all living Americans ever convicted of a felony is actually incarcerated at this very moment. Quite the contrary: Maybe 90 percent of all sentenced felons today are out of confinement and living more or less among us. The reason: the basic arithmetic of sentencing and incarceration in America today. Correctional release and sentenced community supervision (probation and parole) guarantee a steady annual “flow” of convicted felons back into society to augment the very considerable “stock” of felons and ex-felons already there. And this “stock” is by now truly enormous. Very rough calculations might therefore suggest that at this writing, America’s population of non-institutionalized adults with a felony conviction somewhere in their past has almost certainly broken the 20 million mark by the end of 2016. A little more rough arithmetic suggests that about 17 million men in our general population have a felony conviction somewhere in their CV. That works out to one of every eight adult males in America today.
Nearly half of states are facing budget shortfalls. Here's why that matters. | PBS -- Federal budget experts are anxiously waiting to see how President Donald Trump’s plans to repeal the Affordable Care Act, cut taxes and make significant changes to a number of other programs impact federal spending. But Trump and congressional Republicans’ evolving fiscal plans have created uncertainty at the local level, too, as states scramble to get their finances in order while planning for potential federal tax cuts. Both Mr. Trump and House Speaker Paul Ryan have said they want to overhaul the federal tax code, a move that could lower taxable income at the state level as well. “States aren’t starting out in a good place, and things could possibly get much, much worse very quickly,” said Richard Auxier, a researcher at the Urban Institute, an economic policy research group. Nearly half of all states are projected to have budget shortfalls for the fiscal year 2018, according to the National Association of State Budget Officers, a nonpartisan research organization. Alaska, Connecticut, Nebraska, Oklahoma and Oregon all face deficits of around $1 billion. And proposed cuts to federal spending is making budget planning even more difficult. In the short term, states are proposing massive cuts to some of their programs. Connecticut, which must address a $1.3 billion deficit, is taking a two-pronged approach. Democratic Gov. Daniel Malloy’s proposed budget includes about $200 million in new taxes, and would cut back on state employee labor costs and shift teacher pension costs to cities and towns.
U.S. appeals court upholds Maryland's ban on assault rifles | Reuters: A federal appeals court on Tuesday upheld Maryland's ban on assault rifles, ruling gun owners are not protected under the U.S. Constitution to possess "weapons of war," court documents showed. The U.S. Court of Appeals for the Fourth Circuit decided 10-4 that the Firearm Safety Act of 2013, a law in response to the massacre in Newtown, Connecticut, by a gunman with an assault rifle, does not violate the right to bear arms within the Second Amendment. "Put simply, we have no power to extend Second Amendment protection to the weapons of war," Judge Robert King wrote, referring to the "military-style rifles" that were also used during mass shootings in Aurora, Colorado, San Bernardino, California, and Orlando, Florida. These are "places whose names have become synonymous with the slaughters that occurred there," he wrote, noting that the Supreme Court's decision in the 2008 District of Columbia v. Heller case excluded coverage of assault weapons. The United States has among the most permissive gun rights in the world. Because the U.S. Congress has long been a graveyard for gun control legislation, some states and localities have enacted their own measures. In total, seven states and the District of Columbia have laws that ban semiautomatic rifles, several of which that have faced various court challenges as there is a longstanding legal debate over the scope of Second Amendment rights.
Appeals court rules there is no Second Amendment protection for 'weapons of war' -- A federal appeals court on Tuesday upheld Maryland’s ban on assault weapons and high-capacity magazines, ruling that Second Amendment protections do not extend to what it called “weapons of war.” Writing for the 10-4 majority, Judge Robert King of the Fourth Circuit Court of Appeals in Richmond, Virginia, said that the landmark Heller v. District of Columbia decision rendered in 2008 explicitly allows governments to regulate firearms similar in design and function to those issued to members of the military. “We are convinced that the banned assault weapons and large-capacity magazines are among those arms that are ‘like’ M-16 rifles — ‘weapons that are most useful in military service’ — which the Heller Court singled out as being beyond the Second Amendment’s reach,” the decision reads . “Put simply, we have no power to extend Second Amendment protection to the weapons of war that the Heller decision explicitly excluded from such coverage.”The decision marks the fifth time that a federal appeals court has upheld a state assault weapons law, but it goes further than those previous decisions. It is the first to exclude AR-15s and other similar guns from Second Amendment protection on the grounds that they are virtually indistinguishable from weapons of war. The court found that such designation overrides considerations of the common usage or suitability for home self-defense of a gun like the AR-15.
DOJ Reverses Obama-Era Decision To Phase Out Private Prisons --Another day, another reversal of a legacy Obama policy. Moments ago, US Attorney General Jeff Sessions reversed an Obama-era memo to phase out the use of private prisons, signaling his support for federal use of such facilities and advising that the Bureau of Prisons will "return to its previous approach to the use of private prisons."Sessions issued a new memo Thursday replacing one issued last August by Sally Yates, the deputy attorney general at the time, in which he said the Obama decision "impaired" the ability to meet the needs of the correctional system.That Yates memo told the Bureau of Prisons to begin reducing and ultimately end its use of privately run prisons. She said the facilities were less well run than those managed by the Bureau of Prisons, and were less necessary given declines in the overall prison population.But Sessions says in his memo Thursday that Yates' directive contradicted longstanding Justice Department policy and "impaired the Bureau's ability to meet the future needs of the federal correctional system."In light of Trump's aggressive push to round up as many as 11 million illegal aliens currently residing in the US, we can venture the reason behind this expansion of US incarceration facilities.Meanwhile, the market reaction was quick, with the private prison REITs jumping following the DOJ announcement. Among individual stocks, CoreCivic rose 2.9% post-market while GEO Group was up 0.7%.
Are We Spoiling Our Kids with Too Much Praise? - When my daughter came home from her third-grade sports day with a plastic gold medal, I asked her what she had won it for.“We all got a medal,” she beamed. I looked at my husband, who had been at her school all day cheering her on.“They got a medal just for showing up?” I asked. He didn’t seem to think there was a problem with this, but it niggled at me for weeks. I couldn’t help wondering about the kids who are genuinely gifted in the 30-yard dash or at jumping over hurdles. How would they feel being awarded the same medal as the ones who have zero interest in running and jumping or are just not that good at it? Have we reached the point where we can’t be honest about our children’s skills and limitations? Educators and psychologists have debated the subject of praising children just for showing up for decades. You often hear comments like, “We are in a new age of narcissism” or, “We are entering a new me generation.” Is there, in fact, a connection between entitlement and how much praise we give our children? If so, what can we, as parents, caregivers, and educators do about it? Although the debate is far from over, well-accepted studies in this area come to the conclusion that, yes, in many ways our well-intentioned tendency to lavish our offspring with praise is fueling a generation of narcissists. I am still not happy with the “gold medal for all” approach to sports day, but I have to grapple with the fact that many of us live in a society that values praise over engagement and end goals over process.
Any Economist Who Talks about Rational Investment is Full of Shit, Hoosier Edition-- Ken Houghton - CPAC had a gathering of Republican Governors today. As Jennifer Hayden (@Scout_Finch) on Twitter noted, the Brownback/Walker/etc. panel was called “How to ruin your state’s economy with one easy tax cut.” So naturally my thoughts shifted to the one way blowing up your state’s economy could be ameliorated: if some unearned windfall occurred. Lo and behold, the PowerBall jackpot was won by a ticket in Lafayette, IN, last night. The Indianapolis Star (Dan Quayle’s ancestral paper, fwiw) notes that this is the second large-value ticket won in the Hoosier State in the past nine months: In July, another Hoosier hit a big jackpot in the Mega Millions game. One great thing about having people win nearly $1,000,000,000 in the lottery is the tax windfall for the State. So what is the brilliant Indiana State Senate planning to do with those windfall profits? If you guessed “invest in human capital,” you must be an idiot or an economist (but I repeat myself): A powerful Indiana Senate panel on Thursday slashed a proposed funding increase for a state program that sends poor children to preschool, jeopardizing a major pillar of Republican Gov. Eric Holcomb’s agenda. The move imperils efforts by Republican and Democratic education advocates to help Indiana catch up with more than 40 other states that offer significant preschool programs, according to 2015 figures from the National Institute for Early Education Research at Rutgers University. So much for that Rutgers-joining-the-Big-Ten thing meaning that Indiana State Senators pay attention to the needs of their constituents:Increasing state funding for preschool programs was a major issue in the governor’s race last year. Democrat John Gregg called for a universal program, while Holcomb said he supported expanded access for poor kids. The state currently spends $10 million a year on a preschool pilot program, called On My Way Pre-k, which is offered in five counties. But advocates say demand far outstrips available funding and sought $50 million for preschool programs in the next state budget. The Thursday vote by the Senate Appropriations Committee reduced a $10 million a year increase that Holcomb sought to $3 million. Maybe that $7MM savings will go toward saving two more jobs at Carrier. Maybe the Fed could get interested; I hear an unpopular ex-Governor from that State might now have a position of power there. The current pilot program was created at the behest of former Gov. Mike Pence, now the vice president, over the objection of many skeptics. But Pence shocked advocates when he opted not to seek $80 million in federal preschool funding for the effort…
Trump To Revoke Obama's Transgender Bathroom Rule -- In yet another leak, a draft of a letter to the nation's schools obtained by The Washington Post, administration officials plan to say they are withdrawing guidance issued by the Obama administration that found that denying transgender students the right to use the bathroom of their choice violates federal prohibitions against sex discrimination. “This interpretation has given rise to significant litigation,” states the two-page draft, which indicates that the Education and Justice departments plan to issue it jointly. The draft says administrators, parents and students have “struggled to understand and apply the statements of policy” in the Obama-era guidance. As a result, the departments “have decided to withdraw and rescind the above-referenced guidance documents in order to further consider the legal issues involved.” The letter makes clear that schools must protect all students and that the withdrawal of the guidance “does not diminish the protections from bullying and harassment that are available to all students. Schools must ensure that transgender students, like all students, are able to learn in a safe environment.” A final version of the letter is slated to be issued Wednesday, according to a Republican operative with knowledge of the conversations within the Trump administration on the issue. The administration is expected to release the letter despite objections from Education Secretary Betsy DeVos, who did not want to rescind the guidance, the operative said. Officials with the Education and Justice departments did not immediately respond to requests for comment late Tuesday night. Notably, Betsy DeVos, the new education secretary, wanted to keep Obama's guidance intact, according to WaPo's sources. Full leaked letter (via Reuters):
Waiting for the Supremes: High Court’s Decision in Gloucester County to Determine Validity of ACA Section 1557 Gender Identity and Transgender Services Rules - Two district courts[1] have recently stayed cases alleging that sex discrimination under ACA Section 1557 includes discrimination on the basis of gender identity and denial of coverage for gender transition, pending the Supreme Court’s decision in G.G. v. Gloucester County School Board.[2] The Supreme Court accepted certiorari in Gloucester in October 2016 to determine the validity of recent Department of Education Title IX guidance regarding gender identity. Briefing is currently under way. The district courts stayed the Section 1557 cases, reasoning that the Supreme Court’s decision would likely determine the validity of the Department of Health & Human Services’ Section 1557 regulations on gender identity as well. Section 1557 (42 U.S.C. § 18116) prohibits entities that receive federal funds for health activities or programs from discriminating on the grounds prohibited by Title IX. Title IX generally prohibits discrimination on the basis of sex by recipients of federal education assistance.[3] Title IX, however, permits federal fund recipients to set up “separate living facilities for the different sexes.”[4] DOE and HHS regulations for Title IX, originally issued by the Department of Health, Education and Welfare, define sex in binary terms – “one sex” versus “the other sex” — and permit recipients to set up comparable but separate housing and “toilet, locker room, and shower facilities on the basis of sex.”[5]
Revised Chicago School Budget Approved, $111 Million Gap Remains (Reuters) - The Chicago Board of Education on Wednesday approved a revised budget that incorporates unpaid furlough days and other cost-cutting measures to save $104 million to help address a $215 million pension funding shortfall. The $5.41 billion budget still has a $111 million hole to fill before the fiscal year ends on June 30. The Chicago Public Schools (CPS) will continue to pursue money from the state of Illinois to fill the gap, including through its recently filed lawsuit against the state, according to a school spokeswoman. The nation's third-largest public school system sued Illinois last week, claiming the state's method of education funding discriminates against the district's largely black and Hispanic student body. CPS is struggling with pension payments that will jump to $733 million this fiscal year from $676 million in fiscal 2016, as well as drained reserves and debt dependency. The fiscal woes have pushed its general obligation credit ratings deep into the junk category and led investors to demand fat yields for its debt. As part of a deal to enact state-wide pension changes, Illinois lawmakers passed a bill last year to send CPS $215 million in one-time funding earmarked for its teachers' retirement system. In December, Governor Bruce Rauner vetoed the measure after comprehensive pension legislation failed to materialize. Frustration over the veto led CPS to file its lawsuit invoking Illinois' Civil Rights Act. The Illinois State Board of Education said on Wednesday it finalized a settlement in the only other pending lawsuit over state funding, which was filed by civil rights group the Chicago Urban League in 2008.
Baltimore public schools face $129 million budget deficit, plan mass layoffs - The head of Baltimore public schools announced last month massive budget cuts and layoffs intended to offset the $129 million deficit facing the school district in the fiscal year starting July 1. “Baltimore city public schools will look drastically different on July 2,” said Sonja Santelises, CEO of Baltimore Public Schools, stated in the announcement. “This is going to hit everything kids love about coming to school,” she said. The current deficit amounts to 10 percent of the entire budget for the Baltimore City school system, which has an enrollment of around 82,000 students. The plan calls for $80 million in cuts in funding for individual schools and laying off 1,000 teachers and staff. A cost-cutting measure last May laid off 171 support staff, but spared teachers and principals. Santelises said that individual schools can expect to see a “dramatic increase in class size.” The current proposal could increase class sizes by as many as 10 students in some schools. “My class size is already at capacity, at 30 and 36 kids,” Athanasia Kyriakakos, an art teacher at the Mergenthaler Vocational-Technical School and Maryland teacher of the year, told the Baltimore Sun. “What are they going to make it, 46 kids?” “I want my kids to succeed. I just had another student die the other day. I don’t want them on the street,” she said. Another $10 million in savings will come from cutting each department in the school system’s central office by 10 to 15 percent. This will entail a decrease in school services, such as delaying maintenance projects and reducing trash pickup from five times a week to two. The plan also calls for dipping into the school district’s reserve fund along with a hiring and spending freeze, which would bring in a further $20 million. Finally, school officials are planning salary freezes and imposing up to five furlough days to pare down the budget deficit by $20 million.
Urban Charter Schools Often Succeed. Suburban Ones Often Don’t - Charter schools are controversial. But are they good for education? Rigorous research suggests that the answer is yes for an important, underserved group: low-income, nonwhite students in urban areas. These children tend to do better if enrolled in charter schools instead of traditional public schools. Not all charter schools are outstanding: In the suburbs, for example, the evidence is that they do no better than traditional public schools. But they have been shown to improve the education of disadvantaged children at scale, in multiple cities, over many years. Charter schools are publicly funded but not bound by many of the rules that constrain traditional public schools. Charters, for example, can easily try new curriculums or teaching strategies, or choose to have a longer school day. They have more autonomy than traditional public schools in hiring and firing teachers, who have voted to form unions at only a handful of charters. Perhaps as a result, teachers’ unions have often opposed charter schools, saying they compete unfairly with traditional public schools and are not held to the same standards. Measuring the effectiveness of any school is challenging. Parents choose their children’s schools, either by living in a certain school district or by applying to a private or charter school. Some schools are filled with students — say, the children of highly motivated parents — who would perform well in almost any setting. This could mislead us into thinking these schools provide an exemplary education, when the truth is they attract strong students. This is so-called selection bias, the greatest challenge in evaluating the effectiveness of schools. Stuyvesant High School in New York City, to which entry is granted through a competitive exam, is filled with smart students who might succeed anywhere. When those students do well, is it because of the school or the students or both? How about Harvard, or any other school? In the case of charter schools, researchers have found an innovative way to overcome selection bias: analyzing the admission lotteries that charters are required to run when they have more applicants than seats. Each lottery serves as a randomized trial, the gold standard of research methods. Lottery winners and losers are identical, on average, when they apply. Any differences that emerge after the lottery can safely be attributed to charter attendance.
UMich Students Demand 'No-Whites-Allowed' Safe-Space To Plot "Social Justice" Activism --A student activist group at the University of Michigan is demanding campus officials provide them with “a permanent designated space on central campus for Black students and students of color to organize and do social justice work.” The demand is one of several lodged by “Students4Justice,” who this month ratcheted upcampus demonstrations to pressure administrators to cave, complaining in a newly launched petition that President Mark Schlissel has snubbed their demands.The clamor for a segregated space for students of color to organize social justice efforts comes even as the public university builds a $10 million center for black students in the center of campus.In their demands, students explain why the new black student center is not enough, “because we want a space solely dedicated to community organizing and social justice work specifically for people of color.”“We want documentation of past, current, and future student activism and this should be a permanent space that is staffed, and has resources for students to organize and share resources,” the demand letter states.
Colleges Lost Billions to Hedge Funds in 2016 - A peculiar thing happened in 2016. While the Dow Jones industrial average grew by more than 13 percent, college endowments saw nearly a negative 2 percent rate of return. The worst endowment performance took place at the nation’s wealthiest private institutions. Harvard’s endowment alone shrank by $2 billion, a 5-percent decline. Out of the 40 biggest endowments, 35 declined in value. A key factor is poor performance by the hedge-fund gurus that institutions have increasingly paid to manage their investment portfolios. Colleges have reason to be angry because hedge funds charge high fees even when they lose money. Colleges and universities spent an estimated $2.5 billion on fees for hedge funds in 2015 alone. They paid an estimated 60 cents to hedge funds for every dollar in investment returns between 2009 and 2015, according to a report by the Strong Economy for All Coalition. These fees helped each of the top five U.S. hedge-fund managers earn more than $1 billion in 2015 despite mixed performance. Unfortunately, the disastrous endowment performance of 2016 disproportionately affects public colleges and less-wealthy private colleges, while leaving the most-elite private institutions with their wealth intact. The wealthiest colleges felt relatively little impact from their losses in 2016 because they have benefited from major endowment growth since 1977. To understand the current situation, it’s helpful to understand the backstory...
Who Gains If U.S. Universities Lose Out - Justin Fox - Since World War II, the U.S. university system has been the envy of the world. More than that, it has to some extent been the world’s university system, drawing the best scholars from all over the planet to do their research and teaching where academic standards are highest and resources greatest. America’s higher-education dominance has continued even as other sectors of the U.S. economy have lost ground to foreign competition, and it has fueled the rise of new industries in which the U.S. has become a world leader. By most measures, this dominance continues. According to Shanghai Ranking Consultancy’s 2016 Academic Ranking of World Universities, which focuses on research output, 15 of the world’s top 20 universities, and 50 of the top 100, are in the U.S. Still, those numbers are down from 17 and 54 a decade ago. Public universities in the U.S. have been hammered by cutbacks in state support, while the federal funding that many researchers in the sciences rely on has been shrinking as a share of gross domestic product. Meanwhile, other countries have been doing what they can to catch up, with some (mostly small European ones) putting a far greater share of GDP into academic research than the U.S. does. Lately, President Donald Trump seems to have given a new assist to his nation’s academic rivals, with an immigration order that brought disruption and uproar at U.S. universities and an attitude toward academia in general that can fairly be categorized as less than friendly. It’s enough to make a person wonder whether U.S. academic dominance might be at risk. Because I was briefly in Zurich last week, I thought I ought to ask a couple of people who might know: the presidents of two of Europe’s top universities, ETH Zurich and the University of Zurich. Somewhat to my surprise, they were both perfectly willing to talk to me about it.
The exploitation of adjunct faculty --Kevin Birmingham is the winner of the Truman Capote Award for his book,The Most Dangerous Book: The Battle for James Joyce’s Ulysses. The book also won the 2015 PEN New England Award for Nonfiction. You would think that an author of a first book that won multiple prizes would be a rising academic star. But Birmingham is just an adjunct faculty member at Harvard, where ‘adjunct’ means he is paid on a short-term contract and is not on the tenure ladder. He gave a speech titled “The Great Shame of Our Profession” as part of the Capote award ceremony, and the speech has been published in the Chronicle of Higher Education. It’s about the exploitation of adjunct faculty in the humanities.Here’s a sample.According to the 2014 congressional report, adjuncts’ median pay per course is $2,700. An annual report by the American Association of University Professors indicated that last year “the average part-time faculty member earned $16,718” from a single employer. Other studies have similar findings. Thirty-one percent of part-time faculty members live near or below the poverty line. Twenty-five percent receive public assistance, like Medicaid or food stamps. One English-department adjunct who responded to the survey said that she sold her plasma on Tuesdays and Thursdays to pay for her daughter’s day care. Another woman stated that she taught four classes a year for less than $10,000. She wrote, “I am currently pregnant with my first child. … I will receive NO time off for the birth or recovery. It is necessary I continue until the end of the semester in May in order to get paid, something I drastically need. The only recourse I have is to revert to an online classroom […] and do work while in the hospital and upon my return home.” Sixty-one percent of adjunct faculty are women.The problem is not exclusive to the humanities. There are also adjunct faculty in science and some argue that post docs are often exploited in science. And it is not a marginal problem: the majority of college faculty are now ‘contingent’.
Visualizing The Stunning Truth About How Students Are Spending Loan Cash --Over the last 15 years the starting salary for recent college grads has declined about $4000. Unfortunately, as ValueWalk.com details, the amount of student loan debt most students are graduating with has skyrocketed. You can now expect to graduate into a worse job market and with more debt than just a decade ago, which is leading to a serious financial crisis- the average debt load upon graduation is $37,000, and many people can’t even make their minimum payments.Nearly 60% of student borrowers have no idea when their student loans will be paid off. Over half of borrowers have no idea what their monthly payments will be when they graduate. When you combine these facts with declining wages and rising housing rates, many people will find they just can’t make ends meet.There are a few things students can do before graduation to ensure they aren’t set up for failure. Find out what your total costs will be and only take out the amount you need-financing a pizza every Friday night for four years can easily turn an expense of $1800 into $2291 when you have to pay interest over time. Try to seek out alternative ways to cover at least a portion of your expenses- a work-study program or part-time job can be a big help!Student loans can never be bankrupted, so it’s important to pay them off as quickly as possible. Make payments while you are still in school on order to minimize your debt load upon graduation, and once you graduate try to make additional principal payments whenever possible to help accelerate your payoff schedule. Stay on top of payments and set up automatic payments if necessary so you never miss a payment- penalties can keep you on the hook much longer than you need to be. Learn more about lightening the student loan burden from this infographic!
Dallas Police and Fire Pension Backs Cutbacks to Avoid Collapse -- The Dallas Police and Fire Pension is getting behind a Texas lawmaker’s plan to save the retirement system from financial collapse. The fund’s board voted 9-0 on Monday to back a proposal by Dan Flynn, chair of the pensions committee in the state’s House of Representatives, that would raise the retirement age to 58 from 55, eliminate cost-of-living adjustments and lower a multiplier used to determine the size of officers’ and firefighters’ benefit checks, according to a summary on the pension’s website. The plan would also increase Dallas’s annual contribution to 34.5 percent of payroll plus $11 million per year. The city contributed 27 percent in 2015, according to audited financial statements. Employee contributions would climb to 13.5 percent of their pay from 8.5 percent. The $7 billion shortfall in the police and fire pension triggered downgrades to Dallas’s credit rating from Moody’s Investors Service and S&P Global Ratings. The system was battered by losses on exotic investments including Hawaiian villas, Uruguayan timber and undeveloped land in Arizona. The pension, which counted on annual investment returns of 8.5 percent to cover promised benefits, had an average 1.5 percent loss over the past five years, according to S&P. Despite the poor returns, the city’s annual contribution is capped by state law, limiting its ability to boost contributions to make up for the investment losses.
The Affordable Care Act: The View From a Hospital CEO -- Health care in the U.S. appears to be heading toward dramatic changes for the second time in less than a decade. As president and chief executive of New York-Presbyterian, Steven Corwin will have to maneuver a system with 10 hospitals and $7 billion in annual revenue through what may be years of regulatory uncertainty and upheaval for U.S. hospitals. That’s because President Donald Trump apparently is determined to follow through on his campaign promise to repeal and replace the Affordable Care Act of 2010, the nation’s most sweeping health-care legislation in decades. But no clear picture has emerged yet of how the ACA’s provisions for private insurance and the government’s Medicaid program might change—or when. The Wall Street Journal spoke with Dr. Corwin in December and again in early February about the risks and opportunities for hospitals during this time of transition. Here are edited excerpts of those conversations
SF reaches $400K settlement proposal in Nevada patient-dumping case - San Francisco’s more than two-year legal battle with Nevada over the state’s practice of sending psychiatric patients to The City has reached a conclusion in a $400,000 settlement pending approval by the Board of Supervisors and the state of Nevada. City Attorney Dennis Herrera launched an investigation and subsequently filed a lawsuit over the dumping of patients after the Sacramento Bee exposed the practice by a Las Vegas-based psychiatric hospital in 2013. The amount of the proposed settlement is $400,000. Other details are not yet public. The lawsuit also sought protections to ensure the practice would not occur again. The Nevada Board of Examiners would need to approve of the terms, which it may do as early as Oct. 13.In a statement issued Friday to the San Francisco Examiner, Nevada Gov. Brian Sandoval said that the settlement would “validate the patient management best practices and procedures which Nevada has had in place for two years.” He added, “We look forward to working with California to ensure all patient transfers to and from both states are managed using these best practices and adhering to conditions detailed in the agreement.” Sandoval did note in the statement that the settlement amount was less than what Herrera had sought and that the proposed settlement would include “reciprocal obligations” by San Francisco “regarding patient status and movement.” Herrera’s spokesman Matt Dorsey declined to comment on the case, pending approval of the settlement by Nevada. “Nevada’s practice of psychiatric ‘patient dumping’ is shockingly inhumane and illegal,” Herrera said in April 2013. “Over the past five years, the state of Nevada has transferred to other states approximately 1,500 patients discharged from its state-run Rawson-Neal Psychiatric Hospital, including 500 patients that Nevada sent by Greyhound bus to cities and counties in California,” said the lawsuit filed September 2013 by Herrera in San Francisco Superior Court.
Insurers May Get More Time to Opt Into Obamacare in 2018 - The deadline for health insurers to apply for the 2018 Obamacare federal exchanges would be extended from May 3 to June 21, the HHS proposed Feb. 17. The extra month and a half would provide more time to stabilize the troubled Affordable Care Act exchange markets, America’s Health Insurance Plans spokeswoman Kristine Grow told Bloomberg BNA in an e-mail Feb. 17. Health plans are in the process of deciding whether to participate in the 2018 exchanges, and many health-care stakeholders have said the 2018 exchanges are in jeopardy of further premium increases and withdrawals as Republicans prepare plans to repeal and replace the Affordable Care Act. Humana Inc. was the latest to withdraw from the 2018 exchanges, and Molina Healthcare Inc. also indicated it may not participate. Most of the health plans participating in the ACA exchanges are losing money due to a sicker-than-expected population of enrollees. In addition to the draft bulletin that would revise the timing for qualified health plan submissions, the Health and Human Services Department's Centers for Medicare & Medicaid Services released a document of revised key date filings for qualified health plan certification in the federal exchanges and an addendum of technical guidance. Plans can file their applications as early as May 10 under the proposal, on which the CMS requested comments no later than March 7. The CMS would send final certification notices to insurers by Oct. 12, instead of Sept. 22. The 2018 open enrollment period is to start Nov. 1. The deadline extension will be helpful, Katie Allen, executive director of the Council for Affordable Health Coverage (CAHC), told Bloomberg BNA Feb. 17, but “we think that could be pushed back a couple more weeks.” The CAHC represents employers, health insurers, pharmaceutical manufacturers, patient groups and providers.
Wasteful Health Care Spending - The high costs of health care are not just an issue for the United States, but for countries all over the world. The OECD addresses the issue of How to Tackle Wasteful Health Care Spending in a January 2017 (which can be ordered or read online for free here). Here's a taste of the findings from the "Foreword":Across OECD countries, a significant share of health care system spending and activities are wasteful at best, and harm our health at worst. One in ten patients in OECD countries is unnecessarily harmed at the point of care. More than 10% of hospital expenditure is spent on correcting preventable medical mistakes or infections that people catch in hospitals. One in three babies is delivered by caesarean section, whereas medical indications suggest that C-section rates should be 15% at most. Meanwhile, the market penetration of generic pharmaceuticals – drugs with effects equivalent to those of branded products but typically sold at lower prices – ranges between 10-80% across OECD countries. And a third of OECD citizens consider the health sector to be corrupt or even extremely corrupt. At a time when public budgets are under pressure worldwide, it is alarming that around one-fifth of health expenditure makes no or minimal contribution to good health outcomes. ... Actions to tackle waste are needed in the delivery of care, in the management of health services, and in the governance of health care systems. There's no magic bullet for reducing wasteful spending: instead, the strategy of the report is to pile up studies and examples until the sheer weight and number of opportunities to reduce health care spending is overwhelming. The report divides the evidence into three main categories: wasteful clinical care (care that either provides very low value or can even be counterproductive to health); operational waste (like paying excessively high prices or overusing expensive inputs like brand-name drugs); and governance-related waste (like ineffective or unnecessary administrative expenses). Here are a few words on each.
Lancet Study on Life Expectancy by 2030 Confirms Poor US Performance - Yves Smith - The highly-respected medical publication, The Lancet, released an important new study yesterday, Future life expectancy in 35 industrialised countries: projections with a Bayesian model ensemble. To the extent it was noticed by the media, this Google News search show that coverage focused on how life expectancies are expected to continue to rise, to the degree that the projected best performer, South Korea, will have better than 50% odds an expected lifespan of 90 years for women. However, the focus on the high performers, which after South Korea are, in order, France, Spain, and Japan, gives short shrift to the continuing fall in the relative performance of the US, which Lancet projects as landing solidly in third world terrain in terms of women’s life expectancies. Men show better relative results and do well now by global standards, but they show a much bigger expected relative fall in the upcoming decade plus. If you look at the data charts, the big reason is that the researchers project the US to show very little in the way of improvement, while they anticipate many other countries to register big gains, to the degree that they leapfrog the US. Japan is even more stagnant, but it now ranks so high that the relative fall is not as dramatic. This is the high resolution version of analysis of life expectancy at birth as of 2010 and projected to 2030; you can see view it at Lancet here. Even with the microtype, you can see that in the 2010 chart, the US has ten countries with lower life expectancies, such as the Czech Republic, Poland Cratia, Serbia, Mexico, and Macedonia. By 2030, the US is forecast to have slipped further, with Poland and the Czech Republic having pulled ahead. By contrast, men in the US do well by global standards, and one wonders if that reflects biases in treatment. The press has recently started to discuss how certain conditions are chronically underdiagnosed in women, such as heart disease. Similarly, most non-psychiatric clinical trials, unless they are of women-only ailments, are conducted on male-only subjects, meaning the efficacy and typical dosages may not translate well to women. Another well-documented bias in the US (and query whether this is less true elsewhere) is that women complaining of pain or sub-clinical conditions are regularly seen as being hypochondriacs, and doctors push antidepressants as the remedy, while this is apparently less common for men. Even so, you can see the Lancet team also anticipates a big fall in relative standards for US men:
Metals Debris Found in Vaccine Supply -- Robert F. Kennedy, Jr.- A landmark new study has found metal debris and biological contamination in every human vaccine tested. The study should have profound and immediate impact on public health policies and vaccine industry procedures around the globe. A team of scientists used a highly sensitive technology—an Environmental Scanning Electron Microscope equipped with an x-ray microprobe—to scan for solid contaminants in 44 samples of 30 vaccines. The researchers reported their results in the International Journal of Vaccines and Vaccination . They found widespread contamination by toxic aluminum salts, red blood cells of unknown origin and inorganic, foreign particle debris in aggregates, clusters and independent particulates. The composition of those clusters, the researchers observe, are consistent with "burnt waste." Further analyses of those particles revealed them to be "non-biocompatible and bio-persistent foreign bodies" composed of lead, stainless steel, chromium, tungsten, nickel, iron, zirconium, hafnium, strontium, antimony and other metals. The investigators also identified some particles embedded in a biological substrate, probably proteins, endotoxins and residues of bacteria. The researchers found contamination in 43 of the 44 vaccine samples tested. The authors stated that these contaminants should not be present in any vaccine, and that their presence was not declared by the manufacturers. Ironically, the one sample that came back clean was a veterinary vaccine
Brain pollution: Evidence builds that dirty air causes Alzheimer’s, dementia | Science | AAAS: Some of the health risks of inhaling fine and ultrafine particles are well-established, such as asthma, lung cancer, and, most recently, heart disease. But a growing body of evidence suggests that exposure can also harm the brain, accelerating cognitive aging, and may even increase risk of Alzheimer’s disease and other forms of dementia. The link between air pollution and dementia remains controversial—even its proponents warn that more research is needed to confirm a causal connection and work out just how the particles might enter the brain and make mischief there. But a growing number of epidemiological studies from around the world, new findings from animal models and human brain imaging studies, and increasingly sophisticated techniques for modeling PM2.5 exposures have raised alarms. Indeed, in an 11-year epidemiological study to be published next week in Translational Psychiatry, USC researchers will report that living in places with PM2.5 exposures higher than the Environmental Protection Agency’s (EPA’s) standard of 12 µg/m3 nearly doubled dementia risk in older women. If the finding holds up in the general population, air pollution could account for roughly 21% of dementia cases worldwide, says the study’s senior author, epidemiologist Jiu-Chiuan Chen of the Keck School of Medicine at USC.Deepening the concerns, this month researchers at the University of Toronto in Canada reported in The Lancet that among 6.6 million people in the province of Ontario, those living within 50 meters of a major road—where levels of fine pollutants are often 10 times higher than just 150 meters away—were 12% more likely to develop dementia than people living more than 200 meters away. Demented dogs in Mexico City in the early 2000s offered the first hints that inhaling polluted air can cause neurodegeneration. Neuroscientist Lilian Calderón-Garcidueñas, now at the University of Montana in Missoula, noticed that aging dogs who lived in particularly polluted areas of the city often became addled, growing disoriented and even losing the ability to recognize their owners. When the dogs died, Calderón-Garcidueñas found that their brains had more extensive extracellular deposits of the protein amyloid b—the same “plaques” associated with Alzheimer’s disease—than dogs in less polluted cities. She went on to find similarly elevated plaque levels in the brains of children and young adults from Mexico City who had died in accidents, as well as signs of inflammation such as hyperactive glia, the brain’s immune cells.
A Lethal Bird Flu Returns to China - An especially virulent form of bird flu has taken a record-breaking toll this year in China, raising alarms in Beijing and at the World Health Organization (WHO) headquarters in Geneva. The H7N9 form of influenza, which first emerged in China in March 2013, has killed eighty-seven people between January 1 and February 12, 2017, more than in any previous season since the original outbreak, in 2013. On February 11, health authorities identified this year’s first acute case, in Beijing, raising national concerns in China. The H7N9 virus circulates in wild birds, which may pass it on to domestic poultry and songbirds by contaminating food and water with virally infected feces or through competition over food that leads to pecking and fighting. The original outbreak spread from wild birds to live poultry markets and songbird sales centers and then on to people, so it is worrying that more than a third of the chickens and other poultry randomly screened in live animal markets that serve a population of seventeen million in the southern city of Guangzhou tested positive for H7N9 this month. Though most of the patients caught their infections directly from handling birds, there were clusters of human-to-human transmission, raising the prospect that H7N9 could become an epidemic, or even a pandemic, among people. The virus is far more virulent than the type of influenza that killed an estimated fifty to seventy-five million people in 1918 and 1919. A common feature of H7N9 outbreaks is transmission within families and inside hospitals, where there is intimate contact between patients and caregivers. But so far the virus has not taken on a form that can be spread from one stranger to another, via coughing or handshakes, as is the case with seasonal, routine flus. That’s a good thing, given how deadly H7N9 is. The U.S. and Chinese centers for disease control have worked together closely since 2013, tracking cases and trying to anticipate changes in the virus that might make it more contagious among human beings (So far, the virus has not mutated dramatically since 2013.)
China’s H7N9 bird flu measures came too late, experts say - Attempts by Chinese authorities to curb the H7N9 bird flu virus in live poultry markets came too late, with officials failing to take preventative steps before the peak flu season started, medical experts say. Mainland China is in the grip of the worst outbreak of the H7N9 strain since it first emerged in the country in 2013. The death toll for January alone was 79, higher than the few dozen fatalities recorded during the month in previous years. At least eight more deaths were recorded in the first 12 days of this month. The experts believe the spike was partly caused by greater human exposure to infected poultry before and during the Lunar New Year holiday, as the season prompted more shopping for poultry, especially live birds. The H7N9 virus shows little or no clinical symptoms in poultry, complicating detection. But authorities should have stepped up their surveillance going into the peak season, the experts said.
Why Was a Drug Used to Euthanize Animals Found in This Dog Food? -- Last week the U.S. Food and Drug Administration (FDA) warned pet owners not to feed specific lot numbers of Evanger's canned Hunk of Beef or Against the Grain Grain Free Pulled Beef with Gravy canned dog food because they might contain enough pentobarbital to sicken or kill their animals. The FDA began investigating Evanger's Dog & Cat Food Company Inc. when it learned about five dogs in a single household that suffered acute neurological symptoms shortly after eating the product. One dog was euthanized after secondary complications and three others recovered after receiving veterinary care. One of the dogs treated remains on seizure medication and the fifth dog that ate the least amount of food recovered with time. The stomach contents of the deceased dog and an open can of the product were tested by an FDA Veterinary Laboratory Investigation and Response Network lab and unopened cans of the product from the pet owner and retailer that sold the products (from the same production lot), were tested by FDA's lab. All of the samples tested positive for pentobarbital.
57 Snow Monkeys Euthanized for Carrying 'Alien' Genes -- The Takagoyama Nature Zoo in the city of Futtsu, Japan euthanized 57 snow monkeys who were found to have hybrid genetic make-ups. The zoo mistakenly believed all 164 of its resident primates were pure Japanese macaques (Macaca fuscata), which are endemic to Japan. When the zoo discovered through DNA testing that 57 of them were actually of a hybrid breed, rhesus macaque (Macaca mulatta), which is common throughout Southeast Asia, they culled the hybrid monkeys. In 2013, Japan's environmental laws were revised to make holding or transporting invasive species including hybrids illegal, in an attempt to protect the indigenous environment and native species. Culling of rhesus macaque is allowed under this law, which designates them as an "invasive alien species." An Office for Alien Species Management official said the culling was unavoidable because the hybrid species might escape and reproduce in the wild, BBC reported . The monkeys were culled through lethal injection over the course of about a month, ending in early February. The zoo operator then held a memorial service for the hybrid monkeys at a local Buddhist temple.
Major Victory for California Cities vs. Monsanto Over PCB Contamination - Monsanto manufactured about one billion pounds of PCBs for between the 1930s-70s before the U.S. Environmental Protection Agency (EPA) banned the chemical in 1979. PCBs are harmful to humans, wildlife and the environment. To this day, the toxins are dispersed throughout landfills, water bodies and even in the deepest part of the ocean . In recent years, eight West Coast cities, the Port of Portland as well as Washington state have taken legal action against Monsanto to recover PCB cleanup costs. In Washington, for instance, Attorney General Bob Ferguson said that the state has spent tens of millions of dollars on cleanup efforts all while the pollutants cause harm to protected salmon and orcas. Monsanto has been dismissive of the lawsuits for a number of reasons, including "having nothing to do with the company's current business." But the litigation is gaining momentum. Earlier this month, a California federal judge denied Monsanto's motion to dismiss separate public nuisance lawsuits filed by the cities of San Jose, Oakland and Berkeley. The cities are suing Monsanto for costs associated with PCB cleanup and stormwater system retrofit damages. The cities also allege that Monsanto knew for decades that PCBs were dangerous but continued to sell them anyway. As stated in U.S. District Judge Edward J. Davila's Feb. 3 order, an internal Monsanto report identified PCBs as "nearly global environmental contaminants" but urged "a number of actions which must be undertaken to prolong the manufacture, sale and use of these particular Aroclors," which was the trade name of commercial PCB mixtures. Furthermore, an internal memo declared that despite the hazards of PCBs, Monsanto "can't afford to lose one dollar of business."
Will Superweeds Choke GMO to a Timely Death in USA? - When we human beings become too self-destructive for our own well-bring and that of our Earth, sometimes nature takes control and does what we in our greed and stupidity refuse to do. The refusal of Governments around the world–with notable exceptions such as the GMO-free Russian Federation–to order an immediate global ban on planting of Genetically Manipulated Organisms, GMO, including for corn, for soybeans, for cotton to name just a few, along with an immediate ban on paired weed-killers such as Monsanto’s Roundup, is stupidity pure. The response of nature, however, may sound the death knell for American farmers’ use of GMO seeds more effectively than any labelling or WHO carcinogen warning. Superweeds are literally choking GMO plants to death across the US Midwest farm belt and that should send a very real signal that nature abhors GMOs and their toxic weed-killing chemicals. Since President George Herbert Walker Bush met with the directors of Monsanto in the White House in a closed-door 1992 meeting, American agriculture and the American people have been the experimental guinea pig for testing the effects of planting of GMO crops paired to specific toxic weed-killers.G.H.W. Bush after the Monsanto powwow ordered US Government agencies to treat the untested GMO seeds and their paired weed-killer chemicals as “substantially equivalent” to non-GMO plants and not requiring extra government testing, one of the more lunatic decisions of a President who seems to have had a morbid affinity for lunatic decisions Today, a quarter century later, 96% or almost every ear of USA corn, and most every single soybean, 94%, planted today in the United States is GMO. Those GMO crops find their way into practically every store-bought food product agribusiness pushes on us today. Most of it is Monsanto GMO crops using, by mandatory contract agreement, Monsanto glyphosate-based Roundup weed killer. This is because at present the Monsanto GMO seeds are genetically-modified only to resist Monsanto Roundup weed-killer based on glyphosate. As well, some 90% of every cotton ball harvested in the United States is GMO, and sprayed too, with toxic glyphosate.
Monarch Populations Plummet: 27% Decrease From Last Year - The annual population status report for the monarch butterfly ( Danaus plexippus ) has been released showing a 27 percent decrease from last year's population. Populations of this once-common iconic black and orange butterfly have plummeted by approximately 90 percent in just the last two decades. The threats to the species are the loss of habitat in the U.S.—both the lack of availability of milkweed , the only host food plant for monarch caterpillars, as well as nectar plants needed by adults–through land conversion of habitat for agriculture, removal of native plants and the use of pesticides and loss of habitat in Mexico from illegal logging around the monarchs' overwintering habitat. The new population numbers underscore the need to continue conservation measures to reverse this trend. The population is evaluated by measuring the number of hectares occupied by the monarch butterflies in their overwintering habitat in Mexico. This year there are an estimated 109 million monarchs occupying just 2.91 hectares (7.2 acres), down from 150 million last year covering 4.01 hectares (9.9 acres). The monarch population found west of the Rockies, which migrates to California rather than Mexico, has also severely declined but looks to have remained at the same level as last year . Despite the alarming overall decline in the monarch population, there is some reason to be cautiously optimistic about efforts to help monarchs. Shortly after last year's population numbers were released, severe late-season storms hit monarch overwintering sites in Mexico, which scientists estimate killed anywhere from 7.4 percent of the population to as much as 50 percent of some of the overwintering colonies. This mortality was not reflected in the official population number last year, meaning that far fewer monarchs actually survived to migrate north in the spring of 2016.
Bees are even smarter than we realized - (video) A fascinating set of experiments has revealed that bees can be taught to use tools, even though they don't use them in the wild. London biologist Olli J. Loukola and his colleagues wanted to find out more about how bee intelligence works. Previous experiments with the insects have shown that they can count, communicate with each other using "waggle dances" that reveal the direction of food, and pull strings to get access to food. Loukola's new tool use test showed that not only are bees good with tools, but they can also extemporize to use them more effectively. Loukola wanted to test bees' intelligence with a scenario that they would never encounter in nature. So he decided to teach the bees to move a tiny ball into the center of a platform to get a sugary reward. First, he showed them how it was done by using a plastic bee on the end of a stick. After about five days of training, the bees started to drag the ball to the center of the platform on their own. Then, Loukola allowed the trained bees to show other bees how to unlock the sweet reward. He and his colleagues also trained bees using a "ghost bee," or a magnet under the platform that moved the ball to the center. Bees learned best from other bees (and the plastic bee), but many were able to learn from the ghost bee, too. Bees without training were not able to figure out how to get sugar water in the test.
Maple syrup producers face challenges in warming world (AP) -- New Hampshire's maple syrup producers say they are feeling the impact of climate change, as winters become warmer and frigid nights so critical to their business become fewer. Producers joined climate experts and Democratic U.S. Sen. Maggie Hassan of New Hampshire on Tuesday to talk about the state's changing climate and how it is affecting one of the state's most important industries. Some producers talked of seeing a steep drop in the amounts of sap they are getting, while others are dealing with another trend attributed to warmer temperatures in which the sap goes up to the top of the trees rather than down to taps. Others complained about a drop in the sugar content of their sap.Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania and Vermont produced 3.78 million gallons of syrup in 2016, according to a Northeast maple syrup production statistics service run by the U.S. Department of Agriculture. Vermont is the clear leader, alone producing more than 47 percent of the country's maple syrup. Hassan said the state's changing climate can have dramatic effects on the natural resources that "define us as a state and are critical to our economy, our environment, and our way of life in New Hampshire." The ideal temperatures for sap production are in the 20s at night and 30s and 40s during the day. When the climate is in the 50s and 60s during the day and the nights stay warm, sap runs not to the taps, but to the tops of the trees, causing the tree to bloom. That can lead to a cloudy and off-tasting product.
Groups sue EPA to protect wild salmon from climate change | Reuters: U.S. fishing and conservation groups sued the Environmental Protection Agency on Thursday, seeking to protect wild salmon threatened by rising water temperatures attributed in part to climate change in two major rivers of the Pacific Northwest. The lawsuit, filed in U.S. District Court in Seattle, is believed to be the first court case brought against the EPA under President Donald Trump's newly confirmed chief of the agency, Scott Pruitt. The groups' legal bid on behalf of salmon runs in the Columbia and Snake rivers hinges on the EPA's authority under the Clean Water Act to regulate excessive temperatures in those rivers as pollutants. The lawsuit seeks to compel the EPA to thus require dam operators in the Columbia and Snake watersheds of Washington state, Oregon and Idaho to control river flows in such a way as to keep water temperatures cool enough for the salmon to survive. The plaintiffs, including Idaho Rivers United and the Pacific Coast Federation of Fishermen's Associations, have argued those dams create stretches of artificially slow or shallow waters susceptible to increasingly warm weather, a regional consequence of climate change. The lawsuit cites the EPA's own recognition in 2015, amid a major salmon die-off in the Northwest that year, of the "critical" need to lower river temperatures in the face of human-caused global warming. It also noted that Pruitt, a former Oklahoma attorney general who sued the EPA more than a dozen times on behalf of his oil-producing state, is on the record as doubting the science of climate change.
It’s Time To Put Food Policy Back On The Table -Jim Hightower --During the farm crisis of the 1980s, an Iowa farmer asked if I knew the difference between a family farmer and a pigeon. When I said no, he delighted in explaining: “A pigeon can still make a deposit on a new John Deere.” That’s funny—except, it really wasn’t. Worse, the bitter reality of the tractor joke is still true: The farm crisis has not gone away, though hundreds of thousands of farm families have. The economic devastation in farm country continues unabated as agribusiness profiteers, Wall Street speculators, urban sprawlers and corrupted political elites squeeze the life out of farmers and rural America.Actually, the farmer has long been forgotten in America’s presidential discussion. In a New York Times op-ed, Professor A. Hope Jahren reported on the discovery she made when reading through transcripts of past debates: “Farm policy hasn’t come up even once in a presidential debate for the past 16 years.”That’s Bush-Kerry, Obama-McCain, Obama-Romney, and Trump-Clinton! Not one of them mentioned the people who produce our food. Jahren notes that the monetary value of farm production alone is nearly eight times greater than coal mining, a declining industry whose voters Clinton and Trump avidly courted. This disregard for farmers and food policy is not only irresponsible, but also politically inexplicable when you consider that food is far more than economics to people. Purchasing food has become a political act that takes into account cultural, ethical, environmental, and community values. This was confirmed last March in a national survey published by Consumer Reports showing that huge percentages of shoppers consider production issues important:
- Supporting local farmers: 91 percent
- Reducing exposure to pesticides in food: 89 percent
- Protecting the environment from chemicals: 88 percent
- Providing better living conditions for farm animals: 84 percent
Why Ditching NAFTA Could Hurt America's Farmers More Than Mexico's - In the early 1990s, the Reiter family started growing strawberries and raspberries in Mexico, in addition to California. It found regions in Mexico where the climate allowed them to grow the fruit — especially raspberries — during seasons of the year when it hadn't been feasible back home. Many U.S. fruit and vegetable growers have made the same move over the past two decades. They've all done it to expand their growing season, and also to cut costs. Farmworkers in Mexico get paid very little, compared with workers in the U.S. Reiter says that when he got to Mexico and met his Mexican partners, he discovered another reason to locate there. "They're farmers. They want to be farmers. That is their industry," he says. There's excitement about new fruit varieties, and new methods of growing crops. Since 1992, raspberry exports from Mexico to the U.S. have gone from zero to $500 million each year. The increase in strawberry exports is similar. Total Mexican shipments of fruits and vegetables to the U.S. have increased by nine times over the last 25 years, to $12 billion a year. People in the industry say most of that increase is a result of U.S. companies setting up production in Mexico. Yet the situation on the other side of the trade equation, for U.S exports to Mexico, is considerably different.Those exports also have grown dramatically, but a lot of them are commodities that Mexico could buy from other places, such as corn, soybeans and dairy products."Mexico is the No. 1 buyer of U.S. dairy products in the world," says John Wilson, senior vice president of Dairy Farmers of America, a cooperative with 14,000 dairy farmer members. American dairy farmers have come to rely on exports in recent years. About 15 percent of all milk is processed into products for export. Wilson's cooperative, for instance, has a plant in Portales, N.M., that receives milk from big dairy farmers in the eastern part of that state and dries it into powder. "About 38 million pounds of [milk] powder moved from the plant into Mexico last year," Wilson says. In total, the U.S. exports about $500 million worth of milk powder to Mexico annually. That's up more than 10 times from 20 years ago. The U.S. also exports billions of dollars' worth of corn, soybeans and pork. And NAFTA is really important for most of those exports. It allows products to enter Mexico duty-free and makes American commodities just slightly cheaper than the competition, such as milk powder from New Zealand.
