week ending Feb 10

 Trump's New Dark Money Man Takes Over - Nomi Prins - During her last news conference in December, Janet Yellen stood firm on her record stating, “The global economy is doing well. We’re in a synchronized expansion. This is the first time in many years that we’ve seen this.” While attempting to lock in her record, Yellen urged, “There’s less to lose sleep about now than has been true for quite some time.”Well, a lot of people lost sleep these past few days. And they might lose more sleep in the days to come.Markets were due for a correction. Whether it turns out to be something worse, time will tell.A recent article in MarketWatch said 2018 could “be the year the stock market rally screeches to a halt.” That’s because at some point debt bubbles are going to pop, and after they do, stocks will follow. The Fed has continued to provide what I call dark money to big Wall Street banks while they continue to buy back their shares with it. Dark money comes from central banks. Ultimately, central banks “print” money or electronically create funds to purchase bonds or stocks. They also use tools like adjusting interest rate policy and currency agreements with other central banks. Dark money then flows out to the biggest Wall Street banks and financial institutions. Because of dark money provided by central banks, corporations have been piling on debt like arsonists hoarding lighters before a fire. They’ve been using that debt either to service old debt or to buy their own stocks. That move artificially elevates their share values and in turn makes more bond investors relish buying their debt.  The entire U.S. primary corporate bond, or debt, market has been at record levels. There was $1.44 trillion of investment-grade issuance in 2017 compared with $1.34 trillion in 2016. There was $266.3 billion of high-yield issuance last year, that sector’s fourth-biggest year.This debt creation can’t sustain itself forever. It doesn’t take but a tiny mistake by central bankers to throw the bond markets into disarray. Equity markets don’t always follow right away, but they will eventually follow. And these past few days, equities marched in lockstep with the spike in bond yields. The question now becomes whether or not Janet Yellen’s successor, Jerome Powell, will change course.Here’s my answer: Don’t expect Powell’s policies to differ from Yellen’s. He also won’t change from her predecessor, Ben Bernanke, as his voting record shows us, aside from pressing for more leniency for Wall Street.

Moving Pieces - Tim Duy’s Fed Watch - There are lots of moving pieces right now. So many that few wanted to step in front of last week’s selling on Wall Street. I am going to try to sort out some of these pieces here. The employment report and, most notably, the pop in wages caught analysts off guard. If you were expecting the job market to slow down early this year, you continue to be on the wrong side of the story. Employers added 200k workers to payrolls in January, close to the three-month average of 192k. Curiously, the unemployment rate has held steady for four months in a row despite job growth well in excess of labor force growth. To be sure, those numbers come from different surveys, so they don’t need to match up month to month. Still, I think the household survey will eventually catch up and hence we should be prepared for a sharp lurch downward in the unemployment rate in the coming months. Wage growth accelerated to 2.9 percent year over year, a sharp rebound. I think there are two stories to tell here. First, 2.9 percent by itself isn’t cause for concern that labor markets are overheating. If inflation were at 2 percent, then real wage growth would be 0.9 percent, which is pretty much in line with productivity growth.   Moreover, hours worked slipped, setting the stage for a productivity boost in the first quarter. Higher productivity growth, even just 0.5 percentage points, would help support nominal wage acceleration in a continued low inflation environment. The second story, however, is arguably more disconcerting for bond traders. Annualized wage growth in four of the last five months exceeded 3 percent. In two of those months the gain was more than 5 percent. The three-month moving average is a 4.1 percent gain. That marks the fastest three-month gain since 2008. This solid pace over the last several months suggests that the January number is more than just higher minimum wages. If this trend continues, the Fed will tend to see such numbers as evidence that the economy has pushed excessively past full employment. To be sure, such wage growth doesn’t have to be inflationary – productivity could leap higher to above 2 percent, or profit margins squeezed. Or some combination of the two could come to pass. But any way you look at it screams caution in the near term until it all gets sorted out.