U.N. urgently seeks $4 billion aid to avert famine for 20 million in Africa, Yemen | Reuters: More than $4 billion is needed by the end of March to help nearly 20 million people who risk starvation in Nigeria, Somalia, South Sudan and Yemen, United Nations Secretary General Antonio Guterres said on Wednesday. Citing armed conflicts and climate change as part of the reasons for the food emergency, Guterres led a call for $5.6 billion in funding for humanitarian operations in the four countries this year, of which $4.4 billion are needed by the end of next month "to avert a catastrophe." "Despite some generous pledges, just $90 million has actually been received so far," said Guterres, about two cents for every dollar needed. "We are in the beginning of the year but these numbers are very worrying." Armed conflicts are having devastating humanitarian consequences, said Guterres, calling climate change a “key enhancer” of the humanitarian problem. Last week, the U.N. World Food Programme's chief economist told Reuters more than 20 million people in the four countries were at risk of dying from starvation within six months. U.N. chief Guterres said Wednesday women and girls are disproportionately affected by the crisis and nearly half a million children are suffering severe acute malnutrition. "Famine is already a reality in parts of South Sudan," Guterres said. "Unless we act now, it is only a matter of time until it affects other areas and other countries. We are facing a tragedy."Yemen, where more than 10,000 people have died as part of a two-year-long conflict, is facing the largest food insecurity emergency in the world, Guterres said, with an estimated 7.3 million people needing immediate help.
Why 20 Million People Are on Brink of Famine in a ‘World of Plenty — In a world filled with excess food, 20 million people are on the brink of famine, including 1.4 million children at imminent risk of death. In the face of such grim numbers, a stark question confronts the world’s most powerful: Why in 2017 can’t they avert such a seemingly archaic and preventable catastrophe? Secretary General António Guterres of the United Nations raised the alarm Wednesday afternoon about the risk of famine in northern Nigeria, Somalia and Yemen. And this week, the United Nations declared famine in a patch of South Sudan. “In our world of plenty there is no excuse for inaction or indifference,” Mr. Guterres said at a news conference, flanked by the heads of his aid agencies. Famine is a rare and specific state. It is declared after three specific criteria are met: when one in five households in a certain area face extreme food shortages; more than 30 percent of the population is acutely malnourished; and at least two people for every 10,000 die each day. : “When you declare a famine, bad things have already happened. People have already died.” Famine was last declared in Somalia in July 2011, after an estimated 260,000 people had died, mostly in a two-month period. Mr. Guterres cited two reasons for the current crisis. First, he said, there is not enough money; the United Nations needs $5.6 billion to address the needs, most of it by the end of March. Barely 2 percent of that money is in hand, he said. Whether the United States, by far the biggest humanitarian donor in the world, will follow through on its commitments under President Trump remains unclear. Second, all four countries facing the threat of famine are reeling from conflict, and in many instances, the leaders of warring parties are blocking aid workers from delivering relief where it is most needed. “I want to make a personal appeal to the parties to conflict to abide by international humanitarian law and allow aid workers access to reach people in desperate need,” Mr. Guterres said. “Without access, hundreds of thousands of people could die, even if we have the resources to help them.”
South Sudan’s man-made famine demands a response - FOR VICTIMS of hunger in South Sudan, the world has been tilted into a bleak tableau of want. By international standards, 42 percent of the population is now classified as “severely food insecure,” an unprecedented level, and many are enduring the most severe trial of all, famine. By the peak of the lean season in July, nearly 5.5 million people could be in crisis. South Sudan was already vulnerable to climate-related shocks to agriculture, but this crisis is largely man-made, as the humanitarian group Oxfam and the State Department both pointed out this week. Newly independent in 2011, South Sudan was split by a senseless and destructive civil war in 2013, and now the country is fragmenting into violence-racked shards that are impeding humanitarian aid, collapsing markets, disrupting traditional agriculture and consigning millions to hunger and malnutrition. The United States, its allies and the United Nations could have done more, and done it earlier, to stop the fighting, curtail the flow of weapons and bring about better conditions for humanitarian aid. Last year’s effort to impose an arms embargo failed in the U.N. Security Council for a variety of reasons, including lack of willpower. Will the Trump administration care at all about a nation the United States helped found after years of war and that now seems to be falling ever deeper into the abyss? Opposition leader Riek Machar, who battled President Salva Kiir over the past few years, has fled the country but left behind forces that are still fighting. Mr. Kiir’s troops are also engaged in a campaign of violence and coercion that has forced hundreds of thousands to flee into camps and across South Sudan’s borders. Separately, fighting has intensified in the southern Equatorias, where disaffected tribes have taken up arms. The violence has terrible spillover effects: roadblocks, suspicion and other obstacles that make it very difficult for humanitarian aid to be delivered. Mr. Kiir’s government has waged a particularly nasty crackdown on civil society, too, that has put aid workers in the crosshairs. The United States has provided more than $2 billion in humanitarian relief from 2014 until now. More will be necessary, but just as important is stopping the violence that is driving more people into displacement and desperation and making it more difficult to help those who need it.
In Madagascar, mothers weep and send their children to bed without water to drink - In Madagascar, the island nation off the southeastern coast of Africa, a grim cycle has set in. Rains arrive late and leave early in the African country most exposed to climate change, according to the United Nations’ Food and Agriculture Organization. Droughts, earthquakes, epidemics, floods, cyclones and extreme temperatures have wrought severe damage on agriculture in recent decades. Nearly 850,000 people in Madagascar desperately need food aid. But the U.N.’s humanitarian appeal for the country is only 29% funded because of emergencies elsewhere. Even the most desperate families are given only half of what they need to survive. Each year, farmers in southern Madagascar sow their seeds in November for the rainy season, but in recent years the skies have only spluttered sulkily for a few weeks, before drying up and searing the immature crops. Some rain finally arrived late last year, but many families had no seeds left to plant and no money to buy them.With repeated crop failures, people have to sell firewood to survive, taking small sharp axes and hacking efficiently at the trees that are the lungs of their dying country — only deepening the crisis. Tonelie, 42, has six of her eight children still living at home and no husband. She has land to farm, but it is bare. Eight months ago, she made the long, regretful walk to market to sell her last cow. Many people in this harsh land have sold their last goat or even their last chicken. Then week by week, they have sold everything else: clothes, spoons, tin plates, cups, pots, plastic sheets. Even their mattresses. They cling finally to their plastic water cans, receptacles of the last drops of hope. Tonelie even had to sell hers.
World’s ability to feed itself “in jeopardy,” U.N. warns in new report – The world will have trouble feeding itself in decades to come unless countries undertake “major transformations” to the way they grow and distribute food, the United Nations said Wednesday in a report that paints a bleak and hungry future. Because of growing global population — experts estimate the world will have 10 billion mouths to feed in 2050, vesus 7.3 billion today — agricultural output will need to increase by 50 percent, the U.N. Food and Agriculture Organization (FAO) warned in “The Future of Food and Agriculture: Trends and Challenges.” There are a number of related challenges beyond just a growing population. Diets are changing from heavy on cereals to include more meat, which requires significantly more grains and water. (The average Chinese person went from consuming 28.6 lbs. of meat per year in 1982 to 138.9 lbs. of meat in 2016). Groundwater sources themselves are being depleted rapidly. From the central valley of California to northern China, water reserves in 21 of 37 of the world’s largest aquifers are on the decline. (Two billion people around the world rely on aquifers for their water supply.) Likewise, climate change is altering weather and precipitation patterns, and in decades to come is expected to shrink agricultural yields, especially in already-vulnerable regions like the Sahel in Africa. Together, that’s creating a ticking time bomb down the road. The U.N. estimates that 600 million people will be undernourished in 2030, and overall global food security will be “in jeopardy,” unless there is a concerted effort to change eating habits and mitigate the worst effects of climate change. Lorenzo Bellu, senior economist with the FAO, said additional annual investments of $265 billion would be needed through 2030 to keep the hungry fed. That could include investments in new agricultural technology to improve crop yields, researching genetically modified organisms, new distribution methods, and more investments in humanitarian aid and development. But it would also require shaking unsustainable habits, such as intensive agriculture, over-consumption of meats, and little practical action to tackle the causes of climate change.
UN: $4.4bn needed to prevent ‘catastrophe’ of famine - The United Nations needs $4.4bn by the end of next month to prevent "a catastrophe" of hunger and famine in South Sudan, Nigeria, Somalia and Yemen, according to Secretary-General Antonio Guterres. More than 20 million people face starvation in the four countries and action is needed now to avert a humanitarian disaster, Guterres told a news conference at UN headquarters on Wednesday. "We need $4.4 billion by the end of March to avert a catastrophe," he said.Who's to blame for famine in South Sudan? – Inside Story So far, the UN has raised just $90m.South Sudan on Monday declared a famine in northern Unity State while Fews Net, the famine early warning system, has said that some remote areas of northeast Nigeria are already affected by starvation since late last year.The four famine alerts are unprecedented in recent decades.There has only been one famine since 2000, in Somalia. At least 260,000 people died in that disaster - half of them children under the age of five, according to the UN World Food Programme.The UN children's agency UNICEF this week said almost 1.4 million children acutely malnourished in Nigeria, Somalia, South Sudan and Yemen could die from famine in the coming months. Of the four famine alerts, only one - Somalia - is caused by drought, while the other three are the result of conflicts, also described as "man-made food crises"."The situation is dire," said Guterres. "Millions of people are barely surviving in the space between malnutrition and death, vulnerable to diseases and outbreaks, forced to kill their animals for food and eat the grain they saved for next year's seeds."
Fueling the Destruction of Food - GM ethanol-ready corn is perhaps the perfect GMO, at least within the realm of what readily can be sold given conventional subsidies. The only thing better would be a GMO which spontaneously combusts in the field prior to harvest. Indeed, this would be less costly to society, which is why it wouldn’t be as attractive to the GMO cult which is dedicated to being as destructive as possible. Ethanol-ready GMOs represent an advance in the anti-food paradigm of corporate industrial agriculture. Corporate agriculture’s primary goal is to eradicate direct, efficient food production and replace it with highly costly, highly wasteful, highly inefficient commodity production designed to channel all proto-food production through CAFOs and processing in order to generate one calorie of eventual food product out of as much as a hundred calories’ worth of energy. This is the most effective way to destroy as much fuel and food as possible for the least return to human beings. The real product is concentrated power for governments and corporations. The process is made economically possible through massive subsidies and forcing all the costs onto society and the environment. The entire human and earthly economy must bear the burden of this massively bloated parasite. There’s the true cost of corporate industrial agriculture, which through smoke and mirrors is made to seem so cheap to the Western consumer at the retail checkout aisle. This mirror effect is part of the funhouse designed to reinforce the religious mindset which believes that food comes not from the earth but from the supermarket, and ultimately from corporations. Ethanol and biodiesel production comprises a refinement in this Food is Dead paradigm. With cropping bound for ethanol, the commodity crop no longer will be turned into even the most vestigial food. Instead the entire process is a pure loss: The land, the soil, the seed, the water, the air, the work, the socioeconomic destruction, the massive poisoning of the environment, all a total write-off for humanity. This is why ethanol subsidies persist even though this is one of the few corporate projects which actually has provoked resistance from other corporate sectors. In spite of the self-evident insanity and impracticality of the agrofuel concept, it remains sacred to the core of the anti-food technocratic priesthood. To put that more precisely, agrofuels are attractive to technocracy exactly because of their insanity and impracticality. Which is also why GMOs in general are such an object of cult worship for this fundamentalist religion. The cultists believe because it’s insane.
State of Air 2017: China, India, Pakistan, and Bangladesh Among Most Polluted -- The 2.5 micron particulate matter (PM2.5) pollution of air accounts for the world's highest number of pollution-related premature deaths in China and South Asia, according to a report titled "State of Global Air 2017". More than half of the 4.2 million deaths attributed to PM2.5 pollution occur in just two countries: India and China. The next two countries accounting for the highest pollution-related mortality are Russia with 136,900, Pakistan with 135,100 and Bangladesh with 122,400 deaths in 2015, according to the report. India and Bangladesh experienced some of the largest increases in PM2.5- attributable mortality, on the order of 50% to 60%. India (1.09 million deaths) now approaches China (1.11 million deaths) in the number of deaths attributable to PM2.5. Nearly all (86%) of the most extreme concentrations (above 75 µg/m3 ) were experienced by populations in China, India, Pakistan, and Bangladesh. Among the world’s 10 most populous countries and the EU, the biggest increase (14% to 25%) in seasonal average population-weighted concentrations of ozone over the last 25 years were experienced in China, India, Pakistan, Bangladesh, and Brazil. The report said decreases in exposure in Russia, Brazil, Indonesia, and Pakistan were offset by population growth and population aging, resulting in net increases in attributable mortality. In the United States and the European Union, reductions in exposure over the past 25 years have offset the contributions of population growth and aging, resulting in net decreases in PM2.5-attributable mortality (by 17% and 22%, respectively). A similar pattern contributed to a net decrease of 34% in PM2.5-attributable mortality in Nigeria, although the reductions in exposure were likely due to factors different from those in the United States and EU. Within the EU, this pattern held in all member countries except Italy, Greece, and Malta, where attributable mortality increased from 1990 to 2015, according to the report.
Officials say damage to sewage plant in Discovery Park is catastrophic -- King County has stopped dumping raw sewage into Puget Sound from its crippled West Point treatment plant for now — but the county will likely start dumping again when rainy weather returns. The plant, which treats sewage from 1.7 million people around the Seattle region, suffered catastrophic damage on Feb. 9 and will not resume regular service for many weeks, according to Mark Isaacson, director of the King County’s wastewater-treatment division. Beaches at Discovery Park are closed, with no date yet for reopening, because of the risk to public health from raw sewage pumped from the plant into the Sound. “We are here for the health of the environment, and for public health, and right now, we are compromising that,” said Isaacson. The trouble started when the pump station that sends treated wastewater out of the plant failed, according to a letter from plant managers sent Wednesday to King County’s regulators. Staff on duty about 2:15 a.m., Feb. 9, worked to reduce the incoming flow while attempting — unsuccessfully — to restart the 2,250-horsepower motors on the pumps. As water levels in the plant continued to rise, staff next worked to manually intervene to stop pumps bringing more incoming flow. That caused the upstream levels of sewage entering the plant to rise, triggering an emergency bypass gate to automatically open. That diverts raw sewage away from the plant and into an emergency outfall pipe to Puget Sound, as a desperate measure to save the plant. By then the plant was already flooded, with a barrage of some 15 million gallons of water barreling through it, powerful enough to buckle and break down 25-foot-high garage doors, mangle equipment and leave a fur of untreated sewage 12 feet up the walls. Cavernous rooms filled with pumps and other equipment were flooded to the ceiling and steeped in muck.
EPA Failures Predate Trump: Evidence Emerges of Tropical Parasites in Rural America - (Real News Network video and transcript) Jerri-Lynn here: The appointment of Scott Pruitt, former Oklahoma attorney general, as administrator of the Environmental Protection Agency (EPA), has elicited much storm und drang, due to his longstanding close collaboration with fossil fuel interests to thwart policies to address climate change. In fact, just an hour ago, I crossposted a piece from DeSmogBlog tracing such close connections.Yet while it’s no doubt true that Pruitt and other Trump appointees are poised to gut the EPA, this timely Real News Network interview reminds us that to date, the agency and other federal and state regulators have far from a sterling record in dealing with toxic chemicals and other hazardous wastes, in water supplies and elsewhere. The interview focuses on an underreported issue, the failure of these regulators to keep waste water out of the backyards of rural America. Catherine Coleman Flowers, the founder of the Alabama Center for Rural Enterprise (ACRE) and subject of the interview, claims that the failure to protect citizens from this and similar hazards is not just confined to Alabama, but extends throughout the country. The common factor linking what she describes as “sacrificed communities” that are exposed to waste water, or to other hazards in their water supply, is that they are overwhelmingly poor.Raw sewage, tropical parasites: is it still surprising that many of the the rural poor are outraged?
This First Nation Is Still Under Boil-Water Advisory After 21 Years -- Neskantaga First Nation in Ontario has had to boil water since 1995. "We're over 20 years already where our people haven't been able to get the water they need to drink from their taps or to bathe themselves without getting any rashes," Neskantaga Chief Wayne Moonias told CBC News in 2015. Their water issues have yet to be resolved. They're not alone. In fall last year, 156 drinking water advisories were in place in First Nations in Canada. More than 100 are routinely in effect—some for years or decades. According to a 2015 CBC investigation, "Two-thirds of all First Nation communities in Canada have been under at least one drinking water advisory at some time in the last decade." Water advisories vary in severity. A "boil water advisory" means residents must boil water before using it for drinking or bathing. "Do not consume" means water is not safe to drink or consume and a "do not use advisory" means water is unsafe for any human use. Water on First Nations reserves is a federal responsibility, but " severe underfunding " (in the government's own words) for water treatment plants, infrastructure, operations, maintenance and training has led to this deplorable situation. Canada has no federal standards or binding regulations governing First Nations' drinking water. After years of pressure from First Nations and Indigenous and social justice organizations, the Liberal party promised in its 2015 election campaign to end all First Nations' long-term drinking water advisories within five years of being elected. In 2016, the new government's budget included $1.8 billion over five years, on top of core funding for First Nations' water infrastructure, operations and management. Funds have gone to help Neskantaga and other communities, but money's not enough. If the federal government is to fulfill its commitment to ending advisories in five years, it must reform its system.
Flint water crisis: Report says ‘systemic racism’ played role - A government-appointed civil rights commission in Michigan says systemic racism helped to cause the Flint water crisis, according to a report released Friday.The 129-page report does not claim there were any specific violations of state civil rights laws, but says "historical, structural and systemic racism combined with implicit bias" played a role in the problems, which still linger in the city's drinking water almost three years later."The presence of racial bias in the Flint water crisis isn't much of a surprise to those of us who live here, but the Michigan Civil Rights Commission's affirmation that the emergency manager law disproportionately hurts communities of color is an important reminder of just how bad the policy is," state Sen. Jim Ananich, a Democrat from Flint, said.It was an emergency manager, appointed by Gov. Rick Snyder, who had the cash-strapped city's water supply changed from Lake Huron to the Flint River in 2014 -- a decision reversed more than a year later amid reports of corroded pipes and elevated blood lead levels. The report, which was released after a year-long investigation that followed three public hearings and took testimony from more than 150 residents and officials, says: "The people of Flint have been subjected to unprecedented harm and hardship, much of it caused by structural and systemic discrimination and racism that have corroded your city, your institutions, and your water pipes, for generations."
Giant ‘Rivers in the Sky’ Are Causing Widespread Chaos in California -- This month, the percentage of California still stuck in a drought dropped by 22 percent in a single week, as the wettest winter in decades saw an onslaught of storms deliver record-breaking rains across the state. Now, researchers have connected the chaos to a strange phenomenon known as atmospheric rivers - narrow corridors of concentrated moisture suspended in the atmosphere, which can hold up to 15 times more water than the amount that flows through the Mississippi River.If you're unfamiliar with atmospheric rivers, or are wondering if that's just a fancy name for "rain", they're actually a unique movement of moisture through Earth's atmosphere, responsible for most of the horizontal transport of water vapour outside the tropics. These suspended moisture plumes, which can stretch 400 to 600 km wide (250 to 370 miles), have been linked to all seven floods on California's Russian River between 1996 and 2007, and likely played a role in the 'Snowmageddon' event that blanketed the East Coast in 2010. All 10 of Britain's largest floods since the 1970s have also been attributed to atmospheric rivers, and late last year, researchers linked them to their first ever mass die-off event, when nearly 100 percent of wild oysters in northern San Francisco Bay mysteriously disappeared in 2011.Now, scientists led by Duane Waliser, an atmospheric scientist at NASA's Jet Propulsion Laboratory, have found that massive atmospheric rivers are responsible for up to 75 percent of all extreme wind and rainfall events on the world's coasts, and half of the strongest wind gusts recorded in nearly two decades. The team also linked them to up to 65 percent of the extreme rain and snow events in the Western United States - such as the storm that hit Northern California on Monday - and say they could also be the cause of 80 percent of major floods in the state.
Worst flooding in 100 years hits San Jose, forcing 14000 to evacuate -- San Jose was hit by what officials described as the worst flooding in 100 years as the Coyote Creek, which runs through the heart of the city, overflowed, inundating neighborhoods and forcing thousands to flee. About 14,000 residents in large swath of central San Jose were under mandatory evacuations orders. Evacuation advisories were also issued to 22,000 residents as flooding closed the 101 Freeway — a key route through Silicon Valley — as well as other major roads. The creek crested to a height of 13.6 feet at a river gauge point on Tuesday evening in South San Jose — nearly four feet above flood stage. The record before then was in 1922, when the creek crested at 12.8 feet, and before that, in 1917, when the creek reached 12.2 feet. “This is a once-in-a-100-year flood event,” National Weather Service meteorologist Roger Gass said, referring to Coyote Creek’s surging height in South San Jose. “This is a record level.” Officials did not have an estimate on when residents would be allowed to return home. Authorities are waiting for floodwaters to recede, but they think at least 40 homes suffered flood damage, he said. Vossbrink said city officials had been working on evacuations plans before the creek spilled over and flooded neighborhoods. “The water was much higher than anybody expected,” Vossbrink said. “The creek spilled over the banks faster and higher than anybody expected.”
Raining On The Gas Market’s Parade - The Oroville dam's overflow is a symptom of the West Coast having gone from drought to deluge in the past year or so. The U.S. Drought Monitor reports Death Valley is still "in moderate drought," but I'm guessing you won't lose much sleep over that. Everywhere else is looking much more soggy (or snow-covered) compared to this time in 2015: All of which is great for hydroelectricity. California, Oregon and Washington together host about half of the country's hydroelectric capacity, and they get to use it more when the rain gods do their thing. The flip side is that if you're generating more kilowatt-hours from running water, you don't need quite as much electricity from burning gas. In fact, the interplay of water and natural gas in the West's electricity market is striking: Natural gas and hydroelectricity compete head to head when it comes to their shares of power output in the Pacific states. The return of the rains should, all else equal, mean less demand for gas-fired electricity in the West and, therefore, less demand for gas. In a report published this week, analysts at Citigroup estimated that if rising hydroelectricity output directly replaced that from gas-fired plants, it could be displacing around 1 billion cubic feet per day of demand by the end of May. That may not sound like much in a national market of about 75 billion cubic feet per day. But it matters in a market where gas inventories remain above average for the time of year due to relatively mild weather across the U.S. Natural gas prices have tumbled, and every scrap of demand is required to mop up excess supply -- especially as new pipelines threaten to unleash more shale gas later this year.
Oroville Dam: A Wake-Up Call for Americans -- Sixty years old, Oroville single handedly provides one-third of the water for all of Southern California. It is on the verge of failure, because an under designed emergency spillway began to erode away the face of the dam when used for the first time. Three counties and 220,00 people have been evacuated; much of California's agriculture faces parched fields after one of the heaviest rainfall years on record. The state's water establishment refused to armor the emergency channel with concrete because "it was too expensive"—perhaps $10-20 million. They justified their recklessness by assuming that if the emergency spillway was needed, the emergency in question would be mild, timid and well-behaved. The main function of the dirt spillway was to provide a false sense of security to the public. No one knew if it would really work or much cared. Experts blithely asserted it would never be needed. Now we know. It was and it doesn't. America's bridges, dams, highways, mass transit systems, drinking water supplies, sewers, levees, ports and other vital public support systems face similar challenges and pose similar risks. Of 84,000 major dams in the U.S., 14,000 are rated as being "high-hazard" if they fail. The foundations of our economy and our communities are eroding beneath us just like the muddy face of the Oroville Dam. The agencies and regulators charged with ensuring that our physical infrastructure works often shill for shoddiness and short-cuts. Often maligned environmental "obstructionists" are the frequently outshouted defenders of doing it right. Oroville Dam was only approved by the voters of California after a devastating Feather River flood swept through Oroville in 1955; it was sold as a public safety measure. The real driver was the desire of development interests in arid Southern California to tap the rivers of the wetter north. Even presented as flood protection, the dam barely received voter approval. To keep costs down, the emergency spillway, designed to handle overflow waters from the severe rainfall events, wasn't clad in concrete, except at the very lip. It was known and accepted, that surging waters over-topping the spillway would rapidly erode the earthen dam below that lip. In bureaucratese, the safety rules conceded that the spillway would fail if used: "The guidelines specify that during a rare flood event, it is acceptable for the emergency spillway to sustain significant damage."
Why Oroville is a big deal - look at the places that need its water. Lake Oroville contains about 3.2 million acre feet of water, making it the second-largest reservoir in California. It provides water for more than 22 million people and 700,000 acres of farmland. The lake nearly ruptured this week, swollen by a constant deluge of rain that overwhelmed the spillways and threatened to flood everything downstream. Keeping California properly hydrated requires some of the most complicated plumbing in the world. This infographic reveals a subset of that system—an incomplete one, at that. And it shows the massive amount of accounting involved into getting every drop of water from source to faucet. But also, energy. “What happens is water flows naturally through rivers from Oroville to the California Delta,” says Jennifer Stokes-Draut of the UC Berkeley Water Center. “Then there’s a big pump plant that pumps the water over these coastal mountain ranges and into the canals where it is distributed to all the customers, from the Bay Area, to the Central Coast, and down in Southern California.” Stokes-Draut and her colleague Mike Taptich created this chart as part of a project tracking the energy required to move water around the state. In a visualization of the statewide dataset, Lake Oroville’s network would disappear in the convolution of nodes. That’s not to say that this web is any easier to read. Start by locating Lake Oroville—it’s a white oval near the top labeled Lk_Orvl. It’s the mother of all the other linkages. Peer a little below and to the left of the Lake Oroville oval and you’ll see a white oval labeled Feather. That’s the Feather River. It would have flooded had the lake ruptured. The graphic features a few other oval colors. Between the two white ovals you see two light brown ovals filled with numbers. “These represent all the pump plants all throughout the state, which are the branches for delivering water,” says Stokes-Draut. The light blue ovals? Utilities, which sell the water to the yellow ovals: customers.
California’s dam crisis highlights the surprisingly deadly history of hydroelectric power -- But as this week’s Oroville, California dam crisis illustrates, hydroelectric energy technology comes with a major yet infrequent risk: Catastrophic collapse and flooding. According to a March 2011 data analysis by reporter Phil McKenna at New Scientist, dams may be among the riskier power sources in the world. The magazine compiled data from the Organization for Economic Cooperation and Development, the International Energy Agency, and other sources. The analysis calculated the immediate and later deaths that occurred for every 10 terrawatt-hours (TWh) of power generated globally — as a point of contrast, the world makes about 20,000 TWh of electrical power a year. The data give a range of deaths for each type of power, but the ranking consistently places hydroelectric power as more deadly than nuclear energy and natural gas:• Nuclear — 0.2 to 1.2 deaths per 10 TWh (least deadly)
• Natural gas — 0.3-1.6 deaths per 10 TWh
• Hydroelectric — 1.0-1.6 deaths per 10 TWh
• Coal — 2.8 to 32.7 deaths per 10 TWh (most deadly)
Expect to see more emergencies like Oroville Dam in a hotter world -- The evacuation of nearly 200,000 people near Oroville Dam is the kind of event that makes climate change personal. A co-worker of mine was forced out of his home for several days by the emergency evacuation, and another friend was visiting Lake Oroville and happened to leave 15 minutes before the evacuation order was issued. Like many extreme events, the Oroville emergency is a combination of natural weather likely intensified by climate change. California regularly sees “atmospheric rivers” that deluge the state with rainfall, but in a hotter world, scientists anticipate that they’ll be amplified by an increase in the amount of water vapor in the atmosphere. Northern California is in the midst of its wettest rainy season on record – twice as wet as the 20th century average, and 35% wetter than the previous record year. It proved to be almost too much for America’s tallest dam to handle. Water managers were forced to use Oroville Dam’s emergency spillway for the first time ever, which then began to erode, posing the threat of a failure and catastrophic flooding of nearby towns. While studies haven’t yet connected this extreme wetness to climate change (there are still several months remaining in California’s rainy season), what we’re seeing is consistent with climate scientists’ expectations of a hotter world. Dams in the United States were built 50 years ago, on average. Since then, the Earth’s surface temperature has warmed about 0.75°C, and there’s now more than 5% more water vapor in the atmosphere as a result, which intensifies storms. With hotter temperatures, more precipitation falls as rain and less as snow, and California’s Sierra snowpack also melts earlier in the year. Climate change stresses California’s water infrastructure through all of these mechanisms.
500 inches and counting: Snow has clobbered California ski resorts this winter - The snow amounts in California’s Sierra Nevada mountain range this winter are difficult to wrap your head around. In many cases topping 500 inches, they are some of the highest totals in memory.At the Squaw Valley Alpine Meadows resort, seven feet fell in just the past week. The snow is so high that it buried chairlifts and ski patrol shacks. The resort has received 565 inches (47 feet) this season, including a 45-year record of 282 inches in January. On Thursday, it announced that its ski area would remain open through July 4. Since 1962, it will mark just the fourth instance of Independence Day skiing (the other years were 1998, 1999, and 2011), according to a resort spokesperson. Other ski areas in the Sierra Nevada also have seen mind-boggling amounts of snow (totals via SnowBrains.com):
- 636 inches at the Mount Rose ski area in Nevada.
- 584 inches at Boreal Mountain.
- 556 inches at Kirkwood, including 80 inches this week.
- 544 inches at Heavenly, including 81 inches this week.
- 534 inches at Northstar, including 84 inches this week (61 inches in 48 hours).
- 510 inches at Mammoth.
The prolific snowfall has resulted from phenomena known as atmospheric rivers, which are essentially rivers in the sky that carry vast amounts of moisture. Like a fire hose, they have bombarded central and northern California, repeatedly. “We usually see three or four atmospheric rivers in a season,” Scott McGuire, a meteorologist with the National Weather Service office in Reno, told the San Francisco Chronicle. “We’ve already had 10. We’ve had so much snow to the point where it’s getting hard to measure.”
Saudi Arabia hit by mass FLOODING as 'apocalyptic' storm sweeps desert - Severe flooding has devastated Saudi Arabia, after freak weather broke a century-old record for rainfail. People took to social media to voice their fears that the freak weather was "apocalyptic". The bizarre Saudi Arabia flooding comes just two weeks ago after a snowstorm blasted across the United Arab Emirates. Meteorologists claimed the rainfall broke a 100 year old record in the Arabian desert, as more than three months worth of rain pummelled the desert country in less than 24 hours. Cities such as Dammam, Al-Ahsa and Riyadh were all brought to a standstill over the dramatic weather. At least two people have drowned in the floods while several others remain missing. Schools, government offices and businesses have also been shut down. Hundreds have been rescued from perilous situations as the rainfall even submerged oil fields and luxurious malls.The country's Civil Defense has reported more than 4,500 emergency cases, according to Arab News.Saudi Railways said that a train derailed following heavy trains, injuring up to 18 passengers. Saudi Red Crescent also reported 104 car accidents and motorists trapped in their vehicles.On Twitter, users were panicked that the bizarre onset of devastation was a "sign from God".One person said: "Never before have we witnessed persistent rain for such a long period."Another added: "When it rains in Saudi Arabia, the Great Flood happens." The powerful storm is expected to recede in the next few days, but not before a dust storm hits the region this weekend.
Middle America is basking in unprecedented February warmth - The weather this February keeps getting weirder. At a time when Arctic blasts usually sweep across the nation and Northern states are covered in snow and ice, historically warm air has flooded the eastern two-thirds of the nation. All-time February record high temperatures are falling and the air feels more like early May. Wednesday’s average high temperature over the Lower 48 was forecast to soar to a balmy 59 degrees – “the near warmest February day during the last three decades”, said Ryan Maue, a meteorologist for WeatherBell Analytics. A stunning 2,805 record high temperatures have occurred across the nation this month compared with just 27 record lows. The warmest air with respect to normal has focused on the Midwest and, in some areas, it’s unlike anything they’ve ever witnessed. Flower stems are sprouting in Chicago, and the Great Lakes are practically ice-free. In an area normally thick with ice, “a boat was seen skimming over the calm waters of Lake Michigan on Monday afternoon,” CBS Chicago reported. Chicago set record highs on four straight days between Friday and Monday, complementing a dizzying number of other warm weather milestones. Before Sunday, when it was 70, it had reached 70 only three other times in records dating to 1871. Then it hit 70 again Monday. And it could hit 70 once more Wednesday. In other words, half of Chicago’s February 70-degree days in recorded history are likely to occur in this one astonishingly warm week.
Weather experts say new El Niño possible later this year -- Scientists from the World Meteorological Organisation (WMO) say there is a possibility of a new El Niño event forming later this year.In 2015 and 2016, a powerful El Niño drove up global temperatures and played a role in droughts in many parts of the world. Normally the weather phenomenon only re-appears every two to seven years. Neutral conditions are most likely later this year but there is also a 40% chance of a new El Niño forming .The complex and natural weather event is marked by an upwelling of warm water in the Pacific that accumulates off the west coast of North and South America, causing stormy conditions locally. The so-called "Super El Niño" of 2015 and 2016 is said by experts to have had a role in driving global temperatures to record highs. Earlier this week researchers detailed the impact of the event on winter beach erosion in California, which was 76% above normal according to the study. However, the influence of El Niño is felt right around the globe, affecting monsoons in Asia and droughts in Africa. Often after an El Niño, you get a marked reversal of conditions - a so-called La Niña event. According to the WMO, the recent cooler ocean conditions were only intermittently indicative of La Niña, and in January this year they returned to a neutral state. So weak was the overall impact that many scientists dubbed the event "La Nada" - which translates as "the nothing" in Spanish, the original source of the "La Niña" and "El Niño" terms. Ocean temperatures in the region have increased by 1.5C above average, creating "a coastal El Niño", which scientists say could develop into a more widespread event although overall, neutral conditions are still more likely. To achieve an official El Niño status, temperatures across a large part of the equatorial Pacific have to be at least 0.5 degrees above average and sustain for three months.
100+ species face extinction as warming hits Australia’s southern waters - Seaweeds, invertebrates, fish and giant, ethereal kelp jungles are among a group of more than one hundred species that are being driven towards extinction by warming waters around Tasmania, an Australian senate inquiry has heard. Neville Barrett, a research fellow at the Institute for Marine and Antarctic Studies in Hobart, where the hearing was held, told the Environment and Communications References Committee that the waters around Tasmania were a global hotspot for warming. “I mentioned that there were 100 or more species in general of kelps and endemic fishes and things that will probably disappear over the coming century, certainly by the turn of the next century under the current bottom end of predictions of climate change,” he told Climate Home after his appearance.“There’s a whole lot of species on the southern end of Australia that are as far south as they can currently go and some of them are already pushed to their upper thermal limit, as far as summer temperatures will go.” Beyond Tasmania, there is no major landmass until Antarctica, meaning many species have “nowhere else to go”, said Barrett.
Act now before entire species are lost to global warming, say scientists -- The impact of climate change on threatened and endangered wildlife has been dramatically underreported, with scientists calling on policymakers to act urgently to slow its effects before entire species are lost for good. New analysis has found that nearly half (47%) of the mammals and nearly a quarter (24.4%) of the birds on the International Union for the Conservation of Nature (IUCN) red list of threatened species are negatively impacted by climate change – a total of about 700 species. Previous assessments had said only 7% of listed mammals and 4% of birds were impacted. “Many experts have got these climate assessments wrong – in some cases, massively so,” said Dr James Watson of the University of Queensland and the Wildlife Conservation Society, who co-authored the paper with scientists in the UK, Italy and the US. Published in the Nature Climate Change journal, the analysis of 130 studies reported between 1990 and 2015 painted a grim picture of the impact of the changing climate on birds and mammals already under threat. Most researchers tended to assess the impact of climate change on one species or ecosystem, and often cast forward 50 or 100 years, ignoring the fact the climate is already altered, said Watson. “When you combine the evidence, the impact on species is already really dramatic.” Some species were more vulnerable than others, with elephants and primates’ ability to adapt to changing conditions curtailed by their slow reproductive rates. Rodents that could burrow to escape extreme environments would be less impacted. Mammals with specialised diets were “already far more affected” than others, as were species of birds living at high altitudes. Animals found in tropical and subtropical forests under an existing threat of habitat degradation faced an additional challenges from climate change. Watson said many assessments of red listed species had assumed that hunting, deforestation and loss of habitat posed greater and more immediate risk than climate change.
It’s official: The oceans are losing oxygen, posing growing threats to marine life -- A large research synthesis, published in one of the world’s most influential scientific journals, has detected a decline in the amount of dissolved oxygen in oceans around the world — a long-predicted result of climate change that could have severe consequences for marine organisms if it continues.The paper, published Wednesday in the journal Nature by oceanographer Sunke Schmidtko and two colleagues from the GEOMAR Helmholtz Centre for Ocean Research in Kiel, Germany, found a decline of more than 2 percent in ocean oxygen content worldwide between 1960 and 2010. The loss, however, showed up in some ocean basins more than others. The largest overall volume of oxygen was lost in the largest ocean — the Pacific — but as a percentage, the decline was sharpest in the Arctic Ocean, a region facing Earth’s most stark climate change. The loss of ocean oxygen “has been assumed from models, and there have been lots of regional analysis that have shown local decline, but it has never been shown on the global scale, and never for the deep ocean,” said Schmidtko, who conducted the research with Lothar Stramma and Martin Visbeck, also of GEOMAR. Ocean oxygen is vital to marine organisms, but also very delicate — unlike in the atmosphere, where gases mix together thoroughly, in the ocean that is far harder to accomplish, Schmidtko explained. Moreover, he added, just 1 percent of all the Earth’s available oxygen mixes into the ocean; the vast majority remains in the air. Climate change models predict the oceans will lose oxygen because of several factors. Most obvious is simply that warmer water holds less dissolved gases, including oxygen. “It’s the same reason we keep our sparkling drinks pretty cold,”
Microplastics in Oceans Outnumber Stars in Our Galaxy by 500 Times - The United Nations is " declaring war " on the biggest sources of planetary pollution— ocean plastic . On Thursday, the intergovernmental organization's environment program ( UNEP ) launched its #CleanSeas campaign at the World Ocean Summit hosted by The Economist in Bali, Indonesia. The unprecedented global initiative urges governments and businesses to take measures to eliminate microplastics from cosmetics and personal care items, ban or tax single-use plastic bags and dramatically reduce other disposable plastic items by 2022. Everyday citizens are also encouraged to join the fight. Ten countries have already joined the campaign. Indonesia aims to reduce marine litter by 70 percent by 2025. Uruguay will tax plastic bags later this year. Costa Rica will implement better waste management and education strategies to slash single-use plastic. Estimates say that 8 million tonnes of plastic ending up in our oceans every year, wreaking havoc on aquatic life and ecosystems and costing at least $8 billion in damage to marine ecosystems. If plastic continues to be dumped at its current rate, the oceans will carry more plastic than fish by 2050 and an estimated 99 percent of seabirds will have ingested plastic by then. There is also a growing presence of tiny plastic particles that shred off of larger items such as plastic bags, bottles and clothing. According to UN News , "as many as 51 trillion microplastic particles—500 times more than stars in our galaxy—litter our seas, seriously threatening marine wildlife."
The damage done when corals die is even worse than scientists previously thought - When the water in the sea gets warmer, corals can get stressed, causing them to release their photosynthesizing algae in a process called bleaching — so-called because the coral turns white. This is bad because the coral is then more susceptible to dying, but new research has just shown the impacts of bleaching could be worse than scientists thought. In fact, the new research suggests that coral reefs are eroding faster than they're growing back.Researchers at the University of Exeter found that warmer oceans caused by last year's strong El Niño led to a huge amount of corals dying off in the Maldives, which caused reef growth rates to collapse. Their findings were published in the journal Scientific Reports. Coral bleaching in these areas led to extensive coral death in all the shallow water areas the team examined, and they also found species such as parrot fish have been eroding the reefs at an increased rate. The major concern is how quickly reefs recover. Bleaching doesn't kill corals, but it makes them vulnerable and stressed, meaning they are more likely to die. In the past, it has taken 10-15 years for corals to recover from similar situations, but the researchers explained major bleaching events may become even more frequent in a warmer world. That could be disastrous. "It could lead to long-term loss of reef growth and so limit the coastal protection and habitat services these reefs presently provide," Chris Perry, professor of Geography at the University of Exeter and the lead author of the study, said in a statement. "The most alarming aspect of this coral die-off event is that it has led to a rapid and very large decline in the growth rate of the reefs." A declining growth rate affects the ability of the reefs to match any increases in sea-level, meaning there will be less of the habitat which is critical for many marine species.
NASA launched an unprecedented study of Greenland’s melting. Now, the data are coming in - In 2015, in a moment of science communication genius, NASA created a mission called “OMG.” The acronym basically ensured that a new scientific mission — measuring how quickly the Oceans are Melting Greenland — would get maximum press attention. OMG amounts to a comprehensive attempt, using ships, planes, and other research tools, to understand what’s happening as warm seas creep into large numbers of fjords that serve as avenues into the vast ice sheet — many of which contain large and partly submerged glaciers that are already melting and contributing to sea-level rise. Greenland is, in fact, the largest global contributor to rising seas — adding about a millimeter per year to the global ocean, NASA says — and it has 7.36 potential meters (over 24 feet) to give. The question is how fast it could lose that ice, and over five years, OMG plans to pull in enough data to give the best answer yet. NASA's Oceans are Melting Greenland team and oceanographer Josh Willis shared this video from the G-III aircraft as it collected data while flying over Greenland in March 2016. The video shows some of the data collected with a Glacier and Land Ice Surface Topography Interferometer (GLISTIN) radar. (NASA)And now the first data are coming in, in the form of not one but two new studies published in the journal Oceanography by NASA scientists and affiliated university researchers, seeking to measure the swirl of oceans around Greenland and in particular how a warm, deep layer of Atlantic-originating water is moving and interacting with its glaciers.Basically, it works like this: Waters swirl in a broadly clockwise rotation around the enormous island (see below), often darting inward toward the outlying glaciers along the way. And in fjords that are the deepest, the Atlantic layer, which tends to be over 200 meters (more than 650 feet) deep, has the greatest chance of causing sustained melting.“Where it’s deep, there’s warm water,” says Willis. Above the Atlantic layer, meanwhile, is a layer of colder polar water that has far less of an effect on glaciers — meaning that the big and thick glaciers often get hit hard at their bases, even as the small and thin ones don’t necessarily get hit much at all.
UN: Sea Ice In Both Arctic, Antarctic Hits Record Low: Sea ice in both the Arctic and Antarctic last month hit the lowest levels on record for January, the United Nations World Meteorological Organization says. Concentrations in the atmosphere of carbon dioxide, the chief gas said to cause global warming, also hit a January record. "It is a quite strange situation," said David Carlson, director of the World Climate Research Program, on February 17. Despite being winter, "it's extraordinarily warm in the north, and the sea ice...is at a minimum at this point in both hemispheres." The heat content of the oceans, which is a more reliable measure of earth's warming than surface air temperatures, has been "relentlessly going up and up and up,” he said. There have been at least three periods this winter when Arctic sea ice has retreated, when it should have been expanding, according to satellite records that go back 38 years. This January, Arctic sea ice averaged 260,000 square kilometers less than the previous record low last January -- a shrinkage the size of the United Kingdom. Sea ice in the Antarctic, where it is summer, was 22.8 percent below average, the organization said. "The number of years until summer sea ice disappears [is] absolutely shortening," Carlson said.
Video shows massive crack in Antarctic ice shelf expected to spawn iceberg -- Video released Tuesday shows detailed imagery of a massive crack in an Antarctic ice shelf.The 110-mile crack in the Larsen C ice shelf on the Antarctic Peninsula is likely to create a massive iceberg larger than Rhode Island.The British Antarctic Survey, a research group monitoring the crack, released the video.The crack in the Larsen C ice shelf is about 1,500 feet wide and has grown by about 20 miles since December. That's a fast pace, considering that overall, the crack has grown by 50 miles since 2011, according to the survey. Once the crack goes all the way across, the iceberg will shear off.Ice shelves normally produce an iceberg every few decades, according to Project MIDAS, another British Antarctic research project that keeps watch on the ever-growing crack.Icebergs broke off the nearby Larsen A and B ice shelves in 1995 and 2002. Scientists at Project MIDAS can't say whether the expected breakup of the Larsen C shelf is a result of climate change, but evidence points to global warming for its thinning. What's important is floating ice shelves hold back glaciers, which can contribute to sea-level rise as they flow into the sea.
The Pentagon Is Still Worried About Climate Change - U.S. Defense Secretary Jim Mattis isn’t exactly the type of person environmentalists would typically pin their hopes on. The retired Marine general is best known to most Americans for his quotable musings on killing and the thrill of combat. However, while environmental issues may not be Mattis’ top priority he definitely believes in climate change. He also helped spearhead the military’s research into renewable fuel sources. In many ways, that sets him apart from other members of the Trump administration. President Donald Trump appointed a range of climate change skeptics and fossil fuel industry insiders to cabinet positions and in the White House staff. Scott Pruitt, Trump’s pick for chairman of the Environmental Protection Agency, has filed multiple lawsuits against the agency he now leads.Recently, the House of Representatives held a hearing on “Making the EPA Great Again” focused on looking into the agency’s “process for evaluating and using science during its regulatory decision-making activities.”The seemingly hostile attitude of members of the current U.S. government toward climate and environmental science has made many researchers and ecologists nervous. But the U.S. military — which Trump has promised to lavish with more funding and resources — has for years explored alternative energy sources and studied how pollution, environmental degradation and climate change can harm service members, affect military operations and contribute to new conflicts around the world.That will likely continue under Mattis’ leadership. For the military, it’s not about saving the whales — it’s about preparing for the wars of the future. So far there hasn’t been any indicators that the White House plans to block the Pentagon, specifically, from continuing its environmental research.
Russia Won't Pick Fight With Trump on Climate, Lawmaker Says - Russia intends to stick to international climate commitments, though it may not argue with President Donald Trump if he decides to weaken U.S. adherence to the Paris accord, according to a senior Russian lawmaker. “We will support all the efforts that lead to progress in this area,” Alexei Pushkov, a member of the Russian upper house’s defense and security committee, said in an interview in Munich on Saturday. “But I don’t think we will choose to have it as a topic of contention with President Trump.” It is not clear when and if Trump will make good on his frequent campaign promise to pull the U.S. out of the Paris climate accord, a 2015 United Nations agreement to curtail greenhouse-gas emissions that was adopted by nearly 200 countries. Since he took office, the administration has rolled back U.S. rules to combat climate change and eased restrictions on fossil-fuel companies. For Russia, the world’s biggest energy exporter and a signatory to the Paris convention, there are more important bilateral challenges than climate to tackle with the U.S., Pushkov said during an international security conference. The U.S. has imposed sanctions on Russia over President Vladimir Putin’s annexation of Crimea and the Kremlin’s role in the conflict in eastern Ukraine. Climate change “is an important issue,” but “there are other issues more important for us,” the Russian lawmaker said. “I don’t think we will argue with President Trump.”
Scott Pruitt is now EPA chief. Which is a reminder: Democrats will lose a lot of fights. Scott Pruitt was narrowly confirmed by the Senate to lead the Environmental Protection Agency. Because of the relevance of the EPA’s mission to efforts to combat climate change — and because of Pruitt’s deep hostility to that mission — this could have enormous ramifications over the long haul. Which is another reminder that, while the messy drama and Trumpian antics may create the impression that the administration is consumed in chaos and incompetence, Democrats are going to lose a lot of fights to come — often to great consequence. The Post notes that Pruitt’s confirmation came after a furious campaign of opposition: Pruitt’s confirmation marked a serious defeat for environmental advocacy groups, which wrote letters, waged a furious social media campaign, lobbied members of Congress, paid for television ads and sponsored a series of public protests to keep the Oklahoman from taking the reins of EPA. “Scott Pruitt as administrator of the EPA likely means a full-scale assault on the protections that Americans have enjoyed for clean air, clean water and a healthy climate,” Michael Brune, executive director of the Sierra Club, said in an interview. “For environmental groups, it means we’re in for the fight of our lives for the next four years.” “The fight of our lives” is a good way to put it. Pruitt is very much in sync with much of the congressional GOP, both when it comes to hostility to environmental regulations, and when it comes to its widespread hostility or indifference to climate science. This means that, via Pruitt, Republicans are now in a position to mount a serious challenge to President Obama’s gains in fighting climate change. There are many ways Pruitt can do this, but one of the most momentous could be his expected efforts to try to unravel Obama’s Clean Power Plan, an EPA rule that sets targets for states to limit carbon dioxide emissions from existing power plants. That, in turn, is key to our ability to keep our commitments to the Paris climate accord, which in turn is important to creating the possibility of continued global cooperation to keep climate change from escalating to a point of no return.
Pruitt confirmation sets stage for Trump EPA assault | TheHill: With his pick to lead the Environmental Protection Agency (EPA) in place, the stage is set for President Trump to begin his long-promised overhaul of the agency. EPA foes and Trump allies say the agency needs to be cut down to size and its regulations reined in after an expansion under President Obama, a position shared by new administrator Scott Pruitt, whom the Senate confirmed Friday. Trump is expected to release a string of executive orders aimed at the agency's operations, and he could unveil them as early as this week. The orders will likely delight industry and business groups that have long warned against overregulation from the EPA. But greens, Democrats and agency boosters warn that Trump and Pruitt could cripple the agency at a time when climate change and public health issues are calling for a strong federal regulator. The Senate confirmed Pruitt on a 52-46 vote on Friday, a mostly party-line tally that illustrates the tense partisan divide over Pruitt’s nomination and the agenda he and Trump have set for the EPA. Republicans spent years butting heads with an EPA that, under Obama, expanded its regulatory efforts in the administration’s fight against climate change.They see Pruitt and Trump as agents of change, officials who won’t just undo Obama-era efforts but reduce federal rulemaking and give more deference to states and industries that are the subject of agency regulations. “Over the past eight years, the Environmental Protection Agency, with its regulatory rampage, has hurt a lot of people in my home state of Wyoming and all across the country,” Sen. John Barrasso (R-Wyo.) said during floor debate over Pruitt’s nomination. “The EPA’s overreaching regulations have stunted job growth, hurt our economy, and failed to help the agency meet its mission, and the mission is to protect the environment and the health of all Americans. The EPA needs to be reformed and modernized. Oklahoma Attorney General Scott Pruitt is the right person for the job.”
Factbox: Energy impacts of Pruitt's confirmation as EPA administrator - Oil | Platts News Article & Story: Scott Pruitt was confirmed Friday as administrator of the US Environmental Protection Agency by a 52-46 Senate vote. Highlights of his energy-related comments during the confirmation process that could signal his impact on policy ahead:
- Pruitt said he would uphold the Renewable Fuel Standard and only deviate from statutory volume increases after careful deliberation, distancing himself from his previous criticism of the policy as an "unworkable" and "flawed program."While Pruitt is not expected to change 2017 blending levels, he could lower 2018 targets due in November and possibly side with refiners and blenders urging the agency to move the RFS point of obligation to the wholesale rack.
- When asked about his environmental philosophy and what he would do to protect the environment, Pruitt said the regulated community currently suffers from an "inability to predict or know what's expected of them as far as their obligations under our environmental laws." He said EPA's mission is to protect natural resources, improve air and water quality, help ensure the health and welfare of citizens and pursue vigorous enforcement where necessary.
- "There are substantive requirements, obligations, authorities, jurisdiction granted to the states under our environmental statutes," he said.
- When pressed to share what he believed to be causing climate change, Pruitt said his personal opinion was immaterial to the job of EPA administrator. Rather, that job "is to carry out the statutes as passed by this body," and those statutes put constraints on what EPA can do in regards to carbon emissions, Pruitt said.
- Asked why he took no action as Oklahoma attorney general in response to a spike in earthquakes tied to wastewater injection wells, Pruitt said the state has taken the issue very seriously and has successfully regulated hydraulic fracturing for decades.
- "If confirmed, I will work to ensure that the limited resources appropriated to EPA by Congress are managed wisely in pursuit of that important mission and in accordance with all applicable legal authorities," he said.
Assault on the EPA Begins: Trump to Sign Two Executive Orders -- The Trump administration is expected to begin attacks on the U.S. Environmental Protection Agency (EPA) and climate science at the executive level now that the administration has a leader in place at the agency. Multiple outlets have reported that President Trump may be planning a visit to EPA headquarters as early as this week, where he could sign executive orders targeting Obama administration climate policies and the agency's structure. The Washington Post added additional details yesterday evening, reporting that two executive orders being prepared target the Clean Power Plan and the Waters of the U.S rule for a revamp, while also lifting a moratorium on coal leasing on federal land. Congress is keeping busy with climate rollbacks too, as the Senate eyes a vote on methane regulations this week. As the Washington Post noted: One executive order—which the Trump administration will couch as reducing U.S. dependence on other countries for energy—will instruct the Environmental Protection Agency to begin rewriting the 2015 regulation that limits greenhouse-gas emissions from existing electric utilities. It also instructs the Interior Department's Bureau of Land Management (BLM) to lift a moratorium on federal coal leasing . A second order will instruct the EPA and Army Corps of Engineers to revamp a 2015 rule, known as the Waters of the United States rule, that applies to 60 percent of the water bodies in the country. That regulation was issued under the 1972 Clean Water Act, which gives the federal government authority over not only major water bodies but also the wetlands, rivers and streams that feed into them. It affects development as well as some farming operations on the grounds that these activities could pollute the smaller or intermittent bodies of water that flow into major ones.
Will Trump Drastically Deregulate Environmental Protection? – - What regulatory shifts in environmental law can we expect from the Trump Administration? Answer: It’s hard to know.Everyone knows that the signs to date point toward deregulation. The head of the Trump Administration’s transition team for the U.S. Environmental Protection Agency (EPA), Myron Ebell of the Competitive Enterprise Institute, proposed cutting the agency’s staff by two-thirds—that is, down to EPA’s staffing levels during the Nixon years, when the agency’s responsibilities were far less than they are now. Ebell, at least, only had a place in government during the transition. Far more important is newly confirmed EPA Administrator Scott Pruitt, whose chief environmental activity as Oklahoma Attorney General was suing EPA to set aside new rules as overregulation. For instance, Pruitt and others challenged EPA’s Clean Power Plan—a rule aimed at reducing greenhouse gas emissions from electricity generating units —as well as its Mercury and Air Toxic Standards, which seek to limit mercury emissions and other toxic pollution from these same units. There are also rumors that Pruitt will initiate major staff shakeups and that soon-to-be-issued executive orders will call for weakening environmental requirements. Reinforcing this trend towards deregulation is Congress’s consideration of legislation that would make it more difficult for agencies to regulate. And perhaps most significant is President Trump’s executive order aimed at curbing regulation by focusing on cutting regulatory costs. Although the details of this executive order are far from clear, it apparently instructs agencies to repeal two existing rules for every new rule that they promulgate, and to ensure that the repealed rules are equivalent in cost to the costs imposed by a new rule. Of course, the order will discourage agencies from issuing new rules—even if the new rules have, as is the case with many of EPA’s regulations, monetized benefits far outweighing their costs. Under this executive order, EPA effectively will only be able to make rules required by statute. The consequence may be a retreat from many of the initiatives of the Obama Administration. For example, the Clean Power Plan may be repealed, or at the least, it will not be administered aggressively. EPA’s “Waters of the United States” rule—designed to clarify which waters are subject to federal regulation under the Clean Water Act—is similarly in trouble.
Ivanka, Kushner pushed to strike climate deal criticism from executive order: report | TheHill: President Trump's daughter Ivanka and her husband Jared Kushner, a senior White House adviser, pushed to exclude criticism of a global climate deal from a forthcoming executive order, The Wall Street Journal reported Thursday evening. Several people familiar with the move told the newspaper that the language was axed from an earlier draft of the order after Ivanka and Kushner intervened. Trump is expected to sign at least two orders within days aimed at unraveling former President Barack Obama's environmental and climate regulations, according to the newspaper. One White House official told the Journal that Kushner and Ivanka Trump are considered to be a moderating influence on the president's views on environmental issues and climate change. Trump, who previously called climate change a hoax created by the Chinese, was highly critical of his predecessor's environmental policy on the campaign trail and pledged to backtrack on the climate deal reached by the Obama administration and nearly 200 countries in Paris in late 2015. White House press secretary Sean Spicer on Thursday declined to say whether Trump plans to withdraw from the accord, deferring to Secretary of State Rex Tillerson, who the Journal noted backed the Paris deal while serving as CEO of Exxon Mobil Corp.
New U.S. environmental chief says agency can also be pro-jobs | Reuters: The new head of the U.S. Environmental Protection Agency said on Tuesday that America need not choose between jobs and the environment, in a nod to the energy industry, as the White House prepares executive orders that could come as soon as this week to roll back Obama-era regulation. "I believe that we as an agency, and we as a nation, can be both pro-energy and jobs, and pro-environment," Scott Pruitt said in his first address to staff. "We don't have to choose between the two." Critics of the agency have complained that regulations ushered in by former Democratic President Barack Obama have killed thousands of energy jobs by restricting carbon emissions and limiting areas open to coal mining and oil drilling. Democrats, environmental advocates and many of the EPA's current and former staff worry President Donald Trump's appointment of Pruitt signals a reversal in America's progress toward cleaner air and water and fighting global climate change. Both Trump and Pruitt have expressed doubts about climate change, and Trump vowed during his 2016 presidential campaign to pull the United States out of a global pact to fight it. The Republican president has promised to slash environmental rules to help the drilling and mining industries, but without hurting air and water quality. Pruitt sued the agency he now leads more than a dozen times while attorney general of Oklahoma to stop federal rules. He did not mention climate change in his 12-minute speech at the EPA's headquarters in Washington.
Pruitt says he will lead US EPA with civility, attention to rule of law - Newly confirmed Environmental Protection Agency Administrator Scott Pruitt reiterated Tuesday his support of the agency's mission and belief that being pro-energy and pro-environment was not an either-or proposition. Speaking to EPA employees Tuesday, Pruitt commended career staff's contributions to the agency and the country and said "this is a beginning for us to spend time and discuss certain principles by which I think this agency should conduct itself, and I look forward to leading this agency with [those] principles in mind." While rumors have circulated that executive-level action could come as early as this week to roll back President Barack Obama's climate agenda and reverse certain environmental regulations seen as burdening the power and gas sector, Pruitt's remarks were light on concrete details for his vision of the agency. He told EPA staff that an "attitude of finding answers, being problem solvers and making decisions" was necessary when dealing with the monumental issues concerning the environment and natural resources. He committed to "listen, learn and lead with" staff to address environmental issues and called for bringing civility back to what have become tense, contentious discussions. "We ought to be able to get together and wrestle through some very difficult issues and do so in a civil manner," Pruitt said. "We ought to be able to be thoughtful and exchange ideas and engage in debate to make sure that we do find answers to these problems, and do so with civility."
Greens launch ads against two GOP senators for Pruitt votes | TheHill: An environmental group is launching an advertising campaign against two Senate Republicans who voted to confirm Environmental Protection Agency (EPA) Administrator Scott Pruitt last week. The ads target Sens. Dean Heller(R-Nev.) and Jeff Flake (R-Ariz.), both of whom are up for reelection in 2018. They are part of a $580,000 campaign from the League of Conservation Voters, featuring both English and Spanish TV and radio spots. The Arizona ads highlight asthma rates in the state, saying the EPA under Pruitt “will only make things worse” through weaker air pollution rules. The Nevada television ad said a Pruitt-led EPA would hurt clean water. The League's ads are the first released by a green group since Pruitt’s confirmation as EPA administrator, but not the first related to his nomination for the position. The group is one of several organizations to have advertised against Pruitt, spending $50,000 on a digital ad campaign as part of a $3 million battle over his nomination. Nevada and Arizona were two of seven states included in a NextGen Climate television ad campaign in January designed to convince Republican senators to vote against Pruitt.
The Pruitt Emails: EPA Chief Was Arm in Arm With Industry - As Oklahoma’s attorney general, Scott Pruitt, now the Environmental Protection Agency administrator, closely coordinated with major oil and gas producers, electric utilities and political groups with ties to the libertarian billionaire brothers Charles G. and David H. Koch to roll back environmental regulations, according to over 6,000 pages of emails made public on Wednesday. The publication of the correspondence comes just days after Mr. Pruitt was sworn in to run the E.P.A., which is charged with reining in pollution and regulating public health. Senate Democrats tried last week to postpone a final vote until the emails could be made public, but Republicans beat back the delay and approved his confirmation on Friday largely along party lines. The impolitic tone of many of the emails cast light on why Republicans were so eager to beat the release. And although the contents of the emails were broadly revealed in The New York Times in 2014, the totality of the correspondences captures just how much at war Mr. Pruitt was with the E.P.A. and how cozy he was with the industries that he is now charged with policing. “Thank you to your respective bosses and all they are doing to push back against President Obama’s E.P.A. and its axis with liberal environmental groups to increase energy costs for Oklahomans and American families across the states,” said one email sent to the offices of Mr. Pruitt and an Oklahoma congressman in August 2013 by Matt Ball, an executive at Americans for Prosperity. That nonprofit group is funded in part by the Kochs, the Kansas-born business executives who spent much of the past decade combating federal regulations, particularly in the energy sector. “You both work for true champions of freedom and liberty!” the note said.
Emails reveal Scott Pruitt's close contact with fossil fuel giant - While serving as Oklahoma’s attorney general, new Environmental Protection Agency chief Scott Pruitt coordinated closely with fossil-fuel companies and special interest groups working to undermine federal efforts to curb planet-warming carbon emissions, newly released emails show. More than 7,500 pages were released under court order Tuesday evening after an Oklahoma judge ruled that Pruitt had been illegally withholding his correspondence — which is public record under state law — for the last two years. Pruitt’s office was forced to release the emails after he was sued by the Center for Media and Democracy, a left-leaning advocacy group. Other emails are still being held back pending further review. White House press aides did not immediately return a request for comment from the Daily News. A particularly blatant example of Pruitt's cushy relationship with the fossil-fuel community is revealed in a June 2013 email from a senior lobbyist at Oklahoma-based oil and natural gas behemoth Devon Energy. Attached to the lobbyist's email was a drafted letter opposing proposed federal regulations on fracking in Oklahoma. Two months later, Pruitt sent a nearly indistinguishable letter to the state's Interior Secretary. The only additions were Pruitt's signature, letterhead and one graph arguing that there was legal precedent to reject the proposed regulations. The Republican-dominated Senate confirmed Pruitt as the new EPA head on Friday. Democrats had sought to delay the vote until the requested emails were released, but Republican leaders used their slim majority to push Pruitt through.
Thousands of Emails from Oklahoma Office of Trump EPA Administrator Scott Pruitt Published --The Center for Media and Democracy (CMD) has published thousands of emails obtained from the office of former Oklahoma Attorney General, Scott Pruitt, who was recently sworn in as the head of the U.S. Environmental Protection Agency (EPA) for the Trump Administration. Housed online in searchable form by CMD, the emails cover Pruitt's time spent as the Sooner State's lead legal advocate, and in particular show a “close and friendly relationship between Scott Pruitt’s office and the fossil fuel industry,” CMD said in a press release. CMD was forced to go to court in Oklahoma to secure the release of the emails, which had sat in a queue for two years after the organization had filed an open records request. Among other things, the emails show extensive communication with hydraulic fracturing (“fracking”) giant Devon Energy, with Pruitt's office not only involved in discussions with Devon about energy-related issues like proposed U.S. Bureau of Land Management fracking rules, but also more tangential matters like how a proposed airline merger might affect Devon's international travel costs. They also show a close relationship with groups such as the Koch Industries-funded Americans for Prosperity and the Oklahoma Public Policy Council, the latter a member of the influential conservative State Policy Network (SPN). On the BLM fracking rule, Priutt's office solicited input from Devon, the Oklahoma City fracking company, which seemed to incorporate the feedback in the company's formal legal response. Pruitt's office was aiming to sue the BLM on the proposed rules, a case multiple states eventually won, getting indispensible aid in the effort from the Interstate Oil and Gas Compact Commission (IOGCC). “Any suggestions?” Pruitt's office wrote in a May 1, 2013 email to a Devon vice president. Attachments missing from the FOIAresponse make it unclear to what extent edits suggested by Devon were actually inserted into the AG's correspondence, although Pruitt's deputy later wrote “thanks for all your help on this.”
As EPA head, Scott Pruitt must act on climate change - IN May, Scott Pruitt wrote an article suggesting that protecting the environment and its people are examples of government overreach. Now, Pruitt is head of the Environmental Protection Agency, a federal agency whose mission is “to protect human health and the environment.” We challenge Pruitt to take this mission seriously and reconsider his public statements on science, climate change and our national need for environmental protection. We have a message for Pruitt: We are scientists and we are not going away. And neither is climate change. Pruitt has claimed that “healthy debate is the lifeblood of American democracy.” We agree. In fact, the scientific enterprise is built on debate, along with skepticism, conflict and progress. But do you know what we do not debate anymore? Basic physical science — like the fact that Earth’s climate is changing, or like the fact that the planet spins in a certain direction, or that the ocean’s tides are influenced by the moon. As a scientific community, we have immense consensus on these issues. The climate is changing because we burn fossil fuels and emit greenhouse gases — that is a fact. Even the former CEO of ExxonMobil, along with other oil and gas company CEOs, has stated this fact and called for “serious action” on climate change. The existence and cause of climate change is not up for debate — in a similar way that gravity is no longer up for debate, no matter how high Pruitt personally can jump. The global scientific community is now focused on how to best prevent catastrophic damages from climate change — here, there is much room for leadership and new ideas, and we welcome a healthy debate to find the best solutions. Pruitt has expressed disdain with the “climate-change agenda.” Although it is not immediately clear what this means to him, we can tell you what it means to us. As Americans, we collectively continue to strive, generation by generation, to form a more perfect union. Our agenda is about evidence and innovation — the lifeblood of democracy and our American experiment. Our agenda is about human health. It is about equal access to clean air and water. It is about protecting our children’s and grandchildren’s futures. This isn’t a political agenda — it is a human agenda. As head of EPA, we are calling on Pruitt to be a part of this inclusive, American, responsible agenda.
Ivanka Trump Saves Paris Agreement From Executive Order -- Ivanka Trump and Jared Kushner pushed President Trump to exclude language that criticized the Paris agreement from an upcoming executive order, the Wall Street Journal reported Thursday evening. According to the Wall Street Journal's multiple sources, the upcoming executive order targeting Obama-era climate regulations now excludes any mention of the deal due to the Kushners' intervention. Saving—or killing—the agreement has been front-of-mind for many interested parties recently: the United Nations Framework Convention on Climate Change Executive Sec. Patricia Espinosa told reporters she is hoping to meet with Rex Tillerson to discuss the deal while she visits Washington next week, while a coalition of 300 high-profile climate change deniers sent a letter to Trump Thursday asking him to pull out of the United Nations Framework Convention on Climate Change entirely. Tillerson's successor at ExxonMobil , meanwhile, praised the 2015 agreement—and the carbon tax plan rolled out by GOP luminaries earlier this month—in a blog post published Thursday.
Hundreds rally against Trump policies in 'stand up for science' protest | TheHill: Hundreds of protesters gathered in Boston on Sunday to voice opposition to the Trump administration, particularly over issues of climate change. Protesters held signs reading “Science Matters,” “Follow the Evidence” and “Climate Change is Real,” the Boston Globe reported. Protesters also chanted “Stand up for science” in the middle of Boston’s Copley Square, with some wearing white lab coats. The rally took place the same weekend as the American Association for the Advancement of Science annual meeting in Boston.Some protesters attended to criticize the confirmation of Environmental Protection Agency chief Scott Pruitt and slam the Trump administration’s stance on issues like climate change. Some attendees also seemed to urge Trump to support the science behind vaccines. One sign read “Got Polio? No! Thank science,” according to the Globe. Trump has expressed skepticism over climate change, as have some of his top Cabinet members and nominees. He, along with Pruitt, have vowed to roll back many of President Obama's major environmental regulations. And he has also previously voiced doubts about the efficacy of vaccines. Trump also met with noted vaccine skeptic Robert F. Kennedy Jr.
CLIMATE: Conservatives predict 'real war' with environmentalists -- Thursday, February 23, 2017 -- www.eenews.net: People who question the science of climate change today told conservative activists they were looking forward to using their bigger platform during the Trump administration to roll back U.S. EPA regulations on greenhouse gas emissions. At the annual Conservative Political Action Conference, a panel of prominent global warming skeptics said one of their top targets was the Obama administration's 2009 endangerment finding, the basis for EPA's greenhouse gas regulations. "It's going to be a real war with environmentalists, no question about that," said Steve Milloy, who says he served on President Trump's EPA transition but was not listed on the administration's official landing team for the agency. "There's going to be a lot of litigation. But we're going to move EPA in the right direction." Appearing on the panel with Milloy were James Delingpole and Tony Heller. All three have questioned whether human-caused climate change is occurring. Delingpole, an executive editor at the Breitbart News Network, likened environmentalism to a religion and recycling advocates to a "cult." The environmental movement, he told the conservative audience, was full of "control freaks" looking for a scientific justification "to tax us, to regulate us, to control our lives." Heller claimed that conservatives who don't believe in climate change have been treated like women who were accused of being witches in the 1600s. "The people who portray people like us as selfish, greedy, nature-hating scumbags — no. They are the scumbags. We are the good guys," Delingpole said. "Thank goodness, thanks to Donald Trump, the tide's turned, and we are about to witness that."
Trump plans to roll back Obama’s Clean Power Plan. Here’s how he’ll do it - In the coming days, President Donald Trump is expected to sign an executive order that will kick off the long, tangled process of dismantling President Barack Obama’s signature climate policy — the Clean Power Plan. Trump’s executive order won’t, by itself, repeal the Clean Power Plan, which is a massive Environmental Protection Agency regulation that aims to reduce carbon dioxide emissions from existing power plants 32 percent below 2005 levels. Instead, Trump will ask his new EPA head, Scott Pruitt, to replace Obama’s rule with … something else. There are lots of options for what “something else” could look like: Pruitt might try to scrap the requirement for CO2 cuts altogether, or he might try to soften the rule considerably, easing the burden on coal plants. But crafting a new rule will take many months, if not years, and Pruitt will face a slew of procedural and legal hurdles in trying to undo Obama’s plan. “Procedurally, it’s hard to do,” says Richard Lazarus, a professor of environmental law at Harvard. This is likely to be one of Pruitt’s biggest — and most consequential — moves as head of the EPA. So let’s walk through, step by step, what he’d actually have to do.
GOP Congressman: Getting Rich Will Solve That Whole Environment Thing - Rep. Dave Brat (R-Va.) argued Tuesday that one of the best things the United States could do for the environment was grow the economy, because rich people like clean air and water. Brat made the comments during a contentious town hall in Blackstone, Virginia, where he was heckled for a little over an hour. It was one of a number of similar events around the country in which constituents angrily confronted members of Congress in their home districts. His answer on the environment came after he was asked what he would do to protect the Environmental Protection Agency. After saying that he agreed with the agency’s mission of providing clean air and water, Brat went on to say that the best way to guarantee those resources for a country was economic growth.“I worked at the World Bank, and they’re very interested and they have departments that do clean air and clean water. And guess what the No. 1 thing you can do to have clean air and clean water is? Increase your economic growth. Rich people, it turns out, like clean air and clean water,” Brat said, immediately earning loud boos from the crowd. Brat responded by saying he didn’t think he had said anything controversial, and then went on to ask the crowd, “Do you want to be poor or do you want to be rich?” He went on to compare the United States to Brazil. “If you look at Brazil and the trade-offs they had on a clean environment,” Brat said. “They put their own living on a day-to-day basis, chopping down forests, et cetera, versus growing the economy, versus cleaning the environment. They’re in a hard spot. We’re not in a hard spot. We have the cleanest air and the cleanest water.”
Who Really Benefits From Repealing the Stream Protection Rule? - Behold the politics of Donald Trump in a nutshell:Talking to Trump voters here, several have said that Trump "put the miners back to work." (They are referring to the stream rule rollback) — Dave Weigel (@daveweigel) February 18, 2017 Weigel is in Florida, so the workers in question are mostly Appalachian miners. Here's a quick look at Appalachian coal mining employment:1 This chart shows two things. First, coal mining in Appalachia has been plummeting for a long time. Decades, actually. So it's pretty easy to see why Appalachian coal miners are in dire straits and eager to listen to someone, anyone, who sounds sympathetic to their plight. Second, Trump is getting a lot of of attention for rolling back the Stream Protection Rule, but it's not going to put anyone back to work. I had to cheat to even get it to show up on the chart. It's responsible for maybe a hundred mining jobs out of a total decline of 30,000 between 2009 and 2020. So who does benefit from rolling back this rule? Well, OSM figures that Appalachian mine owners will save about $24 million per year in compliance costs.3 So they're pretty happy. This is a dynamic that we're going to see over and over from Trump:
- He puts on a big show about something or other. Workers cheer.
- Offstage, it turns out the benefit to workers is minuscule.
- Instead, the bulk of the benefits end up going to corporations and the rich.
- Liberals will find out about this because the New York Times will probably write about it. Working-class Trump fans won't, because none of it will be reported by Fox News or Drudge or Limbaugh or Breitbart.
Environmentalists disappointed by Va. House’s bill to study coal ash’s effect on the environment – A bill approved by the House on Friday would require Dominion Virginia Power to study whether its controversial coal ash ponds might pollute the water, but environmentalists say the legislation doesn’t do enough.SB 1398 would requires energy companies to identify the risks of heavy metals polluting the groundwater and alternatives methods of disposal when they apply for a permit to decommission a “coal combustion residuals unit,” commonly called a coal ash pond.These ponds, a mixture of the byproduct of coal combustion and water, are often near rivers. Dominion has four sites around Virginia containing millions of tons of coal ash. The company hopes to close the ponds by treating and discharging the water and then burying the remaining coal ash with a protective seal.As passed by the Senate 29-11 on Feb. 7, SB 1398 said Dominion would have to complete the environmental assessment on a coal ash pond before getting a permit to close the facility. The director of the Virginia Department of Environmental Quality “shall issue no draft permit to provide for the closure of any CCR unit until he has reviewed and evaluated the complete assessments and all comments received relating to that CCR unit,” the bill said.However, that language was dropped in the version of the bill that the House passed 96-1 on Friday. Under the House-approved version, the Department of Environmental Quality would not have to consider the environmental studies when granting permits to close coal ash ponds. The DEQ director “shall not suspend, delay, or defer the issuance of any permit” pending the completion of the environmental assessment, the House version said. “In deciding whether to issue any such permit, the Director need not include or rely upon his review of any such assessment.”
Trump should clean-up Greenland - A theme of President Donald Trump’s campaign was that US diplomacy had failed. The world no longer respected the United States as it should, and that he could do a better job. Trump and Secretary of State Tillerson already appear prepared to change that with regard to Israel, Egypt, and perhaps Saudi Arabia, but while it might seem peripheral to the world stage, Trump might also signal the value of alliance by making Greenland right. Here’s the backdrop to the story: During World War II, the United States built what became the Sondrestrom Air Base at Kangerlussuaq in west central Greenland and the Bluie West One airfield which was later rechristened the Narsarsuaq Air Base, near Greenland’s southern tip. These were the first bases but far from the last. During the Cold War, Denmark—which is suzerain over Greenland—allowed the United States to construct a number of other air fields, bases, radar facilities, and meteorological outposts. Best known is Thule, a US Air Base in northwestern Greenland still in operation. Secretly, however, the U.S. military built other bases. While US Army Camp TUTO was known to those flying in and out of Thule, the U.S. Army built Camp Fistclench 200 miles to the east which itself was a prototype for Camp Century, a facility for up to 200 soldiers buried deep under Greenland’s ice cap. Here, for example, is a fascinating paper from more than 50 years ago talking about the concept and history of this unique Greenland base. Jakobshavn Glacier, near Ilulissat —is known as the world’s fastest glacier. In the case of Greenland, it has exposed waste left by the United States military at its Greenland bases—especially Camp Century—during the Cold War. During the Eisenhower-era, military officials might have believed that chemical and nuclear waste buried under the ice cap would be entombed forever, but they were wrong. Now, not only the autonomous government in Greenland, but also the Danish government want the United States to clean up its mess. The American Geophysical Union has a good summary, here.
Automakers urge new EPA chief to withdraw Obama car fuel-efficiency rules | Reuters: A trade association representing General Motors, Toyota, Volkswagen and nine other automakers on Tuesday asked new Environmental Protection Agency chief Scott Pruitt to withdraw an Obama administration decision to lock in vehicle emission rules through 2025. On Jan. 13, then-EPA Administrator Gina McCarthy finalized a determination that landmark fuel efficiency rules instituted by President Barack Obama should be finalized through 2025, a bid to maintain a key part of his administration's climate legacy. Mitch Bainwol, president and chief executive of the Alliance of Automobile Manufacturers, said in a letter to Pruitt the decision was "the product of egregious procedural and substantive defects" and is "riddled with indefensible assumptions, inadequate analysis and a failure to engage with contrary evidence." Automakers have argued that the rules could result in the loss of up to 1 million jobs because consumers could be less willing to buy the more fuel efficient vehicles since their engineering will result in higher price tags. The EPA had until April 2018 to decide whether the 2025 standards were feasible but in November moved up its decision to Jan. 13, just before Obama left office. Separately, the Association of Global Automakers, a trade group representing Honda, Nissan, Hyundai and others, said late Tuesday it had formally petitioned the EPA to withdraw the determination. The group argued in a separate letter to Pruitt Tuesday reviewed by Reuters that "EPA opted for political expediency" and "jammed through a final determination in the waning days of the lame-duck administration."
Big Corn courts old foe Big Oil to combat electric car threat | Reuters: A U.S. biofuels lobbying group on Tuesday said it is seeking to work with longtime rival the oil industry to fight the threat to both from subsidies for electric vehicles. The two industries have been at loggerheads for years as they seek sway with Washington over how much biofuel should be included in gasoline and diesel. But that enmity is thawing as the growing number of electric cars on the road threatens to cut demand for both renewable and conventional fuels. The two groups are more aligned on many objectives than they have previously acknowledged, Renewable Fuels Association (RFA) President Bob Dinneen said on Tuesday, noting electric vehicles as one area where both sides have concerns. "We want to make sure there's a level playing field," Dinneen told reporters on the sidelines of an annual meeting. The RFA sees opportunity to work on key regulatory and other issues with Big Oil, he added. "Our objectives will align more times than not," Dinneen said to two representatives from the petroleum industry on a panel. Oil advocates agreed that electric vehicles are cause for concern to the transportation fuel sector. "(We) think we should be working to promote the longevity of the internal combustion engine," said Chet Thompson, president of American Fuel and Petrochemical Manufacturers (AFPM), in a presentation on Tuesday. The group welcomes RFA and others pointing out what he described as "inequities" in the support the electric vehicle industry receives, Thompson told Reuters.
Repeal Fuel Economy Standards and Replace Them with a Tax – Ed Dolan -The Wall Street Journal reports that automakers are asking the EPA to repeal automobile fuel economy standards, known as Corporate Average Fleet Economy (CAFE) standards, which are set to rise to 56 miles per gallon by 2025. Repealing the standards would be a good idea, provided they were replaced by tax designed to achieve an equivalent saving in fuel. A carbon tax would do the job nicely, but an increase in the existing tax on motor fuels would also work. What, exactly, is wrong with the CAFE standards? The fundamental problem is that they attack the third-party effects, or negative externalities, of motor fuel use, such as pollution, highway congestion, and accidents, only partially and indirectly. As a result, the cost of achieving a given reduction in fuel use via CAFE standards is higher than it would be if the same result were achieved more directly through a carbon tax or an increase in the federal gasoline tax. To understand why, we need to consider the various ways consumers can cut back on fuel use. In the short run, they can buy an efficient hybrid instead of a gas-guzzling SUV, they can reduce discretionary driving, or they can shift some trips from their Ford F-250 to their Honda, if they happen to have one of each in the driveway. Given more time to adjust, they can make work and lifestyle changes like moving closer to public transportation, work and shopping, changing jobs, or working at home. The problem with higher CAFE standards is that they encourage fuel saving only with regard to the choice of what car to buy. Once a consumer buys a low-mileage vehicle, the cost of driving and extra mile goes down, thereby reducing the incentive for fuel-saving measures like moving closer to work, working at home, riding the bus to work, or consolidating errands. The very fuel-saving strategies that CAFE standards discourage, like moving closer to work or consolidating errands, are often the ones that have the lowest costs. That is why the total cost of reaching a given national fuel-saving target will be greater when achieved through CAFE standards than when induced by an increase in fuel taxes. A 2004 study from the Congressional Budget Office concluded that an increase in the federal gasoline tax would achieve a given reduction in fuel economy at a cost 27 percent less than that of an equivalent tightening of CAFE standards. Furthermore, its effects would be felt more quickly, because they would not have to wait for the gradual turnover of the national motor vehicle fleet.
Biomass subsidies 'not fit for purpose', says Chatham House - Subsidies should end for many types of biomass, a new Chatham House report argues, because they are failing to help cut greenhouse gas emissions. The report adds that policymakers should tighten up accounting rules to ensure the full extent of biomass emissions are included. The analysis outlines how policies intended to boost the use of biomass are in many cases “not fit for purpose” because they are inadvertently increasing emissions by often ignoring emissions from burning wood in power stations and failing to account for changes in forest carbon stocks. It argues that UK and recently revised EU rules for bioenergy are inadequate for managing and monitoring the emissions from burning biomass. Carbon Brief examines the main arguments of the report, which cut through the long-running debate about the climate impacts of burning biomass. The rising demand for renewable power around the world has led to a large increase in the production and burning of wood pellets. Advocates, such as power firm Drax – the UK’s largest biomass user – argue they are more reliable for providing baseload power than other renewables, such as wind or solar. Worldwide production hit a record 28 million tonnes (Mt) in 2015, according to the UN Food and Agriculture Organisation (FAO), up from under 20Mt just three years earlier. Meanwhile, the UK has become the world’s largest importer of wood pellets, burning 42% of the 15.5Mt of total global imports in 2015. The chart below shows how global electricity generation from biomass, which includes wood pellets, more than doubled between 2005 and 2015.
The 20th century saw a 23-fold increase in natural resources used for building -- The volume of natural resources used in buildings and transport infrastructure increased 23-fold between 1900 and 2010, according to our research. Globally, there are now 800 billion tonnes of natural resource “stock” tied up in these constructions, two-thirds of it in industrialised nations alone.This trend is set to continue. While industrialised countries have lost some momentum, emerging economies are growing rapidly, China especially. If all countries were to catch up to the per capita level of the industrialised nations, this would quadruple the amount of natural resources tied up in the built environment. In Australia, 70% of the buildings and infrastructure that will be used in 2050 have not yet been built. Constructing all of this will require a huge amount of natural resources and will severely impact the environment. To avoid this, we need work to build more efficiently and waste less of our resources. Our buildings need to last longer and become the inputs of future construction projects at the end of their lifetime.Continuing the massive expansion of natural resource consumption would not only require vast quantities of new raw materials, it would also result in considerable environmental impact. It would require massive changes in land use for quarrying sand and gravel, and more energy for extraction, transport and processing. And, if we do not change course, more raw material use now means more waste later. All of this will be accompanied by a large rise in carbon dioxide emissions, making it much harder to achieve the climate goals agreed in Paris. Cement production alone, for example, is responsible for about 5% of global carbon emissions.
The Age of the Giant Battery Is Almost Upon Us - The idea that giant batteries may someday revolutionize electrical grids has long enthralled clean-power advocates and environmentalists. Now it’s attracting bankers with the money to make it happen. Lenders including Investec Plc, Mitsubishi UFJ Financial Group Inc. and Prudential Financial Inc. are looking to finance large-scale energy-storage projects from California to Germany, marking a coming-of-age moment for the fledgling industry. The systems help utilities solve a longstanding clean-power conundrum: managing the unpredictable output from wind and solar farms, and retaining electricity until it’s needed. Battery costs have declined 40 percent since 2014 and regulators are mandating storage technology be added to the grid. That’s encouraging utilities to offer longer contracts and developers are expected build $2.5 billion in systems globally this year. These trends are changing the risk profile, giving lenders confidence in batteries in much the same way that power-purchase agreements opened banks’ doors years ago for wind and solar power. “Having big money come in is the first step to widespread deployment,”
The West’s largest coal-fired power plant is closing. Not even Trump can save it.- As a presidential candidate, Donald Trump promised to help revive the struggling coal industry. It’s looking like a tough promise to keep. In the past three weeks, owners of two of the nation’s biggest coal-fired power plants have announced plans to shut them down, potentially idling hundreds of workers. One plant in Arizona is the largest coal-fired facility in the western United States. The decision this week by the utilities that own the Navajo Generating Station outside Page, Ariz., to decommission the plant at the end of 2019, was decades earlier than expected. The 2,250-megawatt plant has faced increasing financial pressure in the face of record-low natural gas prices, which have made it more expensive to produce electricity at the facility than to purchase it from cheaper sources. “The utility owners do not make this decision lightly,” said Mike Hummel, deputy general manager of Salt River Project, which operates the plant and owns it along with several utility companies and the U.S. Bureau of Reclamation. “NGS and its employees are one reason why this region, the state of Arizona and the Phoenix metropolitan area have been able to grow and thrive,” he added in a statement. “However, [its owners have] an obligation to provide low-cost service to our more than 1 million customers, and the higher cost of operating NGS would be borne by our customers.”
Coal plants keep closing on Trump's watch -- -- Bailly Generating Station's closure was announced one week before Donald Trump bested Hillary Clinton in the presidential contest. But while Trump and his congressional allies pursue a rollback of Obama-era environmental regulations in Washington, coal plants continue to close at a rapid clip across the country. In the next four years, utilities have plans to close 40 coal units, federal figures show. Six closures have been announced since Trump's victory in November. Vectren Corp., a utility based in Evansville, Ind., said in December that it expects to close two coal plants by 2024. Dayton Power and Light Co. announced in January it will close two massive coal plants in southern Ohio next year. And in Arizona, four utilities voted last week to shut down the Navajo Generating Station in 2019. The plant played the vital role of powering the set of canals that deliver drinking water from the Colorado River to Phoenix and Tucson. The spate of closures underlines the challenges facing President Trump, who ran on a promise of revitalizing the coal industry. Utilities, beset by stagnant power demand and presented with cheaper alternatives like natural gas and wind, have shown little appetite for returning to the fuel that long powered the American economy. "Unless those fundamentals change in some deep and fundamental way, I don't see how you get anything other than rapid elimination of coal plants and certainly not any new ones," said William Hogan, a professor of energy policy at Harvard University.
Britain's coal output falls by half to record low | Reuters: Britain's coal production fell by 51 percent to a record low last year as all large deep mines closed and others neared the end of their operational life, preliminary government statistics showed on Thursday. Coal output fell to just over 2 million tonnes of oil equivalent last year, the Department for Business, Energy and Industrial Strategy (BEIS) said in 2016 provisional energy data. Britain's coal production has fallen by 77 percent in the last five years. Coal accounted for 10.6 percent of electricity supplied in 2016, down from 25.8 percent in 2015, due to coal plant closures and a carbon price floor which has made coal-fired generation more expensive than gas-fired power. More detailed estimates of 2016 will be published on March 30, BEIS said.
Ukraine declares emergency situation on electricity market due to coal shortage -- The Ukrainian cabinet has supported a recommendation by the ministry of energy and coalmining to introduce provisional emergency situation measures in the wake of an acute shortage of anthracite coal, which emerged after the far-right radicals began a blockade of railways leading to the areas of eastern Ukraine uncontrolled by the pro-Kiev forces. A decision has been taken to introduce measures of this kind,” Prime Minister Vladimir Groysman said at a regular meeting of the cabinet after reports by Igor Nasalik, the minister of energy and coalmines, the Gennady Zubko, the minister of regional development and construction. Ukrainian thermal power plans have come to grips with shortages of anthracite coal supplied from coalmines in the areas of Donbass outside of the pro-Kiev forces’ control in the aftermath of a blockade of railway lines. Former militants from the so-called “volunteer battalions” began it with support from the right-wing radical deputies of the Verkhovna Rada national parliament on January 25. Nasalik also warned that disruptions in the national electric power grids might begin already in fourteen days’ time.
Why Is Asia Returning to Coal? - For Japan, coal has emerged as the best alternative to replacing its 54 nuclear reactors, which are deeply unpopular with the population and seen as symbols of devastation after the Fukushima Daiichi nuclear disaster six years ago. Mindful of the public mood, the government of Shinzo Abe has completely given up on the country’s dream of nuclear self-sufficiency, and pulled the plug in December on the $8.5 billion experimental reactor project at Monju. On February 1, the government pledged to decommission all reactors and replace them with 45 new coal-fired power plants equipped with the latest clean coal technology. In this, Tokyo seeks to achieve two overreaching goals: preserve its energy security and stay on course to fulfill the obligations set forth by the 2016 Paris Climate Agreement. But why did Abe go with coal and not renewables or, say, natural gas? After Fukushima, Japan initially ramped up its imports of liquefied natural gas, but realized that LNG would be prohibitively expensive in the long-term. Cost-conscious, the government has instead opted for high-efficiency low-emissions (HELE) coal plants and plans to market its clean coal technologies abroad in addition to implementing them at home. Coal power already made up 31 percent of Japan’s energy mix in 2015 but under the current plan, the fossil fuel will become the country’s primary power source by 2019. Japan’s embrace of coal puts it squarely within the general trend for Asia, where countries are turning to the fossil fuel for a host of different reasons. For India and China, the million-dollar question that any energy strategy has to answer is: “Does it promote or does it hinder the country’s economic development?” That question has been at the center of fierce debates and even though both Beijing and New Delhi have been adopting renewable energies, it doesn’t seem that coal’s position is threatened.
China may tighten up coal output curbs again as prices collapse -- China may soon reinstate coal production curbs in an effort to avoid the return of an oversupply and improve the profitability of its heavily indebted coal industry. The National Development and Reform Commission (NDRC), which is the country’s top planner, is considering to limit local coal output by restricting miners to a 276-day operational year, rather than the 330 days they are currently allowed to work. Sources familiar with the matter told Bloomberg that the fresh clampdown will remain in place for six months, with some mines and areas possibly excluded, though no decision has been made yet. Coal, particularly the steelmaking kind, rocketed last year after Beijing introduced production curbs. Coking coal prices more than quadruple and peak at over $300 a tonne in December — a level last seen in 2011. Thermal coal, which is used in power stations to produce electricity, also benefitted from the restrictions. But after a recent pause following 12 weeks of non-stop selling, the rout on coking coal markets resumed on Tuesday. The steelmaking raw material fell 4.7% to $154.80 on the day, the lowest since early September.
The Murky Future of Nuclear Power in the United States - This was supposed to be America’s nuclear century. The Three Mile Island meltdown was two generations ago. Since then, engineers had developed innovative designs to avoid the kinds of failures that devastated Fukushima in Japan. The United States government was earmarking billions of dollars for a new atomic age, in part to help tame a warming global climate. But a remarkable confluence of events is bringing that to an end, capped in recent days by Toshiba’s decision to take a $6 billion loss and pull Westinghouse, its American nuclear power subsidiary, out of the construction business. The reasons are wide-ranging. Against expectations, demand for electricity has slowed. Natural-gas prices have tumbled, eroding nuclear power’s economic rationale. Alternative-energy sources like wind and solar power have come into their own. And, perhaps most significantly, attempts to square two often-conflicting forces — the desire for greater safety, and the need to contain costs — while bringing to life complex new designs have blocked or delayed nearly all of the projects planned in the United States. Continue reading the main story Advertisement Continue reading the main story “You can make it go fast, and you can make it be cheap — but not if you adhere to the standard of care that we do,” said Mark Cooper of the Institute for Energy and the Environment at Vermont Law School, referring to the United States regulatory body, which is considered one of the most meticulous in the world. “Nuclear safety always undermines nuclear economics. Inherently, it’s a technology whose time never comes.”
Toshiba’s nuclear fallout shows the Government must take a stand -- Toshiba’s nuclear meltdown has come as little surprise to an industry wracked by spiralling losses, credit downgrades and growing debt. World Nuclear Association (WNA) figures have revealed that the number of new reactors under construction is at one of the highest points of the past two decades. In the USA and Europe reactors may be shutting down faster than they are being built but the strong growth of Government-backed projects in India and China are leading the way in rolling out new nuclear reactors. The difference, according to experts, is in the level of state support. Steve Randle, head of PwC’s nuclear consulting unit, says a strong element of Government backing is what separates those nuclear companies which flourish, and those which flail. “The nature of financing nuclear plants is difficult for private investors to buy in to. A nuclear developer will need to shoulder billions in capital spending for the 10 to 15 years it takes to plan and build the plant, followed by 60 years of managing what is essentially a cash machine, before facing the ballooning cost of decommissioning the plant at the end of the reactor’s life cycle,” Mr Randle said. “Governments are far better placed to take a longer-term position than private investors. In China and South Korea there is a stronger element of government backing where they are willing to play an active role in supporting some of these new build projects so developers aren’t carrying all of the risk,” he added.
Concerns Grow About A Nuclear "Incident" In Europe After Spike In Radioactive Iodine Levels -- Concerns about a potential, and so far unsubstantiated, nuclear "incident" have spread in the past week, after trace amounts of radioactive Iodine-131 of unknown origin were detected in January over large areas in Europe according to a report last week by the Institute for Radiological Protection and Nuclear Safety, the French national public expert in nuclear and radiological risks. Since the isotope has a half-life of only eight days, the detection is an indication of a rather recent release. As the Barents Observer adds, "where the radioactivity is coming from is still a mystery."The air filter station at Svanhovd - located a few hundred meters from Norway’s border to Russia’s Kola Peninsula in the north - was the first to measure small amounts of the radioactive Ionide-131 in the second week of January. Shortly thereafter, the same Iodine-131 isotope was measured in Rovaniemi in Finnish Lapland. Within the next two weeks, traces of radioactivity, although in tiny amounts, were measured in Poland, Czech Republic, Germany, France and Spain.Norway was the first to measure the radioactivity, but France was the first to officially inform the public about it. "Iodine-131 a radionuclide of anthropogenic origin, has recently been detected in tiny amounts in the ground-level atmosphere in Europe. The preliminary report states it was first found during week 2 of January 2017 in northern Norway. Iodine-131 was also detected in Finland, Poland, Czech Republic, Germany, France and Spain, until the end of January", the official French Institute de Radioprotection et de Süreté Nucléaire (IRSN) wrote in a press release.
French Nuclear Watchdog Gives An Update On Mysterious Radioactive Iodine Blanketing Europe -On Sunday we reported that concerns have spread in Europe about a potential nuclear "incident" following a recent report by a French nuclear watchdog agency - the Institute for Radiological Protection and Nuclear Safety (IRSN), the French national public expert in nuclear and radiological risks - that radioactive Iodine-131 had been observed across much of northern and central Europe. Since the isotope has a half-life of only eight days, the detection is an indication of a rather recent release. As the Barents Observer added, "where the radioactivity is coming from is still a mystery."The emission was said to originate close to the Arctic circle, with some speculating that a nuclear test of emergency had taken place in Russia in January and the fallout then spread to Norway and onward to Europe:"Iodine-131 a radionuclide of anthropogenic origin, has recently been detected in tiny amounts in the ground-level atmosphere in Europe. The preliminary report states it was first found during week 2 of January 2017 in northern Norway. Iodine-131 was also detected in Finland, Poland, Czech Republic, Germany, France and Spain, until the end of January", the French Institute de Radioprotection et de Süreté Nucléaire wrote in a press release. Adding an air of mystery to this alleged "incident" was the spotting of the "Constant Phoenix", which as we first reported, arrived on Friday in the UK's Mildenhall airbase from Florida. The WC-135 Constant Phoenix has been used in the past to determine whether nuclear tests or detonations have taken place in any given region. The WC-135 is a derivative of the Boeing C-135 transport and support plane. The WC-135, known as the “sniffer” or “weather bird” by its crews, can carry up to 33 personnel. However, crew compliments are kept to a minimum during mission flights in order to lessen levels of radioactive exposure.
Fukushima Aborts Latest Robot Mission Inside Reactor; Radiation At "Unimaginable" Levels -- Two years after sacrificing one robot, TEPCO officials have aborted their latest robot mission inside the Fukushima reactor after the 'scorpion' became unresponsive as it investigated the previously discovered hole where the core is believed to have melted.A "scorpion" robot sent into a Japanese nuclear reactor to learn about the damage suffered in a tsunami-induced meltdown had its mission aborted after the probe ran into trouble, Tokyo Electric Power company said Thursday. As Phys.org reports, TEPCO, the operator of the Fukushima nuclear plant, sent the remote-controlled device into the No. 2 reactor where radiation levels have recently hit record highs.The "scorpion" robot, so-called because it can lift up its camera-mounted tail to achieve better viewing angles, is also designed to crawl over rubble inside the damaged facility.But it could not reach its target destination beneath a pressure vessel through which nuclear fuel is believed to have melted because the robot had difficulty moving, a company spokeswoman said."It's not immediately clear if that's because of radiation or obstacles," she said, adding that TEPCO is checking what data the robot was able to obtain, including images....."Scorpion's mission is to take images of the situation and collect data inside the containment vessel," TEPCO spokesman Shinichi Nakakuki said earlier." Challenges include enduring high levels of radiation and moving on the rough surface," he said.Radiation levels inside the reactor were estimated last week at 650 sieverts per hour at one spot, which can effectively shut down robots in hours.
Toxic Liquid Nuclear Waste Headed for US Roadways - The Department of Energy, to the consternation of environmental groups, is preparing to transport 6,000 gallons of highly toxic liquid nuclear waste over American roadways. The spent nuclear fuel is "target residue material" containing highly enriched uranyl nitrate—which after processing can be used as fuel. The DOE has spent years planning for the transfer of the waste from Canada's Chalk River Laboratories in Ontario to the Savannah River Site, a reprocessing facility in South Carolina. It will be transported in at least 100 to 150 separate truck shipments over a period of about three years, encased in cannisters normally used to transport solids that have been retrofitted to handle liquids. For security reasons, DOE won't reveal the exact timing or routes of the shipments. But elected officials in states it is likely to pass through are concerned about safety. Until earlier this month, the transfer was held up by a lawsuit from environmental and nuclear safety groups, including the Sierra Club and Beyond Nuclear. The groups demanded an environmental impact statement, a step typically required in such cases, but a DC district court judge ruled that the plan had received sufficient DOE review and so an EIS was unnecessary. The shipments are now expected to begin this spring. A spokesman for the Savannah River Site says the DOE will receive $60 million to cover the cost of moving and processing the material, although that figure may have changed. The deal was initiated in 2008 by Atomic Energy of Canada Limited, which oversees that country's nuclear waste, because Chalk River doesn't have the means to convert the liquid waste into a solid. The United States originally gave the highly enriched uranium, then in solid form, to the Canadian facility for research and to produce medical isotopes.