The new asymmetric risk --Jared Bernstein -- For years, economists, including no less than former Fed chair Janet Yellen, talked about the concept of “asymmetric risk,” or AR. In this earlier context, which related to monetary policy, AR maintained that the risk of weak demand was greater than that of faster inflation. Therefore, the full-employment side of the Fed’s mandate should get more weight in interest rate decisions than the stable-prices part.  With some important caveats I’ll get to below, there’s a new AR in town, this time as regards fiscal policy. As I’ve written in many places, thanks to the deficit-financed tax cuts and new spending bill, the deficit as a share of GDP is going to be unusually large, given that we’re likely closing in on full employment.As John Cassidy points out, some analysts, quite reasonably, worry that stimulating an economy so close to full employment is a basic economic mistake. It’s being more Keynesian than Keynes. Such stimulus won’t deliver more real economic activity, like jobs or real wage growth. It will just deliver more inflation and higher interest rates, which we slow growth. Added fiscal impulse at this point, they fear, will add more heat than light.  I share their concerns, but I think AR is in play, which points towards supporting this fiscal experiment. Once again, the risk of insufficient aggregate demand is greater than that of overheating. Let me explain.

Increased U.S. trade deficit in 2017 illustrates dangers of ignoring the overvalued dollar - The U.S. Census Bureau reported that the annual U.S. trade deficit in goods and services increased from $504.8 billion to $566.1 billion from 2016 to 2017, an increase of $61.2 billion (12.1 percent). The rapid growth of the overall U.S. trade deficit reflects the failure of Trump administration trade policies to materially affect trade flows in its first year, and its failure to address currency misalignment and prolonged overvaluation of the U.S. dollar. The U.S. goods trade deficit increased from $752.5 billion in 2016 to $810.0 billion in 2017, an increase of $57.5 billion (7.6 percent). The U.S. goods trade deficit is dominated by the trade deficit in manufactured products (including re-exports), which increased from $648.7 billion in 2016 to $699.8 in 2017, an increase of $51.1 billion (7.9 percent). Rapidly growing trade deficits in manufactured goods are a threat to future employment in this sector, which remains a large employer despite decades of policy-inflicted decline. The U.S. trade deficit with China reached a new record of $375.2 billion in 2017, up from $347 billion in 2016, an increase of $28.2 billion (8.1 percent). China is a particular source of concern in trade in steel aluminum, industries in which that country has accumulated massive amounts of subsidized, and often state-owned excess production capacity, over the past two decades. The president needs to promptly take trade action inpending national security investigations in these sectors. The remainder of the goods trade deficit is composed of trade in petroleum and other energy products, and miscellaneous transactions. The United States also had a small trade surplus in agricultural commodities, which reached $22.1 billion (including re-exports) in 2017. The U.S. surplus in services trade declined from $247.7 billion in 2016 to $244.0 billion in 2017, a decline of $3.7 billion (1.5 percent). The most important cause of large and growing U.S. trade deficits is persistent currency undervaluation by countries such as China, Japan, and Korea, which have run large, persistent trade surpluses, as well as large structural surpluses accumulated by Germany. The real, trade-weighted value of the U.S. dollar increased sharply in 2014 and 2015, as shown below. Although the dollar declined in the 12 months ending in January 2018, on average it was 16 percent higher than in 2013. The dollar affects trade flows with a lag of about two years, and the dollar increase in 2014–15 was the most important cause of the sharp increase in the trade deficit in 2017. The United States is likely to incur growing trade deficits unless and until steps are taken to re-align the dollar with the undervalued currencies of countries with persistent trade surpluses.

The U.S. government is set to borrow nearly $1 trillion this year, an 84 percent jump from last year - WaPo -- It was another crazy news week, so it's understandable if you missed a small but important announcement from the Treasury Department: The federal government is on track to borrow nearly $1 trillion this fiscal year — Trump's first full year in charge of the budget.That's almost double what the government borrowed in fiscal year 2017.Here are the exact figures: The U.S. Treasury expects to borrow $955 billion this fiscal year, according to documents released Wednesday. It's the highest amount of borrowing in six years, and a big jump from the $519 billion the federal government borrowed last year.Treasury mainly attributed the increase to the “fiscal outlook.” The Congressional Budget Office was more blunt. In a report this week, the CBO said tax receipts are going to be lower because of the new tax law.President Trump said during a Jan. 18 speech in Coraopolis, Pa., that Republicans' tax overhaul is already benefiting the U.S. economy. Here are his full remarks.  The uptick in borrowing is yet another complication in the heated debates in Congress over whether to spend more money on infrastructure, the military, disaster relief and other domestic programs. The deficit is already up significantly, even before Congress allots more money to any of these areas. “We're addicted to debt,”  What's particularly jarring is this is the first time borrowing has jumped this much (as a share of GDP) in a non-recession time since Ronald Reagan was president,   Under Reagan, borrowing spiked because of a buildup in the military, something Trump is advocating again.