Ohio community fights proposed DPL coal plant closures - A group in Adams County wants the Public Utilities Commission of Ohio to rule against a Dayton Power and Light plan to close two power plants in that county located on the Ohio River. The group has filed a motion with the PUCO that targets what it calls the “self-serving” plan to retire the coal-fired plants “without even mentioning (much less attempting to explain away) the pervasive and disastrous closure effects that DP&L forthrightly admitted will be visited upon the citizens of Ohio — and particularly the residents of Adams County — by the shuttering of coal generation plants.” The motion says DP&L directly or indirectly employs nearly 700 people at the two coal-fired power plants, including 490 DP&L employees and 200 contractor employees. The two plants generate about $9 million in annual property taxes for the county and other political entities, the motion says. The Manchester School District alone gets $5.6 million in annual revenue from the plants, according to the motion. The motion, filed late last week, refers to a group calling itself “Citizens to Protect DP&L Jobs” whose members include business people, property owners and taxpayers. In November last year, DP&L told the PUCO that in talks with parties to its electric security plan, some “have raised the subject of the closure of Killen and Stuart Stations.” At that time, no decision had been reached. DEVELOPMENT: DP&L expands development role In late January, though, DP&L filed a proposed settlement with PUCO that, if approved, would increase customers monthly bills as well as close the two plants in question, both on the Ohio River. If approved by the PUCO, the company seeks to close its Stuart and Killen coal plants by mid-2018. A spokeswoman for DP&L said the company would not oppose the group’s motion to intervene.
Fracking produces unexpected benefits for Ohio counties - Oil and gas drilling, a long-time staple in Ohio, has become an important revenue source for not only gas companies themselves, but also for the counties that allow drilling on their land, a new industry study found. The study from two organizations, the industry trade group Ohio Oil and Gas Association and the industry-funded Energy in Depth, showed that six Ohio counties, Belmont, Carroll, Guernsey, Harrison, Monroe and Noble, saw sharp increases in their property tax revenue since 2010.These counties received $43 million from tax revenue from oil and gas drilling rigs between 2010 and 2015, and in 2015, 24 percent of all property tax collected from these counties came from taxes paid on drilling operations. This recent spike can largely be traced to hydraulic fracturing, a type of drilling that has been in Ohio since 2011. Fracking brought large-scale production to multiple states, including Ohio, and with this increase in production also came an increase in the taxes paid to the townships that give their land to drilling companies, according to Jackie Stewart, state director of Energy in Depth. Production has particularly spiked since 2013 in Ohio and gas drilling increasing by 852 percent since then, the study found. Although the study did not include the early results of 2016, Stewarts said the first three quarters of 2016 already greatly surpassed 2015 in overall production. In general, Ohio’s taxes on oil and gas are lower than the taxes on natural gas in other states, something Gov. John Kasich has attempted to adjust in the past, with little support form Republicans in the General Assembly. Carroll County is the leading county for natural gas production, with over $14 million made off revenue tax between 2010 and 2015. Their profits have largely gone back to schools in the county: overall real estate tax revenue given to the Carrollton Exempted Village School District jumped from $6.7 million in 2013 to $11.2 million in 2015.
New Protest Escalates Ohio Fracking Fight - Center for Biological Diversity (press release) — Conservation groups this week filed an administrative protest challenging a Bureau of Land Management oil and gas lease auction slated for Ohio’s Wayne National Forest. The protest takes aim at the Bureau’s refusal to adequately analyze the impacts of fracking on climate change, water quality and endangered species. “Our protest challenges the Bureau’s disturbing practice of favoring fracking industry interests over clean water, wildlife and human health,” said Taylor McKinnon of the Center for Biological Diversity. “With each new federal fossil fuel lease, the Trump administration pushes us closer to climate disaster.” The protest charges that the plan to allow hydraulic fracturing or “fracking” on 1,186 acres of Wayne would degrade streams and groundwater, fragment wildlife habitat and worsen climate change. The federal auction is scheduled for March 23. The groups also note that the federal environmental assessment for the lease auction failed to fully disclose fracking’s effects on the national forest. That’s because the government failed to study the increased surface disturbance, habitat fragmentation, and water-pollution impacts of opening up adjacent privately owned areas to oil industry development. “The Wayne National Forest is owned by all Americans, and it’s a special place that deserves protection,” said Nathan Johnson, an attorney with the Ohio Environmental Council. “Tens of thousands of citizens are demanding a halt to fracking in the Wayne. The public doesn’t want to see pipelines tearing up this forest, and we don’t want fracking chemicals staining its streams. This fight is about holding the federal government accountable to both the law and the will of the people.” The protest follows a November filing by the groups that raised similar concerns about a December oil and gas lease auction in Wayne National Forest. In January the groups filed a notice of intent to sue the Bureau and the U.S. Fish and Wildlife Service for failing to consider the impacts of fracking in conjunction with white-nose syndrome and climate change effects on the endangered Indiana bat and other protected species threatened with extinction in the area.
New natural gas processing and fractionation capacity in Marcellus/Utica -- Anticipating renewed growth in natural gas and natural gas liquids production in the Marcellus and Utica plays, midstream companies active in the region are planning new gas processing plants and fractionators, as well as new NGL takeaway capacity and in-region NGL storage. And Shell Chemicals has made a Final Investment Decision to build a $6 billion, ethane-consuming steam cracker in western Pennsylvania by the early 2020s. In today’s blog, “Unleashed in the (North)East—New Gas Processing and Fractionation Capacity in Marcellus/Utica,” Housley Carr continues our series on on-going efforts by midstreamers and others to keep pace with NGL growth in the epicenter of U.S. gas and NGL production. In Part 1 of this series, we noted that RBN’s Advance, Growth and Cutback forward price scenarios call for natural gas production in the Marcellus and Utica plays to increase by 30% to 47% over the next five years, which is especially impressive when you consider that the region already is producing more than 22 billion cubic feet a day (Bcf/d). NGL production in the liquids-rich “wet” Marcellus (western Pennsylvania and northern West Virginia) and Utica (eastern Ohio) is projected to increase even more sharply, driven not only by gas production gains but by rising NGL demand (from new steam crackers and export markets) and the expectation that NGL prices will increase with that rising demand. Under RBN’s Advance Scenario (2022 Henry Hub gas prices of $3.90/MMbtu), Northeast NGL production (including ethane “rejected” into the natural gas stream as well as NGLs separated out for fractionation) would soar 74% to 1,287 MMb/d in 2022 (from 740 Mb/d in 2016) and production would rise 63% (to 1.207 MMb/d) under the Growth Scenario ($3.60 Henry Hub gas in 2022).
Fracking Caused Pennsylvania Earthquakes, New Report Confirms - Earthquakes in Pennsylvania are usually rare but fracking operations triggered a series of small temblors in Lawrence County last year, officials at the state's Department of Environmental Protection (DEP) announced in a Feb. 17 report. Hilcorp Energy Co., a Texas-based oil and gas company, was fracking a pair of wells in the Utica Shale when seismic monitors detected five earthquakes measuring between 1.8 and 2.3 on the Richter scale between April 25-26, 2016. "Our analysis after doing the review... is that these events are correlated with the activity of the operator," DEP Acting Secretary Patrick McDonnell told Penn Live . While the tremors were too small to be felt by humans or cause any damage, they are the first quakes in the state to be blamed on fracking. Pennsylvania happens to be the second largest natural gas-producing state in the country. "At least within Pennsylvania, this is the first time that we have seen that sort of spatial and temporal correlation with [oil and gas] operator activity," Seth Pelepko, chief of well-plugging and subsurface activities for DEP's oil and gas management program, told Allegheny Front , a western Pennsylvania public radio program. "No faults identified along portions of the well bore where these seismic events were detected," Pelepko continued. Hilcorp spokesman Justin Furnace said operations were immediately suspended after learning about the tremors. Fracking and stimulation operations have since been discontinued at the well pad indefinitely. The DEP said that Hilcorp was using a technique known as "zipper fracturing" at the time, which involves the concurrent fracking of two horizontal wellbores that are parallel and adjacent to each other. Four wells were drilled to depth of about 7,900 feet in that location. Evidence indicates that induced earthquakes occur when the separation between Utica Shale and basement rocks is lessened during drilling operations. That means, when someone drills too close to basement rocks, there can be earthquakes.
Quake-Producing Fracking In Pennsylvania Stopped by Company Itself - The fracking operation of a natural gas company in Pennsylvania was found to cause earthquakes in the western part of the state. The owner of the operation, Hilcorp Energy Co., had the facility very near the earthquakes; however, no damage was reported. Regardless, fracking is known to be a method that can cause earthquakes.Seth Pelepko, an official in the Department of Environmental Protection, said: “This is the first time we have seen that sort of spatial and temporal correlation.” After the earthquakes were observed, Hilcorp Energy stopped extracting the natural gas. Justin Furnace, Hilcorp’s spokesman, stated that there will be no more fracking on the site and work with the state if concerns raise.In fact, there are many different ways of fracking: The one that the Hilcorp used was ‘zipper fracturing’. This method fracks two intersecting horizontal wells. Whatever the method, Hilcorp decided to stop fracking a quarter milenear the towns where the earthquakes occured to reduce the chance of a potential earthquake.The DEP asked Hilcorp to use its seismix monitors while working near the townships in case of any earthquake that can delay fracking procedures.This is not the first time that Hilcorp was accused of its fracking operations. There had been 77 earthquakes in Poland Township, Ohio, where the magnitude was as large as 3.0. This magnitude does not hold a vital threat; however, it was clearly felt by the residents and raised concerns for the potential of a larger earthquake.Pennsylvania is still one of the states under heavy dispute. Throughout the history, the earthquakes were generally seen in the southeastern part, whereas the gas fields are in the western and northeastern part.
Pipeline Standoff: Judge won’t halt Sunoco Logistics construction plans; community foes vow to fight on: Work may have started on the Sunoco Logistics Mariner East 2 pipeline, but that hasn’t stopped the Middletown Coalition for Community Safety (MCCS) from continuing its opposition to the project. The company began the 350-mile system within days of receiving the necessary permits from the Pennsylvania Department of Environmental Protection (DEP) and learning a state Environmental Hearing Board (EHB) judge had denied a request from three environmental groups to block them. MCCS, however, is not conceding. “Sunoco intends to wreak immediate and irreparable harm in Delaware County,” according to an email from the organization. “Legal action now becomes the primary defense against this proposed pipeline, which threatens public safety, property values and constitutional private property rights.” While it was not a party, the grassroots organization supported the appeal filed by the Clean Air Council, Delaware Riverkeeper Network and Mountain Watershed Association regarding issuance of the water obstruction and erosion and sediment control permits. The action, submitted within 24 hours of Monday’s DEP ruling, called the review process “inadequate” and stated the groups would suffer “immediate and irreparable injury” if Sunoco was permitted to break ground for the controversial plan. Judge Bernard Labuskes Jr. rejected the request to halt construction and the environmental organizations filed a motion with the EHB to reconsider the decision. He set a March 1 date to hear the appeal, according to published reports. Spanning Pennsylvania, West Virginia and Ohio, the Mariner 2 system would bring natural gas liquids such as propane, ethane and butane from the Marcellus shale areas to the Marcus Hook Industrial Complex. The first 20-inch pipeline would have an initial capacity of about 275,000 barrels a day with the ability to expand to 450,000; the second 16-inch line, if needed, would have an additional capacity of approximately 250,000 barrels a day. Both lines would be included as part of the project. The DEP decision waived the seven-day notice requirement, allowing Sunoco to begin construction.
Across tough terrain, Sunoco pipeline leaves some hard feelings: While a legal battle continues over Sunoco’s Mariner East 2 project, construction of the controversial Marcellus Shale pipeline has begun in far Western Pennsylvania, where crews are working feverishly to install the pipe in a deep trench cut across the landscape. More than two dozen workers in a slow-moving caravan of heavy equipment last week worked their way up a hillside in Hopewell Township, Washington County, welding sections of 20-inch-diameter coated-steel pipe before the conduit was lowered into place and buried. It's a messy business, involving lots of earth-moving machinery and mud, and it presages the disruption that could take place this year in Delaware and Chester Counties, when Sunoco Logistics Partners LP plans to build the other end of the 350-mile pipeline connecting the Marcellus and Utica Shale production areas with Sunoco’s terminal on the Delaware River in Marcus Hook. Sunoco and the state’s political and business leaders have endorsed this $2.5 billion project, which will provide a needed market outlet for producers to send propane and other liquid fuels extracted from the shale fields, potentially fueling new industries. “It’s really been welcomed here and in southeast Ohio,” said Jeff Shields, spokesman for Sunoco Logistics, whose headquarters are in Newtown Square. Most of the fuel that will be sent to Marcus Hook is set for export to European petrochemical producers, but Sunoco also hopes to develop new local industries to buy the materials.
4 Pipeline Fights Intensify as Dakota Access Nears Completion - Under orders from President Trump , the Army Corps of Engineers on Feb. 7 approved a final easement allowing Energy Transfer Partners to drill under the Missouri River near the Standing Rock Sioux Reservation in North Dakota. Construction has re-started, and lawyers for the company said it could take as little as 30 days for oil to flow through the Dakota Access Pipeline . While the Standing Rock Sioux and neighboring tribes attempt to halt the project in court, other opponents of the pipeline have launched what they're calling a "last stand," holding protests and disruptive actions across the U.S. In North Dakota, where it all began, a few hundred people continue to live at camps on the Standing Rock Sioux Reservation, using them as bases for prayer and for direct actions to block construction.Now, most of the thousands of people that visited Standing Rock last fall have returned home, and some have taken up long-shot local fights against the oil and gas industry. In Oklahoma, Arkansas and Tennessee it's the Diamond pipeline ; in Louisiana, the Bayou Bridge . In Wisconsin, the Bad River Band of Lake Superior Chippewa actually voted to decommission and remove the Enbridge Line 5 pipeline from their reservation. Many communities have turned to direct action as a last resort. The city of Lafayette, Colorado, which has long attempted to block fracking in the area, has even proposed a climate bill of rights, enforceable via nonviolent direct action if the legal system fails. In at least four states, encampments built as bases for pipeline resistance have emerged. They face corporations emboldened by Trump and the Republican-controlled Congress, which have used their first month in power to grant fossil fuel industry wishes, overturning environmental protections, appointing former ExxonMobil CEO Rex Tillerson as secretary of state, and reviving the halted Dakota Access and Keystone XL pipelines. "Forces arrayed against us are quite wide in my opinion," said Owl, a member of the Ramapough-Lunaape tribe who helped set up a camp in New Jersey to oppose the Pilgrim pipeline. "They are hell-bent on this infrastructure." Here's what you need to know about the Trans-Pecos, Atlantic Sunrise, Sabal Trail and Pilgrim pipelines:
Pipeline fights move from Dakota prairie to Louisiana bayous | Reuters: Rosinski is fighting the latest request for a right-of-way, this time from Energy Transfer Partners - the company behind the controversial Dakota Access Pipeline. She said ETP declined to make contract changes she wanted or to properly compensate her for lost property value. Opposition to the company's planned extension of the Bayou Bridge pipeline has made Louisiana bayous the latest battleground in a nationwide war against new pipeline construction. The pushback here is one example of the increasingly broad and diverse base of opposition nationally, which now extends beyond traditional environmental activists. In Louisiana, opponents include flood protection advocates, commercial fishermen and property owners such as Rosinski. Their fight follows high-profile protests in North Dakota that were led by Native Americans and joined by military veterans, who together succeeded in convincing the Obama administration to delay construction. Although the new administration of President Donald Trump has since cleared that project's completion, pipeline companies are nonetheless taking the rising political opposition seriously. Alan Armstrong, chief executive at pipeline firm Williams Companies, told a conference in Pittsburgh that Trump's action would not hamper the protest movement. “It may even enhance it,” he said the day after Trump cleared the Dakota pipeline in January.
Counties can reject solar power but not fracking - Currituck County commissioners this week approved a motion to prohibit new solar farms.The action followed a recommendation by the county's planning board, reported by the Daily Advance.The decision followed a lively discussion lasting nearly two hours (beginning at about the 1:05 mark of the video). Ordinary folks spoke both for and against the proposal. Farmers wanted the opportunity to lease some of their land for solar panels; others said the operations are disruptive.This was a democratic process. Local people expressed their views to their local representatives. The issues had to do with economic development, quality of life and everyone's vision of what's best for Currituck County.Even as they made their decision, commissioners noted that they could reverse themselves at some future time if circumstances change.I compliment all of them for the care they took to resolve an important local question.I also noticed that there was no interference from the state legislature in this matter.Certainly not! Why should there be?Well, if the subject were a natural gas drilling operation rather than a solar farm — arguably much more potentially disruptive — our legislature would have butted in, telling the Currituck County commissioners they have no right to decide for themselves what's best for Currituck County.Our legislature would have told the good people of Currituck County to save their breath. Their views don't matter.The "fracking" law passed by the General Assembly and signed into law by then-Gov. Pat McCrory in 2014, stated: "It is the intent of the General Assembly to maintain a uniform system for the management of oil and gas exploration, development, and production activities, and the use of horizontal drilling and hydraulic fracturing for that purpose, and to place limitations upon the exercise by all units of local government in North Carolina of the power to regulate the management of oil and gas exploration, development, and production activities by means of special, local, or private acts or resolutions, ordinances, property restrictions, zoning regulations, or otherwise ..."
"Recessionary" Demand Forces New York Harbor To Divert Gasoline Shipments -- Two weeks ago, Goldman analysts were stunned when they noted that in recent weeks gasoline demand in the US has collapsed to levels that suggest not all is well with the economy. In fact, as the bank's oil expert Damien Courvalin said "to achieve the 5.9% decline suggested by the weekly data, our model requires PCE to contract 6%, in other words, a recession. Perhaps, but so far those "transient" supply factors are only getting more chronic, and as supply continues to grow in anticipation of a demand bounce that refuses to materialize, leading to ever louder speculation that there is something very wrong with the US consumer.... gasoline inventories have hit record levels, and nowhere is this more obvious than on the East Coast, where as Bloomberg writes overnight, "the biggest gasoline market in the U.S. is bursting at the seams." As a result, just like during last year's unprecedented gasoline glut which, too, was supposed to be "transient", but has only gotten worse, traders are now lining up to export gasoline and diesel from New York Harbor, an area that normally relies on fuel imports from Europe and eastern Canada. While at least 6 cargoes that were headed to New York from Europe in January and early February were diverted to the Caribbean or the U.S. Gulf Coast, that wasn’t enough to stem the oversupply building up in terminals along the Eastern Seaboard. Record-high inventories in the region are now pushing prices low enough to turn the typical trade flow on its head.
U.S. refiners cut output as gasoline glut hurts profits | Reuters: U.S. refiners are cutting output to reverse slumping profit margins due to record high inventories ahead of the critical summer driving season. Profits for making gasoline have hit their lowest levels for a year as higher prices at the pump combine with the seasonal lull in demand from motorists to cut consumption and push up inventories. Refiners are hoping that cutting runs will prevent a repeat of last winter, when the industry amassed huge gasoline stockpiles that even a record summer driving season failed to draw down. At least three refineries have cut runs, according to executives and industry sources. More are expected to follow if routine maintenance shutdowns don't ease the supply glut, said Mark Broadbent, refinery analyst at Wood Mackenzie. Marathon Petroleum Corp has cut production by 11 percent to 195,000 barrels per day (bpd) at its Catlettsburg, Kentucky, refinery over the past month, a source familiar with the plant's operations told Reuters on Tuesday. PBF Energy has cut runs at two plants, Chief Executive Tom Nimbley told investors last week. The company ran its 180,000-bpd refinery in Toledo, Ohio, at reduced rates in the fourth quarter due to weak margins, he said. PBF also shut the sweet crude unit at the company's Chalmette, Louisiana, refinery for economic reasons. Refiners producing fuel that was going into storage should be concerned about being "on a fool's errand," Nimbley said
Shale Drilling Is on a Roll as OPEC Cuts Keep Oil Above $50 - Shale wildcatters pushed ahead on the biggest surge in U.S. oil drilling since 2012 as the explorers take advantage of prices above $50 for more than two months. Rigs targeting crude in the U.S. rose by 6 to 597 this week, the highest total since October 2015, according to Baker Hughes Inc. data reported Friday. Drillers have added 72 rigs since 2017 began, the best start in five years. “We’re seeing the rise that we anticipated to take place given the OPEC cuts,” Bloomberg Intelligence analyst Andrew Cosgrove said by phone. “These gains are spreading to other plays, and this is something we’re expecting will continue through the first half given the stability in the price of oil.” Oil producers have brought 281 rigs back to work since drilling bottomed out in May, the biggest gain since producers added 361 rigs over the nine months through June 2012. U.S. crude inventories rose to 518.1 million barrels last week, the highest in weekly data going back to 1982, according to the Energy Information Administration.
OPEC Production Cuts May Have Underestimated The Permian's Improving Breakevens - Play breakevens continue lower. Higher oil prices will spur oil production increases in the US. The Permian should realize the greatest increases. Some have said US unconventional oil is a Ponzi scheme. Those who surmise this rob Peter to pay Paul conspiracy may not understand the complex realities of oil exploration and production. It's a different type of investment. Oil production has high initial costs. Some operators pay high acreage prices to get into plays late. D&C costs can be high initially, but as with most businesses, costs decrease. LOEs are also key, as those costs are stripped from revenues from the well head. This complicated industry has become more so through unconventional designs. The Peak Oil theorists were wrong, as unconventional production was great enough to effect the world's supply and demand balance. It took time, and high oil prices, but US producers got the job done. It may have gotten the job done too well.Conventional wells contrast horizontals with respect to production. Production begins and declines at a relatively low pace month over month. Horizontals produce an immense volume of resource in the first month, followed by a higher decline rate. While conventional production declines are easily calculated, it takes an engineering degree to estimate unconventional curves. The decline is not constant. Decline rates are exponential over several years then change. Initial horizontal production is created through induced fracs and the interconnected natural fracturing within the interval. After three to seven years, induced fracs stop producing, and we enter matrix production. Although a simplistic explanation, it is what many bears get wrong. Matrix production declines are much like a conventional well. Estimates vary at 3% to 5%. So if a horizontal is modeled to decline exponentially, and matrix production is not accounted for, one could model that well to zero in a shorter time.
Permian production, US crude exports have midstream companies battling for barrels - Capitol Crude podcast - The Texas Gulf Coast is gearing up to handle more US oil production and a potential rise in crude exports, but pipeline capacity already outstrips the area's refining capacity. Sandy Fielden, director of oil and products research at Morningstar Commodities & Energy, talks with senior oil editors Meghan Gordon and Brian Scheid about why even more infrastructure is being built along the US coast. Midstream companies are battling for control of the final mile from the pipeline to refineries and marine docks, and Fielden looks to some of the challenges ahead for US crude exports and possible impacts of Congress' tax overhaul plans.
Texas Oil Fields Rebound From Price Lull, but Jobs Are Left Behind - Roughly 163,000 oil jobs were lost nationally from the 2014 peak, or about 30 percent of the total, while oil prices plummeted, at one point by as much as 70 percent. The job losses just in Texas, the most productive oil-producing state, totaled 98,000. Several thousand workers have come back to work in recent months as the price of oil has begun to rise again, but energy experts say that between a third and a half of the workers who lost their jobs are not returning. Many have migrated to construction or even jobs in renewable energy, like wind power. ... Indeed, computers now direct drill bits that were once directed manually. The wireless technology taking hold across the oil patch allows a handful of geoscientists and engineers to monitor the drilling and completion of multiple wells at a time — onshore or miles out to sea — and supervise immediate fixes when something goes wrong, all without leaving their desks. It is a world where rigs walk on their own legs and sensors on wells alert headquarters to a leak or loss of pressure, reducing the need for a technician to check. And despite all the lost workers, United States oil production is galloping upward, to nine million barrels a day from 8.6 million in September. Nationwide, with a bit more than one-third as many rigs operating as in 2014, production is not even down 10 percent from record levels. Some of the best wells here in the Permian Basin that three years ago required an oil price of over $60 a barrel for an operator to break even now need about $35, well below the current price of about $53. Much of the technology has been developed by the aviation and automotive industries, along with deepwater oil exploration, over more than a decade. But companies drilling on land were slow to adapt until oil prices crashed and companies needed to get efficient quickly or go out of business.
Is Automation Limiting The Number Of Jobs Created By The Texas Oil Boom? - The New York Times reports that renewed drilling for oil and natural gas in Texas isn’t creating as many jobs as in the past. The culprit? Automation. Automation in the oil industry is reducing the demand for unskilled labor and new jobs, despite U.S. oil production hitting record highs. “Computers now direct drill bits that were once directed manually,” reports NYT. “The wireless technology taking hold across the oil patch allows a handful of geoscientists and engineers to monitor the drilling and completion of multiple wells at a time — onshore or miles out to sea — and supervise immediate fixes when something goes wrong, all without leaving their desks.”Industry experts estimate roughly 163,000 oil jobs have been lost since the 2014 crude price collapse. The price of crude oil went from $108.09 in June 2014 to $29.18 by January 2016. Job losses just in Texas, the most productive oil-producing state, totaled 98,000. Automation has replaced one-third to half those jobs, NYT reports.On the other hand, automation significantly reduced operating costs for U.S. oil producers. Break-even oil prices at productive wells fell from $60 a barrel three years ago to around $35 today.Jobs are coming back, just not at the pace they were before, and oil companies are still investing in Texas oil.Oil companies poured more than $28 billion into the Permian Basin of west Texas and southeastern New Mexico last year, and $6.6 billion was invested to double the amount of land they control in the region. Land rights in the region can retail for more than $63,000 an acre.
Huge shortage of well inspectors leaves many unmonitored -- Houston Chronicle reported today that several thousand wells just haven’t been checked recently. Not because oil and gas operations are so efficient that there are never any mistakes. But because there just aren’t enough inspectors to go around. Commissioners report that approximately 65 percent of wells haven’t been inspected for at least five years.“The Railroad Commission, which regulates the state’s oil and gas industry, says it not only has a severe shortage of inspectors – just 158 for 435,000 wells – but also antiquated computer systems that make it nearly impossible to track whether wells and their owners have histories of violating state rules and regulations.” The Chronicle reported that the Railroad Commission is seeking a special appropriation of about $45 million from the Legislature to hire more inspectors, upgrade its technology and reduce the inspections backlog, among other things. The goal is to inspect every well at least once every five years and make data more accessible to the commission and the public.
Is there enough natural gas processing capacity in SCOOP / STACK? - The SCOOP and STACK plays in central Oklahoma have emerged as two of the most productive and cost-effective plays in the entire U.S. Rigs are returning, crude oil production is rising, and so is production of associated natural gas. Moreover, the RBN production economics model shows that SCOOP and STACK will continue to be attractive to drillers under all of our various price scenarios—even if crude were to slip back below $50 and natural gas goes back into the dog house, where it has been headed the past few days. Today we continue our look at the side-by-side Sooner State plays with a review of existing and planned gas processing capacity. SCOOP and STACK (acronyms for South Central Oklahoma Oil Province and Sooner Trend Anadarko Canadian Kingfisher, respectively) sit within an 11-county geographic area in central Oklahoma where drilling activity is targeting the oil-rich Woodford and Meramec shale formations of the Anadarko Basin (see Scoop-y Doo and All Come to Look for a Meramec). Producers have successfully exploited this area for decades, but for a time production growth faded. More recently though, the region has been enjoying a revival of sorts as one of the most attractive shale plays in the U.S. Drilling activity has ramped up in recent years, led by Continental Resources in the SCOOP, and by Newfield Exploration in the STACK.
Study Links Childhood Leukemia With Living Near Oil and Gas Development -- With the rise of new technologies like fracking and horizontal drilling, oil and gas development in the U.S. has exploded over the last 15 years. As development expands, it's also pushing ever closer into areas where people live. It's been estimated that today more than 15 million Americans live within one mile of oil and gas development. The drilling process, of course, has the potential to emit toxic substances, including the carcinogen benzene, polycyclic aromatic hydrocarbons and diesel exhaust, into the surrounding air and waterways. But researchers have long been trying to determine to what extent oil and gas drilling operations may threaten public health, particularly around cancer risk. However, new research suggests that children living in areas of high-density oil and gas development may face increased risk of health impacts, namely a certain type of leukemia, as a result of their exposure to pollutants associated with this activity. In some parts of Colorado where oil and gas development is especially concentrated, hundreds of oil and gas wells reportedly lie within one mile of residential areas. And according to a recent study , children and young adults who were diagnosed with acute lymphocytic leukemia were 4.3 times more likely to live within 10 miles of an active oil and gas well than kids with other types of cancer. This finding, published in the scientific journal PLOS One, applied to youth between 5 and 24 years old. "Over 378,000 Coloradans and millions of Americans currently live within a mile of at least one oil and gas well and petroleum development continues to expand into residential areas," Dr. Lisa McKenzie said in a statement .
Colorado Fracking Suit Pits State Vs. Community – -- In the latest salvo in an intensifying national battle over climate change policy and fossil fuel extraction, Colorado Attorney General Cynthia Coffman filed a lawsuit aimed at preventing local communities from restricting hydraulic fracturing. The Republican’s lawsuit on behalf of the powerful oil and gas industry comes only a few years after fossil fuel industry campaign cash boosted her campaign for public office. Republicans have traditionally portrayed themselves as supporters of local control; during a presidential campaign visit to Colorado, Donald Trump said he supported local officials’ right to restrict fracking. But Coffman’s lawsuit aims to overturn moratoriums on fracking passed by Boulder County officials who said they wanted to develop detailed plans for orderly fossil fuel development. “It is not the job of industry to enforce Colorado law; that is the role of the Attorney General on behalf of the People of Colorado,” Coffman said in a statement that asserted the lawsuit was designed to uphold state law. “Boulder County’s open defiance of state law has made legal action the final recourse available to the state.” Coffman's lawsuit to block local fracking regulations was filed just as a new Colorado School of Public Health study found that children in the state with "leukemia were 4.3 times more likely to live in the densest area of active oil and gas wells than those with other cancers." The legal fights over fossil fuel development in Colorado carry national significance, because the political swing state has one of the country’s largest reserves of natural gas.
Thousands of spills at US oil and gas fracking sites - BBC News: Up to 16% of hydraulically fractured oil and gas wells spill liquids every year, according to new research from US scientists. They found that there had been 6,600 releases from these fracked wells over a ten-year period in four states. The biggest problems were reported in oil-rich North Dakota where 67% of the spills were recorded. The largest spill recorded involved 100,000 litres of fluid with most related to storing and moving liquids. The rapid growth in the extraction of oil and gas from unconventional sources in the US has had a massive impact on the production and consumption of energy over the past ten years. The key to this expansion has been the use of hydraulic fracturing, the process of injecting fluids with chemical additives under pressure to crack underground rock and release the trapped resources. However, environmental campaigners have long been troubled by the potential for this process to contaminate water supplies and the environment through leaks and spills. A study carried out by the US Environment Protection Agency on fracking in eight states between 2006 and 2012 concluded that 457 spills had occurred. But this new study, while limited to just four states with adequate data, suggests the level of spills is much higher. The researchers found 6,648 spills between 2005 and 2014. "The EPA just looked at spills from the hydraulic fracturing process itself which is just a few days to a few weeks," lead author Dr Lauren Patterson from Duke University told BBC News. "We're looking at spills at unconventional wells from the time of the drilling through production which could be decades." The state reporting the highest level of spills was North Dakota, a hot bed of activity in both oil and gas recovery.
Fracking Caused 6,648 Spills in Four States Alone, Duke Study Finds - Hydraulic fracturing, or fracking , has long been tied to environmental risks such as spills. The frequency of spills, however, has long been murky since states do not release standardized data. Estimates from the U.S. Environment Protection Agency ( EPA ) vary wildly. "The number of spills nationally could range from approximately 100 to 3,700 spills annually, assuming 25,000 to 30,000 new wells are fractured per year," the agency said in a June 2015 report . Also, the EPA reported only 457 spills related to fracking in 11 states between 2006 and 2012. But now, a new study suggests that fracking-related spills occur at a much higher rate. The analysis, published Feb. 21 in the journal Environmental Science & Technology , revealed 6,648 spills in four states alone—Colorado, New Mexico, North Dakota and Pennsylvania—in 10 years. The researchers determined that up to 16 percent of fracked oil and gas wells spill hydrocarbons, chemically laden water, fracking fluids and other substances.
States' data on fracking well spills inadequate for comprehensive study, researchers say - The nation's regulation of oil and gas development is a mish-mash of disjointed state oversight that makes it difficult to quantify the environmental impacts of drilling. A new study highlights just how inconsistent spill reporting is, showing that the range in requirements makes it impossible to compare states or come up with a comprehensive national picture. The research, published Tuesday in the journal Environmental Science and Technology, pulled together some of the disparate data and found there have been about 5 spills each year for every 100 wells that have been hydraulically fractured. Of the states examined, North Dakota had the highest rate of spills while Colorado companies reported just 11 spills per 1,000 wells annually. But some or all of that difference may be due to the huge differences in what the states ask oil companies to report. North Dakota requires operators to report any spill of 42 gallons or more, while Colorado and New Mexico generally don't ask for anything smaller than 210 gallons. Texas, the nation's top oil and gas producing state, wasn't even included in the study because detailed data was not easily accessible. "It's quite scattershot the amount of information being collected, the form in which it's being collected and the way in which it's being shared with the public," said Kate Konschnik, a co-author of the study and director of the Harvard Environmental Policy Initiative. The paper comes just as Scott Pruitt takes over as administrator of the Environmental Protection Agency. While the agency enforces the nation's environmental laws, many elements of oil and gas development, including fracking, are overseen by states. Pruitt was previously attorney general of Oklahoma, a top oil and gas producer, and has vigorously advocated that states should have regulatory autonomy.
North Dakota Light, Sweet Oil -- About $3 Less/Bbl Than WTI -- A Reader -- A reader writes, with regard to pricing North Dakota light sweet oil (Bakken oil): I have been tracking the monthly average price of ND sweet and WTI since March 2010. These prices are compared each month with the price for the month’s sales we receive from XTO, our largest operator. The price we receive has averaged $6.00 per barrel more than the reported ND sweet price. The received price has averaged about $5.00 less than WTI. However, breaking the WTI differential down I find that it has averaged $3.00 or less for the last two years. Big spreads impacting the long-term average were experienced primarily in 2013 when there were some rather large spreads. As a result, when I’m estimating prices, I use the WTI and back off about $3.00. The NDS price just doesn’t give me much guidance. I have no explanation for why we are so far above the NDS average but I like it! The other three operators usually run a $1.00 of so higher than the XTO price so it is not a phenomena generated by XTO. Thank you, very much appreciated. I'm curious what the experience of others receiving royalties from wells in the Bakken are experiencing. But that makes it pretty easy: during periods of less volatility in pricing it appears that ND sweet, light oil is about $3 less / bbl than the WTI quote seen.
I Must Be Doing The Math Wrong -- Fracking Sand Volume -- February 24, 2017 -- I did this while multi-tasking other tasks so there may be huge mistakes on this page. Back-of-the-envelope:
- Bakken horizontals are about 10,000 feet long
- 1 million lbs of sand = 1,000,000 / 10,000 = 100 lbs / foot
- 10 million lbs of sand = 10,000,000 / 10,000 = 1,000 lbs / foot
- 30 million lbs of sand = 30,000,000 / 10,000 = 3,000 lbs / foot
Is that correct? Note this article at Investor's Business Daily: Continental Resources (CLR) plans to use less sand than other exploration and production companies do, as demand for materials used in fracking takes off and potentially adds to cost pressures for shale companies. Glen Brown, Continental's vice president of exploration, said during a conference call Thursday that the bellwether shale company is using 1,000-2,000 pounds of fracking sand per foot as it tests enhanced completion techniques in the Bakken formation. He noted that Continental's optimum range is closer to 1,000-1,500 pounds in the company's part of the shale play, while other operators in the area are using more than 3,000 pounds. Over at "high intensity fracks" -- these are the exceptions -- run through the list, see how many are using more than 10 million lbs/frack. I'm not seeing it (yet).
Whiting Petroleum nearly doubles its capital spending budget -- Whiting Petroleum Corp., North Dakota's largest oil producer, nearly doubled its 2017 budget for capital spending as crude prices stabilize following a two-year rout. However, shares of the company were down 3.5 percent after the bell as the oil producer's revenue fell below analysts' expectations due to a steep drop in production. Oil companies are betting big on a continued rise in crude prices by buying up acreage and raising capital spending. Whiting boosted its 2017 spending to $1.1 billion from $554 million in 2016. The company's production fell 23.4 percent to 118,890 barrels of oil equivalent per day in the fourth quarter ended Dec. 31. Whiting's net loss available to common shareholders widened to $173.3 million, or 59 cents per share, in the quarter from $98.7 million, or 48 cents per share, a year earlier.
Investors Urge Banks To Support Rerouting Dakota Access Pipeline -- A group of more than 120 investors on Friday told 17 banks financing construction of the Dakota Access Pipeline that the project should be rerouted away from a Native American tribe’s reservation. “We are concerned that if DAPL’s projected route moves forward, the result will almost certainly be an escalation of conflict and unrest as well as possible contamination of the water supply,” said the statement to banks, including Citibank and Wells Fargo, which have lent money to the companies behind the 1,172-mile oil pipeline. The group of investors includes California’s giant public employee pension fund, CalPERS; New York City teacher and firefighter pensions; dozens of religious organizations; and asset management firms. They have a combined $653 billion in managed assets, according to the statement. The investors expressed support for the Standing Rock Sioux, who say that the oil line threatens their drinking water and violates territorial rights in North Dakota established by an 1851 treaty with the federal government. “We call on the banks to address or support the Tribe’s request for a reroute and utilize their influence as a project lender to reach a peaceful solution that is acceptable to all parties, including the Tribe,” the letter said. The group worries that its investments in the banks could be hurt by a public backlash against the project through legal action or boycotts. “As investors we are very concerned by the reputational and potential financial risks due to these banks being associated with DAPL,” the statement said. Representatives of the banks were scheduled to meet with tribal leaders Friday, The Financial Times reported.
Like Keystone XL, Much of Dakota Access Pipeline Steel Made by Russian Company Tied to Putin – Steve Horn - At his February 16 press conference, President Donald Trump discussed his executive orders calling for U.S. federal agencies to grant TransCanada and Energy Transfer Partners the permits needed to build the Keystone XL and Dakota Access pipeline projects. Trump also cited a different executive order signed that same day, highlighting the “Buy American measures” which he said were “in place to require American steel for American pipelines.” But like Keystone XL, as DeSmog previously reported, much of the steel for the Dakota Access project appears to have been manufactured in Canada by Evraz North America, a subsidiary of the Russian steel giant Evraz. Evraz is owned in part by Roman Abramovich, a Russian multi-billionaire credited for bringing Russian President Vladimir Putin into office in the late 1990s. DeSmog's finding comes on the heels of Trump's former National Security Adviser Michael Flynn resigning for potentially having discussed U.S. sanctions against Russia with Russian diplomats before Trump took office, apparently without the knowledge of Trump or now-Vice President Mike Pence. Lisa Dillinger, who does media relations for Dakota Access, LLC, told DeSmog that 57 percent of the pipeline was manufactured in the U.S. by both Stupp Corporation in Baton Rouge, Louisiana and Welspun in Lake Charles, Louisiana. The remaining pipe, Dillinger said, was manufactured in Canada, though she did not comment on which Canadian company manufactured the steel. Welspun does not appear to have a plant in Lake Charles, though it does have one in Little Rock, Arkansas. The company is headquartered in Mumbai, India, while Stupp is headquartered in Baton Rouge. In March 2015, the Dakota Free Press published photos of a line pipe storage site located in Brown County, South Dakota. One of those photos shows pipelines labeled “Made in Canada.” Another photo published that same month by John Davis of the Aberdeen American News also shows the pipes were labeled “Made in Canada.” As Evraz North America points out on its website, it serves as the “only supplier of fully 'Made in Canada' [large diamater] pipe.”
Deadline Looms for Dakota Access Pipeline Protest Camp (AP) -- As dawn breaks over an encampment that was once home to thousands of people protesting the Dakota Access oil pipeline, a few hundred holdouts rise for another day of resistance. They aren't deterred by the threat of flooding, nor by declarations from state and federal authorities that they must leave by Wednesday or face possible arrest. They're determined to remain and fight a pipeline they maintain threatens the very sanctity of the land. Protesters have been at the campsite since August to fight the $3.8 billion pipeline that will carry oil from North Dakota through South Dakota and Iowa to a shipping point in Illinois. Dallas-based Energy Transfer Partners began work on the last big section of the pipeline this month after the Army gave it permission to lay pipe under a reservoir on the Missouri River. The protest camp is on Army Corp of Engineers land nearby. The protests have been led by Native American tribes, particularly the Standing Rock Sioux and Cheyenne River Sioux, whose reservation is downstream. They say the pipeline threatens drinking water and cultural sites. ETP disputes that. Faced with the prospect of spring flooding, some protesters are considering moving to higher ground, though not necessarily off the federal land. Some may move to the Standing Rock Reservation, where the Cheyenne River Sioux is leasing land to provide camping space even though Standing Rock Sioux Chairman Dave Archambault has urged protesters to leave. "We have the same goals," Cheyenne River Chairman Harold Frazier said of himself and Archambault. Those urging the protesters to leave say they're concerned about possible flooding in the area as snow melts. "The purpose of this is to close the land to ensure no one gets harmed," One concern is that floodwaters could wash tons of trash and debris at the encampment into the nearby rivers. "One of the biggest environmental threats to the Missouri is the camp itself," said North Dakota Gov. Doug Burgum.
Watch Live As The Last Remaining Standing Rock Protesters Are Evicted By Police - After nearly a year of conflict, today may mark the last stand at Standing Rock as authorities’ begin their final eviction of protesters, also known as water protectors, from their camps.The standoff in North Dakota revolves around Native American opposition to the Dakota Access Pipeline (DAPL), a controversial initiative the Standing Rock tribe says crosses over land that belongs to them pursuant to the Treaty of Fort Laramie from 1868.The #NoDAPL movement gained widespread attention in 2016 after videos and reportsemerged showing law enforcement’s brutal militaristic crackdown on protests. Hundreds of water protectors have been arrested and injured — some critically. The eviction, expected imminently today, stems from an executive order signed by Governor Burgum.Breaking: North Dakota Executive Order Forcing Unarmed Indigenous People Off Treaty Lands #defundDAPL #MniWiconi pic.twitter.com/PYsmo92xrt— IndigenousEnviroNet (@IENearth) February 22, 2017 Below is a collection of live video from the ground at Standing Rock that we will update throughout the day:
Deadline to clear protest camp prompts fiery farewell - The deadline for protesters to vacate the premises of the Oceti Sakowin camp near the construction of the controversial Dakota Access camp saw about 200 protesters “ceremoniously march” through the camp only 30 minutes before the eviction took place, reports the Huffington Post today. On their way out, some of the remaining activists set fire to a some of the remaining structures, including one at the camp’s main entrance, according to USA Today. At least two people were reported injured and taken to a Bismarck hospital. You can watch the clips of the fires from MSNBC here, posted on YouTube this morning.In preparation for the camp’s evacuation, some protesters set up razor wire to block the camp’s entrance while others beat drums and sang songs on their way out of the camp. One man was seen carrying an American flag upside-down. Others set off fireworks.The camp’s evacuation came after North Dakota Gov. Doug Burgum and the Army Corps of Engineers said it was necessary to clear the area to keep people safe from flooding and to keep debris from contaminating the river system. Activists left behind mounds of garbage and debris as the camp went from thousands of inhabitants to just a few hundred people remaining behind. A Facebook post by Gov. Burgum outlined travel assistance offering each protester water, snacks, a food voucher, a personal hygiene kit, a health and wellness assessment, hotel lodging for one night, and bus fare for the return home. The travel assistance was established to help clear out the camp ahead of spring flooding. Authorities warned that any remaining protesters risk arrest.
Stunning photos show Dakota pipeline protesters setting their tents on fire as deadline to leave passes - A group of activists protesting against the Dakota Access oil pipeline set their campground dwellings on fire in a symbolic final act as the deadline for them to leave passed on Wednesday. About 150 protesters remained out of the thousands that originally occupied the main encampment in Cannon Ball, North Dakota, by the time the 2 p.m. deadline rolled around. A small group stayed after the deadline, and are facing arrest, according to media reports. "It's an act of defiance," protester Nick Cowan told The New York Times. "It’s saying, 'If you are going to make us leave our home, you cannot take our space. We'll burn it to the ground and let the earth take it back before you take it from us.'" Wednesday's deadline, issued last week by North Dakota Gov. Doug Burgum, ended six months of resistance from the local Standing Rock Sioux tribe and activists who demanded an environmental review of the pipeline before its construction. The pipeline, they fear, could result in catastrophic oil spills that would damage sacred sites and pollute the water supply. Burning the remnants of the encampment is in line with Standing Rock tradition, according to one activist and journalist at the scene. "For some Indigenous peoples, when traditional dwellings are erected they are not dismantled in a conventional way," Jenni Monet told NBC News. "They are taken apart in a ceremonial way and that ceremonial way is by burning."
10 Arrested as Deadline to Evacuate Dakota Access Pipeline Protest Camp Passes --The deadline set by North Dakota Gov. Doug Burgum for evacuating the Cannon Ball Dakota Access Pipeline protest site passed Wednesday and most protesters peacefully vacated before the 2 p.m. cutoff time. Authorities arrested 10 remaining protesters refusing to leave the campground and an estimated few dozen people are still at the site. The Chicago Tribune reported this morning that the North Dakota's governor said the remaining people "will have another chance to leave peacefully Thursday." New polling released from the Pew Research Center Wednesday shows nearly half of Americans oppose building the pipeline. Despite continued public protest across the country—including divestment movements in several major cities —lawyers for the pipeline estimated in a court filing Wednesday that oil could be flowing as early as mid-March. "These water protectors inspired people around the world by standing up for the right to clean water and a future free from fossil fuels," Greenpeace USA Climate Campaigner Mary Sweeters said. "Allies around the world acting in solidarity with Standing Rock cannot stop now. We must expose every institution pushing the Dakota Access Pipeline project through and projects like it."
Dakota Access oil could flow by March 6 | The Dickinson Press: .—A status report from the contested Dakota Access Pipeline says it has completed the pilot hole for its horizontal drill under the Missouri River and the pipeline will be ready to flow oil as early as March 6. The company filed the information in U.S. District Court in Washington, D.C., to comply with a federal court order for weekly updates on the pipeline's status while litigation with the Standing Rock and Cheyenne River Sioux tribes continues. The first status report, filed Monday, says the pilot hole that stretches 7,500 feet from one side of the Missouri River/Lake Oahe just north of Standing Rock is being reamed to accept the 30-inch-diameter pipe. Even as the $3.8 billion pipeline from North Dakota's Bakken oil fields to Illinois nears completion, the pipeline's future is in question in federal court. The tribes' attorney, Jan Hasselman, said he was surprised by the early oil-flow date, since the company told the court its best-case scenario was further out, into May. Hasselman, on behalf of the tribes, wants Judge James E. Boasberg to issue a summary judgement in the case filed against the U.S. Army Corps of Engineers after it issued a general permit for the pipeline crossing in July. "We moved fast to get in front of operations. What's disappointing is that this (flow date) is a couple of weeks earlier than it told the court was its best-case scenario," Hasselman said. "Time is of the essence, but, as the judge said, the lawsuit doesn't become irrelevant if they turn on the tap, because he can always direct them to turn it off." The case had been put on hold with the Obama administration' s decision to withhold the corps' river-crossing easement for the pipeline pending a full environmental impact statement, including whether tribal rights had been considered.
Dakota Access developer ‘underestimated’ social media opposition | TheHill: The chief executive of the company developing the Dakota Access pipeline said he “underestimated the power of social media” in the wake of massive protests agains the project. On a call with investors on Thursday, Energy Transfer Partners CEO Kelcy Warren said he was surprised by the way Dakota Access opponents could share stories about the project online and “get away with it,” Bloomberg reports. “There was no way we can defend ourselves,” Warren said, according to the report. “That was a mistake on my part.” Environmentalists and indigenous rights groups broadly oppose the Dakota Access project and have rallied that opposition through protests in Washington, North Dakota, around the country and online. They say the project threatens water supplies in North Dakota and infringes on a local tribe's rights. Opponents of the project were able to stall it for several months, but President Trump fast-tracked it in January. The company now expects to be able to move oil through the $3.8 billion, 1,172-mile project within months. Dakota Access supporters, including Energy Transfer Partners, insist they followed the law and worked to consult with the Standing Rock Sioux Tribe, which opposes the project, before finalizing the pipeline’s route. A federal judge in September mostly approved the steps taken by both Dakota Access and regulators in finalizing the project. Regardless, protests against the pipeline persisted into this month; on Wednesday, law enforcement officials in North Dakota cleared a protest camp established by the pipeline’s opponents while construction work on the project continues nearby.
Dakota Access Owner Says Pipelines Safer Than Rail Yet Owns Rail Hub Connected to Pipeline – Steve Horn - In response to the ongoing battle over the Dakota Access and Keystone XL pipelines, the oil industry and the groups it funds have started a new refrain: transporting crude oil through pipelines is safer than by “dangerous” rail. It's a talking point wedded to the incidents over the past several years which have seen mile-long oil trains derail and even explode, beginning with the 2013 Lac-Megantic oil-by-rail disaster in Quebec, which killed 47 people. These trains were carrying oil obtained via hydraulic fracturing (“fracking”) from North Dakota's Bakken Shale basin. Bakken crude may be more flammable than other crude oils and is the same oil which would travel through the Dakota Access pipeline (DAPL), owned by Energy Transfer Partners. What goes unsaid, however, is that the Dakota Access pipeline actually connects to an oil-by-rail hub, also owned by Energy Transfer Partners, in Patoka, Illinois. Patoka is the end point of this pipeline, where it links to both the rail hub and the Energy Transfer Crude Oil Pipeline Project (ETCOP). “DAPL will provide shippers with access to Midwestern refineries, unit-train rail loading facilities to enable deliveries to East Coast refineries, and the Gulf Coast market through an interconnection in Patoka, Illinois, with ETCOP, which will provide crude oil transportation service from the Midwest to the Sunoco Logistics Partners and Phillips 66 storage terminals located in Nederland, Texas,” Energy Transfer stated in an August 2016 press release. While Energy Transfer Partners has not hidden the fact that it owns the Patoka oil-by-rail hub, entities the company funds are taking a different tact, presenting inland oil transport options as being either pipeline or oil-by-rail, but not both together. “The Dakota Access Pipeline has always been committed to providing low-cost energy as safety [sic] as possible,” Standing Rock Fact Checker, a project funded by Energy Transfer Partners in reaction to protests unfolding near the Standing Rock Sioux Reservation in North Dakota, wrote in a blog post. “Pipelines are already the safest means of transporting crude oil — 5 times safer than rail, 13 times safer than shipping, and 530 safer than trucking — and the Dakota Access Pipeline will be no exception.”
Natural gas leaking from pipeline in Alaska's Cook Inlet: Natural gas for at least 10 days has leaked from an underwater natural gas pipeline in Alaska's Cook Inlet and floating ice has prevented divers from reaching the site. The gas is bubbling from a 20-centimetre pipeline in 24 metres of water about six kilometres off shore. The pipeline belonging to Hilcorp Alaska, LLC, moves processed natural gas from shore to four drilling platforms in the inlet. The Alaska Department of Environmental Conservation is investigating the leak. In an email response to questions, spokeswoman Candice Bressler said the agency is assessing public health and environmental risks. "We believe the risk to public health and safety is small," the agency said. "Environmental risk is less easy to quantify since a monitoring and assessment program is not yet in place." The federal Pipeline and Hazardous Materials Safety Administration is also investigating. The U.S. Coast Guard warned mariners to stay at least 300 metres from the bubbling gas. Another federal agency expressed concern over possible adverse effects on marine mammals. "Our greatest concern is for endangered Cook Inlet beluga whales and impacts to their critical habitat," said Julie Speegle, spokeswoman for the fisheries section of the National Oceanic and Atmospheric Administration, by email. The natural gas discharge is within the winter foraging area for the white whales, she said. ;
Traders drain pricey U.S. oil storage as OPEC deal bites | Reuters: Traders are turning the spigots to drain the priciest storage tanks holding U.S. crude stockpiles as strengthening markets make it unprofitable to store for future sale and cuts in global production open export opportunities. That could signal the beginning of the end for a two-year trade play that came about during an international price war and global oil glut. It is also what the world's largest oil exporters wanted to see when they agreed last year to work together in a historic supply cut to end the glut. From Houston through Louisiana to floating storage in the Gulf of Mexico, traders are starting to ship crude out of inventories as the rising price of oil for near-term delivery erodes the profits to be had by holding onto oil for later sale. To be sure, shipments from storage have so far made only a small dent in record U.S. crude inventories. But if prompt oil prices continue to strengthen, more storage will empty out. "Right now, traders aren't incentivized (to store)," said Sandy Fielden, director of oil and products research at Morningstar. "It won't all stampede out of the gate, but inventory levels will come down. What will happen is that some of it will go to refineries, but a fair amount will be exported too." To make money by holding crude, the spread between oil prices for future months needs to be wide enough to cover the cost of leasing tank space and borrowing the money to buy the fuel to fill it. For the last two years, U.S. traders have rushed to that opportunity as those price spreads widened.Since November, when the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed to cut output, the spread, or discount of prompt barrels to later supplies known as a contango, between the front and second month U.S. benchmark CLc1-CLc2 crude price has narrowed to as little as 26 cents from 95 cents a barrel. That is no longer enough to cover the more expensive storage options, traders said.
Recession Concerns Grow After Gasoline Demand Slides Most In 16 Years --Two weeks ago, we reported that when Goldman observed the latest gasoline demand data, it said that either something must be wrong with the data, or the US is in a recession: as the firm's commodity analyst Damien Courvalin put it, such a steep drop in in US gasoline demand "would require a US recession." He added that "implied demand data points to US gasoline demand in January declining 460 kb/d or 5.2% year-on-year. In the absence of a base effect, such a decline has only occurred in four periods since 1960 during which time PCE contracted."Bloomberg's Liam Denning confirms that "big dips in U.S. gasoline demand, especially of 5 percent or more, are almost unheard of outside of a recession or oil crisis." Goldman then adds that "to achieve the 5.9% decline suggested by the weekly data, our model requires PCE to contract 6%, in other words, a recession."At this point Goldman - which naturally was aghast at the possibility that there is an under the radar consumer recession taking place at a time when the bank was predicting three rate hikes - quickly pivoted and explained that a far more likely explanation is that the latest weekly report was an aberration, and that there was simply something wrong with the data. Our analysis identifies weekly yield and exports as systematically deviating from their final values and such biases suggest that demand could be revised higher by 190 kb/d. The EIA's real-time export data still includes estimates and we see potential for the recent shifts in the Mexican gasoline market to exacerbate the overstatement of US exports by an additional 185 kb/d given (1) lower PEMEX refinery turnarounds, and seasonally lower demand exacerbated by the January 16% hike in prices. Adjusting for these lower exports points to US gasoline demand declining only 85 kb/d yoy in January, in line with our macro model.
U.S. crude oil production increases following higher drilling activity -- U.S. crude oil production increased for the second consecutive month in November 2016, the first time this has occurred since early 2015. Increased drilling activity in the Permian region, which spans Texas and New Mexico, as well as the start of a number of new projects in the Federal Offshore Gulf of Mexico (GOM), more than offset declining production from other regions in October and November 2016. Increased drilling in the Permian region responded relatively quickly to a rise in the West Texas Intermediate (WTI) crude oil price, which increased from an average of near $30 per barrel (b) in the first quarter of 2016 to $45/b or higher beginning in the second quarter of 2016. In the GOM, the new projects that came online in the last quarter of 2016 were planned and approved during the 2012–14 period. U.S. crude oil production averaged an estimated 8.9 million barrels per day (b/d) in 2016, and monthly U.S. crude oil production increased by 232,000 b/d in October and by 105,000 b/d in November. Production in the Lower 48 states increased by 104,000 b/d in October and decreased by 2,000 b/d to average 6.7 million b/d in November, while GOM production increased by 85,000 b/d in October and by 89,000 b/d in November. Changes in Alaskan oil production make up the remaining differences. The Permian region was the only area covered in EIA’s Drilling Productivity Report (DPR) that did not experience a month with a year-over-year production decline throughout 2014–16. This region benefits from a number of highly productive formations located within what is an established oil-producing region that allows producers to continue operations despite low prices. When the WTI spot price rose to more than $45/b in May 2016, the Permian experienced a rapid growth in drilling rigs, increasing by 85 rigs from May to November 2016, suggesting that some operators can generate positive returns in the region at those prices.
US Shale Production To Soar By 3.5 Million Barrels/Day Over Next Five Years: BofA Explains Why - Two years ago, when Saudi Arabia launched on an unprecedented campaign to crush high-cost oil producers, in the process effectively putting an end to the OPEC cartel (at least until last year's attempt to cut production), it made a bold bet that US shale producers would be swept under when the price of oil tumbled, leading to a tsunami of bankruptcies, as well as investment and production halts. To an extent it succeeded, but where it may have made a glaring error is the core assumption about shale breakeven costs, which as we reported throughout 2016, were substantially lower than consensus estimated. In his latest note, BofA's Francisco Blanch explains not only why a drop in shale breakevens costs is what is currently the biggest wildcard in the global race to reach production "equilibrium", but also why US shale oil production could surge in the coming years, prompting OPEC to boost production in hopes of recapturing market share. Specifically, Blanch predicts that US shale oil production could grow by a whopping 3.5 million barrels per day over the next five years. Here's why: as he explains "many oil companies around the world have survived the price meltdown by bringing down breakeven costs in the last two years. But what parts of the world can grow output in the years ahead? In BofA's view, US shale oil producers will come out ahead and deliver outsized market share gains by 2022. Shale oil output in the US may grow sequentially by 600 thousand b/d from 4Q16 to 4Q17 on increased activity in oil rigs and fast productivity gains. Importantly, breakeven costs for key major US plays now stand around the $55/bbl mark. As crude oil prices recover further, cost reflation may partly offset reduced costs linked to less regulation. So assuming a gradual recovery in oil prices into a long-term average of $60 to $70/bbl, BofA projects average annual US shale oil growth of 700 thousand b/d in 2017-22, or roughly 3.5 million bpd over the next 5 years. Shale production could rise even more if prevailing oil prices are higher than $55/barrel. Here is BofA's sensitivity analysis: We estimate that US shale production will decline annually by 270 thousand b/d, on average, until 2022 in a $40/bbl WTI environment. At $50/bbl, growth returns, though only at a small average of 240 thousand b/d. Should WTI trade at $60 for the next five years, growth reaches 700 thousand b/d, and at $70/bbl it reaches 950 thousand b/d (Chart 15). It goes without saying that the level of US shale output in 2022 will highly depend on the average price of WTI in the next five years (Chart 16).
U.S. crude oil imports from Saudi Arabia and Iraq combined recently approached five-year high, but are expected to decline - In November 2016, high production and seasonally low internal demand contributed to record crude oil exports from Iraq and near-record exports from Saudi Arabia (according to the Joint Organizations Data Initiative (JODI), with published data dating to January 2002). In that same month price spreads in the market supported high levels of U.S. crude imports from those countries. However, market developments, including the November 2016 agreement among certain members of the Organization of the Petroleum Exporting Countries (OPEC) to reduce production and the recent widening of the spread between Dubai/Oman crude and U.S.-produced Mars crude, suggest U.S. imports from Saudi Arabia and Iraq are now becoming less attractive to U.S. refiners. According to the latest JODI data, Saudi crude oil exports reached 8.3 million barrels per day (b/d) in November 2016, the highest level since May 2003, before declining to 8.0 million b/d in December. Saudi exports generally increase from August to November as seasonal declines in domestic consumption increase availability of oil for export. In Iraq, exports reached a record high of almost 4.1 million b/d in November and remained at that level in December (Figure 1). According to JODI data, Saudi and Iraqi production levels were relatively high prior to the pledged production cuts beginning January 2017, with December 2016 volumes up 321,000 b/d and 700,000 b/d, respectively, from their year-ago levels, creating an opportunity to increase exports.
U.S. Crude Exports Surge to a Record – Another week, another record for U.S. crude exports. Producers and traders shipped out 1.21 million barrels of crude a day from the U.S. in the week that ended February 17, the most in Energy Information Administration data going back to 1993. Domestic output increased to 9 million barrels per day last week, the fastest pace since April, while U.S. refiners used the least crude since October 2015. Shale output has surged and tankers loaded in the Middle East during the last days of all-out production by OPEC nations arrived this month in the U.S., swelling stockpiles to a record. Prices for West Texas Intermediate crude have averaged $2.24 a barrel below global marker Brent this year, making U.S. oil more attractive to refiners around the world. Local refiners are using as much domestic crude as they can and the remaining incremental production is being exported, Gary Morgan, director for Clarksons Platou Shipping Services USA LLC’s analyst group, said by phone from Houston. "Going forward, most of the increasing production will be for exports. As output moves from 9 million barrels a day to 9.3 million or 9.4 million, three-quarters of that increased output will be for export." For now, U.S. crude is looking especially attractive to buyers in Asia. WTI has averaged 22 cents below Dubai, a lower-quality grade that’s the benchmark for Asia, this year, based on front-month swaps data from broker PVM Oil Associates Ltd.. That compares to a $3.76 premium a year ago. Most of the incremental volumes from last week were destined for the Far East, Court Smith, director of research with shipbrokers MJLF & Associates, said by instant message from Stamford, Connecticut. "The Far East will remain the main destination for U.S. crude exports in the short-term, assuming there are no big swings in price spreads."
Shale production will be used for export, won’t hurt OPEC cuts -- OPEC’s agreement to cut production in order to boost the global oil market seems to be working, but new reports indicate the organization could extend the cuts. The group is likely to determine whether or not to continue with the cuts at its bi-annual meeting, scheduled for May 25. Seeking Alpha explains three reasons why this could happen:
- The “hangover” from overproduction in November and December was felt in January and February, so the positive effects from the cuts are just beginning to show. The six-month production cut now looks more like a four-month cut.
- Analysis of data from the cuts will take a while, and the short time until the May meeting may not be enough time to figure out whether or not the cuts did any good.
- Reports from Saudi Arabia show that the Saudi Aramco IPO will be delayed until 2018. This means that Saudi Arabia will have to support higher oil prices longer, since there’s not enough time to “fundamentally shift oil tactics” before the IPO, so staying on course is better for keeping oil prices higher.
Analysts around the world have speculated about compliance by OPEC since the agreement to cut production was signed. So far, reports show about a 90 percent compliance rate for OPEC and 40 percent for non-OPEC producers, according to Seeking Alpha. Even if some countries OPEC countries cheat, and compliance is not total, production cuts in any form are better than ending the agreement. Plus, the International Energy Agency (IEA) has said this is one of the “deepest cuts on record.” So despite some the fact the United Arab Emirates (UAE) has delivered smaller portions of their pledged reductions, Reuters reports that However, oilfield maintenance could help push the country’s compliance higher. The UAE’s OPEC governor, Ahmed Al Kaabi, told Reuters it is committed to OPEC cuts and is taking necessary measure to ensure it is fully compliant. Oil inventories are still high, and a glut still exists. Reuters reporters Catherine Ngai and Liz Hampton note that traders are reducing U.S. crude stockpiles, since it is unprofitable to store for future sales. This “could signal the beginning of the end for a two-year trade play that came about during an international price war and global oil glut.” In the last week, U.S. crude exports have hit a record high, and producers and traders have shipped 1.21 million barrels of crude a day.
U.S. shale revival likely to cap oil price gains: Kemp (Reuters) - U.S. shale producers are growing production again, renewing the challenge to OPEC’s market share and potentially limiting further increases in oil prices during 2017/18.U.S. crude and condensate production increased in both October and November, the first back to back increases since early 2015, according to the U.S. Energy Information Administration (http://tmsnrt.rs/2lOpdAs).Domestic oil production rose to 8.9 million barrels per day (bpd) in November, up from a cyclical low of 8.6 million bpd in September (“U.S. crude oil production increases following higher drilling activity”, EIA, Feb. 21).Offshore production from the Gulf of Mexico accounted for more than half the total gain, adding an extra 175,000 bpd, with output from Alaska’s North Slope also up 61,000 bpd.However, production increases were also reported from onshore predominantly shale plays in North Dakota (an extra 65,000 bpd), Oklahoma (11,000 bpd), New Mexico (15,000) and Texas (43,000 bpd).Production from the contiguous United States excluding the Gulf of Mexico was still down by almost 550,000 bpd (7.5 percent) in November 2016 compared with November 2015.But the annual decline was sharply lower than in May 2016 when output was down by almost 820,000 bpd (11 percent) compared with the same month a year earlier (http://tmsnrt.rs/2mfDDXA).U.S. oil production appears to have resumed an upward trend, after reaching a trough in September, and output was likely flat or higher in December, January and February. The number of rigs drilling for oil has risen by more than 280 (almost 90 percent) since the end of May 2016, according to oilfield services company Baker Hughes. Exploration and production firms are deploying an average of an extra 10 to 15 rigs each week to boost their oil output (http://tmsnrt.rs/2ltZmgn). And the increase in the rig count understates the extra new production because drilling and fracking operations have become much more efficient. Rig counts tend to affect recorded output with a significant lag because of delays in fracturing and other completion services as well as the gap before new production is reported.
ExxonMobil forced to make cuts to reported oil and gas reserves -- Reported oil and gas reserves at ExxonMobil dropped by 19 per cent last year as it revised away 3.5bn barrels of heavy bitumen at an oil sands project in Canada, the largest drop to be reported by one of the big international oil companies for at least a decade. In its 10-K annual report, filed to the Securities and Exchange Commission on Wednesday evening, Exxon said low oil and gas prices during 2016 meant that some of its assets no longer qualified as proved reserves. Its reported reserves were cut from 24.8bn barrels of oil equivalent at the end of 2015 to 20bn boe at the end of 2016. It is the second year in succession that Exxon’s reported reserves have fallen. It said that the cut, which was required by the SEC’s reporting rules, was “not expected to affect the operation of the underlying projects or to alter the company’s outlook for future production volumes”, and added that it could be reversed wholly or partially if crude prices recover. Exxon also defended its decision to take only relatively small charges for writing down the values of its assets because of weak oil and gas prices, saying “management does not believe that lower prices are sustainable if energy is to be delivered with supply security to meet global demand over the long term”. Although the drop in reported reserves does not have any direct impact on production or earnings, it underlines the strategic challenge the company faces in finding growth.
Exxon Cuts Reserves By A Record 3.3 Billion Barrels As Oil Crash Finally Takes Toll - Last September, when the price of oil was well below where it had been trading for the bulk of the past several years, we reported that NY Attorney General Eric Schneiderman was probing why Exxon Mobil hasn’t written down the value of its assets, two years into a pronounced crash in oil prices. The complaint was simple: out of the 40 biggest publicly traded oil companies in the world, Exxon - then still led by now Secretary of State Rex Tillerson - was the only one that hasn’t booked any impairments in the prior 10 years. And yet, Exxon had - until the later half of 2016 - declined to take any write-downs, the only major oil producer not to do so, which has led some analysts to question its accounting practices. All of that changed this afternoon, when Exxon, now ex-Tillerson, disclosed the deepest reserves cut in its history as the ongoing rout in oil prices erased the value of a $16 billion oil-sands investment and other North American assets. In a press release filed after the close, Exxon announced that "proved reserves were 20 billion oil-equivalent barrels at year-end 2016, inclusive of a net reduction of 3.3 billion oil-equivalent barrels from 2015. Reserves changes in 2016 reflect new developments as well as revisions and extensions to existing fields resulting from drilling, studies, analysis of reservoir performance and application of the methodology prescribed by the U.S. Securities and Exchange Commission." As a result of very low prices during 2016, certain quantities of liquids and natural gas no longer qualified as proved reserves under SEC guidelines.In other words, after years of denials, and claims that "we don't do write-down", Exxon just concluded the biggest reserve cut on record, as 3.3 billion barrels of crude was removed from the company's "proved reserves" category. Following the reserve cut, the company's total reserves dropped to 20 billion, the lowest in two decades.
Former Boehner Staffer Follows Revolving Door, Now Latest KXL Lobbyist -- TransCanada has wasted no time since President Donald Trump signed a January 24 executive order calling for U.S. federal agencies to permit construction of the Keystone XL pipeline. The Calgary-based company has already re-applied for a presidential permit through the U.S. Department of State to cross the U.S.-Canada border with the pipeline and has also applied in Nebraska to build the line across that state. It also has registered to lobby the federal government, deploying lobbyist and former GOP Congressional staffer Jay Cranford of theCGCN Group, for the job. As DeSmog has previously reported, fellow CGCN Group lobbyist Mike Catanzaro is the presumed choice for top energy adviser to President Trump. Catanzaro has a track record as a climate change denier and has lobbied for companies such as Devon Energy, America's Natural Gas Alliance (ANGA), and others.During 2016, Cranford lobbied alongside Catanzaro for an industry client list which included Encana Oil and Gas, Hess Corporation, Noble Energy, American Fuel and Petrochemical Manufacturers, Halliburton, and Koch Industries.Cranford's biography on the CGCN website reads like the prototype for the government-industry revolving door. “[Cranford] joined John Boehner’s leadership team in 2006 when the Ohio Republican was elected majority leader. During his time with Boehner, Cranford oversaw work on six committees, including Energy & Commerce, Natural Resources and Transportation and Infrastructure,” it says. “In that role, he helped coordinate legislative strategy with party leaders, rank-and-file lawmakers and the White House.” Cranford has worked as a pipeline lobbyist before, advocating on behalf of El Paso Corporation. Before joining the staff of Rep. Boehner (R-OH) — who himself is also now a lobbyist — Cranford served as staff director of the U.S. House Natural Resources Committee's Subcommittee on Energy and Minerals. While in this position, Cranford took several industry-funded trips, funded by the likes of BP, Shell, American Petroleum Institute, and Independent Petroleum Association of America.
Trump: Keystone, Dakota Access pipeline makers must buy US steel: President Donald Trump on Thursday said the companies behind two hotly contested oil pipelines must use U.S. steel in their projects. Trump ordered the Department of Commerce last month to develop a plan that would require any company that builds a pipeline within U.S. borders to use American-made materials and equipment. But he has previously stopped short of language suggesting a requirement in public statements, instead saying he would like the projects to be built with U.S. raw steel and pipes. The Commerce Department has not yet issued a report on the requirement, but Trump on Thursday said the companies behind the Keystone XL and Dakota Access pipelines would "have to buy" pipes made from U.S. steel. "And you're going to be doing pipelines now, you know that, right?" Trump told United States Steel CEO Mario Longhi during a meeting of business leaders at the White House. "We put you heavy into the pipeline business because we approved, as you know, the Keystone pipeline and Dakota, but they have to buy, meaning steel, so I'll say U.S. steel, but steel made in this country and pipelines made in this country." The requirement to use U.S. steel would create challenges for TransCanada because much of the pipe for its Keystone XL project has already been manufactured.It is unclear how the mandate would affect Energy Transfer Partners, since all but a small portion of its Dakota Access pipeline has been built. Energy Transfer expects the project to be ready to ship oil on April 1.
Canada's Trans Mountain crude oil pipeline oversubscribed by 25% in March - Kinder Morgan Canada will limit crude nominations on its Trans Mountain pipeline system by 25% in March, meaning the line will only carry 75% of nominated volumes, the company said Tuesday. March volumes on the Trans Mountain mainline system are expected to average 296,105 b/d, down from 326,280 b/d in February, Kinder Morgan said in an email. Exports from the Westridge Dock near Vancouver are expected to average 80,648 b/d in March, compared with 81,888 b/d in February. Vessel loadings are expected to consist of two barges and five tankers, the same amount as in February, Kinder Morgan said. Throughput on the Puget Sound pipeline is expected to average 136,546 b/d in March, down from 146,833 b/d in February. The Trans Mountain pipeline ships Canadian crude from Edmonton, Alberta, to the Westridge export terminal in Burnaby, British Columbia, and on to the connected 180,000 b/d Puget Sound pipeline to Seattle-area refineries.
Exxon to Leave Up to 3.6 Billion Barrels of Tar Sands/Oil Sands in the Ground -- ExxonMobil Corporation will admit this week that it can no longer profitably develop up to 3.6 billion barrels of its Alberta tar sands/oil sands reserves unless oil prices rise, the Wall Street Journal reports. The formal acknowledgement, forced on Exxon by the U.S. Securities and Exchange Commission, followed a quarterly report last fall in which Secretary of State Rex Tillerson’s former employer admitted that up to 4.6 billion barrels of its reserves might have to stay in the ground. The move comes after Exxon burned through $20 billion to “put the oil sands at the centre of its growth plans” through its Kearl project, about 70 kilometres north of Fort McMurray, and “highlights how dramatically the prospects of the region have dimmed,” the Journal reports [sub req’d]. “Once considered a safe bet, Canada’s vast deposits are emerging as a prominent case of reserves being stranded by a combination of high costs, low prices, and tough new environmental rules.” “For a lot of reasons the oil sands look like a prime candidate for eventual abandonment,” Baker Institute energy fellow Jim Krane told the WSJ. “One problem is that costs are persistently higher. The high carbon content only makes it worse.” The uniquely carbon-intensive process for extracting Alberta heavy oil and bitumen, the Journal acknowledges, has prompted the federal and provincial governments to introduce an (not necessarily foolproof) emissions cap and a carbon levy, on top of the already-high cost of tar sands/oil sands production. The Journal points to continuing low oil prices as the central factor that has “altered investment priorities” for fossil producers, drawing emphasis away from expensive (and acutely environmentally sensitive) Arctic, ultra-deep, and tar sands/oil sands deposits. “Such projects can require billions of dollars in up-front investment and seven to 10 years, or even more, to bring returns. Now companies are turning to new sources of crude oil, such as shale, that don’t require the same massive investment of time and money to bring to production,” the paper states. Citing ARC Financial, the WSJ says the price crash and ensuing shift in priorities have so far doomed at least a dozen and a half projects representing 2.5 million barrels of production per day. “Barring some geopolitical catastrophe that really changes the outlook,” said Amy Myers Jaffe, executive director for energy and sustainability at the University of California, Davis, “all these other projects are going to take the wind out of the oil sands.”
Canada's Fading Oil Promise Leaves US Majors Struggling - Oil-sands investments in Western Canada that gobbled tens of billions of dollars over the past decade are proving an Achilles heel for some of the world’s biggest energy producers. Exxon Mobil Corp. slashed proved reserves the most in its modern history after removing the entire $16 billion, 3.5-billion-barrel Kearl oil-sands project from its books on Wednesday. That followed ConocoPhillips’ announcement a day earlier that erased 1.15 billion oil-sands barrels, plunging its reserves to a 15-year low. While prolific shale plays in Texas and Oklahoma are going through an investment boom with oil above $50 a barrel, the oil sands have fallen out of favor. Current investments in the region amount mostly to long-planned expansions by large Canadian producers like Suncor Energy Inc., while majors like Statoil ASA have sold assets. Suncor, which took over Canadian Oil Sands Ltd. less than a year ago, is down more than 3 percent this year in Toronto. The oil-sands operations in northern Alberta are among the costliest types of petroleum projects to develop because the raw bitumen extracted from the region must be processed and converted to a thick, synthetic crude oil. In addition, Canadian crude sells for less than benchmark U.S. crude because of the added cost to ship it to American refineries and an abundance of competing supplies from shale fields. That’s why the oil sands have been particularly hard hit by the worst oil slump in a generation. The combined 4.65 billion barrels of oil-sands crude removed from Exxon’s and Conoco’s books are worth $183 billion, based on current prices for the Western Canada Select benchmark. The revisions hit as both U.S. companies, along with the rest of the oil industry, strove to recover from a 2 1/2-year market slump that collapsed cash flows, wiped out hundreds of thousands of jobs and prompted many explorers to cancel their most ambitious drilling programs.
Alberta’s Growing $30-Billion Liability: Inactive Wells - Alberta has among the continent’s most permissive policies on cleaning up inactive oil and gas wells, and that could saddle taxpayers with more than $30 billion worth of liabilities, according to a new report. While most North American jurisdictions require companies to clean up and restore non-producing oil and gas wells in a timely fashion, Alberta doesn’t, says the report by University of Alberta economist Lucija Muehlenbachs, also a visiting fellow at the U.S. think tank Resources for the Future.Most jurisdictions require companies to shut down and clean up wells that have been inactive for specified periods. Alberta allows companies to say wells are “suspended” indefinitely. “Alberta is one of the more lenient jurisdictions as it has no limit set on the length of time a well can remain suspended,” explains Muehlenbachs in a briefing paper released last week for the School of Public Policy at the University of Calgary.North Dakota, which has no backlog of inactive wells, requires that wells that been inactive for 12 months be properly plugged and decommissioned immediately or within a two-year time period. But Alberta’s lax policies have helped the number of inactive wells triple in the last 20 years from 25,000 in 1989 to 81,602 inactive wells as of Nov. 26, 2016. That means that one-third of the 255,000 oil and gas wells in Alberta are inactive. More than 10,000 of the inactive wells have been sitting idle for decades.Inactive wells pose a variety of environmental and financial risks to the public. Most inactive well sites leak methane and can contaminate soil and groundwater and support invasive weed growth. They also fragment ecosystems, devalue property and prevent farmers making full use of their land. The Alberta Property Rights Advocate Office warned in its annual report last year that conflicts between landowners and oil and gas companies were escalating as companies, struggling with low oil prices, walked away from lease agreements and reclamation responsibilities. Inactive wells also represent a staggering potential liability for taxpayers: they can cost anywhere from $50,000 to millions of dollars to plug, abandon and reclaim.
Rare cargo of US MTBE headed to Mexico: sources - A cargo of US-produced MTBE was bound for Mexico Wednesday, for just the second time this year, sources said. Fixtures for MTBE are not often seen on the spot market, a source with a shipbroker said. MTBE is primarily used as a blending agent in gasoline to increase the octane level. However, since the product is banned in the US due to environmental concerns, all MTBE produced in this country is either directly exported or blended at a load port to achieve a specific grade of gasoline. A shipping source agreed. "PMI often moves MTBE to the east coast of Mexico, but they normally blend it with unleaded gasoline at the load port to get a specific grade," he said. "But, once in a while, they take a full load of MTBE as well." On Wednesday, the Cape Bacton was heard to be fully fixed by PMI at a lump sum of $180,000 to move a 38,000 mt cargo of MTBE from the US Gulf Coast to the east coast of Mexico. The ship is due to begin loading February 24. That freight rate calculates out to $4.74/mt, or 57 cents/b.
Total US gas exports to Mexico set to rise 30% in 2017: Platts Analytics - Platt’s snapshot video - US natural gas exports to Mexico could reach as high as 5.4 Bcf/d by late summer 2017, according to data from Platts Analytics' Bentek Energy, but will be highly dependent on a roughly 4.1 Bcf/d year-on-year build in export capacity. Ross Wyeno, senior energy analyst, shares forecasts around Mexico's natural gas supply and details about four new pipelines that will increase Texas' exports to its southern neighbor.
Mexico turns to the Jurassic era for shale oil -- Mexico’s plans to develop its shale oil resources have finally taken a step forward following years of largely fruitless efforts by the state owned company Pemex. Canada’s Renaissance Oil and Russia’s Lukoil are joining forces to develop the Amatitlan block of the Chicontepec region. They aren’t interested in the shallower tight oil, but in the stack’s deeper Pimienta shale formation, which is what they consider Mexico’s Eagle Ford. Renaissance and Lukoil agreed to a $60 million accelerated development plan for the Amatitlan block for 2017, which will include workovers of existing wells, and the drilling of new wells. The Pimienta formation, located in the Upper Jurassic layer of the Chicontepec, is an important play for the future production of Mexico, as output has been trending lower. Renaissance estimates original oil in place in the Amatitlan block at 4.2 billion barrels of oil equivalent, and estimated the Pimienta section at 564 boe per acre-foot, compared with Eagle Ford at 598 boe. Also, both formations have similar pore pressure. Despite being discovered in 1962, the Amatitlan is largely underdeveloped. The field has produced about 175,000 barrels of light oil, ranging from 34 to 44 API. Pemex estimates that the entire Pimienta holds 20.8 billion boe, mostly liquid hydrocarbons. In 2014, Pemex explored for the first time the Pimienta formations by drilling three conventional exploratory wells. According to Nick Steinsberg, director of engineering with Renaissance Oil, one of these wells has produced close to 800 b/d. Renaissance is bringing shale experience to the project. Steinsberg pioneered horizontal drilling in the US Barnett Shale with Devon Energy. Dan Jarvie, Renaissance’s chief geochemist, was the former chief geochemist of EOG Resources, Eagle Ford’s largest shale producer.
Platts overhauls Brent crude benchmark, adds field - - The North Sea oil grades that underpin the global Brent crude price benchmark have been expanded to address the region's declining production, price reporting agency S&P Global Platts announced Monday. Oil from the Troll field in the Norwegian part of the North Sea will be added to the basket of crude used to calculate the benchmark from 2018, Platts said. The Brent crude price, based on four physical oil streams extracted from fields in the North Sea, is what the majority of the world's physical crude is priced off. The existing basket used to set the price includes Brent Ninian Blend, Forties, Oseberg and Ekofisk. The addition of Troll, a field operated by Norway's Statoil should increase deliverable supplies by around 20%. It will also mean Statoil overtakes Royal Dutch Shell PLC RDSA as the most dominant producer of the streams used to calculate the Brent price. North Sea oil production has been slowly declining since 2000 which is problematic because a robust volume of oil is needed to underpin a benchmark. Platts has addressed this by repeatedly adding to the grades used to calculate the price.
Platts revamps Brent oil benchmark for first time in a decade | Reuters: Oil pricing agency S&P Global Platts is making the first major overhaul of its Brent oil price assessment in a decade, to address falling supplies of the crude oil grades underpinning the benchmark that prices most of the world's oil. A decline in supply from North Sea fields has led to concerns that physical volumes could become too thin and hence at times could be accumulated in the hands of just a few players, making the benchmark vulnerable to manipulation. Platts said on Monday it would add Norway's Troll to the basket of four British and Norwegian crude grades which it already uses to assess dated Brent from Jan 1. 2018. This will join Brent, Forties, Oseberg and Ekofisk, or BFOE as they are known. "Overall we have had significant support for the addition of a new grade to the basket," Jonty Rushforth, global editorial director for S&P Platts Global's oil and shipping price group, said at an industry conference. "Far and away, Troll has received the most support." Troll will add about 200,000 barrels per day, or 20 percent, to the basket of crude supplies underpinning the benchmark, Platts said. The move was in line with expectations after Platts said in December it was being considered. Brent is used to set the price of billions of dollars of daily oil trade though a forward market for BFOE crude cargoes, swaps markets, physical benchmark dated Brent and Brent crude futures.
Brent market tightens sharply as traders eye stock draws, possible squeeze: Kemp - Brent futures prices for the second quarter have risen strongly in recent days suggesting traders expect the oil market to move into deficit earlier or that a squeeze is underway. Calendar spreads for nearby months have tightened sharply since the middle of February to a level that will make storing oil outside the United States unprofitable from the start of the second quarter onwards.The calendar spread from April to May has tightened from a contango of 35 cents per barrel on Feb. 15 to just 17 cents on Feb. 20 and is now trading around 12 cents (tmsnrt.rs/2mhTrZd).The spread is now too narrow to cover the cost of financing and storing barrels under any set of realistic assumptions about the cost of borrowing money and leasing tank space.Spreads are even narrower for later months, with a contango of just 10 cents for May-June and 7 cents for June-July.The spread tightening has been concentrated in the second quarter which implies traders now expect a supply deficit to occur from April rather than June (tmsnrt.rs/2mhEB4W).Calendar spreads have tightened much more in Brent than in WTI - where the spreads remain wide enough to finance crude stockpiles in the United States through until about June (tmsnrt.rs/2lirXoA).If the tightness in Brent persists, physical traders will have an incentive to unwind cash-and-carry storage trades where they hold a long position in physical oil and a short position in futures. Physical barrels will be sold from stockpiles to refiners and reported inventories should start to decline rapidly.
North Sea oil output jumps for second year - UK oil production rose for a second year in a row in 2016, increasing by 5% to 1.01 million b/d of oil equivalent, according to figures released Thursday, encouraging those who argue the North Sea industry still has life in it yet. For the full year, UK crude output increased by 3.2% to 914,000 b/d, while output of natural gas liquids rose 30% to 99,000 b/d, the government's department for business, energy and industrial strategy said. "Following strong production in 2015, crude oil production from the North Sea has been steady from fields that feed into the Flotta and Forties terminals," the department said. However, UK oil production levels remain barely a third of their 1999 peak, it added.Maintenance at the UK's largest producing field, Buzzard, meant liquids output dropped 5% in the fourth quarter from a year earlier, to 11.57 million mt, or 979,000 boe/d. In terms of trade, oil exports increased by 5% in the full year, to 33.31 million mt, while imports fell 5.8% to 42.53 million mt, as refineries sourced a higher share of their crude from the North Sea. The numbers confirm a revival in output caused partly by a surge in investment before oil prices slumped in 2014, as well as upstream tax cuts last year, the setting up of a new regulator, and efficiency measures. Separately on Thursday, US upstream company Apache confirmed plans to start production in the third quarter of this year from a UK discovery known as Callater, which lies near the Beryl field and holds 25 million-50 million barrels of oil equivalent, mainly in the form of liquids. Output should also be boosted by the imminent restart of the BP-operated Schiehallion field west of the Shetland Islands, following a four-year redevelopment.
Oil and gas discoveries at lowest level in 60 years - Discoveries of new oil and gas fields have dropped to a fresh 60-year low, as companies put a brake on exploration and large fields have become harder to find. There were only 174 oil and gas discoveries worldwide last year, compared with an average of 400-500 a year up until 2013, according to IHS Markit, the research group. The slowdown in exploration success shows that the world is likely to become increasingly reliant on “unconventional” resources such as US shale oil and gas to meet demand for energy in future decades. The typical time from discovery to production is five to seven years, so a shortfall in oil and gas discoveries now implies tighter supplies in the next decade. However, there are signs of a tentative upturn in conventional exploration this year, with some companies including Statoil of Norway planning to step up drilling activity.
Natural Gas - An Ugly Week - In recent weeks, I have been cautioning about the downside potential in the natural gas futures market as we are running out of winter weeks. I wrote that the energy commodity had been trending lower since the beginning of 2017. Although there are some pretty juicy price gaps on the daily and weekly charts on the upside, the magnetic force on the bullish side of the market has not been strong enough to entice the price higher. Natural gas had a great run at the end of 2016, the price on the nearby NYMEX futures contract traded to a high of $3.9940 per MMBtu at the end of December. Since then, it has been all downhill. Natural gas is one of the most volatile commodities that trade and while other commodities continue to trade at the upper ends of their trading ranges over the last year, action in the natural gas market turned ugly last week as a critical psychological level gave way. The risk in natural as right now is that speculators will try to create a repeat performance of last year's price action and given the activity in the March futures contract last week, they seem to be on their way. Last week, natural gas not only fell below the critical $3 per MMBtu level but it also took out the $2.90 level.As the weekly chart highlights, it has been a one-way street lower for natural gas prices in 2017. March natural gas closed on Friday, Feb. 10 at $3.035 per MMBtu. The energy commodity had not traded below $3 since the middle of November but last week that changed and the price did not manage to put up one print above that price. The weekly slow stochastic is trending lower and the prospects for even a relief rally at this point are slim given recent price action.
Natural Gas Bulls Crushed As Prices Tank - Natural gas prices plunged to their lowest level since November on mild weather in the U.S., which has caused storage levels to decline at a much slower pace than expected. Contracts for March delivery on the Nymex exchange dipped to $2.63 on February 21, down a third since December. The bearish swing has come after successive EIA reports showing a modest drawdown in gas inventory levels. Natural gas consumption is seasonal, with spikes in demand occurring in winter months. As such, storage levels build up over the course of the year, especially in the milder months of spring and fall. Then, gas is used up in the winter. The winter of 2016 was the warmest on record, leading to a paltry drawdown in inventories. The result was a cratering of natural gas prices last year as inventories swelled following the end of winter. This winter things were supposed to be much tighter. After all, upstream production fell last year after a decade of relentless growth. Meanwhile, the hollowing out of the coal industry has led to a corresponding uptick in natural gas consumption in the electric power sector, which is another way of saying that gas demand is rising on a structural basis. Also, LNG exports started to pick up last year, opening up another source of demand for U.S. natural gas. And the market has indeed tightened. Record high natural gas inventories have declined this winter, falling back closer to more average levels. But they have not declined as much as gas bulls may have liked. Front-month natural gas prices fell to $2.63/MMBtu in the third week of February, down from nearly $4/MMBtu at the end of last year.
Natural Gas Prices Plummet As Weather Forecasts Shift More Bearish - The latest weather update now pits February 2017 as the warmest February since 1970. For the month of February (2/3 to 3/3 week), HFI Research is forecasting -363 Bcf versus the -720 Bcf five-year average draw. Since the start of 2017, bearish weather has added 700 Bcf to the end of storage April estimates. Our EOS is updated daily, but the latest one pits April EOS at 2.1 Tcf or 300 Bcf higher than the five-year average. To give you an idea just how warm this Winter has been so far, Genscape Weather posted this: As a trader told us, "It was cold in all the places that shouldn't be cold and hot in all the wrong places." The structural deficit that continues to plague the physical side of the market has not gone away and will increase in the months to come as new power generation, higher Mexico gas exports, LNG, and industrial demand add 2.8 Bcf/d to total demand. The wide structural deficit did help accelerate storage draws this Winter, but it was not enough to fight off the bearish heating demand. As readers will see in the next several weeks, the weekly EIA storage reports will gradually get worse, and 2/24 week is now expected to be -140 Bcf less than we previously expected. The changes came mostly in the last 2 weeks. As traders combat the bearish short-term outlook with the long-term bullish outlook, we think the spreads for the shoulder months and Summer months could remain wide as the basket widened by $0.05/MMBtu today. We recently released a premium write-up to public, and you can read why we are still bullish natural gas here.
Will US natural gas avoid a collapse this year? -- After ending 2016 on a bullish note, the U.S. natural gas market has been hammered so far in 2017 by relentlessly mild weather—January 2017 ranked as the fifth warmest in 40 years. The prompt CME/NYMEX Henry Hub futures contract, which had climbed to nearly $4.00/MMBtu by late December 2016, has come off more than $1.00 since then to settle at $2.834/MMBtu as of last Friday (February 17, 2017). With every balmy winter day that passes, the chances of sustained $3-$4 natural gas prices seem to be fading away. Nevertheless, there are still some bulls out there hanging on in hopes of a rebound. Prices are still well above year-ago levels and the underlying supply/demand balance continues to carry the implied potential for tightening if given even normal weather. In today’s blog, we provide an update of the gas supply/demand balance, starting with a recap of how we got here. This is the latest of our periodic updates on the fundamental factors influencing the U.S. natural gas market—in particular the supply/demand balance, based on daily supply/demand data from our NATGAS Billboard report (RBN’s joint report with IAF Advisors). When we last wrote about the U.S. natural gas supply/demand balance in mid-December 2016 in The Long and Winding Road, the storage inventory had managed to decline from a record high a month earlier in mid-November to near the five-year average. Production was lagging. LNG and Mexico exports were ramping up. Demand on a per-degree basis was strong. And the overall supply/demand balance suggested the market was headed for a bullish start to 2017, assuming normal to cooler-than-normal weather. Instead, since the New Year, weather has been almost unceasingly bearish, with the potential to derail what the market expected would be a recovery in 2017.
Shell: Global LNG demand to rise 4-5%/year to 2030 - Global demand for natural gas is expected to increase 2%/year between 2015 and 2030, with LNG demand expected to rise at twice that rate at 4-5%/year, according to Royal Dutch Shell PLC’s first LNG Outlook. Shell inherited the outlook following its acquisition of BG Group PLC. The report, which draws on a broad range of independent industry data and internal analysis, projects the size of the global LNG market to rise 50% between 2014 and 2020, mainly attributable to LNG facilities already under construction or recently completed. In 2016, global LNG demand reached 265 million tonnes, including an increase in net LNG imports of 17 million tonnes from a year earlier. Shell notes many expected a strong increase in new LNG supplies would outpace demand growth during 2016. However, demand growth kept pace with supply as greater-than-expected demand in Asia and the Middle East absorbed the increase in supply from Australia. China and India, which are set to continue driving a rise in demand, were two of the fastest-growing buyers in 2016, increasing their imports by a combined 11.9 million tonnes of LNG. This boosted China’s LNG imports in 2016 to 27 million tonnes and India’s to 20 million tonnes. LNG demand has been bolstered by the addition of six new importing countries since 2015—Colombia, Egypt, Jamaica, Jordan, Pakistan, and Poland—bringing to 35 the number of LNG importers, up from about 10 at the start of the century. Egypt, Jordan, and Pakistan were among the fastest-growing LNG importers in the world in 2016. Due to local shortages in gas supplies, they imported a total of 13.9 million tonnes of LNG. The bulk of the increase in LNG exports in 2016 came from Australia, where exports rose 15 million tonnes from a year earlier to a total of 44.3 million tonnes. The US also contributed the growth, with 2.9 million tonnes of LNG delivered from the Sabine Pass terminal in Louisiana. Shell’s outlook forecasts LNG prices to continue to be determined by multiple factors, including oil prices, global LNG supply and demand dynamics, and the costs of new LNG facilities. In addition, the growth of LNG trade has evolved into helping meet demand when US gas markets face supply shortages.
Liquefied natural gas exports expected to drive growth in U.S. natural gas trade - EIA -The United States is expected to become a net exporter of natural gas on an average annual basis by 2018, according to the recently released Annual Energy Outlook 2017 (AEO2017) Reference case. The transition to net exporter is driven by declining pipeline imports, growing pipeline exports, and increasing exports of liquefied natural gas (LNG). In most AEO2017 cases, the United States is also projected to become a net exporter of total energy in the 2020s in large part because of increasing natural gas exports. In 2016, the United States was a net importer of natural gas, with net imports of 0.9 trillion cubic feet (Tcf), or 2.6 billion cubic feet per day (Bcf/d). As several LNG export projects currently under construction are completed, LNG exports are expected to make up a growing share of natural gas exports and to surpass pipeline exports of natural gas by 2020. The Sabine Pass facility in Louisiana became the first operating LNG export facility in the Lower 48 states in 2016. By 2021, four LNG export facilities currently under construction are expected to be completed. Combined, these five plants are expected to have an operational export capacity of 9.2 billion cubic feet per day. After 2021, projected U.S. exports of LNG grow at a more modest rate as U.S. natural gas faces growing competition from other global LNG suppliers.U.S. exports of natural gas by pipeline to Mexico are also expected to increase. U.S. exports to Mexico have doubled since 2009 and are projected to continue rising through at least 2020 as pipeline projects currently under construction are completed. U.S. imports of natural gas, most of which come by pipeline from western Canada, are projected to continue declining. In addition to importing less natural gas from Canada, primarily from Alberta, increasing amounts of natural gas from the Marcellus and Utica basins in the Northeast and Midwest regions of the United States are expected to flow to eastern Canadian provinces.
Pakistan seeks to end gas shortage with LNG imports - With domestic production faltering and pipeline import projects still uncertain, Pakistan's dependency on LNG imports is unlikely to fade away, especially since global oversupply and low LNG prices are set to continue helping the country resolve its decade-long energy crisis. Imports of the fuel are projected to jump over the next five years, with most bullish estimates pointing to a demand of 30 million mt/year, or 4 Bcf/d of gas equivalent, by 2022, which is half of the country's total gas demand projection of 8 Bcf/d for that year, according to industry and government estimates. In the longer term, LNG demand expansion will continue to slow from double-digit growth through 2019 to less than 7% after 2022, according to government estimates, as LNG affordability becomes less certain and pipeline imports add supply competition, but LNG imports will keep rising."LNG was initially seen as a short-term solution, but it looks like Pakistan would keep importing 3-4 Bcf/d or more in the long term, given rising domestic demand and difficulties to start exploration activities in the more unstable areas," said Zeeshan Afzal, head of research with Karachi-based Insight Securities. Pakistan's current gas consumption oscillates between 6.2 Bcf/d in the summer season and 6.8 Bcf/d in winter. Average minimum temperatures in Punjab province, where more than half of Pakistan's population lives, stay below 5 degrees Celsius for most of the winter period, causing heating demand to rise.
Japan plans second offshore methane hydrate output test from late April - Japan plans to conduct a second testing round for offshore production of methane hydrate from around late April, aiming to run the tests non-stop for up to a month, an official at the Ministry of Economy, Trade and Industry said Monday. This will be the world's second offshore methane hydrate production test after Japan produced 120,000 cubic meters, or 20,000 cu m/day, of gas from methane hydrate in a first, six-day offshore production test in the Pacific Ocean in March 2013. That trial followed more than a decade of field research as well as testing of various technologies. Like the last round, METI will conduct the trial using the decreasing pressure system at the Daini-Atsumi Knoll in the eastern Nankai Trough, 70-80 kilometers (43.4-49.6 miles) south of the Atsumi Peninsula in Aichi Prefecture, the official said. The key objectives for the upcoming production test are to evaluate whether Japan can produce gas from methane hydrate using the decreasing pressure system stably for a given period, with a view to commercializing output in the future, the official said.
Analysis: Singapore can't afford to let oil exports lose edge despite carbon tax - Singapore will need to strike the right balance in implementing a planned carbon tax from 2019 to ensure its refining industry remains competitive as the sector faces headwinds from volatile margins, growing exports from China and rising capacity in the region. Singapore Monday announced it will implement a carbon tax starting 2019. The tax, which will be Southeast Asia's first carbon tax, will likely cost between $10-$20 per mt of emissions. The tax is aimed at helping Singapore meet its commitment to cut emissions by 36% below 2005 levels by 2030 under the Paris Agreement. Analysts told S&P Global Platts Wednesday that the tax will raise the cost of operations and pose new challenges for the refining sector, but the way the tax is implemented will determine the final impact. Wood Mackenzie estimates that the increase in cost for the refining sector from this carbon tax regulation could be between 40 cents/b and 70 cents/b. "By 2019, we expect gross refinery margins to be $4-$5/b. So the profit margins could be impacted by 10-15%," said Sushant Gupta, research director for refining and chemicals at Wood Mackenzie.