Treasury set to borrow nearly a trillion in 2018 and more beyond - Don't look now, but the U.S. government needs to borrow more money at exactly the wrong moment — when interest rates are spiking. Last week, in a development first reported by The Washington Post, the Treasury Department quietly released data estimating its 2018 borrowing needs would check in at $955 billion, then top $1 trillion in the next two fiscal years. Those sums are considerably higher than last year's $519 billion in debt issued last year, and an upward revision to estimates released by the Treasury in late 2017. The federal government's voracious financing needs come at a time when it's already pulling in record levels of tax revenue, to the tune of $444 billion in October through November 2017.The Treasury's projections are also in line with an analysis by the Wharton School at the University of Pennsylvania last year, which estimated that the GOP's tax cut would add upwards of $2 trillion in federal debt over the next decade.Given the turmoil in markets and the broad-based tax cut just signed into law, the Treasury's timing arguably couldn't come at a worse time. Interest rates recently hit their highest level in four years, which have ricocheted across markets and prompted investors to sell everything in sight. Meanwhile, the Federal Reserve is expected to begin tightening monetary policy, which will effectively raise borrowing costs even further. So what does it all mean? The political calculations appear fairly straightforward. Democrats, who opposed tax reform with near unanimity, are expected to point to the government's surging borrowing, hammering away at that theme until the November midterm elections. Critics of President Donald Trump's economic policy will also point to the irony of his remarks as a candidate, when he suggested the government could inflate away its debt simply by printing money. Conventional economic wisdom suggests that in the long term, Uncle Sam's burgeoning debt load will put upward pressure on interest rates and hammer the dollar (which has also taken a beating, in spite of soaring yields that theoretically should help bolster its appeal). While printing money to erase debt seems like an easy solution, most economists warn it would put the world's largest economy on a fast track to hyperinflation and a devalued currency (think Zimbabwe and Venezuela).

The era of trillion-dollar budget deficits is making a comeback — The era of trillion-dollar budget deficits is about to make a comeback — and a brewing budget deal could mean their return comes just next year. Talks on a budget-busting spending pact that would give whopping increases to both the Pentagon and domestic programs have been inching closer to an agreement, aides and lawmakers said. GOP defense hawks are prevailing over the party’s depleted ranks of deficit hawks while Democrats leverage their influence to increase spending for domestic priorities such as combating opioid misuse. Details are closely held and subject to change. But at issue is a two-year deal to increase crunching caps on spending set by a failed 2011 budget deal. Republicans have pushed for defense increases in the neighborhood of $80 billion a year and have offered Democrats nearly as much — $60 billion or so per year — for nondefense programs. Add in $80 billion to $90 billion worth of hurricane aid for Texas, Florida and Puerto Rico, health care funding and money for President Donald Trump’s border security plan, and the final tally could total close to $400 billion. The potential cost, over the 2018-19 budget years, would rival the deficit impact of last year’s tax measure over that period. “Republicans for years have made all of these bold promises to rein in spending,” said Brian Riedl, a budget analyst at the conservative Manhattan Institute. “And they’re doing the opposite.” The negotiations are bipartisan since it takes votes from Democrats to lift the budget caps and advance a follow-up omnibus spending bill, whose overall cost is likely to exceed $1.2 trillion. That means domestic programs get their due, despite the opposition of conservatives. “Right now, everything I’m hearing grows the size of government at 13 percent,” said Rep. Mark Meadows, R-N.C., citing back-and-forth budget offers. “And that’s a nonstarter for conservatives.”