Oil sold out of tanker storage in Asia as market slowly tightens | Reuters: Traders are selling oil held in tankers anchored off Malaysia, Singapore and Indonesia in a sign that the production cut led by OPEC is starting to have the desired effect of drawing down bloated inventories. Yet in the short-term, the crude released from tankers will weigh on markets and possibly undermine OPEC's goal of achieving a balanced market by mid-2017. The Organization of the Petroleum Exporting Countries (OPEC) and other producers outside the group, including Russia, announced late last year that they would cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017, looking to drain a glut that pulled down prices from over $100 per barrel in 2014 to around $56.50 currently LCOc1. "OPEC's strategy is targeting inventories – given the scale of the overhang, the market won't rebalance in six months – we expect an extension into (the second half of 2017)," said Energy Aspects analyst Virendra Chauhan. As OPEC's cuts start to leave some demand unmet, a hefty 6.8 million barrels of crude has been taken out of tanker storage from Linggi, off Malaysia's west coast, in February, shipping data in Thomson Reuters Eikon shows. An additional 4.1 million barrels and another 1.2 million barrels have been taken out of storage on tankers in Singaporean and Indonesian waters, the data shows.In the short-term, the flood of crude from floating storage will add to supplies coming into Asia from as far away as the Americas and Europe. In the longer-term, however, clearing oil out of inventories like tankers is part of OPEC's goal to rebalance markets.
After OPEC cuts heavy oil, China teapot refiners pull U.S. supply to Asia | Reuters: Chinese independent, or teapot, refiners are bringing in rare cargoes of North American heavy crude in a new long-distance flow that traders say has only been made possible by OPEC's output cuts and ample supplies in Canada and the United States. In April, at least 1 million barrels of the heavy crude Mars, pumped from the U.S. Gulf of Mexico, are expected to land in China's Shandong province and 1 million barrels of a second unidentified heavy grade will arrive in China, trade and shipping sources said last week. This follows the arrival in January of 600,000 barrels of U.S. Gulf Blend, a heavy crude made up of a blend of various U.S. and Canadian grades loaded onto ships on the U.S. Gulf Coast, according to the sources and shipping data. Heavy crude is typically more dense and viscous than other oil grades. Refiners with facilities that can process these grades value heavy crude because its lower cost results in higher margins from producing fuels from these grades. The Organization of the Petroleum Exporting Countries' (OPEC) output cuts have targeted heavy crude, with linchpin producer Saudi Arabia and Venezuela reducing their exports of heavy crude. That has increased the price of Middle East heavy crudes for Asian delivery, making it economical for traders to ship crude from Russia, the Atlantic Basin and the United States to Asia. "The OPEC cuts started from medium and heavy grades and Venezuela (a key supplier to China) is exporting less,"
China’s use of methanol in liquid fuels has grown rapidly since 2000 - China is the global leader in methanol use and has recently expanded methanol production capacity. Since the early 2000s, China’s methanol consumption in fuel products has risen sharply and is estimated to have been more than 500,000 barrels per day (b/d) in 2016. EIA commissioned a study from Argus Media group to better understand China’s consumption of methanol and its derivatives. The estimates developed in the study have now been incorporated into EIA’s historical data and forecasts of petroleum and other liquids consumption in China. Methanol, like ethanol, is an alcohol with inherent issues such as its solubility in water and corrosiveness. Methanol or its derivative products can be added to fuels such as gasoline and liquefied petroleum gases (LPG). Similar to how ethanol is currently blended into motor gasoline in the United States, methanol is blended into gasoline in China. Most of China’s methanol supply is from domestic production. About two-thirds of China’s methanol feedstock is produced from coal and the remainder from coking gas (a by-product of steel production) and natural gas. China has abundant coal resources, and for more than a decade the country has increased its capacity to manufacture methanol using coal as a feedstock. Smaller amounts of China’s methanol supply are imported from the Middle East, Southeast Asia, South America, and the United States. Methanol is a clean-burning, high-octane fuel component, as the oxygen present in methanol aids in more complete fuel combustion. Blending methanol with gasoline allows refiners to extend China’s gasoline supply and increase the octane level of its gasoline. However, methanol has only one-half the energy per unit of volume as gasoline and requires more fuel consumption on a volumetric basis to provide the same amount of energy.
OPEC's Oil Curbs Grant Russia's Urals a Rare Ticket for Asia - The biggest oil producers in the Middle East are helping crude from Western Siberia boldly go where it’s rarely gone before. Top South Korean refiner SK Innovation Co. is set to receive about 1 million barrels of Urals crude in its first purchase of the Russian blend oil in a decade. The shipment was made viable because of rising costs for rival supply from the Middle East, as nations such as Saudi Arabia curb output to comply with a deal between global producers. The cargo is also another example that helps illustrate how the reductions by top OPEC members are rerouting the flow of oil across the globe. In recent weeks, Asia has become a destination for grades that typically don’t show up in the region -- from U.S. Mars Blend and Southern Green Canyon to West Canadian Select, Hibernia and White Rose. The premium of Oman crude, often pitted against Urals because they are of similar quality, jumped to its highest level this month against Middle East benchmark Dubai oil.“The flow of Urals into Asia is rare as it’s usually not economically viable versus other supplies such as Oman or Upper Zakum crude,” “The grade is typically transported on Suezmax or smaller vessels due to draft restrictions at the port and Suez Canal, and that makes it tough to compete with Mideast grades that are typically transported on Very Large Crude Carriers.” Urals, a medium-sour grade favored by processors in the European and Mediterranean regions, has been less popular among Asian buyers as Middle East crudes were cheaper, required less sailing time due to geographical proximity and were delivered in larger vessels. A VLCC can transport about 2 million barrels, while a Suezmax would hold about 1 million. SK bought about 1 million barrels of Urals for April arrival from Lukoil PJSC, three traders with knowledge of the deal said. Company spokeswoman Kim Wookyung confirmed the purchase. “As Dubai crude supply has become tighter in Asia, this made Russian cargoes more economical for us,” Kim said, adding that the cargo “will be our first purchase of Urals in a decade.”
Rosneft becomes first oil major to pre-finance Kurdish crude | Reuters: Russian state oil firm Rosneft has become the first major oil firm to pre-finance crude exports from Iraq's Kurdistan, joining trading houses in the race for crude from the semi-autonomous region. "We look forward to developing new markets for Kurdish crude oil," a statement by Rosneft quotes chief executive Igor Sechin as saying. The contract is due for 2017-2019, Rosneft said. Sechin said Rosneft would be taking Kurdish barrels to the company's growing refining system. In Europe, Rosneft owns alarge refinery system in Germany. Rosneft also said it was looking to cooperate with Kurdistan in upstream and logistics. Kurdistan's natural resources minister Ashti Hawrami said the deal was opening up new possibilities for cooperation between Rosneft and Kurdistan. Kurdistan has started independent crude exports from the central government in Baghdad in the past three years as it argued it was not getting its share of Iraq's budget revenue sand needed money to fund its war against Islamic State. But as oil prices crashed, the region had to borrow as much as $3 billion from trading houses such as Vitol, Petraco, Glencore and Trafigura as well as neighboring Turkey, repayable by future crude sales.Baghdad has first pledged to sue buyers of Kurdish oil as it insisted the central government was the only legal exporter of barrels both from southern and northern Iraq. But Baghdad has lately softened its stance on the companies and traders working in Kurdistan with the barrels being sold in both Europe and Asia.
Oil prices: the lonely role of the swing producer -- The new Opec quota has been in force for six weeks, which is sufficient time to judge what is happening on the basis of facts rather than speculation. The key questions are, first, whether the restraints on production agreed last November are working or not and, second, whether the regime that came into force at the beginning of January can be sustained until June, as planned. The oil price has been remarkably stable at around $54/$56 a barrel for Brent crude. That is about 15 per cent higher than before the November agreement but still barely half that seen three years ago. So will prices rise further or does the current level represent a ceiling? Let’s start with the facts. Three things are clear. Most of the target reduction is being achieved but the response on a state-by-state basis is far from uniform. Three countries — Algeria, Venezuela and Iraq — have not cut production or have cut by less than they promised. Outside Opec, the situation in Russia is confused. Some production has been cut but the most recent reports suggest an increase in output and exports, particularly from the Urals. Most of the rest have met their quotas and Saudi Arabia has gone further — cutting output to less than 9.8m barrels a day, almost 300,000 barrels below its agreed quota. Without this, the target would not have been met. That all explains the price movement — a tentative upward shift but nowhere near the $70 predicted by some. So what of the way forward? Fixed-point predictions are pretty valueless. The best way to approach the question is to consider the pressures in both directions and the signals to watch for. On the demand side, the prospect is for modest growth, with the strongest impetus coming from the surge in investment in infrastructure being prepared by the Trump administration in the US. Donald Trump’s plans to encourage new hydrocarbon development (which I wrote about last week) will take time to come to fruition. In the short term, the increase will be price-driven. The Energy Information Administration — the authoritative source in the US — predicts an increase of 100,000 b/d this year and 550,000 b/d in 2018. Some commentators are predicting faster growth in US output — of up to 500,000b/d by the end of 2017. Until that comes through, the US will rely on imports, as is evident in the January data. The conclusion from this on conventional wisdom is that prices can stay roughly where they are provided Saudi Arabia accepts that it is now the swing producer. That acceptance is the crucial uncertainty.
OPEC Ready To Cut Deeper - OPEC is finding itself backed into a corner: the group, it appears, is prepared to extend the oil production cut agreement that is set to expire at the end of June and also increase the cuts, if inventories fail to drop to a specified level, sources from the group told Reuters. The agreement, which also involves 11 non-OPEC producers, including Russia, Mexico, Kazakhstan, Azerbaijan, and several smaller producers, envisaged taking off around 1.8 million barrels from the global daily supply. This means, according to the sources, that global stockpiles should shrink with 300 million barrels in the six-month period, to reach the five-year average. This, however, requires a compliance rate of 100 percent from all participants. Despite this stated readiness to cut as much as necessary for as long as necessary, the odds are against any noticeable pickup in prices, at least until conclusive supply data becomes available. It’s true that OPEC is doing a surprisingly good job—at least initially—in complying with its promised output cuts, but pressured by budget deficits caused by the oil price crash, producers will be tempted to pump and export more at those higher prices. For many observers, there is only one question: when OPEC members – or non-OPEC producers for that matter – will start cheating and who will start first.
Hedge funds bet big on oil as OPEC gives them a free put option - Kemp (Reuters) - Hedge funds and other money managers have amassed a very large bullish position in crude oil futures and options without so far having much impact on oil prices. Hedge funds raised their combined net long position in the three main derivative contracts linked to Brent and WTI by another 51 million barrels in the week to Feb. 14. Funds now hold a net long position equivalent to a record 903 million barrels of oil, according to an analysis of records published by regulators and exchanges (http://tmsnrt.rs/2meDpzf). The combined net long position has a notional valuation of more than $49 billion, which is the highest since July 2014 (http://tmsnrt.rs/2lduZua). Hedge funds hold more than 9.5 long positions for every 1 short position in Brent and WTI combined, the highest ratio since May 2014 (http://tmsnrt.rs/2ldKiTX). Fund managers now have the most bullish view on oil since the first half of 2014, when Libya's exports were nearly halted by civil war and Islamic State fighters were racing across northern Iraq. The scale of the net long position is puzzling and raises important questions about how it will eventually unwind. Fund managers have been able to increase their bullish bets with almost no disturbance to the market price of crude. Volatility has been most remarkable by its absence. Funds have increased their net long position by 107 million barrels since Dec. 13 while prices have traded sideways in a narrow range of around $55.50 +/- $1.25 per barrel. Oil prices have been steady at around the $55 level most energy professionals expected would be the average for the year at the start of 2017. The accumulation of a large long or short position by fund managers has normally been the harbinger of a sharp reversal in oil prices when it unwinds.
Biggest Gasoline Glut In 27 Years Could Crash Oil Markets --Oil prices are stuck in a holding pattern, waiting for more definitive data on what comes next. OPEC compliance is helping keep prices afloat, but rising U.S. oil production is acting as a counterweight. A new problem that has suddenly emerged is the record levels of gasoline sitting in storage. The market has already had to digest the fact that U.S. crude oil stocks were rising, and investors have done their best to explain away the trend. But now gasoline inventories are climbing to unexpected heights. It would be one thing if crude stocks were rising, perhaps because refiners were going offline for maintenance. But if that were the case, then gasoline stocks would draw down on lower refining runs. But if both crude and refined product inventories are going up at the same time, then there should be some reasons for worry. In fact, the glut of gasoline is now the worst in 27 years. At 259 million barrels, U.S. gasoline storage levels are now at their highest level since the EIA began tracking the data back in 1990.Part of the reason for the glut, of course, are high levels of production. Although gasoline production ebbs and flows seasonally, U.S. production has been on an upward trend in recent years. Instead of bouncing around in a range of 8.5 to 9.5 million barrels per day before 2014, U.S. production since the collapse of oil prices has steadily climbed to a range of 9 to 10 mb/d.But that increase came in order to satisfy rising demand (which, of course, was stoked by lower prices). More demand should have soaked up that excess supply. However, that is where the problem gets worse. Lately, U.S. demand has faltered. U.S. gasoline demand plunged to just 8.2 million barrels per day in January, and sales were down 4 percent from a year earlier. It was also the lowest level in four years. Weak demand is raising some red flags for the market.Demand is seasonal, with softer demand in winter months, but this winter’s ‘valley’ is lower than any other since 2012. The problem becomes particularly acute when you take into account the fact that refiners have actually cut back on gasoline production in recent weeks. Even with lower refining runs, gasoline storage levels continued to rise.
Don’t Panic About the Gasoline Recession! Unless - According to the gasoline market, we're in a recession.You hadn't noticed? Hmm. Since late January, gasoline demand has been running about 5 or 6 percent lower, year over year, according to the Energy Information Administration's weekly estimates. Historically, that sort of drop has only happened when there's been a recession or a huge spike in prices: This Just Doesn't Happen Big dips in U.S. gasoline demand, especially of 5 percent or more, are almost unheard of outside of a recession or oil crisis Here we are, though, with oil stuck in the mid-$50s, unemployment below 5 percent and the IMF forecasting the economy to grow by 2.2 percent in 2017.This doesn't sound like a recession. Which means those weekly gasoline numbers are probably too pessimistic. The chart above uses the more reliable, revised monthly data (which is why it ends in November 2016). The EIA's weekly figure for gasoline demand is actually a residual rather than a firm estimate; revisions to export and import data, which are always lagging, have a tendency to lead to big revisions in gasoline demand (see this for a detailed take on how these data interact).EX Even if the rest of us can breathe easier, though, that doesn't mean refiners can.One figure that can't be disputed is this: 23.6 million barrels. That's how much excess gasoline had flowed into storage tanks this year as of February 10. The average for the same period in the previous five years is just under 10 million barrels, and that average is skewed higher by a similarly large build-up in early 2016.Even without a recession, gasoline demand is showing distinct signs of stalling out. The latest figures on how far Americans are driving, released this week by the Federal Highway Administration, show the boost delivered by the crash in pump prices is starting to wear off. You can see that boost here:
Oversupply Fears Grow As US Oil Exports Hit Record High - U.S. oil producers contributed a record 7 million barrels of crude oil to international markets during the Week of February 5th, 2017, approximately one million barrels per day. This is on the tail of OPEC strategically limiting their global contributions. These OPEC supply constraints are a continuation of policy agreed upon in January by OPEC nations and other suppliers to support higher prices. Some analysts speculate that this is a harbinger of continuously increasing American activity in the global oil market. However, it remains unclear if this level of output is sustainable in the long-run. The U.S. daily average in the preceding four weeks was a less advantageous 685,000 barrels per day. This increase from U.S. shale producers is a comeback from idle operations during last year’s market downturn. The bulk of the growth originates from Permian shale, a type found predominately in Texas. This increase has also given rise to short-term supply concerns, as too sharp an increase will lower prices. Brent crude oil, for example, dropped 0.4 percent in price on Wednesday, February 15th following a report from the American Petroleum Institute that North American oil production is steadily increasing. In addition to this data, the Energy Information Administration reported record numbers for U.S. oil stockpiles and gasoline inventories, at 518.2 million barrels and 259.1 million barrels, respectively. China seems to be one of the bigger destinations for this American oil, possibly due to the gaps in supply that the other large oil producers are creating. For example, PretoChina and Unipec both chartered 2 million barrels. Additional export destinations for U.S. oil include Europe, Latin America, and Canada. These spikes in shale production are in line with U.S. government estimates, the latest of which predict an increase of 80,000 barrels per day during the month of March – the third month in a row of increasing shale supply. Last week, total production of oil in the U.S. was just under 9 million barrels a day. This is perhaps a function of oil prices having stabilized above $50 a barrel, making production of shale in America more profitable. The forecast concludes that overall oil production will reach 9.5 million barrels per day by next year.
Oil rises in thin trade, but swelling U.S. output caps rally | Reuters: Oil prices inched higher on Monday, as investor optimism over the effectiveness of producer cuts encouraged record bets on a sustained rally, although growing U.S. output and stubbornly high stockpiles kept price gains in check. Top OPEC exporter Saudi Arabia's crude oil shipments fell in December to 8.014 million barrels per day (bpd) from 8.258 million bpd in November, official data showed on Monday. Brent futures LCOc1 ended the session up 0.7 percent at $56.18 a barrel. U.S. futures West Texas Intermediate crude CLc1 gained about 29 cents or 0.5 percent to $53.69 prior to the close of trade at 1 p.m. EST, an hour and a half early due to the Presidents Day holiday. Trading volume in Brent averaged about 181,000 lots of 1,000 barrels each, below the average of about 205,000. Volumes in U.S. crude also dipped, with just over a couple of thousand lots traded, a day ahead of the expiration of WTI futures for delivery in March. On average, more than 300,000 U.S. crude lots trade in a typical trading session. Prices received a lift from a weaker dollar .DXY as well. A strong greenback typically makes oil more expensive for holders of other currencies. The Organization of the Petroleum Exporting Countries and other producers, including Russia, agreed last year to cut output by almost 1.8 million bpd during the first half of 2017. Estimates indicate compliance with the cuts is around 90 percent. Reuters reported last week that OPEC could extend the pact or apply deeper cuts from July if global crude inventories fail to drop enough.
Oil Moves Higher On Expectations Of Tighter Market - Oil prices moved up on Tuesday on hopes that the market is tightening. OPEC says its cuts are working and hedge funds are still bullish on crude, but pitfalls remain. Hedge funds and money managers have been on a buying spree since OPEC announced its deal in late November. Bullish bets on crude oil futures have climbed at a rapid pace in the past few months, setting new records nearly every week. Now, hedge funds and other money managers have surpassed 1 billion barrels of bullish bets, a new record high. As we have noted many times, the record buildup leaves the market exposed to a backsliding in prices if the mood of traders turns sour. The OPEC deal called for cuts of 1.2 mb/d over the course of six months. If the deal is not extended until at least the end of the year, oil prices could fall back into the $30s, according to ABN Amro Bank NV. The “downside risk has become much bigger than previously,” Hans van Cleef, ABN Amro’s senior energy economist, told Bloomberg. The Wall Street Journal reported that Saudi Arabia is leaning towards a western stock exchange when it lists its state-owned oil company. The plan is a partial IPO of about 5 percent of the company, which could allow the kingdom to take in more than $100 billion. Saudi officials looked at exchanges around the world but decided against one in Asia. Now officials are looking at New York, London and Toronto, with New York as the leading candidate. The IPO could be the largest ever. However, because the company is state-owned, it will be difficult to disentangle its finances from the Saudi government. Roughly 90 percent of Aramco’s profits go into government coffers and the royal family certainly takes its share as well. Only about 10 percent of the profits are reinvested in the company. The complexity of this situation is likely to push the IPO off until late 2018 at the earliest, or more likely 2019, the WSJ says.
OPEC/non-OPEC oil cut compliance to rise in coming months: Barkindo - OPEC Secretary General Mohammed Barkindo Tuesday said any decision to extend a landmark oil production cut agreement past June will depend on global stock levels and an assessment of market fundamentals. Speaking at a news conference during the International Petroleum Week conference in London, Barkindo did not rule out further cuts, if necessary, but said "it's too early for us to begin to second guess" what market conditions would be like when OPEC ministers next met on May 25 in Vienna. The 11 non-OPEC countries that are party to the production cut deal will also be invited to confer with OPEC in Vienna to determine their next course of action, Barkindo said. "Confidence has returned to this market, but I think going forward, we have to watch how the stock levels continue to respond to the full and timely implementation of the declaration of cooperation between OPEC and non-OPEC countries," he said. The deal, which runs from January through June, calls for OPEC's 13 members to cut a combined 1.2 million b/d from October levels down to a range of 32.5 million-33 million b/d, while the 11 non-OPEC countries, led by Russia, have committed to a 558,000 b/d cut. OPEC has said the deal is aimed at reducing the global stock overhang down to its five-year average. Barkindo acknowledged that that goal is still a ways off.
U.S. oil on track for highest close in 20 months - Crude-oil futures on Tuesday were on pace to hit their highest settlement in about 20 months as investors bid prices up on the heels of growing bullishness about compliance to a global pact to curb crude output. The April contract for global crude benchmark Brent was up 89 cents, or 1.6%, to $57.07 a barrel while its U.S. counterpart West Texas Intermediate gained $1.01, or 1.9%, to $54.40 for March deliveries, which expires Tuesday. The April contract CLJ7, +1.77% which is the most active, was trading 94 cents, or 1.8%, higher at $54.72 a barrel. Both WTI contracts were on pace to finish at their highest levels since July 2, 2015, according to Dow Jones data. The crude rally comes as OPEC’s Secretary-General, Mohammad Sanusi Barkindo, offered encouragement about the effectiveness of the Organization of the Petroleum Exporting Countries’ and non-OPEC countries’ plans to shrink crude supply by about 2% globally, or 1.8 million barrels daily, during an International Petroleum Week conference in London on Tuesday. Moreover, Barkindo said U.S. shale production, which has been a nagging bugaboo in recent weeks for those contemplating risks to crude holding higher prices, isn’t likely to jeopardize efforts to limit oil. “We are not looking at the U.S. as a risk, we are looking at the U.S. as a partner, a strategic partner in the rebalancing process,” he said. Late last year, the 13 OPEC nations and 11 oil producers outside the group agreed to cut production in a bid to reduce alarmingly high global supplies and balance the market. But the U.S. isn’t a part of the global agreement and rigs drilling for oil have increased steadily since the OPEC agreement was put place in January, causing some to fret that resurgent U.S. production could destabilize prices and upend the pact.
Oil prices will surge to $70 per barrel by year-end – Citi - US investment bank Citi has posted a bullish prediction about oil prices. As supply and demand levels continue to rebalance, crude is likely to reach $70 per barrel by the end of 2017, the bank said in a note. However, the increase will come gradually, and a surge is to be expected a few months later, said Citi."Oil prices are not likely to stray far from their current $53-58 per barrel range in the near term as record investor net length and bearish inventory data will likely cap prices until more tangible evidence of a tighter market emerges," Citi’s analysts wrote. On Wednesday, crude prices were slightly down after the rally on Tuesday with Brent trading at $56.50 per barrel and WTI trading at $54.26.Citi expects to see a positive result from an OPEC production cut, which reported 93 percent compliance in January. The bank added that heavy refinery maintenance in Asia planned for the spring is also a decisive factor for oil prices. Another US bank - Goldman Sachs - expects oil inventories to keep falling globally. While stocks are likely to rise in the US, production cuts and strong growth in demand will be more significant, the bank said. "We do not view the recent US builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness. Given our unchanged 1.5 million barrels per day growth forecast for 2017, this higher base demand level should fully offset higher US output,” Goldman said in a note. "While the production cuts have so far reached a historically high level of compliance at 90 percent [93 percent, according to OPEC], the rebound in US drilling activity has exceeded even our above consensus expectations," the bank added.
Goldman says global crude stocks likely to keep falling | Reuters: Goldman Sachs expects global crude oil inventories to keep falling due to production cuts and strong growth in demand, although stocks are likely to rise in the United States. "We do not view the recent U.S. builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness," analysts at the bank said in a note dated Feb. 21. "Given our unchanged 1.5 million barrels per day growth forecast for 2017, this higher base demand level should fully offset higher U.S. output." The Wall Street bank reiterated its forecast for Brent and U.S. crude prices to rise to $59 and $57.50 per barrel respectively in the second quarter, before dropping to $57 and $55 for the rest of 2017. Oil prices held near multi-week highs on Wednesday, with the U.S. West Texas Intermediate April crude contract up 18 cents at $54.51 a barrel at 0228 GMT (5:28 a.m. ET), while Brent crude was up 24 cents at $56.90. Surging U.S. output has pushed crude and gasoline inventories to record highs, keeping a lid on prices after they climbed following an agreement by the Organization of the Petroleum Exporting Countries (OPEC) and other producers to cut output by about 1.8 million barrels per day (bpd). "While the production cuts have so far reached a historically high level of compliance at 90 percent, the rebound in U.S. drilling activity has exceeded even our above consensus expectations," Goldman said.
Oil prices slip on dollar strength, but OPEC hope cushions the fall: Global oil prices slipped on Wednesday as the U.S. dollar rose, but crude futures traded broadly at multi-week highs after OPEC signaled optimism over its deal to curb output with other producers. A stronger greenback makes dollar-denominated commodities like crude oil more expensive for holders of other currencies. The U.S. West Texas Intermediate April crude contract was down 70 cents, or 0.1.3 percent, at $53.63 a barrel at 9:22 a.m. ET (1422 GMT). The March contract expired on Tuesday. Brent crude was down 72 cents, or 1.3 percent, at $55.94. Nevertheless, an agreement by major oil producers under the OPEC umbrella, which came into place at the start of this year, lent a floor to oil prices.show chapters Citi analysts predict crude oil will hit $70 by the end of 2017 Tuesday, 21 Feb 2017 | 8:27 AM ET | 00:38 Mohammad Barkindo, secretary general of the Organization of the Petroleum Exporting Countries, told a conference on Tuesday that January data showed conformity from member countries in the output cut at above 90 percent. Hedge funds raised their combined net long position in the three main derivative contracts linked to Brent and WTI by 51 million barrels last week, holding a net long position equivalent to a record 903 million barrels of oil. The combined net long position has a notional valuation of more than $49 billion.
Oil prices drop on worries of swelling US stockpiles: Oil prices fell about 1.5 percent on Wednesday on expectations of another surge in U.S. inventories, but they traded close to multi-week highs after OPEC signaled optimism over its deal with other producers to curb output. Analysts polled ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and the U.S. Department of Energy's Energy Information Administration (EIA) estimated, on average, that crude stocks increased by about 3.3 million barrels last week, its seventh weekly build. The API is scheduled to release its data at 4:30 p.m. EST (2130 GMT), while EIA data is due at 11 a.m. EST on Thursday, both delayed a day because of the federal holiday on Monday. The U.S. West Texas Intermediate April crude contract settled 74 cents, or 1.4 percent, lower at $53.59 a barrel. The March contract expired on Tuesday. Brent crude was down 90 cents, or 1.6 percent, at $55.76 at 2:33 p.m. ET (1933 GMT).Hedge funds raised their combined net long position in the three main derivative contracts linked to Brent and WTI by 51 million barrels last week, holding a net long position equivalent to a record 903 million barrels of oil. The combined net long position has a notional valuation of more than $49 billion. Goldman Sachs reiterated its outlook for a recovery in prices in the second quarter — WTI to rise to $57.50 and Brent to $59 — before declining to $55 for WTI and $57 for Brent for the rest of the year.
Oil settles lower to end 3 straight sessions of gains, as non-OPEC production weighs - Crude-oil prices on Wednesday finished lower, snapping a three-session string of gains as concerns about growing output by producers outside of a pact to curtail global production weighed on crude futures. West Texas Intermediate crude oil trading on the New York Mercantile Exchange for April delivery lost 74 cents, or 1.4%, to settle at $53.59 a barrel. Oil traded slightly higher in electronic trading following a release of data from the American Petroleum Institute showing a 884,000-barrel decline in U.S. crude supplies for the week ended Feb. 17, when a consensus of analysts polled by The Wall Street Journal were expecting a gain of 3.4 million barrels. At last check, crude traded up at $53.87 a barrel. The report precedes the more closely watched U.S. Energy Information Administration inventory report on Thursday. April Brent crude on London’s ICE Futures exchange traded down 82 cents, or 1.5%, to close at $55.84 a barrel. The crude market has been anxious about rising production, namely from U.S. shale-oil producers and Russia, which has a history of not complying with production limits.
Oil Bounces After Surprise Inventory Draw -- While OPEC compliance remains key, it appears fundamental over-supply fears are mounting once again. Against expectations of a crude build and gasoline draw, API reported a surprise crude draw but smaller than expected gasoline draw. Cushing also saw a major drawdown and Distillates saw the biggest draw since Oct 2014. WTI and RBOB prices were marginally higher on the print. API
- Crude -884k (+3.3m exp)
- Cushing -1.7mm
- Gasoline -893k (-1.5mm exp)
- Distillates -4.229mm
This surprise draw ends the 6 week streak of builds in crude but Distillates saw the biggest draw since Oct 2014...
Unsatisfied With Oil Prices, Iraq Calls For New OPEC Meeting - Iraq thinks that OPEC should hold a new meeting to discuss the cartel’s oil production cuts, given the fact that the current oil prices are still below expected levels, according to Iraqi Prime Minister Haider al-Abadi.The price of oil is still below the level that is needed to replenish the budget deficit of Iraq, Kazakh agency KazTag reported on Wednesday, quoting Iraqi media that carried al-Abadi’s statements. Iraq - OPEC’s second biggest producer behind Saudi Arabia - has “tried hard to cut down production volume in the cartel and keep the prices, now OPEC needs to conduct a new meeting to reach an agreement”, KazTag quoted al-Abadi as saying.Yesterday, al-Abadi said at a news conference in Baghdad that the country needed oil to reach US$60 per barrel in order to fill in the budget deficit gap. Iraq’s public finances have suffered from low oil prices, as Baghdad relies almost exclusively on oil revenues for budget proceeds. In addition, the country’s fight against Islamic State militants has been further stretching the dwindling financial resources.Iraq has contractual obligations to foreign oil companies, and must deal with the Kurdish Regional Government (KRG), which controls fields in the north, making any production cuts quite complex. In this way, Iraq faces more challenges than other OPEC members in trying to comply with the deal. Nevertheless, it’s a bit odd that Iraq – which in January missed its production cut target under the OPEC deal the most – is the one demanding a new meeting on cuts. In the November 30 supply-cut deal, Iraq pledged to reduce its crude oil production by 210,000 bpd to reach and keep for six months a production level of 4.351 million bpd. OPEC’s figures for January show that Iraq pumped – according to secondary sources – 4.476 million bpd last month. Iraq’s self-reported production was even higher – 4.630 million bpd. The secondary-source figure – which OPEC deems valid for cuts and compliance purposes – is still 125,000 bpd above the targeted level.
Oil To $70? Or Down To $30? - Will oil prices rise to $70 per barrel this year or fall to $30? Depends on who you ask.Oil price forecasts are always all over the map, but the exceptional disparity between some projections for 2017 is pretty stunning.On the one hand, you have Citibank, which sees oil shooting up to $70 this year as supply continues to tighten even as demand rises.Citi acknowledges the headwinds in the near-term. "Oil prices are not likely to stray far from their current $53-58 per barrel range in the near term as record investor net length and bearish inventory data will likely cap prices until more tangible evidence of a tighter market emerges," Citi analysts wrote in a recent research note. However, they see oil prices posting much stronger gains in the second half of the year. But the bearish threats to oil prices on the downside seem to be a lot more visible right now than the bullish ones. Aside from rising shale production, a dagger looms over oil prices in the very near-term. Hedge funds and money managers have pushed bullish bets to a new record high, equivalent to over 1 billion barrels of oil. The massive one-sided bet leaves the oil market dangerously exposed. When the herd suddenly realizes that they are all making the same bet, there could be a stampede back in the other direction. The buildup in bullish bets is all the more remarkable because it occurred at a time when oil prices were stagnant, stuck in the mid- to low-$50s per barrel. "The world is awash with oil at the moment and there continues to be endless supply so therefore I don't see a real reason for prices to rise above $60 or $70…so I'm really seeing probably the risks of the prices falling below $50 for a considerable period of time and probably even touching the levels of $40 to $45 this year," Eugen Weinberg, Head of Commodity Research at Commerzbank, told CNBC's Street Signs on February 21.Some oil watchers are even more pessimistic. Unless OPEC extends its production cut for another six months or so, crude prices could plummet to $30 per barrel, according to ABN Amro Bank NV. The OPEC deal has succeeded in already taking roughly 1 million barrels per day off of the market, but the supply/demand balance is not as tight as OPEC members had hoped it would be at this point.
WTI/RBOB Slide After Crude Inventory Hits Record High, Production Tops 9 Million Barrels -- After API's surprise draw across all major categories, DOE reported the 7th weekly crude build in a row (even as crude imports plunged). Gasoline, Distillates, and Cushing all saw draws even as crude production rose to new cycle highs - back above 9mm bbl/d. DOE:
- Crude +564k (+3.25m exp)
- Cushing -1.528mm (-50k exp)
- Gasoline -2.628mm (-1.5mm exp)
- Distillates -4.924mm (-1.0mm exp)
7th weekly crude build in a row but major draws across the other categories...
Oil volatility migrates from flat prices to spreads: Kemp - The benchmark price of Brent crude has been unusually stable since the middle of December, but there has been plenty of movement in the futures strip and crack spreads.Hedge funds have amassed an unusually large net long position in crude futures and options betting on a further increase in benchmark prices, but the position has not yet yielded much profit, with prices range bound.The more interesting and profitable trades for both hedge funds and physical traders so far in 2017 have been around the calendar, crack and quality spreads.Front-month futures prices have traded in a narrow range of just $3.46 per barrel since Dec. 13, never closing below $53.64 or higher than $57.10 (http://tmsnrt.rs/2mkxpWy).The standard deviation of front-month prices over the last month, which is one way to measure volatility, has fallen to the lowest level since July 2003 (http://tmsnrt.rs/2lREFfn).Some of the reduction in volatility is more apparent than real: as the dollar price has halved since 2014 so a smaller dollar move is equivalent to the same daily percentage change.Volatility is not exceptionally low when daily price changes measured in either dollars per barrel or percentage terms are considered rather than just the flat price (http://tmsnrt.rs/2lRtV0h).Nonetheless, there is no doubt flat-price volatility has declined over the last two months and is now at some of the lowest levels since the oil slump began in 2014 (http://tmsnrt.rs/2lRu6st). But while flat prices have been broadly stable, other elements of the constellation of oil prices have become increasingly volatile.
OilPrice Intelligence Report: What Will It Take For Oil To Breakout? - Oil prices gained some ground this week on the drawdown in gasoline stocks in the U.S., which the markets interpreted as a sign that the glut could be easing. However, on Friday, oil prices fell back a bit on concerns that there is still just too much supply out there. 2017 has brought remarkable increases in the inventory levels for crude oil and gasoline, both of which hit record highs this month. The buildups have threatened to erase the price gains achieved since OPEC announced its deal late last year. The latest data from EIA offered a bit of encouragement, revealing a 2.6-million-barrel drawdown for gasoline, although crude stocks rose by 0.6 million barrels. Investors chose to focus on the improving gasoline figures, and oil prices traded up more than 1 percent on Thursday. They apparently sobered up on Friday, and oil was down about 1 percent during early trading hours. ExxonMobil (NYSE: XOM) removed 3.3 billion barrels from its books this week, as low prices threaten to leave those reserves in the ground. The reserves are located in Canada’s oil sands, some of the most expensive sources of oil in the world. The move comes after ConocoPhillips (NYSE: COP) de-booked more than one billion reserves in Canada as well. The move is a sign of the struggle for Canada’s oil sands to compete in a world of much lower spending levels. Beyond the projects that are already under development, Canada’s oil sands could see fewer and fewer greenfield projects get off the ground. U.S. crude exports broke another record this past week, shipping 1.21 million barrels per day for the week ending on February 17. The oil export ban was only lifted at the end of 2015, and after some relatively small levels of exports throughout most of 2016, exports have accelerated dramatically this year. The sudden uptick in exports comes because crude oil inventories in the U.S. are overflowing and the WTI benchmark is trading at a discount to the more internationally-linked Brent marker, meaning U.S. crude is cheaper than other sources of oil, making it more attractive.
US Crude Production Tops 9 Million Barrels As Rig Count Hits 16-Month Highs -The US oil rig count rose once again this week (up 5) to 602 - the highest since October 2015.US crude production is surging - back above 9 million barrels/day in the last week - the largest since April 2016. The lagged response to rig count builds implies considerably more production to come.
U.S. Oil Rig Count Rises – Up 125 Since OPEC Deal - The number of active oil and gas rigs in the United States increased again, although modestly, on Friday by 3. Both benchmarks were trading down earlier on Friday despite reports of OPEC/non-OPEC compliance of 86 percent, along with Thursday’s EIA inventory data that showed another week of record-high crude oil inventories of 518.7 million barrels.The total number of active oil and gas rigs in the United States is now 754, according to oilfield services provider Baker Hughes, which is 252 rigs above the rig count a year ago.The number of oil rigs increased this week by 5, up from 597 last week to 602 this week. The number of active oil rigs in the United States is now the highest since October 09, 2015. Oil rigs have increased by 125 since the OPEC agreement was announced on November 30, as US drillers are continuing to gain as OPEC continues to hold its members largely to specified production caps. The number of gas rigs declined by 2 this week, and now stand at 151, ending a fourteen-week streak of no losses. Oil and gas rigs increased in the Permian, Eagle Ford, Cana Woodford, and Haynesville basins, and decreased in the Granite Wash and Williston basins. In Canada, the rig count climbed by 10 to 341—166 rigs more than this time last year—partially offsetting last week’s 21-rig decrease. At 11:17 am EST WTI was trading down 0.64% at $54.10—around $1.00 higher last Friday’s pre-rig count price. The Brent crude benchmark was trading down 0.83% at $56.11—more than $.60 above the price point last Friday. By 1:12pm EST, WTI was down further at $54.05, while Brent was up slightly over pre-rig count levels to $56.16.
Up, up and away! Rig count up another 3 -- The Baker Hughes U.S. rig count continues to steadily climb, gaining another 3 rigs this week. A total of 602 rigs are exploring for oil, up 5 from last week, while gas rigs declined by 2. By state, Texas still leads the pack with 386 rigs, up 8 from last week. Alaska and Louisiana each lost two, while North Dakota is down one rig this week. Wyoming gained one. By basin, the Permian still remains strong with 306 rigs, gaining 3 from last week, while the Eagle Ford gained three as well, with 64 rigs there total. The Cana Woodford was up 2 this week. The Haynesville also gained 1. The Williston Basin and the Granite Wash each lost a rig. Some concern about shale production still remains. Some believe the production cuts by OPEC could be compromised with the continued increase at home. According to EIA data, U.S. crude production at 9 million barrels a day last week was the highest level since early April 2016. Market watch’s Mark Decambre and Jenny W. Hsu stated Wednesday: The crude market has been anxious about rising production, namely from U.S. shale-oil producers and Russia, which has a history of not complying with production limits. However, OPEC has so far shown compliance, and the International Energy Agency (IEA) has said the OPEC cuts are the deepest on record. Oilprice.com reported OPEC Secretary-General Mohammed Barkindo dismissed speculation that the United States’ increase in shale oil production was counteracting the effects of the bloc’s less-than-two-month-old output reduction strategy. However, MarketWatch reported that Mohammed al-Sada, the oil minister of OPEC member Qatar, said not all the pieces were falling into place under the agreement, since compliance by non-OPEC members are only at about 50 percent of what was promised. Russia, one of those non-OPEC countries who committed to cuts did report it has reduced its oil production by 117,000 bpd in January, said Oilprice. But their exports, like the United States, were up. Exports through the Transneft pipeline were up 114,000 barrels per day in January compared to December.
Oil slips nearly 1 percent on concerns over rising U.S. output | Reuters: Oil prices fell about 1 percent on Friday as worries about rising U.S. supplies outweighed OPEC pledges to boost compliance with output curbs. But crude prices were on track for a weekly rise as traders have begun to pull out barrels from pricey storage, with physical markets showing signs of tightening. U.S. drillers added oil rigs for a sixth consecutive week, extending a nine-month recovery, energy services firm Baker Hughes Inc (BHI.N) said. [RIG/U] Prices were also pressured by book squaring ahead of the weekend and upcoming Feb. 28 expirations in Brent futures for April delivery, heating oil for March delivery HOc1, and March RBOB gasoline RBc1, analysts and traders said. Brent crude oil LCOc1 settled down 59 cents, or 1.04 percent, at $55.99 a barrel, while U.S. West Texas Intermediate CLc1 ended the session 46 cents lower at $53.99 a barrel. However, both benchmarks notched a weekly gain of about 1.1 percent. "The oil market remains focused on the global rebalancing act, with attention centered on OPEC compliance and U.S. production growth," Prices tumbled over the last two sessions after government data showed U.S. crude inventories rose for a seventh straight week. [EIA/S] But they have been supported within a tight $4 to $5 range since November, when the Organization of the Petroleum Exporting Countries (OPEC) and other producers agreed to cut production. OPEC's record compliance with the deal has surprised the market, and the biggest laggards, the United Arab Emirates and Iraq, have pledged to catch up with their targets.
OPEC still waiting for evidence oil cuts are doing their job - OPEC officials this week hailed the “ excellent” and “ unprecedented” implementation of their agreement to cut oil production, but were still waiting for solid evidence that the deal was fulfilling their key measure of success and shrinking the global glut.A reduction in the amount of oil held in storage around the world is the most important factor for the Organization of Petroleum Exporting Countries, Qatar’s Energy Minister Mohammed Al Sada said at the IP Week conference in London Wednesday. The pace of that decline will determine the group’s next move, including whether to extend the accord beyond its initial six-month term, said OPEC Secretary-General Mohammad Barkindo. The most reliable data available so far on inventories -- crude held in commercial storage in the U.S. -- is going in the opposite direction. Stockpiles in the world’s largest oil consumer have risen every week since OPEC began cutting on Jan. 1, while data on global storage levels has yet to be published. “The trend in inventories recently has been upwards and quite relentless. The market will be a bit careful to rally further if inventories are still building.” Brent crude has risen more than 20 percent since OPEC agreed last year to cut production, a deal that was joined later by Russia, Mexico and several other non-members. Even as the group’s initial compliance with the accord exceeded expectations, the price rally stalled in the mid-$50s as U.S. crude stockpiles surged to the highest level in more than three decades and oil drillers deployed the most rigs since October 2015.
Donald Trump, Saudi Arabia, And The Petrodollar --In late 2016, Obama vetoed the Justice Against Sponsors of Terrorism Act (JASTA). The bill would allow 9/11 victims to sue Saudi Arabia in US courts. With only months left in office, Obama wasn’t worried about the political price of opposing the bill. It was worth protecting Saudi Arabia and the petrodollar system, which underpins the US dollar’s role as the world’s premier currency. Congress didn’t see it that way though. Those up for reelection couldn’t afford to side with Saudi Arabia over US victims. So Congress voted to override Obama’s veto, and JASTA became the law of the land.The Saudis, quite correctly, see this as a huge threat. If they can be sued in US courts, their vast holdings of US assets are at risk of being frozen or seized. The Saudi foreign minister promptly threatened to sell all of the country’s US assets. Unlike every president since the petrodollar’s birth, Donald Trump is openly hostile to Saudi Arabia. Recently he put this out on Twitter:Dopey Prince @Alwaleed_Talal wants to control our U.S. politicians with daddy’s money. Can’t do it when I get elected.The dopey prince that Trump is referring to is Al-Waleed bin Talal, a prominent member of the Saudi royal family. He’s also one of the largest foreign investors in the US economy, particularly in media and financial companies. The Saudis openly backed Hillary during the election. In fact, they “donated” an estimated $10 million–$25 million to the Clinton Foundation, making them the most generous foreign donors. The Saudis did not want Donald Trump in the White House. And not because of some bad blood on Twitter. There are real geopolitical issues at stake.At the moment, Trump seems determined to walk back on US support for the so-called “moderate” rebels in Syria.The Saudis are furious with the US for not holding up its part of the petrodollar deal.They think the US should have already attacked Syria as part of its commitment to keep the region safe for the monarchy.
Trump's energy plan has him cozying up to Saudi Arabia -- Saudi Arabia is quickly becoming one of the biggest fans of President Trump's pro-fossil fuels energy plan, as Trump seeks to make the oil-rich kingdom a key strategic ally for energy security and combating terrorism. "President Trump has policies which are good for the oil industries," Saudi oil minister Khalid Al-Falih told the BBC this month. "He has steered away from excessively anti-fossil fuel, unrealistic fossil fuel policies," he said, referring to the strict policies of the Obama administration. Energy experts in Washington say the Saudis were not fans of former President Barack Obama's energy policies, which included ending sanctions on Iran's oil exports that has made the country a stronger power in the region. Iran is Saudi Arabia's chief nemesis in the Persian Gulf. "It's more geopolitically strategic with the Saudis than it is for the oil, per se," said Guy Caruso, the former head of the Energy Information Administration under former President George W. Bush, who also served as an economist for the Central Intelligence Agency. He is now the senior adviser for energy and national security at the nonpartisan Center for Strategic and International Studies think tank in Washington.Trump's policies are expected to boost cooperation with Saudi Arabia by making the country a key ally on energy and combating terrorism. The U.S.-Saudi joint energy strategy was outlined in Trump's "America First Energy Plan," which the White House posted on Inauguration Day. The plan calls for supporting increased domestic energy development, while simultaneously working "with our Gulf allies to develop a positive energy relationship as part of our anti-terrorism strategy." Those Gulf allies include Saudi Arabia, the United Arab Emirates and Kuwait as the largest crude oil producers, Caruso said.
Saudi Arabia debating shape of Aramco ahead of IPO: sources | Reuters: Saudi Arabia is considering two options for the shape of Saudi Aramco when it sells shares in the national oil giant next year: a global industrial conglomerate, and a specialized international oil company, industry and banking sources said. The listing of Aramco, expected to be the world's biggest initial public offer and raise tens of billions of dollars, is a centerpiece of the government's ambitious plan - known as Vision 2030 - to diversify the economy beyond oil. When the plan was publicly released in June last year, it pledged to "transform Aramco from an oil-producing company into a global industrial conglomerate". But now Saudi officials and their advisers are debating whether to make Aramco "a Korean chaebol", as one source said, referring to sprawling South Korean conglomerates, or a specialized company focused purely on oil and gas. A specialized company might be easier to value because of its simplicity and, since the risks in its business would be clearer, achieve a higher price for its shares. "There are two options being studied now. Either to make Aramco a pure oil and gas company, or a conglomerate and expand its role in petrochemicals and other sectors," said a Saudi industry source, declining to be identified because the debate is being conducted in private. An Aramco spokesperson said: "Saudi Aramco does not comment on rumor or speculation."
The Horrifying Starvation of Yemen Continues - The horrifying conditions in Yemen continue to get worse: Seven million Yemenis are closer than ever to starvation, the UN humanitarian coordinator in the country warned Tuesday, almost two years since a conflict escalated between the government and rebels.“Seven million Yemenis do not know where their next meal will come from and are ever closer to starvation” in a country of 27 million people, Jamie McGoldrick said. “Over 17 million people are currently unable to adequately feed themselves and are frequently forced to skip meals — women and girls eat the least and last,” he said in a statement. Yemen suffered from food insecurity before the U.S.-backed, Saudi-led intervention began in 2015, but that intervention, the ensuing damage to the country’s infrastructure and ports (most of it caused by coalition bombing), and the coalition’s cruel blockade have brought millions of people to the brink of famine. By enabling the coalition’s campaign, the U.S., Britain, and other supporting governments are partly responsible for creating the world’s worst humanitarian disaster, and they have had a hand in causing the famine that is now unfolding there. The disaster that engulfs Yemen was entirely predictable at the start of the intervention, and month after month many people kept warning that this is what would happen as a result of this reckless military intervention. The war has received intermittent coverage, but has been largely ignored. Millions of people are close to perishing from hunger and preventable diseases in a crisis that need not have happened and might still be ameliorated if there were a coordinated international response. Unfortunately, the international response has been anemic at best, and there is scant attention paid to the crisis in the Western countries whose governments have been working to exacerbate the civilian population’s misery.
Tulsi Gabbard Versus "Regime Change" Wars --Rep. Tulsi Gabbard is a rare member of Congress willing to take heat for challenging U.S. “regime change” projects, in part, because as an Iraq War vet she saw the damage these schemes do, as retired Col. Ann Wright explains to ConsortiumNews.com: I support Rep. Tulsi Gabbard, D-Hawaii, going to Syria and meeting with President Bashar al-Assad because the congresswoman is a brave person willing to take criticism for challenging U.S. policies that she believes are wrong. It is important that we have representatives in our government who will go to countries where the United States is either killing citizens directly by U.S. intervention or indirectly by support of militia groups or by sanctions. We need representatives to sift through what the U.S. government says and what the media reports to find out for themselves the truth, the shades of truth and the untruths.We need representatives willing to take the heat from both their fellow members of Congress and from the media pundits who will not go to those areas and talk with those directly affected by U.S. actions. We need representatives who will be our eyes and ears to go to places where most citizens cannot go.Tulsi Gabbard, an Iraq War veteran who has seen first-hand the chaos that can come from misguided “regime change” projects, is not the first international observer to come back with an assessment about the tragic effects of U.S. support for lethal “regime change” in Syria. Nobel Peace Laureate Mairead Maguire began traveling to Syria three years ago and now having made three trips to Syria. She has come back hearing many of the same comments from Syrians that Rep. Gabbard heard — that U.S. support for “regime change” against the secular government of Syria is contributing to the deaths of hundreds of thousands of Syrians and – if the “regime change” succeeded – might result in the takeover by armed religious-driven fanatics who would slaughter many more Syrians and cause a mass migration of millions fleeing the carnage.
The Cancer Of War: U.S. Admits To Using Radioactive Munitions In Syria -- Despite vowing not to use depleted uranium (DU) weapons in its military action in Syria, theUS government has now admitted that it has fired thousands of the deadly rounds into Syrian territory. As Foreign Policy Magazine reports:US Central Command (CENTCOM) spokesman Maj. Josh Jacques told Airwars and Foreign Policy that 5,265 armor-piercing 30 mm rounds containing depleted uranium (DU) were shot from Air Force A-10 fixed-wing aircraft on Nov. 16 and Nov. 22, 2015, destroying about 350 vehicles in the country’s eastern desert. Numerous studies have found that depleted uranium is particularly harmful when the dust is inhaled by the victim. A University of Southern Maine study discovered that:...DU damages DNA in human lung cells. The team, led by John Pierce Wise, exposed cultures of the cells to uranium compounds at different concentrations.The compounds caused breaks in the chromosomes within cells and stopped them from growing and dividing healthily. 'These data suggest that exposure to particulate DU may pose a significant [DNA damage] risk and could possibly result in lung cancer,' the team wrote in the journal Chemical Research in Toxicology. We should remember that the United States is engaged in military activities in Syria in violation of international and US law. There is no Congressional authorization for US military action against ISIS in Syria and the United Nations has not authorized military force in violation of Syria's sovereignty either. The innocent citizens of Syria will be forced to endure increased risks of cancer, birth defects, and other disease related to exposure to radioactive materials. Depleted uranium is the byproduct of the enrichment of uranium to fuel nuclear power plants and has a half-life in the hundreds of millions of years. Damage to Syrian territory will thus continue long after anyone involved in current hostilities is dead.
Russia asks world powers to pay for Syria rebuild -- Russia is pressing world powers to provide Syria with billions of dollars for reconstruction to bolster its faltering efforts to resolve the Arab state’s six-year conflict. But European and Gulf states, angered by Russia’s military intervention that tilted the war in favour of President Bashar al-Assad, will only contribute if Moscow secures a peace settlement that sets the terms for an eventual political transition, western diplomats say. “They [Russia] go in, they mess it all up, they break everything and want everyone to pay for it,” said a European diplomat. The issue is expected to be raised at UN-backed talks between the Syrian government and rebels that begin in Geneva on Thursday. Russia is the dominant foreign player involved in the war, but after helping broker a ceasefire between the warring parties in December, it has struggled to bring the adversaries closer to a political agreement. Mikhail Bogdanov, Russia’s deputy foreign minister in charge of Middle East issues, told a meeting of EU ambassadors in Moscow last week that the reconstruction of Syria would top the agenda very soon, according to European diplomats. He said “tens of billions of dollars” would be needed, while warning that “nothing” should be expected from Russia, the diplomats said.
Yemen president says $10 bn Saudi aid for reconstruction | Daily Mail Online: Yemen's President Abedrabbo Mansour Hadi said Wednesday that Saudi Arabia has earmarked $10 billion in aid for the reconstruction of provinces retaken from Shiite Huthi rebels.Riyadh, which since March 2015 has led a military coalition to support pro-Hadi fighters in Yemen, has made no official announcement on the aid.Hadi said the oil-rich neighbouring kingdom had allocated $10 billion "for the reconstruction of liberated provinces, including $2 billion as a deposit in the central bank to shore up the (Yemeni) riyal", the Saba news agency reported.The president, speaking in the government's temporary southern capital of Aden, called on his government to focus on power, water, roads, health and education in retaken areas.Pro-government forces backed by the Saudi-led coalition took back five southern provinces from the rebels in 2015, but Huthis still control the capital and much of northern Yemen.More than 7,400 people have been killed since the coalition intervened in impoverished Yemen two years ago, including around 1,400 children, according to the United Nations.
Mattis Tells Iraq We Are Not Here To "Seize" Your Oil - In the latest distancing by Trump administration advisors from recent statements by the President, Defense Secretary Jim Mattis arrived in Baghdad on an unannounced visit on Monday to discuss the war effort against ISIS, and said that the US military is not in Iraq "to seize anybody’s oil." Speaking to a small group of reporters traveling with him, Mattis was quoted by Reuters as saying “I think all of us here in this room, all of us in America, have generally paid for our gas and oil all along and I’m sure that we will continue to do so in the future."On his first trip to Iraq as Pentagon chief, Mattis is set to assess the war effort against the Islamic State as Iraqi forces launch a new push to evict ISIS militants from their remaining stronghold in the city of Mosul. In Iraq, he is likely to face questions about Trump's remarks and actions, including a temporary ban on travel to the United States and for saying America should have seized Iraq's oil after toppling Saddam Hussein in 2003. Trump told CIA staff in January: "We should have kept the oil. But okay. Maybe you'll have another chance." Trump later clarified his position in an ABC interview. The president said ISIS would not have become a global threat if it hadn’t taken over Iraq’s oil industry when the country was left weakened by the war.
Iraq: “Is It Oil?” Around the time that the United States invaded Iraq, 14 years ago, then-Senator John Kerry tried to justify the action. As he got into his speech, a loud, slow, calm voice came from the back of the room: “O – I – L.” Kerry tried to ignore the comment. But, again and again, “O – I – L.” Kerry simply went on with his prepared speech. The speaker from the back of the room did not continue long, but he had succeeded in determining the tenor of the day. Looking back on U.S. involvement in the Iraq, it appears to have been largely a failure. Iraq, it turned out, had no “weapons of mass destruction,” but this original rationalization for invasion offered by the U.S. government was soon replaced by the goal of “regime change” and the creation of a “democratic Iraq.” The regime was changed, and Iraqi dictator Saddam Hussain was captured and executed. But it would be very had to claim that a democratic Iraq either exists or is in the making—to say nothing of the rise of the so-called Islamic State (ISIS) and the general destabilization in the Middle East, both of which the U.S. invasion of Iraq helped propel. Yet, perhaps on another scale, the invasion would register as at least a partial success. This is the scale of O – I – L At the time of the U.S. invasion, I wrote an article for Dollars & Sense titled “Is It Oil?” (available online here). I argued that, while the invasion may have had multiple motives, oil—or more precisely, profit from oil—was an important factor. Iraq, then and now, has huge proven oil reserves, not in the same league as Saudi Arabia, but in group of oil producing countries just behind the Saudis. It might appear, then, that the United States wanted access to Iraqi oil in order to meet the needs of our highly oil-dependent lifestyles in this country. After all, the United States today, with just over 4% of the world’s population, accounts for 20% of the world’s annual oil use; China, with around 20% of the world’s population is a distant second in global oil use, at 13%. Even after opening new reserves in recent years, U.S. proven reserves amount to only 3% of the world total.
Iraqi forces storm Mosul airport, military base | Reuters: U.S.-backed Iraqi security forces captured Mosul airport from Islamic State on Thursday, advancing on multiple fronts towards the jihadists' last major stronghold in the western half of the city. The troops have gained ground rapidly in outlying areas south of the city, Iraq's second largest, since launching a new phase of a four-month offensive to terminate Islamic State's territorial holdings in the country. Elite counter terrorism forces joined the battle on Thursday in the southwest, entering the Ghozlani army base and pushing towards the districts of Tal al-Rayyan and al-Mamoun. Federal police and an elite interior ministry unit known as Rapid Response drove Humvees flying Iraqi flags into the perimeter of the airport, and state television later said they had taken full control of the heavily damaged facility. Islamic State fought back with suicide car bombs, drones carrying grenades and mortars, Reuters correspondents in the area said. The burnt corpses of two militants and the motorcycle from which they had fired at Iraqi forces were lying under a tree, apparently hit by an air strike. "Daesh (Islamic State) resistance is not inconsiderable but they are trying to save their strength for inside the city," First Lieutenant Ahmed al-Ghalabi of the Rapid Response force said outside the airport's main entrance. Iraqi forces hope to repair the airport and use it as a base from which to drive the militants from Mosul's western districts where around 750,000 people are believed to be trapped.
The Bitter Battle for Mosul -- Iraqi government forces have started their offensive aimed at capturing the western half of Mosul, Isis’s last big urban stronghold in the country. There are an estimated 4,000 jihadi fighters defending the close-packed houses and narrow alleyways in the half of the city west of the Tigris River, which is inhabited by some 650,000 civilians.Iraqi paramilitary federal police and interior ministry units are advancing from the south of Mosul with the initial aim of seizing the city airport. But the heaviest fighting is likely to come when the soldiers get into built up areas where the militant group has been digging tunnels and holes cut through the walls of houses so they can conduct a mobile defence away from artillery fire and airstrikes.The fighting could be as fierce as anything seen in the Iraq war, which has been ongoing since the US invasion of 2003 overthrew Saddam Hussein. The operation is being largely planned by the US, which has 6,000 soldiers in Iraq and which leads a coalition that has carried out more than 10,000 airstrikes and trained and equipped 70,000 Iraqi soldiers. “Mosul would be a tough fight for any army in the world,” said Lt Gen Stephen Townsend, the commander of the coalition, in a statement. The struggle for Mosul is the climactic battle in the bid by the Iraqi government and its foreign allies to destroy Isis, which established its self-declared caliphate in June 2014 when a few thousand fighters unexpectedly captured Mosul from a 60,000-strong government garrison. Abu Bakr al-Baghdadi, the Isis leader and self-appointed caliph, is in west Mosul according to Hoshyar Zebari, the former Iraqi finance and foreign minister, speaking to The Independent in an interview last week. This gives Isis an extra reason to hold the city to the last man.
Use of weaponized drones by ISIS spurs terrorism fears --Late last month, a pair of Islamic State fighters in desert camouflage climbed to the top of a river bluff in northern Iraq to demonstrate an important new weapon: a small drone, about six feet wide with swept wings and a small bomb tucked in its fuselage.The two men launched the slender machine and took videos from a second, smaller drone that shadowed its movements. The aircraft glided over the besieged city of Mosul, swooped close to an Iraqi army outpost and dropped its bomb, scattering Iraqi troops with a small blast that left one figure sprawled on the ground, apparently dead or wounded.The incident was among dozens in recent weeks in a rapidly accelerating campaign of armed drone strikes by the Islamic State in northern Iraq. The terrorist group last month formally announced the establishment of a new “Unmanned Aircraft of the Mujahideen” unit, a fleet of modified drones equipped with bombs, and claimed that its drones had killed or wounded 39 Iraqi soldiers in a single week.“A new source of horror for the apostates!” the group’s official al-Naba newsletter declared.While the casualty claim is almost certainly exaggerated, U.S. officials confirm that the terrorist group appears to have crossed a threshold with its use of unmanned aircraft. Two years after the Islamic State first used commercially purchased drones to conduct surveillance, the militants are showing a growing ambition to use the technology to kill enemies, U.S. officials and terrorism experts say.
Pope Francis: 'Muslim Terrorism Does Not Exist' - In an impassioned address Friday, Pope Francis denied the existence of Islamic terrorism, while simultaneously asserting that “the ecological crisis is real.” “Christian terrorism does not exist, Jewish terrorism does not exist, and Muslim terrorism does not exist. They do not exist,” Francis said in his speech to a world meeting of populist movements. What he apparently meant is that not all Christians are terrorists and not all Muslims are terrorists—a fact evident to all—yet his words also seemed to suggest that no specifically Islamic form of terrorism exists in the world, an assertion that stands in stark contradiction to established fact. “No people is criminal or drug-trafficking or violent,” Francis said, while also suggesting—as he has on other occasions—that terrorism is primarily a result of economic inequalities rather than religious beliefs. “The poor and the poorer peoples are accused of violence yet, without equal opportunities, the different forms of aggression and conflict will find a fertile terrain for growth and will eventually explode.” The Pope also reiterated his conviction that all religions promote peace and that the danger of violent radicalization exists equally in all religions. “There are fundamentalist and violent individuals in all peoples and religions—and with intolerant generalizations they become stronger because they feed on hate and xenophobia,” he said. While denying the existence of Islamic terrorism, Francis also seemed to condemn the denial of global warming, asserting that “the ecological crisis is real.” “A very solid scientific consensus indicates that we are presently witnessing a disturbing warming of the climatic system,” he said. We know “what happens when we deny science and disregard the voice of Nature,” the Pope said. “Let us not fall into denial. Time is running out. Let us act. I ask you again—all of you, people of all backgrounds including native people, pastors, political leaders—to defend Creation.”
Ex-officials: Israeli Leader Spurned Secret Peace Offer(AP) -- Israel’s prime minister turned down a regional peace initiative last year that was brokered by then-U.S. Secretary of State John Kerry, former American officials confirmed Sunday, in apparent contradiction to Benjamin Netanyahu’s stated goal of involving regional Arab powers in resolving Israel’s conflict with the Palestinians. Netanyahu took part in a secret summit that Kerry organized in the southern Jordanian port city of Aqaba last February and included Jordan’s King Abdullah II and Egyptian President Abdel Fattah el-Sissi. The secret meeting was first reported by the Israeli newspaper Haaretz1 According to two former Obama administration officials, Kerry proposed regional recognition of Israel as a Jewish state — a key Netanyahu demand — alongside a renewal of peace talks with the Palestinians with the support of the Arab countries. Netanyahu rejected the offer, which would have required a significant pullout from occupied land, saying he would not be able to garner enough support for it in his hard-line coalition government. The initiative also appeared to be the basis of short-lived talks with moderate opposition leader Isaac Herzog to join the government, a plan that quickly unraveled when Netanyahu chose to bring in nationalist leader Avigdor Lieberman instead and appoint him defense minister.
Russia, Iran discuss oil cooperation, market conditions - Russian energy minister Alexander Novak discussed Russian companies' participation in Iranian oil projects and the situation on international oil markets with Iranian oil minister Bijan Zanganeh in Tehran on Tuesday, according to a ministry statement. Russia and Iran are key participants in an OPEC/non-OPEC deal to curb crude production and are planning to further strengthen links via deals for oil supplies and Russian participation in Iranian upstream projects in the near future. Earlier this week Russian companies also signed cooperation deals with Libya, Iraq and Iraqi Kurdistan, further cementing closer cooperation with partners in the region. Local media reported following the Tehran meeting that Russia and Iran are on the verge of signing a deal for the supply of 100,000 b/d of Iranian crude in return for cash and goods, in an indication that a long-discussed deal may be close to being signed. "It is expected that a contract for daily sales of 100,000 b/d of crude oil to Russia will be inked in early March," Zanganeh said, according to the Mehr news agency. Other agencies reported the deal would involve Russia paying 50% in cash and the remainder in goods. The Russian energy ministry did not immediately comment on the plans. Russia and Iran first signed a memorandum on an oil-for-goods deal in 2014. Covering a five year period, the deal envisaged supply of goods, oil equipment and services to Iran in exchange for Iranian oil. Since then officials have indicated that the deal has not been completely shelved, but little progress seems to have been made. Novak himself indicated in mid-2016 that the plan, designed to help sanctions-hit Iran market its crude, is less likely to be implemented since sanctions against Iran were eased.
Iran's foreign minister mocks Donald Trump 'putting him on notice' | The Independent: Iran’s foreign minister has mocked being “put on notice” in a tweet by Donald Trump and dismissed mounting pressure coming from Washington. Mohammad Javad Zarif drew laughter from an audience at an international security conference in Munich when, referring to the President's post, he said the “tweet is now very fashionable’’. Mr Trump had warned the Gulf nation it was “formally put on notice” on earlier in February after it tested a ballistic missile.The Trump administration then imposed sanctions on individuals and groups linked to the country's Revolutionary Guards. “We don’t respond well to threats, we don’t respond well to coercion and we don’t respond well to sanctions,” Mr Zarif told the meeting. “Crippling sanctions produced a net total of 19,800 centrifuges.” During his campaign, Mr Trump called a nuclear deal between several world powers and Iran was “one of the dumbest deals ever” and vowed to swiftly dismantle it. Iran has kept its part of the deal and significantly reduced its nuclear capacity, according to international monitors.
Iran Warns US: "The Enemy Will Receive A Strong Slap In The Face" --This past Saturday, two weeks after the White House unveiled new sanctions on two dozen Iranian entities in retaliation for a recent ballistic missile test, Iran's elite Revolutionary Guard announced it was set to conduct military drills this week despite warnings from the United States not to engage in such activity. General Mohammad Pakpour, commander of the force's ground units, told a news conference that "the manoeuvres called 'Grand Prophet 11' will start Monday and last three days." and warned that "rockets would be used" without specifying which kind. Several days later, as Tehran concluded the previously announced war games, Iran retaliated in the ongoing escalation of sabre rattling, when the abovementioned General Mohammad Pakpour again took to the airwave, and said quoted by Reuters that the United States should expect a "strong slap in the face" if it underestimates Iran's defensive capabilities, as Tehran concluded war games.On Wednesday, the Revolutionary Guards concluded three days of exercises with rockets, artillery, tanks and helicopters, weeks after Trump warned that he had put Tehran "on notice" over the missile launch. "The message of these exercises ... for world arrogance is not to do anything stupid," said Pakpour, quoted by the semi-official news agency Tasnim."The enemy should not be mistaken in its assessments, and it will receive a strong slap in the face if it does make such a mistake," said General Mohammad Pakpour, head of the Guards’ ground forces, quoted by the Guards' website Sepahnews.
Chinese Import Data Strongly Suggests OPEC Is Lying About A Production Cut -- To those cynics who accuse the self-monitoring OPEC, and its various adjunct agencies, of lying that it has implemented last year's agreed upon production cuts, China just released January crude import data, which validates this skepticism. As JPMorgan writes, while IEA estimated the OPEC crude oil production fell by 1mbd to 32.06mbd in January, suggesting an initial compliance of 90% with the output agreement reached end 2016, the latest oil supply details released by China customs today suggest a reduction of supplies was not yet seen by China, the world’s largest oil importer. In fact, quite the contrary: crude oil shipments from the 11 OPEC nations committed to a 1.2mbd output cut increased by 28% yoy, and more importantly, rose 4% from December 2016 - in a time when production was supposed to be declining - to 4.6mbd in January, accounting for 57% of China’s total oil imports. Ironically, if anyone was cutting it may have been the non-OPEC nations, mostly Russia, who foolishly assumed that Saudi Arabia et al would be true to its word: non-OPEC countries led by Russia that also agreed to a cut boosted their January supplies to China by 40% yoy, but saw a 10% drop sequentially, in line with what one would expect. Comparing January 2017 levels with the 2016 average, China’s crude oil imports from the committed OPEC and non-OPEC producers gained 6%/13% respectively, while the country’s total oil imports gained 5%.Some details:
- Saudi, Angola and Iran lead OPEC supply growth to China. According to the China Customs’ buy country oil supply data, Saudi Arabia boosted shipments to China by 19% yoy and 41% mom to 1.19mbd in January (16% growth versus the 2016 average). Imports from Angola increased by 63% yoy and 46% mom to 1.17 mbd last month (33% higher than 2016 average), while volumes from Iraq jumped by 43% yoy and 12% mom to 0.83mbd (14% higher than 2016 average).
- Russia and Oman drive non-OPEC supply growth. Among the non-OPEC countries that committed to 558kbd production cut from January, Russia’s oil supply to China increased by 36% yoy but fell 9% mom to 1.09mbd in January (3% higher than 2016 average), and Oman supplies expanded by 47% yoy and dropped 5% mom to 842kbd (20% higher than 2016 average).
It becomes even more blatant when charted: while total OPEC supply to China rose to a 4 month high, the combined oil supply from Saudi Arabia, Angola and Iraq in January soared to the highest a year, quite the opposite one would expect if the countries were cutting production instead of merely seeking to grab market share.
China iron ore hits record high, tracks rally in steel | Reuters: Iron ore futures in China surged more than 5 percent to a record high on Tuesday, pushed by a sustained rally in steel prices as investors bet on strong demand and tighter supply as Beijing tackles excess production capacity. Other steelmaking raw materials coking coal and coke extended gains amid possible curbs on coal output and China's suspension of North Korean coal imports. "Revival of infrastructure investment has been driving demand for steel and hence iron ore," said Wang Fei, analyst at Hua'an Futures in Hefei in eastern China. Traders and analysts expect construction and industrial activity to gain steam from March when spring begins. The most-traded iron ore on the Dalian Commodity Exchange rose as far as 741.50 yuan ($108) a ton, its strongest since the bourse launched the contract in October 2013. It closed up 3.8 percent at 732 yuan. Rebar on the Shanghai Futures Exchange ended 1.7 percent higher at 3,575 yuan per ton. The construction steel product touched 3,630 yuan earlier, its loftiest since February 2014. "While we anticipate resilient steel demand in China this year on the back of infrastructure investment, we think current pricing is too optimistic," Commonwealth Bank of Australia analyst Vivek Dhar said in a note. Iron ore has piggybacked on the strength in steel prices, and the rally comes despite a rising mountain of the raw material at Chinese ports. Stockpiles of imported iron ore at major Chinese ports reached 127.55 million tonnes, the most since at least 2004, according to data tracked by SteelHome consultancy.
China’s Estimated Intervention in January -- It should go almost without saying that China’s ability to maintain its current exchange rate regime matters. The yuan has been more less stable against the CFETS basket since last July. If the current peg breaks, China will struggle to avoid a major overshoot of its exchange rate. Christopher Balding recently has argued that the fall in the dollar (on say the Fed’s dollar index) in 2017 is more or less the same as the yuan’s depreciation against the basket—which would make China’s exchange rate regime now more a pure peg against the dollar rather than a true basket peg. Hence the lack of movement against the dollar in past few weeks. Maybe. I though am inclined to think that the yuan’s depreciation against the basket this year just undid the upward drift against the basket that came when the dollar appreciated last year, and China is still aiming to keep the currency more or less stable against the basket, not stable against the dollar. Time will tell. Right now, the exact nature of China’s peg now matters less than China’s ability to maintain some kind of peg, and thus to avoid a sharp depreciation. If there is a depreciation, either the world will absorb a new wave of Chinese exports—a 10 percent real effective exchange rate depreciation should raise China’s real trade balance by about 1.5 percent of China’s GDP, or by roughly $180 billion (using this IMF study as a baseline for the estimate, it is summarized here)—or a wave of protectionist action will limit China’s export response, and in the process threaten the global trading rules.* Neither is a good outcome. The data for the next few months will be critical. China does seem to have tightened its outflow controls—despite the official denials. FDI outflows certainly have slowed. Hopefully the screws will be placed on a few other categories of outflows—there are plenty of categories in the balance of payments that show a buildup of foreign assets that, in my view, should be controllable.
China’s $9 Trillion Moral Hazard Is Now Too Big to Ignore - China may be about to embark on its most ambitious -- and perilous -- campaign to convince investors that they shouldn’t depend on a bailout when markets go south.In a rare show of cooperation, the nation’s main financial regulators are drafting new rules for asset-management products that aim to make clear the investments don’t have government guarantees, people familiar with the matter told Bloomberg News on Tuesday. The products, which promise higher returns than bank deposits but are viewed by many investors as a form of risk-free savings, have become an integral part of the Chinese financial system after swelling in recent years to almost $9 trillion as of June 30. Policy makers face a difficult balancing act. If they fail to dispel the notion of an implicit government guarantee, riskier investments could proliferate and pose an even greater threat to the financial system when China faces its next bout of market turmoil. But if authorities act too forcefully now, they risk triggering a stampede away from products that have become a key funding source for banks. “Rolling this back is China’s biggest financial challenge,” David Loevinger, a former China specialist at the U.S. Treasury who’s now an analyst TCW Group Inc. in Los Angeles, which oversees about $191 billion, said by e-mail. “But seeing is believing. Saying investors won’t get bailed out is important, but you have to show them you mean it.” For President Xi Jinping’s government, it’s a particularly sensitive time to be shaking up an industry that manages assets worth more than three-quarters of China’s gross domestic product. Policy makers have been placing an emphasis on financial stability as the ruling Communist Party prepares for a twice-a-decade leadership reshuffle later this year. They also need to grapple with a host of other risks, from a potential trade war with America to political upheavals in Europe and North Korea’s nuclear program.
The US-China Bilateral Balance in Trade in Value Added - As the Administration mulls over possible trade actions against China, it is important to concede official trade statistics do provide in some sense a misleading picture of US-China bilateral trade — but not misleading in a way that bolsters the Administration’s arguments. Currently, the full value of a widget partly made in Malaysia, Singapore, and Taiwan and finally assembled in China is counted as coming from China. Suppose, instead, we counted the amount of value added in China in the trade statistics. What would the trade deficit look like? As of 2015, the goods trade deficit in value added would be about half the size of the official. Why this disjuncture? From the report: the bilateral trade number fails to fully explain the impact of trade with China on the US economy. As it plugs into the global industrial supply chain, China is the “Great Assembler.” The OECD estimates that about one-third of the content of Chinese exports is foreign, compared with just 15 percent of US exports. Although China has been trying to increase its domestic consumption and move up the value-added chain, the latest data suggests that even in key growth markets—computer equipment, electronics, and electrical machinery—the foreign content of goods assembled and re-exported from China is still roughly 50 percent. The quintessential example is the iPhone, as recounted by Xing (2011). Lest one think this is a finding specific to this Oxford Economics study, be aware that similar results have been found in Johnson and Noguera (2014), discussed in this post, as well as Sposi and Koech (2013). Here is a picture of what US bilateral trade balances look like after adjustment:
Beijing Responds To Trump Charge China Is A "Grand Champion At Currency Manipulation" --When it comes to the latest US stance vis-a-vis China's currency manipulation, the jury is out, and based on two recent statements it is more confused than ever.The reason why is that shortly after Treasury Secretary Mnuchin said in a Bloomberg TV interview that there is "no urgency to brand China a currency manipulator", and that no announcement on currency manipulation will come before the Treasury’s April report (which contradicted an October pledge by candidate Donald Trump to direct his Treasury secretary to name China a manipulator on the first day of his administration), hours later Reuters released an interview with Trump in which he accused China of being a "grand champion" at currency manipulation, adding he had not "held back" in his assessment that China manipulates its yuan currency."I think they’re grand champions at manipulation of currency. So I haven’t held back. We’ll see what happens."This morning China responded Trump's accusation, when Beijing said it has no intention of using currency devaluation to its advantage in trade, which presumably excludes China's August 2015 devaluation which unleashed a period of acute market volatility. Chinese Foreign Ministry spokesman Geng Shuang said he hoped the United States could "fully and correctly" view the exchange rate issue.Quoted by Reuters, Shuang said "China has no intention of seeking foreign trade advantages via an intentional devaluation of the renminbi. There is no basis for the continued devaluation of the renminbi," he told a daily media briefing in Beijing.Geng said there was no basis for the continued devaluation of the renminbi and he hoped "the relevant side can fully and correctly view the renminbi exchange rate issue." And yet, earlier this month, China's SAFE, or main fX regulator, said the economy still faced weak global demand and financial market volatility caused by expectations of further interest rate rises by the U.S. Federal Reserve, implying that every move higher in US rates will likely lead to a weaker Chinese currency.
U.S. carrier group patrols in tense South China Sea -A United States aircraft carrier strike group has begun patrols in the South China Sea amid growing tension with China over control of the disputed waterway and concerns it could become a flashpoint under the new U.S. administration. China's Foreign Ministry on Wednesday warned Washington against challenging its sovereignty in the South China Sea. The U.S. navy said the force, including Nimitz-class aircraft carrier USS Carl Vinson, began routine operations in the South China Sea on Saturday. The announcement was posted on the Vinson's Facebook page. The strike group's commander, Rear Admiral James Kilby, said that weeks of training in the Pacific had improved the group's effectiveness and readiness. "We are looking forward to demonstrating those capabilities while building upon existing strong relationships with our allies, partners and friends in the Indo-Asia-Pacific region," China wrapped up its own naval exercises in the South China Sea on Friday. War games involving its own aircraft carrier have unnerved neighbors with which it has long-running territorial disputes. China lays claim to almost all of the resource-rich South China Sea, through which about $5 trillion worth of trade passes each year. Brunei, Malaysia, the Philippines, Taiwan and Vietnam also claim parts of the waters that command strategic sea lanes and have rich fishing grounds, along with oil and gas deposits.
China grants Trump a trademark he's been seeking for a decade - Feb. 17, 2017: The Chinese government has granted President Trump and his business something they had been seeking for more than a decade: trademark protection for the use of the Trump name in the construction industry. Trump fought unsuccessfully in Chinese courts for years to try to gain control of the trademark, but his fortunes changed suddenly last year during the latter stages of his campaign for the White House. China's trademark review board announced in September it had invalidated a rival claim for the Trump trademark, clearing the way for Trump to move in. In November, soon after the election, it awarded the trademark to the Trump Organization. The trademark was officially registered this week after a three-month notice period for objections expired. The sequence of events makes some ethics experts uncomfortable: Chinese authorities reversed their position as Trump's political star rose. "China is going to want concessions from Mr. Trump, and this is now the first in what will be a series of efforts to influence him," said Norman Eisen, a White House ethics counsel under President Obama. Eisen is part of a group that has sued Trump for violating the foreign emoluments clause of the Constitution by accepting foreign payments through his business ventures.
North Korea's Regime In Jeopardy After China Bans All Coal Imports --North Korea just lost a very big ally. On Saturday, China said that it was suspending all imports of coal from North Korea as part of its effort to implement United Nations Security Council sanctions aimed at stopping the country’s nuclear weapons and ballistic-missile program. The ban, according to a statement posted on the website of the Chinese Commerce Ministry, takes effect on today and will last until the end of the year. While China will hardly suffer material adverse impacts, Chinese trade - and aid - have long been a vital economic crutch for North Korea, and the decision strips North Korea of one of its most important sources of foreign currency. The ban comes six days after the North Korean test of a ballistic missile that the Security Council condemned as a violation of its resolutions that prohibited the country from developing and testing ballistic missile technology. In the test, - which took place during a dinner between Japan's Prime Minister and Donald Trump - North Korea claimed that it had successfully launched a new type of nuclear-capable missile. It said its intermediate-range Pukguksong-2 missile used a solid-fuel technology that American experts say will make it harder to detect missile attacks from the North. According to the NYT, China's decision has the potential to cripple North Korea's already moribund economy: coal accounts for 34-40% of North Korean exports in the past several years, and almost all of it was shipped to China, according to South Korean government estimates. As Yang Moo-jin, a professor at the University of North Korean Studies in Seoul confirms, coal sales accounted for more than 50 percent of North Korea’s exports to China last year, and about a fifth of its total trade. China had previously bought coal under exemptions that allowed trade for “livelihood” purposes. China’s Ministry of Commerce didn’t respond to faxed questions outside office hours.
China’s Message to Trump With North Korea Coal Ban: Let’s Deal -- China’s move to ban coal imports from North Korea, effectively slicing the country’s exports by about half, came with a message for the U.S. and its allies: It’s time to do a deal. Authorities in Beijing announced on Saturday that China would halt all shipments from Kim Jong Un’s regime until the end of the year, in compliance with United Nations Security Council resolutions over North Korea’s nuclear program. At the same time, Chinese officials said that pushing North Korea into a corner won’t work as Kim’s regime will keep developing its nuclear capability until it feels safe. Instead, it’s time to restart talks and “break the negative cycle on the nuclear issue,” Chinese Foreign Minister Wang Yi said in a statement on Sunday after meeting South Korean counterpart Yun Byung-se at a security meeting in Munich. “The Chinese are getting more frustrated with North Korea,” Eurasia Group President Ian Bremmer said in an interview at the same conference. “They clearly don’t feel that they have a lot of influence and they’re worried that the U.S. under Trump is going to blame China as opposed to continuing a multilateral process.” China’s call for a new initiative contrasts with a more hawkish tone out of Washington. President Donald Trump, who during his campaign said he could negotiate with Kim over a hamburger, this month promised to deal with North Korea “very strongly” after its latest missile test. He also called on China to get tougher. The U.S. is putting a defense system called Thaad in South Korea -- a move that also potentially threatens Beijing’s military capabilities. '
China Prepares For "Regime Collapse" In North Korea - Over the weekend, following reports that China has banned all North Korean coal imports which marked a troubling escalation in relations between the two formerly "amicable" nations in the aftermath of last week's North Korean ballistic missile launch, we noted that the movenot only led to Kim Jong-Un potentially losing a "very big ally", but that it could also result in jeopady for his regime, and a potential political coup in the dictatorship. Now, it appears that the likelihood of a regime collapse in North Korea is being taken seriously by none other than the country's formerly largest trading partner, China, which as SCMP reports, will take the “necessary measures” to safeguard national security in the event of the collapse of the neighbouring North Korean regime, a defence official said on Thursday. The recent assassination of North Korean leader Kim Jong-un’s half-brother Kim Jong-nam has sparked renewed concerns over the stability of Pyongyang and the possibility of a collapse of the reclusive regime. Beijing – long seen as the guarantor of Pyongyang’s security – has stayed largely silent on the incident. However in the aftermath of the abrupt coal import suspension, Beijing was no longer able to avoid the topic. Asked whether China had a contingency plan for a North Korean collapse, defence ministry spokesman Ren Guoqiang said Beijing has maintained its usual policy towards Pyongyang, and urged the “relevant parties to refrain from any actions that will escalate tensions”.
Japan February flash manufacturing PMI shows expansion at three-year high | Reuters: Japanese manufacturing activity expanded in February at the fastest pace in almost three years, a preliminary survey showed on Tuesday, a sign that domestic and overseas demand is improving. The Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 53.5 in February from a final 52.7 in January. The index remained above the 50 threshold for the sixth consecutive month and marked the fastest expansion since March 2014. A reading about 50 indicates expansion in the sector while a reading below 50 indicates contraction "Japan's manufacturing engine shifted into a higher gear during February, as faster increases in output, new business and employment were reported," said Samuel Agass, economist at IHS Markit, which compiles the survey. "Encouragingly...the added pressures on capacity should ensure growth will be maintained at a solid pace during at least the first half of this year." The index for new orders, which measures both domestic and external demand, rose to a preliminary 54.7 from a final 54.0 in January, which also shows the fastest growth since March 2014. The flash index for new export orders rose to 54.2 from 53.1 in the previous month to indicate the fastest growth since December 2013. The output component of the PMI index rose to a preliminary 54.3, showing the fastest expansion since February 2014.
Is India’s demonetisation supporting the rupee- Future historians may eventually conclude the most significant event of 8 November 2016 was the Indian government’s decision to scrap most of its physical currency (by value). The policy has been justified as an attack against corruption and other illegal activities facilitated by paper money, even though legitimate transactions seem to have borne the brunt of the costs. One unexpected consequence could be stronger support for the value of the rupee against other currencies. The following chart comes from Srinivas Thiruvadanthai of the Jerome Levy Forecasting Center and compares the share of currency in India’s measure of narrow money against the nominal exchange rate: For about ten years, the growing use of physical currency — something unique to India and supportive of the argument that “black money” has become more pervasive” was associated with a depreciating nominal exchange rate. Since then, “demonetisation” has caused the supply of narrow money to shrink by about a quarter. This hasn’t yet done much to the exchange rate, although the rupee has outperformed most other currencies since the beginning of November. It’s therefore possible one effect of the currency reform is that it could allow the Indian government to loosen fiscal and monetary policy without having to worry about exchange rate depreciation. Something to watch.
India’s “Bold Experiment With Cash”: Debunking Myths --Jerri-Lynn Scofield -- Earlier this week, the FT’s Martin Wolf wrote about Indian Prime Minister Narendra Modi’s demonetization policy in his article India’s bold experiment with cash. Regular readers will recall that on November 8, Modi announced the decision to cancel existing Indian rupee 500 (about $7.50) and 1000 ($15) notes– 86% of cash in circulation, with immediate effect. Holders of the old currency had until December 30 to exchange old notes for new, legal tender currency. (I’v written about the Modi action– and the widespread chaos and suffering it has caused, in previous posts, on November 10, November 16, November 18, and December 31.) Wolf writes,”In its boldness, this move by the democratically elected leader of so vast a country makes everything that US President Donald Trump has done so far look trivial.” On that much, I concur. Unfortunately, we part company on just about everything else. In order to keep this post to a manageable length, I’ll only address five problems with Wolf’s article. Wolf writes: According to the finance ministry’s Economic Survey 2016-17, the policy’s aim was fourfold: “To curb corruption, counterfeiting, the use of high denomination notes for terrorist activities, and especially the accumulation of ‘black money’, generated by income that has not been declared to the tax authorities.” These goals are popular with many Indians, who have tolerated the upheaval surprisingly calmly, in the hope that crooks would get their deserts. These are also reasonable objectives. Few would deny India suffers from corruption and tax avoidance on a large scale. Yet the action might also sow permanent distrust of government promises. The disease might be bad, yet the cure is costly. How costly might it be and how beneficial? Wolf assumes the Indian government’s policy effectively addressed the stated objectives. I beg to differ. And why is that? As I’ve written previously in my December 31 post: The basic problem stems from a failure to distinguish between “black money”– money on which tax due has not been paid– and the legitimate informal sector– the cash-based economy. Estimates of the size of that sector range from about 50% to around 90% (depending on how it’s measured, e.g., as a percentage of GDP, or in terms of the percentage of wages paid in cash and not paid into a bank account). Many people working in the informal sector don’t pay any income tax– not because they’re corrupt or tax evaders, but because their income falls below the threshold upon which tax is due. The bottom line: Demonetization at best partially addressed the ills it was aimed to remedy. And as articles like this one in The Wire– Three Months On, India’s Economy Remains Crippled By Demonetisation— spell out, the policy imposed crippling costs.
India Inc Needs To Fix Its Numerous and Basic Information Security Flaws Quickly - At this very moment, there are a number of corporate websites in India that directly and indirectly expose the personal data of many individuals. Access to such data doesn’t require passwords or any form of sophisticated hacking. It’s there in the open and for the taking.Not only can criminally-motivated individuals harvest this “leakage” of data to defraud individuals on a mass scale, but business are harming themselves by disclosing valuable information. To remedy the situation, website owners need to perform audits of their systems and plug any leaks they find. The government urgently needs to enact stronger laws protecting the collection, storage, use and dissemination of data and designate an agency to be responsible for enforcing the law. Finally, central and state law enforcement agencies need to vigorously enforce these laws. While it may perhaps surprise individuals that data about them, such as customer names and contact details, is openly available online, they may also easily shrug it off as nothing serious. However, a website does not have to expose a person’s account number to put them at risk of fraud. In recent years there has been a huge increase in the number of attempts to gain access to an individual’s devices or email, social media accounts or financial accounts through targeted emails or messages using personal information. These attempts, known as phishing, rely on reaching individuals through mass email or messaging campaigns, like catching fish in trawler nets. A more targeted form of attack, called spear phishing, goes after specific individuals using personal information that would cause them to lower their guard.
In Pakistan, tolerant Islamic voices are being silenced - Last week, only three days after a suicide bomb went off in Lahore, an Islamic State supporter struck a crowd of Sufi dancers celebrating in the great Pakistani shrine of Sehwan Sharif. The attack, which killed almost 90, showed the ability of radical Islamists to silence moderate and tolerant voices in the Islamic world.The attack also alarmingly demonstrated the ever-wider reach of Isis and the ease with which it can now strike within Pakistan. Isis now appears to equal the Taliban as a serious threat to this nuclear-armed country.The suicide bombing of the Sehwan shrine is an ominous development for the world, in a region that badly needs stability. It is an Islamic shrine where outsiders, religious minorities and women are all welcomed. Here, 60 years after partition and the violent expulsion of most of the Hindus of Pakistan into India (and vice versa with Muslims into Pakistan), one of the hereditary tomb guardians is still a Hindu, and it is he who performs the opening ritual at the annual festival. Hindu holy men, pilgrims and officials still tend the shrine.But the wild and ecstatic night-long celebrations marking the Sufi saint’s anniversary were almost a compendium of everything Islamic puritans most disapprove of: loud Sufi music and love poetry sung in every courtyard; men dancing with women; hashish being smoked. Hindus and Christians were all welcome to join in the celebrations. A radical anti-Sufi movement is growing throughout the Islamic world. Until the 20th century, ultra-orthodox strains of Islam tended to be regarded as heretical by most Muslims. But since the 1970s, Saudi oil wealth has been used to spread such intolerant beliefs across the globe. As a result, many contemporary Muslims have been taught a story of Islamic religious tradition from which the tolerance of Sufism is excluded. What happens at the Sehwan Sharif shrine matters, as it is an indication as to which of the two ways global Islam will go. Can it continue to follow the path of moderate pluralistic Islam, or – under the pressure of Saudi funding – will it opt for the more puritanical, reformed Islam of the Wahhabis and Salafis, with their innate suspicion (or even overt hostility) towards Hinduism, Christianity and Judaism?
Nigeria naira hits new black market low as traders digest cenbank action | Reuters: Nigeria naira hit a fresh low of 520 on the black market on Monday, as retail currency traders tried to digest a new central bank decision to sell dollars to retail users through commercial lenders, one retail trader said. The central bank plans to sell $1 million weekly to each of the country's 21 commercial lenders at a rate of 375 naira to clear a backlog of demand for retail users and try to narrow the premium between the official and black market rates, traders said on Monday. On Friday, the naira was quoted at 516 on the black market. On the official market, the naira was quoted at 305.50 Retail currency users buy dollars from licensed bureaux de change (BDC). However, due to the central bank's inability to meet dollar demand, BDCs have tended to source dollars from private sources and resell at a much higher margin, fuelling the black market.
The Future of Not Working - - The village is poor, even by the standards of rural Kenya. To get there, you follow a power line along a series of unmarked roads. Eventually, that power line connects to the school at the center of town, the sole building with electricity. Homesteads fan out into the hilly bramble, connected by rugged paths. There is just one working water tap, requiring many local women to gather water from a pit in jerrycans. There is no plumbing, and some families still practice open defecation, lacking the resources to dig a latrine. There aren’t even oxen strong enough to pull a plow, meaning that most farming is still done by hand. The village is poor enough that it is considered rude to eat in public, which is seen as boasting that you have food. In October, I visited Kennedy Aswan Abagi, the village chief, at his small red-earth home, decorated with posters celebrating the death of Osama bin Laden and the lives of African heroes, including JaKogelo, or “the man from Kogelo,” as locals refer to former President Barack Obama. Kogelo, where Obama’s father was born, is just 20 miles from the village, which lies close to the banks of Lake Victoria. Abagi told me about the day his town’s fate changed. It happened during the summer, when field officers from an American nonprofit called GiveDirectly paid a visit, making an unbelievable promise: They wanted to give everyone money, no strings attached. “I asked, ‘Why this village?’ ” Abagi recalled, but he never got a clear answer, or one that made much sense to him. GiveDirectly wants to show the world that a basic income is a cheap, scalable way to aid the poorest people on the planet. “We have the resources to eliminate extreme poverty this year,” Michael Faye, a founder of GiveDirectly, told me. But these resources are often misallocated or wasted. His nonprofit wants to upend incumbent charities, offering major donors a platform to push money to the world’s neediest immediately and practically without cost.
Billions Wasted: Structures Built For 2016 Olympics In Brazil Are Now In Ruins --The 2016 Summer Olympics in Brazil cost Brazilian taxpayers $4.6 billion, conservative estimates show. But once related expenses covered by the Brazilian government are factored in, the overall costs hit the $12 billion mark, which equates to about 0.72 percent of Brazil’s national budget. Prior to the Olympics, however, the Brazilian government had already spent BR$39.5 billion on infrastructure, or about $12 billion. Stadiums and urban projects designed to ensure the country was ready for the sports event were built, but aside from the events scheduled for 2014 and 2016, there seemed to be little to no demand for such public investments, whichprompted the country to wonder whether the expenses were worth the trouble. Now, as these same structures are left to rot, the documented decay becomes a symbol of government waste, not only because the investments weren’t meant to stand the test of time, but also because the Brazilian government’s lack of concern for the taxpayer is not the main story. It is, in fact, just a footnote. Like many others, the government ignored the economic realities of the country, betting on inflation and cronyism in order to throw an unforgettable party. Due to backlash over former President Dilma Rousseff’s economic policies, a nationwide movement supporting impeachment targeted her for, among many other things, raising government spending without accounting for the increases. Due to the government’s lavish spending prior to the World Cup and Summer Olympics, Rousseff was afraid of suffering the consequences for increasing spending without hurting other government projects as a result, which would have forced the president to be upfront about her expenses. This led to a move that provoked chaos among consumers simply because banks were forced to put money into circulation that wasn’t backed by anything. Instead of giving the money to banks so they could then cover social projects, pensions, and welfare programs, Brazil’s Treasury Department simply promised banks they would pay them back down the road. Thus, money meant for other projects remained in the treasury, allowing the federal government to spend it with other matters.
Ecuador leftist leads presidential vote but may face runoff | Reuters: Ecuador's leftist government candidate Lenin Moreno looked set for victory on Monday in a presidential election, but slow results meant it may take days to know if he will face a runoff with former banker Guillermo Lasso. In a nail-biter vote with eight candidates at the weekend, Moreno was close to the threshold needed to avoid a second round on April 2 and continue a decade-long period of leftist rule, just as South America is moving to the right. While Ecuadoreans are angry over an economic downturn and corruption scandals, the opposition split its votes among candidates and the ruling Country Alliance remains popular with many poor voters thanks to social welfare programs. As results trickled in from Ecuador's Andes, jungle, and Pacific coast, Moreno, a disabled former vice president, was just short of the 40 percent of votes and a 10 percentage-point difference over his nearest rival to win outright. He had 39.11 percent of valid votes versus 28.34 percent for Lasso, with 89.5 percent of votes counted, the official preliminary election count showed on Monday afternoon. The electoral council said clarity would not arrive for three more days due to votes trickling in from isolated areas and Ecuadoreans abroad, bureaucratic delays and "inconsistencies" in some ballots.
75% Of Venezuelans Lose "At Least 19 Pounds" In 2016 - A new study conducted by three universities in Venezuela sheds new light on just how dire the food shortages are in Maduro's failed Socialist utopia. Called ENVOVI, the living conditions survey found that 75% of Venezuelans lost "an average of at least 19 pounds" in 2016 due to food shortages. Per UPI:Venezuela's Living Conditions Survey found that nearly 75 percent of the population lost an average of at least 19 pounds in 2016 due to a lack of proper nutrition amid an economic crisis.The survey, called ENCOVI, is a joint effort conducted by the Central University of Venezuela, the Andrés Bello Catholic University and the Simón Bolívar University, along with the Fundación Bengoa food and nutrition group and other non-governmental organizations.In the survey, researchers found that most Venezuelans substituted red and white meats with vegetables and tubers -- such as potatoes. According to the survey, 82.8 percent of Venezuelans are considered poor due to their income. Of course, food shortages and riots have become the norm in Maduro's Venezuela and resulted in the country ceding control of its food supply to the military last summer (see "Maduro Puts Military In Charge Of Venezuela's Food, Calls It 'Great Sovereign Supply Mission'"). While the move was obviously sold by Maduro as a way to protect citizens from food riots and ensure equal distribution of scarce supplies, in reality it simply ceded more control to the military while making the head of the armed forces, Defense Minister Vladimir Padrino, one of the most powerful people in Venezuela...all while Venezuelans have resorted to eating whatever they can find in the garbage.
Pence seeks to soothe jangled EU nerves with pledge of support -- Delivering a strong declaration of solidarity to European allies desperately craving reassurance, U.S. Vice President Mike Pence told senior EU and NATO officials in Brussels that the transatlantic partnership remained a bedrock of President Donald Trump’s foreign policy. Pence’s message, which he said he carried at Trump’s direct request, brought particular relief to the corridors of the European institutions, where the new president’s cheering of Brexit and seeming indifference to the bloc that has helped keep peace on the Continent since World War II had set off serious alarm. “With regard to the European Union, my message very simply was that the United States is committed to continuing its partnership with the European Union and I wanted to make that very clear,” Pence said, during the last public appearance of a brief European tour, a visit to NATO headquarters where he met with Secretary General Jens Stoltenberg. “We understand the relationship between our economies,” Pence said. “We understand the deep heritage of member states in the European Union with people in the United States of America.” It was a far stronger message than had been anticipated in Brussels where some officials wondered if Pence would even be willing to utter the words European Union given that he refrained from doing so in a statement before dinner Sunday night with Belgian Prime Minister Charles Michel.
The last big crime of a dying political establishment in Brussels - Finally, the European political establishment voted for CETA, the trade deal between EU and Canada that will mark the definite domination of the corporate multinational cartels against the European people. As expected, most of the MEPs from the Popular Right and the Socialists, the two political parties that dominated in the European political landscape the last decades, voted for CETA. These are the representatives of a dying political establishment that wants to take as much as it can from the corporate lobbyists in the Brussels corridors, before leaving like a thief in the night. These are the pure samples of a corrupted political system that has been completely taken over by the neoliberal doctrine. Despite the financial catastrophe, they convinced themselves that there is only one way: deregulation, privatization and austerity overdose for the masses. Of course, this unexplained, dogmatic persistence becomes instantly explainable once you realize that they have taken some special 'gifts' from their corporate buddies, all the previous years. Of course, they don't give a damn about the people. And as they know that they are about to collapse, they rush to grab as much as they can, by voting everything that their corporate buddies want. Unfortunately, the power vacuum will be covered by the Far Right and the nationalists who are taking advantage of the situation. One more time, the Left is unable to 'read the data' and realize that the system needs a total restart to work truly for the people.
Sweden complains it is collecting too much tax - Sweden’s government has an unusual complaint — it is collecting too much tax. Negative interest rates have made some of the world’s highest taxes a lot less painful as businesses and individuals race to hand cash to the state because of the relatively generous returns on offer. Data released on Wednesday showed Sweden’s government generated a budget surplus of SKr85bn ($9.5bn) in 2016, with approximately SKr40bn coming from tax overpayments. The government will have to repay more than £3.5bn to businesses and individuals who purposely paid too much tax in 2016. The government wants to discourage further overpayments but the national debt office has admitted its efforts will probably not be enough. “We cannot do anything [further], it is simply a consequence of current interest rates,” Marten Bjellerup, the office’s head of forecasting, said on Wednesday. The payments are an unintended consequence of the Swedish central bank’s efforts to kick-start inflation in the local economy by lowering interest rates to below zero per cent two years ago. While bank interest rates plummeted, Swedish tax rules meant that excess deposits in taxpayers’ payment accounts continued to earn a minimum of 0.56 per cent annual interest, leading many people to use them like makeshift bank accounts. Most governments would be pleased with an annual budget surplus more than twice the forecast size. But Stockholm has complained that this “involuntary borrowing” from residents will cost it around SKr800m more over 2016 and 2017 than if they had borrowed the money at market rates.
Eurozone PMI Jumps To 56, Highest Since April 2011; Job Creation Best In A Decade As Inflation Surges –- Eurozone private sector and manufacturing growth unexpectedly jumped to the highest in six years in February and job creation reached its fastest since August 2007, propelled by strong demand and optimism about the future, the latest Markit PMI survey found. The Markit Eurozone PMI registered 56.0 in February, up from 54.4 in January , the highest reading since April 2011. "The pace of eurozone economic growth improved markedly to hit a near six-year high in February, according to PMI survey data. Job creation was the best seen for nine and a half years, order book growth picked up and business optimism moved higher, all boding well for the recovery to maintain strong momentum in coming months."
‘From bad to worse’: Greece hurtles towards a final reckoning “I grow wheat,” said Costopoulos, holding out his wizened hands. “I don’t make decisions. Honestly, I can’t understand why things are going from bad to worse, why this just can’t be solved.” As Greece hurtles towards another full-blown confrontation with the creditors keeping it afloat, and as tensions over stalled bailout negotiations mount, it is a question many are asking. The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July.Amid the uncertainty, volatility has returned to the markets. So, too, has fear, with an estimated €2.2bn being withdrawn from banks by panic-stricken depositors since the beginning of the year. With talk of Greece’s exit from the euro being heard again, farmers, trade unions and other sectors enraged by the eviscerating effects of austerity have once more come out in protest. From his seventh-floor office on Mitropoleos, Makis Balaouras, an MP with the governing Syriza party, has a good view of the goings-on in Syntagma. Demonstrations – what the former trade unionist calls “the movement” – are a fine thing. “I wish people were out there mobilising more,” he sighed. “Protests are in our ideological and political DNA. They are important, they send a message.” This is the irony of Syriza, the leftwing party catapulted to power on a ticket to “tear up” the hated bailout accords widely blamed for extraordinary levels of Greek unemployment, poverty and emigration. Two years into office it has instead overseen the most punishing austerity measures to date, slashing public-sector salaries and pensions, cutting services, agreeing to the biggest privatisation programme in European history and raising taxes on everything from cars to beer – all of which has been the price of the loans that have kept default at bay and Greece in the euro. In the maelstrom the economy has improved, with Athens achieving a noticeable primary surplus last year, but the social crisis has intensified.
Wanted: a CEO willing to hold Greek banking's poisoned chalice | Reuters: Greece has failed to find a boss for its Hellenic Financial Stability Fund since July, when its three-member executive team resigned. A new CEO, offered the job in late October quit a week later. His predecessor, an interim boss, had lasted two months. The fund, financed by euro zone and International Monetary Fund loans, has not explained its failure to find a new leader, but a source close to the recruitment process said the role was challenging and "less enticing than initially thought". Former fund executives describe it as one of the most thankless jobs in banking. One called it a "poisoned chalice". The failure to find a new CEO means the fund lacks a strong leader to push banks to make painful reforms, such as tackling bad loans. Their huge burden of bad debt, totaling 106 billion euros ($113 billion) or about half of all loans, inhibits them from providing credit to the shattered economy's vibrant firms. The CEO's role is to use the fund's leverage as a major investor in three of Greece's four major listed banks to help push through banking reforms designed by the European Union, the European Central Bank and IMF and to eventually divest its stakes, returning banks to private hands. The job now comes with an annual salary of up to 270,000 euros ($290,000), perhaps low by the international standards of senior bank executives, but higher than two years ago when then-finance minister Yannis Varoufakis capped it at 132,000 euros.Moreover, the boss has to answer to several masters who are currently at loggerheads over the broader question of Greek reforms. The government, the central bank, the EU, ECB and European Stability Mechanism are all represented on a six-member selection panel, set up in 2010, to recruit fund executives. Athens and its key lenders are in disagreement over the terms of the latest bailout. If a resolution cannot be found by July, Greece again may face insolvency.
Greece says Germany must drop demand for high budget surplus - ekathimerini.com: Greece on Tuesday urged Germany to drop its “irrational” demand that it meet a 3.5-percent primary budget surplus over a 10-year period and be “constructive” about calls to ease the cash-strapped country’s debt mountain.Athens and its international lenders agreed on Monday to resume talks on a bailout review, easing a standoff which had threatened to block the disbursement of another tranche of its 86-billion-euro ($90-billion) financial aid program. It needs the money by the third quarter of 2017 to meet debt repayments.“We expect the German finance ministry to back down on its irrational demand for primary surplus levels of 3.5 percent over a 10 year period, and adopt a constructive stance to allow the easing of Greece's debt over the medium term,” government spokesman Dimitris Tzanakopoulos told a news briefing.He said this would help build confidence in the Greek economy and pave the way for Greece’s inclusion in the European Central Bank’s bond-buying scheme, which Athens needs to allow access to bond market again before its bailout ends in 2018. “The aim of the government is a comprehensive agreement to provide the economy with the needed impetus to extricate itself from fiscal adjustment programs, gradually return to money markets, and when the program ends in August 2018 to be able to refinance its debt without borrowing from the public sector.” Bailout inspectors representing Greece’s lenders are expected to return to Athens and resume talks on working out new reforms to pensions, income tax and labor laws.
Greek Debt and that Sharp Bite in the Backside - Come July, Greece will owe about €3.8 billion to the European Central Bank, another €292 million to the International Monetary Fund, and €1.5 billion to private investors who purchased bonds Greece issued in 2014, less than two years after completing a savage restructuring of its pre-crisis debt. If — and it’s a big if — the official sector players and Greece can come to an understanding that will permit the next disbursement under Greece’s third bailout program, slightly more than €4 billion of that money will merely slosh from one official sector pocket (the EU) to other official sector pockets (the ECB and the IMF). The net effect will be lower interest rates and longer maturities on the Greek government’s obligations to the rest of Europe. This has happened many times since the Greek crisis began in 2010. What would be relatively new, however, would be using €1.5 billion of those official sector funds to repay bonds issued by the Greek government in the spring of 2014. Those bonds are held by private investors and have much higher yields than the interest rate charged by the European Stability Mechanism on its loans to the Greek government. That difference in borrowing costs presumably reflects the higher risk that the Greek government might default on its private sector creditors. Using official sector money to repay those investors in full would therefore be equivalent to a transfer of taxpayer funds from housefraus in Stuttgart to hedgies in Connecticut — a reversal of the previous consensus among Europe’s official sector creditors.
Strategic Defaulters Owe €10 Bln to Greek Banks - One in five (21%) of nonperforming loans in Greek banks’ portfolios, amounting to 10 billion euros, belong to borrowers who are able to repay them but choose not to in the hope they could get a favorable settlement. According to a Kathimerini newspaper report, the majority of strategic defaulters, as bank officials call them, have home mortgage payments which they can afford but use the economic crisis as an excuse to avoid paying their dues. Bank officials estimate that out of a total 20 billion euros in residential mortgage NPLs, 30 percent (6 billion euros) belong to people who dodge repayments intentionally. NPLs in corporate credit total 28.9 billion euros, of which an estimated 15% (4.3 billion euros) are debts that strategic defaulters have to pay. According to the report, the mortgage strategic defaulters phenomenon is attributed to systematic encouragement by the “I Won’t Pay” political movement, supported by today’s ruling party when they were in opposition, the Syriza election promises of “Seisachtheia” (the Ancient Greek term for debt forgiveness), and the debt write-offs that banks had to make in order to get at least some of the money owed to them in light of the income losses brought by the economic crisis. Strategic defaulters were also encouraged by a law introduced in 2010 by former economy minister Louka Katseli, according to which debtors could receive write-offs if they could prove that they were unable to meet their financial obligations since they were unemployed or their incomes were slashed because of recession. Currently, there are more than 150,000 applications from individuals hoping to reap the benefits of the Katseli law that remain pending in courts, with some of them scheduled as far as 2032.
Protesters in Barcelona urge Spain to take in more refugees - Tens of thousands of people marched through Barcelona on Saturday urging the Spanish government to immediately meet its pledge to take in thousands of refugees. Ada Colau, the mayor of Spain’s second city, had called on Barcelona residents to “fill the streets” and march under the slogan volem acollir (“We want to welcome them” in Catalan). Local police said approximately 160,000 people had heeded her call. Many of those flooding the major Via Laietana thoroughfare carried signs reading “Enough excuses, welcome them now”.Spain has only taken in 1,100 refugees, despite a pledge in 2015 to take more than 10 times that. Photograph: Manu Fernandez/AP The protest comes after Spain pledged to take in about 16,000 asylum seekers from other EU countries under a quota system agreed in 2015, as the continent struggled with its biggest migration crisis since the second world war. Like other EU members, Spain has fallen far short of this target, with only 1,100 resettled in the country so far.
Italy’s Renzi resigns as party leader, in tussle over how to counter rise of 5 Star - Italy’s governing center-left Democratic Party was locked in a fierce battle Sunday over the best way to pull the country’s economy out of the doldrums and blunt the momentum of antiestablishment politicians—as mainstream politicians across the Continent struggle to come up with winning strategies in a year of major elections across the European Union. Former Prime Minister Matteo Renzi, who resigned as premier after losing a referendum vote on constitutional changes in December, formally stepped down as leader of the party after facing sharp criticism for his inability to stem the mounting popularity of the rival 5 Star Movement, a euroskeptic party that wants Italians to have a national vote on whether to leave the eurozone. “Let’s stop now. Today we’ll speak among us and confront our opinions, but from tomorrow we have to take care of the country,” Renzi told members of the party Sunday.5 Star, which opposed Renzi’s proposals in the plebiscite, and the Democrats are running neck-and-neck in public-opinion polls. Both parties have pushed for fresh parliamentary elections this year. The country is now being run by a caretaker administration.
New Political Turmoil In Italy After Renzi Quits As Ruling Party Leader, Triggering Re-election Battle -- Two months after an unexpected, landslide loss in the December 4 constitutional referendum which cost him his job as Italy's prime minister, on Sunday Matteo Renzi quit as leader of Italy’s ruling party, in the process triggering a re-election fight against minority dissidents that threatens the stability of the center-left government, Bloomberg reports. Renzi told a national assembly of the ruling PD that he had handed in his resignation acknowledging he was set back by defeat in last year's referendum, one day after critics from leftist factions threaten to abandon the Democratic Party. “Everything stems from the referendum,” Renzi told more than 600 party delegates. “I feel responsible for the defeat, there is a before and an after. That referendum was a blow for the whole country, starting with the economic system and we must now put the car back on the road.” Renzi denounced “blackmail by a minority” and infighting that he called “a gift” to the anti-establishment Five Star Movement. He is expected to stand for re-election at a congress in April or May. As Bloomberg adds, concerns about a party split have pushed Italian bond yields higher and led to the widest spread between Italian and German 10-year bonds since February 2014. The selloff may accelerate as Renzi's resignation could benefit Five Star, which is neck-and-neck with the party in opinion polls and wants a referendum on Italian membership of the euro area. Renzi has faced challenges to his reformist strategy and leadership especially since losing the referendum, which prompted him to resign as premier and sponsor current Prime Minister Paolo Gentiloni, a Renzi loyalist and fellow PD member, as his successor.
EU Commission to warn Italy on Wed over rising debt | Reuters: The European Commission will warn Italy on Wednesday it could face EU disciplinary action for not reducing its huge public debt as required by EU laws, unless Rome delivers on deficit cutting measures as promised, an EU official said. The warning comes after the latest round of Commission economic forecasts for the 28-nation bloc, which showed Italy's public debt would rise to an all-time high of 133.3 percent of gross domestic product this year from 132.8 percent in 2016. EU rules say Italy should instead reduce its debt by about 3.6 percent of GDP annually. The warning on Wednesday is to put more pressure on Rome to deliver on promises made in a letter to the EU executive on Feb. 7, pledging Italy would cut its structural deficit by 0.2 percent of GDP this year through measures to be adopted by the end of April. "Unless Italy specifies its commitments properly, next week will show that they are not compliant with the debt rule," said the EU official, who has insight into the process but spoke on condition of anonymity. "They committed to measures in their letter to do 0.2 percent of measures to reduce the structural deficit. We need to see that happening," the official said. The disciplinary action that the Commission could launch against Italy in May if the measures are not in place is called an excessive deficit procedure and could, in theory, end up in fines for Rome, although this is unlikely.
Brussels and ECB divided by Monte dei Paschi’s capital proposals -- Brussels and the European Central Bank are at odds over the capital plans of Monte dei Paschi di Siena, throwing doubt on details of the state rescue of Italy’s oldest and most troubled bank. Rome’s proposal to recapitalise MPS has been in limbo since December because the ECB, the bank’s supervisor, and the European Commission, which polices state aid, have different views on their responsibilities and the merits of taxpayer bailouts. The two-month stand-off leaves fundamental questions over the rescue proposals, including the level of state support allowed, the amount of losses that creditors will suffer and the depth of restructuring needed to make the bank viable.Senior eurozone officials and bankers warn it could take several months to resolve a protracted bank saga that has damaged confidence in Italy’s financial sector and tested rules implemented by the EU after the financial crisis.The Single Supervisory Mechanism, the ECB’s supervisory wing, believes it is waiting for Brussels to agree a plan to restructure MPS and approve state aid. Yet Brussels, in turn, thinks it is waiting for the supervisors to agree a capital plan with MPS before it can finalise restructuring terms. One person involved in the process called the situation “surreal”.
Worries Grow Over Euro's Fate as Debts Smolder in Italy and Greece -- Even as global stock markets climb, worries are building among investors that long-simmering debt troubles in Greece and Italy will put additional strain on the euro. Over the past year, aggressive bond buying by the European Central Bank and encouraging signs of economic growth across Europe have helped the eurozone overcome a series of political jolts, including Britain electing to quit the European Union and Italian voters rejecting the proposals of a reform-minded government. Yet with the central bank expected to eventually unwind its purchases of government bonds and other assets, investors are increasingly becoming concerned about how Europe—and Germany, in particular—can cope with escalating debt pressures in Italy and Greece. The result has been a sell-off of European government bonds as investment funds reassess the risks of holding such securities. In Italy, for instance, some hedge funds are making direct bets that the prices of Italian bonds will collapse. The yield on Italy’s benchmark 10-year note—which moves in the opposite direction of its price—has doubled to 2.3 percent since late last fall. The yield on the equivalent Greek note has jumped to nearly 8 percent from 6.7 percent at the beginning of the year. Mario Draghi, the European Central Bank’s president, promised in summer 2012 to do whatever it took to save the euro, but the debt burdens of Italy and Greece have become progressively worse amid the stagnation of their economies. Italy’s debt as a share of its economic output has risen to 133 percent from 123 percent during that period. In Greece, debt has increased to an expected 183 percent of the country’s total economy from 159 percent. These figures highlight a harsh economic reality: Just as an individual will struggle to pay off a punishing credit card bill if her salary stays flat or falls, a country cannot reduce its debt pile without expanding its economy.
How Many Euro Crises Will This Make? It's Getting Hard To Keep Track - Every few years, it seems, one or another mismanaged eurozone country falls into one or another kind of crisis. This leads to speculation about the end of the common currency, which in turn spooks the global financial markets. Then the ECB conjures another trillion euros out of thin air, buys up and/or guarantees all the offending country’s bonds, and calm returns for a while. At least, that’s how it’s gone in the past. The latest crisis has more than the usual number of flash-points and could, therefore, be something new and different. Currently:
- Greece. This charming but apparently ungovernable country only got into the eurozone in the first place because its corrupt leaders conspired with Goldman Sachs to hide the true condition of the government’s finances. It quickly blew up and has been on intensive care ever since. Now the latest bailout has become deal-breakingly messy: ‘From bad to worse’: Greece hurtles towards a final reckoning (Guardian) – With another bailout set to bring more cuts, quitting the euro is back on the agenda. The country’s epic struggle to avert bankruptcy should have been settled when Athens received €110bn in aid – the biggest financial rescue programme in global history – from the EU and International Monetary Fund in May 2010. Instead, three bailouts later, it is still wrangling over the terms of the latest €86bn emergency loan package, with lenders also at loggerheads and diplomats no longer talking of a can, but rather a bomb, being kicked down the road. Default looms if a €7.4bn debt repayment – money owed mostly to the European Central Bank – is not honoured in July.
- Italy. A few months ago the centrist president, Matteo Renzi, resigned after losing a referendum (don’t bother with the details, they were never very interesting and in any event have been overtaken by events), making a new election necessary. There was a chance that Renzi would be returned to office, which would reset the clock on Italy’s inevitable descent into Greek-style chaos. But yesterday he resigned, throwing the upcoming elections into disarray and opening the door to eurosceptic populists. Combine political turmoil with a moribund banking system and Italy becomes a prime candidate for Big European Crisis of 2017.
- France. Each new immigration horror story adds a bit to the popularity of the anti-immigration National Front, and increases the odds that party leader Marine Le Pen makes a strong showing in upcoming elections. The odds are still against her actually winning, but as the polls tighten, French bonds are sold off by nervous traders, widening the spread between French and German yields. A widening yield is a sign of approaching trouble: Political Turmoil Returns To Europe: French-German Spread Blows Out
And those are just the front-burner problems. The Dutch are also holding general elections next month in which their version of Donald Trump will likely be the leading vote-getter. Germany has two elections this year, and opposition parties are gaining on Chancellor Angela Merkel. So there will be no shortage of scary headlines from the Continent going forward.
Delusional lawyering won’t save European bonds - John Dizard - Mocking the delusions of US populism has been easy work for journalists. Now it is time to do the same for European elite opinion. Lately, I have been coping with the sheer tonnage of bank and law firm research on redenomination risk. This refers to how European sovereign bond investors should prepare for the risk of one or more eurozone countries readopting national currencies. Would another paragraph of lawyering do the trick? To me, this seems like preparing for a giant meteor strike by packing another pair of socks. Yet we are seeing just that sort of thinking in the market’s pricing of European bonds. The magic lawyering in European sovereign bonds is supposedly provided by the Model CAC, for Collective Action Clause, that has been incorporated in all eurozone sovereign bonds since January 2013. The Model CAC was a post-Greek crisis bit of language that says any hypothetical restructuring of bond payments can be agreed by a supermajority of 75 per cent of bondholders. At the time, this was considered a way to avoid allowing a few evil New York hedge funds to profit by refusing to take a haircut like nice regulated Europeans wanted. Not that any other European countries would ever “do a Greece”. Except that now leading national candidates in France and Italy are openly proposing a return to the franc and the lira, at least for paying foreigners and distant institutions. Nothing would happen to voters’ savings, those candidates tell us, just as their counterparts in Argentina told that country’s voters over the years. Some of the bond market’s lawyers believe that if such a candidate is elected in either France or Italy, they will not be able to pay the national debt in depreciated francs or lire, at least for those bonds that incorporate Model CAC’s.
Le Pen Advances in French Polls as Security Concerns Sway Voters - Marine Le Pen gained ground on her rivals for the French election as she benefits from concerns about security while other candidates trained their fire on independent front-runner Emmanuel Macron. Monday’s daily OpinionWay poll showed that first-round support for anti-euro candidate Le Pen rose 1 percentage point to 27 percent, with Macron and Republican Francois Fillon unchanged at 20 percent each. While no surveys so far have shown Le Pen even close to a victory in May’s run-off, she’s quickly narrowing the gap to her rivals. OpinionWay showed Macron would defeat Le Pen by 58 percent to 42 percent in the second round. His advantage has halved in less than two weeks. Le Pen is gaining from her tough stance on the disturbances that flared up across France last week during mostly peaceful protests against police brutality. The National Front leader is tapping into voters’ unease after more than 200 people were killed in terrorist attacks in just over two years and those sentiments were stirred up again this month when a soldier in the Louvre fired five shots at an assailant armed with a machete and crying “Allah Akbar.” The spread between French 10-year bonds and similar-maturity German bunds rose 5 basis point to 79 basis points at 1:37 p.m. in Paris, the widest risk premium in more than four years. “It’s all about security,” said Bruno Jeanbart, director of OpinionWay. “Le Pen is benefiting from the fact that they’re all busy either bickering or unable to disentangle themselves from their many controversies.” A separate Harris poll showed that Le Pen is considered best placed to deal with security issues.
Selling Of French Bonds Accelerates As Le Pen Extends Lead, Macron Tumbles In Latest Poll -- Another day, another headache for owners of French bonds. In the latest French presidential poll, conducted by Elabe for TV broadcaster BFMTV, Marine Le Pen extended her lead by another 2-3 points, while support for her primary centrist challenger Emmanuel Macron, tumbled by 5 points in the last week. The poll, released today, showed that Le Pen's lead rose by either 1.5 points to 27% or by 2 points to 28%, depending whether centrist candidate Francois Bayrou would take part in the election... or withdraw.
"I Will Not Cover Myself Up": Le Pen Refuses To Wear Headscarf, Cancels Meeting With Lebanese Cleric -- French presidential candidate Marine Le Pen, and leader of the National Front, canceled a Tuesday meeting with Lebanon's grand mufti, its top cleric for Sunni Muslims, after refusing to wear a headscarf for the encounter. After meeting Christian President Michel Aoun, her first public handshake with a head of state, and Sunni Prime Minister Saad al-Hariri on Monday, she had been scheduled to meet the Grand Mufti Sheikh Abdul Latif Derian. He heads the Dar al-Fatwa, the top religious authority for Sunni Muslims in the multireligious country. “ You can pass on my respects to the grand mufti, but I will not cover myself up," she said. As Reuters reports, Le Pen, who is a frontrunner for the presidency, is hoping to boost her foreign policy credentials with a two-day visit to Lebanon nine weeks from the April 23 first round, and may be partly targeting potential Franco-Lebanese votes. The cleric's press office said Le Pen's aides had been informed beforehand that a headscarf was required for the meeting and had been "surprised by her refusal". But, as Reuters observes, it was no surprise in the French political context: French law bans headscarves in the public service and for high school pupils, in the name of church-state separation and equal rights for women. Le Pen wants to extend this ban to all public places, a measure that would affect Muslims most of all. Furthermore, as discussed last month, buoyed by the election of President Donald Trump in the United States and by Britain's vote to leave the European Union, Le Pen's anti-immigration, anti-EU National Front (FN) hopes for similar populist momentum in France. Like Trump, she has said radical Islamism must be faced head on, although she has toned down her party's rhetoric to attract more mainstream support and possibly even woo some Muslim voters disillusioned with France's traditional parties.
Marine Le Pen refuses to be questioned by French police - Far-right leader Marine Le Pen has refused to be questioned by French police as part of a widening investigation into the alleged misuse of EU funds, presenting the inquiry as a politically motivated plot with France’s presidential election just two months away. Ms Le Pen, who is leading pre-election polls with her anti-establishment and anti EU rhetoric, rejected a formal summons from French investigators this week, according to the French prosecutor’s office and her lawyer. She is free to decline police interviews because she enjoys parliamentary immunity as a member of the European Parliament. Magistrates can seek to have her immunity lifted but that process could take months, according to lawyers. Rodolphe Bosselut, Ms Le Pen’s lawyer, told the Financial Times on Friday that French justice was “artificially speeding up the questioning” before the election, adding that she did not want to answer questions during the campaign. The investigation has added to a sense of uncertainty in France’s tight election race, which has been marked by a funding scandal engulfing François Fillon, the centre-right candidate. Ms Le Pen remains the favourite to win the first round of the presidential election on April 23, although polls suggest that she will lose in the second round run-off on May 7 to a more centrist candidate. Ms Le Pen is accused by the European Parliament of using two legislative aides who were on the EU payroll for her party’s political activity. French judicial authorities are investigating, raiding the FN’s offices this week. The party has denied wrongdoing.
French human rights 'at tipping point' as state of emergency continues, says Amnesty International | The Independent: Human rights in France are at “a tipping point” as the government expands police powers in the wake of a wave of Isis-inspired terror attacks, a report has warned. Parliament has voted to extend the country’s ongoing state of emergency five times since 130 people were massacred by militants in Paris in November 2015. It affords security services exceptional powers including the ability to place anyone deemed to be a security risk under house arrest, dissolve groups thought to be a threat to public order, carry out searches without judicial warrants and block any websites that “encourage” terrorism. Amnesty International chose to unveil its annual world report in Paris, where the group warned that human rights were being eroded.Secretary General Salil Shetty said security measures approved by all French political parties had put the country at “a tipping point”. “It's absolutely the responsibility of the government to protect the people, but it has to be proportionate,” he added, speaking out against “traumatising house raids...all pointing towards one religion”. Mr Shetty said Amnesty was very worried about ongoing security crackdown, which has seen more than 4,000 houses searched without a judge’s order and at least 400 people handed assigned residence orders. “The world is watching France,” he added.
France Set to Remain 'Most Difficult' in Post-Vote Brexit Debate - When French presidential candidate Emmanuel Macron arrives in London on Tuesday he will bring a Brexit negotiating stance widely shared by his country’s governing class: the U.K. cannot expect special favors as it seeks to extract itself from the European Union. “I will be pretty tough on it because we have to preserve the rest of the European Union,” Macron told Channel 4 News on Feb. 13. “It’s not to be punished but to be consistent with such a decision. You don’t get a passport and you don’t get access to the single market when you decide to leave.” Rival Francois Fillon is if anything harder. “You can’t have one foot in and one foot out,” Bruno Le Maire, the former minister who is handling foreign affairs for Fillon, said in an interview last week. “We need to organize the exit as quickly as possible to respect the interests of France and Europe.” Three months since an adviser to Prime Minister Theresa May’s Conservative Party was photographed carrying a memo that read “French likely to be most difficult,” the people anticipated to take over from Francois Hollande in May all pose challenges to Britain’s Brexit strategy as they vie to run the euro-area’s No. 2 economy. ‘Different Ballgame’ The exception among the the three front-runners for the French presidency is Marine Le Pen, who has promised a referendum on France’s own relationship with the EU within six months of taking office. “With Le Pen it’s a different ballgame,” said Francois Heisbourg, president of the London-based International Institute for Strategic Studies. While Le Pen is on track to lead in the first round of voting on April 23, all polls show that she would be defeated in the run-off two weeks later by either Fillon or Macron, who are in a tight race to be the candidate facing her.
French Presidential Contender Macron Backs Tough Stand on Brexit - Yves Smith - Given what a wild ride the French presidential campaign has been, it’s premature even only a couple of months from the vote to put too many chips on any horse. However, as Ambrose Evans-Pritchard points out in a new column, Emmanuel Macron is taking a hard line on Brexit. It’s not clear that Macron will make it to the second round to face off against Marine Le Pen. Fillon took a hit due to scandals involving potentially illegal government payments to his wife and son. But Macron’s own goal has put Fillion back ahead of him. From Bloomberg: Republican candidate Francois Fillon is back on track to qualify for the run-off in France’s presidential race, a poll showed on Tuesday, as a sweetened program of reforms and intensive campaigning on social media and across the country pay dividends.Fillon leapfrogged independent front-runner Emmanuel Macron, gaining three percentage points to 21 percent, while Macron shed five points to 18.5 percent, according to the survey by Elabe for L’Express magazine….Running for office for the first time in his career, Macron suffered his first significant misstep of the campaign last week, when he qualified French colonial rule in North Africa as a “crime against humanity.” Since then he’s taken the brunt of rivals’ attacks and was forced to apologize to French citizens who left Algeria when it gained independence in 1962. Presumably polls next week will show how lasting the damage to Macron is. Marine Le Pen is continuing to gain, with the Elabe poll showing her getting 42% to 58% versus Fillion in a second round.Nevertheless, Macron is a serious enough contender that he was able to secure a meeting with Theresa May in London. Evans-Pritchard quoted his “Franco-German” unity versus the UK in a Brexit negotiation. While this is accurate, I find it an odd way for Macron to have stated his views. The fact is that the EU, from the very day the Brexit vote was announced, has been unified in telling the UK what its major negotiating parameters are, and how they are consistent with both EU principles and existing agreements with other countries that are not in the EU, like Norway and Switzerland. As we’ve recounted long form, the UK continues to be astonishingly obtuse, with its politicians and press having convinced themselves that the British Isles are oh-so-special that the EU will be forced to relent.
Cost of insuring French debt against default at highest since 2013 | Reuters: The cost of insuring French government debt against default rose on Tuesday to its highest level in more than three years on heightened concerns about an unpredictable presidential race in the euro zone's second-biggest economy. Five-year credit default swaps (CDS) on French government debt rose to around 67 bps FRGV5YUSAC=MG, according to data from Markit, the financial information services company. There is about a 5.5 percent probability of a French default within five years, according to the Markit data. That compares with 3 percent at the start of February.
Move back to franc could trigger French default warns S&P | Reuters: A move by France to pay its debt into a new version of the franc would result in a default rating, S&P Global said on Wednesday, though continuing to pay bondholders in euros could see it avoid that label. French presidential hopeful Marine Le Pen - one of two candidates likely to make a May election run-off - has said she would take France out of the euro if she won and denominate its national debt in a new currency. "Were a government to unilaterally decide to pay a euro-denominated instrument in a another currency contrary to the original terms of the instrument, S&P Global Ratings would, under its criteria, view this as a breach of the terms of the instrument and therefore a default," S&P's chief sovereign analyst Moritz Kraemer said in a report. He added that a more technical "selective default" was more common for governments than a plain vanilla default because defaulting sovereigns often continue to service at least some of their debt. Kraemer said even if a country decided to change its currency, default could be avoided if the country continued to service its legacy debt in the contractually agreed currency.
How France scrapping the euro could go beyond a ‘Lehman moment’: Past performance is no guide to future returns, as investors are so often told, but the French electorate runs the risk of creating a crisis worse than the fall of Lehman Brothers if it follows the U.K. in instigating a referendum on EU membership, according to analysts at Deutsche Bank. As the French presidential race heats up ahead of the first round of voting in April, the German bank has warned of the pitfalls of using the U.K.'s Brexit vote as a model for a potential "Frexit", as touted by nationalist candidate Marine Le Pen. Le Pen, who is currently leading the race according to the latest BVA-Salesforce opinion poll, has vowed to hold a French referendum on EU membership if she is successful in winning France's two-round leadership race. Pointing to the U.K., which has – so far – felt a relatively benign impact from its Brexit vote, Le Pen has relied on it as a basis for rallying support during her campaigning, saying: "They told us that Brexit would be a catastrophe, that the stock markets would crash … The reality is that none of that happened." However, Deutsche Bank has warned of the inconsistencies of likening the two votes. An EU referendum in France, one of the founding members of the economic bloc, runs the risk of undermining the euro, the currency shared by 19 of the EU's 28 member states. "Make no mistake, there is the world of difference between tearing up bilateral and multilateral trade agreements, and, unwinding a monetary union as far reaching in scope as the EMU (economic and monetary union) project," Deutsche Bank said in a note Tuesday
Le Pen Says French Foreign Policy Must Be Decided in Paris - Laying out her foreign-policy vision in a speech in Paris, Le Pen spoke of a world based on nation states that pursue their own interest and preserve their own cultures without interference. “To assure the freedom of the French, there is no price too high too pay,” Le Pen said. “The foreign policy of France will be decided in Paris, and no alliance, no ally, can speak in her place.” Her first move as president would be to renegotiate EU treaties as an initial step toward creating a “Europe of Nations,” she said. She saluted Britain’s vote to leave the EU, and said she’d withdraw from NATO’s military command. “I rejoice in Europeans claiming back their freedom against the attempts to create an artificial superstate,” she said. “The European Union is not the solution, it’s the problem.” On the U.S., she said she was hopeful President Donald Trump would reverse what she described as interventionist policies of President Barack Obama. She listed support for rebels in Libya and Syria as “mistakes” that have undermined world peace.
Can Europe Be Saved from Populism? --Yves here. In fairness, the original title of this VoxEU post is “European integration and populism: Addressing Dahrendorf’s quandary,” but I think you’ll find my relabeling it to be fair. I’m posting it because I was struck by the way the authors mischaracterized the populist upsurge, and the worst is, my sense this reflects a lack of comprehension and/or a refusal to believe that the adherents are well-informed about their own circumstances. This appears to reflect the yawning gap between the members of the elite, their technocratic aides and administrators, and the large swathes of the public that have suffered as a result of neoliberalism. In particular, it treats the opposition to the TPP, TTIP, and TISA as being a revolt against trade. Huh? In Europe with the TTIP, even more so that in the US with the TPP, the objection to the TTIP was mainly about the investor-state dispute settlement process, which would gut environmental, product safety, and labor regulations, and on the EU’s ability to maintain strict privacy regulations. And this is just dishonest:But populists do not talk in terms of disagreement over policy, which in a democracy is the very point of politics; rather they claim that they and they alone speak in the name of what they tend to call the ‘real people’ as opposed to the ‘establishment’Sanders was and is all about policy. Mark Blyth pointed out that the reason Marine Le Pen might win despite the odds in the second round of the French presidential election is by virtue of her economic positions:
Geert Wilders Follows the Trump Twitter Trail -- Der Spiegel --All it takes for Geert Wilders to get into the spotlight is a single tweet. "Pechtold is protesting with Hamas terrorists," the far-right Dutch politician recently tweeted, along with a photo. It showed protesters with long beards and white prayer caps holding up signs with slogans like "Islam will conquer Europe." Alexander Pechtold, the head of the Dutch liberal party D66, appears to be standing in the middle of the crowd. But the photo is a fake -- someone had photoshopped Pechtold's head into the crowd. Fake or not, it still served Wilders' purposes. Almost as soon as Wilders, who heads the so-called Party of Freedom (PVV) had posted the image online, hundreds of his more than 760,000 followers began retweeting it. The move outraged Wilders' opponents in The Hague, including the heads of the GreenLeft and Social Democratic parties as well as Pechtold himself. The D66 party head had only recently received a death threat from a right-wing fanatic, and many media organizations in the Netherlands were providing broad coverage of the scandal. But Wilders? Amused, he sent out a tweet that night namedropping the TV shows that had reported about him and then garnished it with the words: "180 characters and an old fake photo from 2009. #ilovetwitter."Wilders is conducting much of his campaign using his mobile phone, which he uses to tweet out extremely short messages on Twitter. It's a strategy straight from the Donald Trump playbook, but can Wilders copy his success? With his postings, Wilders has once again reached his goal of drawing the maximum possible attention with the least effort. In the run-up to the March 15 general election in the Netherlands, all eyes are on Wilders, with his signature blow-dried coiffure.
Germany suggests EU ease rules to deport asylum seekers | Reuters: German officials have proposed that the European Union relax some human rights safeguards so that more asylum seekers can be deported while awaiting the outcome of their cases, according to a working paper seen by Reuters. The paper is among many under discussion in Brussels as the EU, which has taken in more than 1.3 million migrants and refugees since the start of 2015, makes it tougher for them to get in and be allowed to stay. The paper said the proposal would only kick in at times of a "mass influx" of people to the bloc. "This is another element in efforts to energize readmission of people to wherever they came from," said one Brussels-based diplomat. The EU currently has an agreement allowing the return of asylum seekers only with Turkey. If approved, the proposal could enable such transfers to other places as well, including south of the Mediterranean, diplomats said. The EU is already talking to Libya, Tunisia and Egypt about curbing immigration to Europe. While the EU says it has the right to send away all economic migrants if it chooses, its existing laws on human rights say asylum seekers awaiting a ruling on their cases can only be deported to countries that meet certain conditions. The working paper lists them as including: safety from threat and persecution; humane reception conditions; and at least partial access to medical care, education and the labor market. Some parts of this "clearly exceed" the basic safeguards stipulated by the Geneva convention on refugees and the European Charter of Fundamental Rights, it said.
German houses are up to 30% overvalued: Bundesbank - Houses in Germany's cities are overvalued by as much as 30%, the Bundesbank warned on Monday, adding to fears of a housing bubble in Europe's largest economy after years of ultralow interest rates. Prices for residential real estate rose by 8% last year in 127 cities, up from an average of 6.75% per year between 2010 and 2015, the German central bank said in its monthly report, published on Monday. Prices have risen by about two-thirds since 2010 in the seven biggest cities: Berlin, Hamburg, Munich, Cologne, Frankfurt, Stuttgart and Duesseldorf. That rate of growth "exceeded the development that is supported by fundamental demographic and economic factors," the Bundesbank warned. Low borrowing costs--a result of the ultralow interest rates ushered in by the European Central Bank--explain only a part of that dynamic, the Bundesbank said. Germany has one of the lowest home ownership rates of the advanced economies, which has helped the country avoid the types of housing-market excesses seen in the U.S., Britain and other countries. Only around half of Germans own their own homes, compared with around two-thirds in neighboring France. But German house prices have been rising strongly since 2010, as the nation has rebounded rapidly from the financial crisis and investors have sought a safe place to park their money. Price pressures intensified further over the past two years as more than a million asylum seekers entered the country and required accommodation. "In the past two years people who moved from overseas settled mainly in the cities," the Bundesbank said. Meanwhile the ECB's stimulus policies--including a €2.3 trillion bond-purchase program--have helped to drive down borrowing rates across the 19-country eurozone. That has helped to support lending and growth but has also triggered side effects, including a surge in the prices of stocks, bonds, real estate and other assets.
German 2Y Yield Plunges To Record -0.95%: Citi Explains Why It Will Keep Dropping --In his latest note this morning, DB's Jim Reid admits that "I've no idea why Bunds are rallying so hard at the moment." That said, he does attempt to provide some reasons noting that 10y yields (-4.7bps) hit 0.228% yesterday, down from their YTD peak of 0.495% intraday on the 26th of January. 2y yields also closed another -3.0bps lower yesterday at -0.932%. They traded as ‘high’ as -0.648% back on the same day.The most obvious explanation is of course Euro systemic risk - especially from France and perhaps Italy. However other markets (equities, equity vol, the Euro, broader credit spreads etc) aren't moving much to price in redenomination risk in Europe. A lack of high quality collateral has been cited as an explanation but it's not clear there is much new info on this over recent days to explain the move. Perhaps it's as simple as government bond investors are generally by nature ultra conservative and Bunds seemingly offer complete safety from redenomination risk.Whatever the reason, the demand for German paper is nowhere more obvious than the "schatz", the German 2 Year whose yield fell earlier in the week to what was then a record 0.92%, and has since continued to fall, earlier in the session sliding to a new all time low of -0.95%, down 15 bps on the week, before rebounding modestly as ravenous credit traders snapped up every German asset they can find amid rising political fears, and the avocementioned concerns about a collateral shortage.
US no longer Germany′s top trade partner - In 2016, China for the first time became Germany's most important trading partner, toppling the United States, which fell back to third place behind France. German imports from and exports to China rose to 170 billion euros ($180 billion), Reuters reported after reviewing figures from the National Statistics Office (Destatis). The development may be seen in a positive light in Berlin, with the German government coming out as a supporter of global free trade after US President Donald Trump threatened to impose hefty tariffs on imports and his top adviser on trade accused Germany of exploiting a weak euro to boost shipments abroad. Germany's neighbor, France, remained the second most important business partner for Germany with a combined trade volume of 167 billion euros, followed by the US with a volume of 165 billion euros. Looking at exports alone, the US remained in the top spot, being the biggest client for products from Europe's powerhouse in 2016. Britain accounted for the biggest bilateral trade surplus, with exports surpassing imports from the UK by more than 50 billion euros. This means that Britain and the US together accounted for about 40 percent of Germany's record trade surplus of 252.9 billion euros last year.
Wolfgang Schäuble sends new Brexit warning - German Finance Minister Wolfgang Schäuble has poured cold water on the anti-Brexit plea from the U.K.’s Former Prime Minister Tony Blair, who last week urged his countrymen to resist an EU exit.“When I read that Blair is campaigning on the revision of Brexit, I’d say it’s a little bit late,” Schäuble said, speaking at an event at La Fédération des entreprises de Belgique in Brussels on Monday.Schäuble’s comments follow Blair’s call to arms a mere month before the current Prime Minister Theresa May is set to trigger Brexit negotiations.The German finance minister also warned the U.K. that there are limits to how beneficial a Brexit trade deal with the remaining 27 EU countries can be. “We have to avoid that the British example will be followed by other member states,” he said. “That’s been the position of the German government.”Still, the EU has an interest in maintaining close relations with the U.K., Schäuble continued, especially as “the financial center of London will remain and be important to the EU economy as a whole.” “We have to negotiate,” Schäuble said. “[But] my feeling is that people in the British government are only realizing what Brexit means [now].”
Germany and Italy back European Commission on Brexit -- Berlin and Rome are backing the European Commission’s plan to rule out starting trade talks with Britain until the UK gives assurances on a multibillion-euro Brexit bill and citizens’ rights. German and Italian officials say they support Michel Barnier, the chief EU negotiator, in seeking progress on divorce terms as an opening step. France is uncompromising on the estimated €60bn bill, while Spain is more wary of attempts to “punish” Britain. Such stances are preliminary, since EU member states have still to take a formal position. But the stance of Berlin and Rome is a blow to British ministers who are banking on Germany taking a softer approach and overruling commission hardliners. David Davis, Brexit minister, is adamant that trade talks will start in parallel with discussions on the terms of Britain’s withdrawal. EU member states take different approaches to the calculation of Britain’s exit bill. Christian Kern, the Austrian chancellor, confirmed the commission’s €60bn estimate. “The cheque should be around €60bn; that’s what the European Commission has calculated and this will be part of the negotiations,” he told Bloomberg. The emphasis Brussels and member states now place on the exit bill also contrasts sharply with EU leaders’ suggestions last summer that they were open to the idea of parallel trade talks in discussions with Theresa May, prime minister. Since then Mrs May has increasingly favoured a hard Brexit, with no UK membership of the single market.
France's Macron meets PM May in London, vows to stand up for EU | Reuters: French presidential candidate Emmanuel Macron told British Prime Minister Theresa May on Tuesday not to expect any favours from the European Union during Brexit talks, and drew big cheers for his pro-EU message from French nationals in London. Macron visited May at her Downing Street office and later met Britain's chancellor Philip Hammond, a public relations coup for the young ex-banker at a time when his campaign appears to be losing momentum. "Brexit cannot lead to a kind of optimisation of Britain's relationship with the rest of Europe. An exit is an exit," he told reporters outside 10 Downing Street after meeting May. "I am very determined that there will be no undue advantages." Macron, 39, a former economy minister in Socialist President Francois Hollande's government, is running as an independent. He is due to unveil his detailed programme next week. The latest polls suggest he and right-wing rival Francois Fillon are tied behind far-right leader Marine Le Pen ahead of the first round of the election on April 23. Polls suggest either man would easily beat Le Pen in the May 7 run-off. Macron, who did not obtain a meeting with German Chancellor Angela Merkel during a recent visit to Berlin, was keen to improve his standing on the world stage and court voters in London, which has an estimated 200,000 French residents.
Nicola Sturgeon says Tony Blair is right to say Brexit strengthens case for independence -- Nicola Sturgeon has praised the “quality of analysis and argument” in a speech by Tony Blair after he claimed the case for Scottish independence had become “much more credible” since the Brexit vote. The former Labour prime minister warned the break-up of the UK was “back on the table”, while adding that he did not want Scotland to become independent. In a speech for Open Britain, which is campaigning against a hard Brexit outside the single market, he called on pro-Europeans to “rise up” and persuade the British people to change their minds. Mr Blair, an unlikely ally for the SNP, whose members have previously called him to be tried for war crimes over the 2003 invasion of Iraq, added: “There is the possibility of the break-up of the UK, narrowly avoided by the result of the Scottish referendum, but now back on the table, but this time with a context much more credible for the independence case.”
Ireland’s Brexit meltdown— Forget about the Brexit upside. Just weeks before British Prime Minister Theresa May is expected to pull the trigger which begins divorce negotiations, Dublin is convinced that Britain’s departure from the EU will be disastrous and is desperate for the rest of Europe not to forget its plight. The turning point was May’s admission that Britain intended to leave the single market and probably the customs union, delivered in a speech at Lancaster House in London in January, which set out the prime minister’s vision for a United Kingdom outside the EU. “We genuinely believed that Britain would not want to walk away from the single market,” Danny McCoy, CEO of the Irish Business and Employers Confederation (IBEC), told reporters at a Brexit dialogue event hosted by the government in Dublin Friday. “We are now confronting the reality of Ireland being in a different customs union to Britain. For the business community that’s by far the biggest issue.” Tariffs would be “devastating” for goods exporters, while regulatory inconsistencies could cause havoc in Ireland’s pharmaceutical and med-tech industries, McCoy predicted. The Irish government shares business leaders’ concern that the economy is so intertwined with the U.K. — its second biggest export partner after the U.S. and its biggest importer — that a punitive Brexit deal that erects trade barriers between the EU and the U.K. will hurt Ireland at least as much as it does Britain. Dublin therefore is preparing to be Britain’s best friend among the EU27, pushing for the closest possible trading links, or at the very least special status for Northern Ireland.
UK on track to trigger Article 50 by end of March - David Davis | Reuters: Britain remains on track to trigger the legal process for leaving the European Union by the end of March, Brexit Secretary David Davis said on Monday, although he would not name a specific date. "We will complete by March 31 and trigger by March 31. When before then? I am not going to offer a view. I am confident we can meet that date," Davis told reporters during a trip to Estonia.
Brexit casts doubt over rating agencies’ London future - Credit rating agencies’ activities in London have been thrown into doubt by Brexit, as the UK government faces the prospect of cobbling together a new regulatory regime for institutions often blamed for exacerbating the financial crisis. The regulation of rating agencies, which grade the creditworthiness of companies and countries, shot up the political agenda after 2008 because of the agencies’ perceived failure to anticipate deep problems in the banking system and elsewhere. But in Britain, the European hub for the big three rating agencies, they are overseen only by an EU watchdog — and no UK body is yet ready to step in. The UK government may have to outline alternative arrangements in its Great Repeal Bill, the planned act of parliament that seeks to transpose and adapt EU law to the UK statute book. But financial professionals warn that it could take many months to prepare either the Financial Conduct Authority or the Bank of England, the two most likely candidates, to take over the tasks currently carried out by the Paris-based European Securities and Markets Authority (Esma).
Container shipping faces critical moment after years of losses -- At first glance, it is not obvious watching the cargo moving on and off the Leverkusen Express at the Port of Southampton that the container shipping industry has been contending with the biggest financial crunch in its 60-year history. Cranes lift boxes over the towering sides of the 367m long vessel, just as they did before a glut of ships and a slowdown in global trade sent freight rates tumbling. But on a closer look, there are signs of financial stress on the Southampton quayside. The decks of containers on the Leverkusen Express, operated by Hapag-Lloyd, are notable for being speckled with the colours of at least five other shipping companies, highlighting intense efforts to ensure that the vessel is filled to capacity. In the past, ship operators used to only put their own containers on their vessels, plus maybe those of one or two partners. Operators have of late engaged in increased co-operation to fill their ships because that is the only way they will make money out of the giant vessels. Much of the container shipping industry has been running up losses for years, but there are good reasons — including this enhanced collaboration between companies — to think that the sector has reached a critical moment in its battle to secure a course to sustainable profits. A recent wave of deals is reducing the number of lines, while South Korea’s Hanjin Shipping last year became the first big container ship operator to enter bankruptcy since 1986. Some executives think that the shake-up, which involves almost all the top 15 lines in mergers and new industry alliances, has stopped the decline in freight rates. According to Drewry Shipping Consultants, average revenue per 40-foot container recovered to a profitable $1,645 in December, from a lossmaking low of $1,113 in April.
This is Why World Trade is the Weakest Since 2009 - Wolf Richter - World Trade has been on our worry-list for a while, most recently in December [World Trade Falls to 2014 Level, just in Time for a “Trade War”]. Why has world trade refused to boom recently? And it wasn’t just last year. But last year was particularly crummy. Lackluster global demand gets blamed. But that’s using a broad brush to sketch a troublesome development. Now the alarmed World Bank, in its report, Trade Developments in 2016 (PDF), barely blames the usual suspects for this lackluster global demand, but identifies a new and dominant one: “policy uncertainty.” It points out that 2016 was the fifth year in a row of “sluggish trade growth.” 2015 had already been the weakest year since 2009, when global trade collapsed as a result of the Financial Crisis. But 2016 was even worse than 2015. World trade is devilishly hard to quantify, and so the estimates for 2016 vary:
- The World Bank’s Global Economic Prospects estimates world trade growth in goods and services at 2.5%.
- The IMF’s World Economic Outlook and the OECD’s Economic Outlook peg growth in goods and services at 1.9%.
- The World Trade Monitor by the CPB, Netherlands, estimates growth of merchandise trade at merely 1.1% (in the first 11 months of 2016 compared to the same period in 2015).
Despite the differences in the data, “there is a consensus across data sources that 2016 will register the lowest growth in trade volumes since the Great Recession of 2008–2009,” the report explains. Based on these sources – the IMF, the CPB, and the World Bank – the report estimates trade growth in 2016 at 1.9%: There are the usual suspects, or as the report calls them, the “enduring structural determinants”:
- Maturing of global value chains (GVCs)
- Rising protectionism
- “Notably slow global growth”
- The decline in commodity prices; but after the lows in early 2016, they’ve been rising, so this wasn’t a large factor in 2016, though it was a larger factor in 2015.
- “Macroeconomic rebalancing” in China toward an economy that is less dependent on exports, property investment, and industrial production