Before budget deadline Thursday, Senate Democrats and Republicans prepare reactionary “border security” bill - Congressional Democrats and Republicans and the Trump White House appeared deadlocked Monday on a range of fiscal and policy issues, above all immigration, only three days before another budget deadline that threatens another partial shutdown of the federal government. The continuing resolution that put an end to a three-day partial shutdown of federal operations in January expires at midnight, Thursday, February 8, with little to no prospect that either the House or Senate will pass a budget for the remainder of the current fiscal year, which runs until September 30. Congressional Republican leaders have already indicated they will seek another short-term continuing resolution, the fifth this year, extending authorization for federal agencies to spend money until March 23. This would mean three major legislative deadlines during the month of March:

• March 5—the expiration of protection against deportation for 700,000 young immigrants under the Deferred Action for Childhood Arrivals (DACA) program, which Trump rescinded last September
• Mid-March—the US Treasury will hit the debt ceiling of $20.5 trillion, the current limit on federal borrowing, about a month earlier than previously expected, because of lower tax collections due to the corporate tax cut enacted in December
• March 23—the next continuing resolution, if passed by Congress this week, would expire, meaning that the federal government will be halfway through the fiscal year without a full-year authorization to spend money

 Immigration Deal Remains Elusive As Lawmakers Scramble To Avert Another Shutdown - If Congress doesn't pass another continuing resolution - what would be its fifth since September - by midnight Thursday, the federal government will shut down for the second time in the span of a month.And as CNN points out, there are two pressing priorities that must be worked out if lawmakers want to eventually open the door to a more-permanent spending agreement.Lawmakers are up against two key deadlines that were put in place as part of the negotiations to reopen the government last month, creating a short window to show substantial signs of progress on a deal to protect undocumented immigrants who came to this country as children and their families. Immigration negotiators say they've taken steps in the right direction, but no deal to address the contentious issue has thus far emerged.The first deadline is Thursday, when government funding runs out. The second is to reach a long-stalled deal on immigration before Senate Majority Leader Mitch McConnell opens a promised freewheeling floor debate to try to settle the contentious issue.Lawmakers from both parties insist there won't be another shutdown: But then again, they said that last month, before a three-day shutdown that ultimately left Democratic leaders looking impotent in the eyes of progressives who want them to show more of a backbone on immigration. At the behest of their base, Democrats are insisting that Congress pass an immigration bill before they agree to a budget caps deal, which is needed to write a massive omnibus-spending bill for the rest of the fiscal year, as the Hill explains.

McCain, Coons To Introduce Immigration Bill Without Wall - The bipartisan bill aims to provide a compromise between Republicans and Democrats in order to pave the way for a budget deal before the federal government runs out of money on Friday. While Mr. Trump said he is open to providing Dreamers with a path to citizenship, he has repeatedly said that there would be no deal without wall funding - telling Ranking Democrat Chuck Schumer "If there is no Wall, there is no DACA"  Senate aides revealed to the Journal that the plan would allow illegal immigrants who have resided in the US since December 31, 2013 legal status and a path to citizenship - which is a much larger number of people than the 1.8 million covered under Trump's proposal. Meanwhile, the bill would require the State Department to submit a three-year strategy aimed at addressing the underlying causes of migration from Central America into the United States (because a better standard of living, lower crime, and taxpayer funded government handouts aren't the obvious conclusion, apparently). As the Journal aptly points out, "Many Central Americans try to enter the U.S. illegally because of severe drug gang violence in their home countries." The Journal reported that the legislation is "almost identical" to House legislation introduced by Reps. Will Hurd (R-TX) and Pete Aguilar (D-CA), which has the support of 27 Democrats and 27 Republicans in the House.“It’s time we end the gridlock so we can quickly move on to completing a long-term budget agreement that provides our men and women in uniform the support they deserve,” McCain said in a statement to the Journal on Sunday. “While reaching a deal cannot come soon enough for America’s service members, the current political reality demands bipartisan cooperation to address the impending expiration of the DACA program and secure the southern border,” he continued.  The legislation also calls for the hiring of 55 new judges per year, along with dozens of staff attorneys for three years, in order to clear out the enormous backlog in the immigration-court system.

House To Vote Tuesday On Bill To Avert Shutdown - But There's A Catch -- A meeting last night among House Republicans must've born fruit, because the caucus announced late last night that they would hold a vote late Tuesday on a bill to keep the federal government open through March 23. The vote would avert the second government shutdown this year. The measure would fund most government agencies and contain a year of defense funding as well as two years of funding for community health centers, the Republican representatives told reporters. But without a concurrent deal on immigration that includes enshrining DACA protections in law, it's difficult to say whether the bill will muster the votes to clear the Senate, where it would require 60 votes to circumvent a Democratic filibuster, per Reuters.As CNN explains, the full-year defense-spending plan - a long-sought objective of Mark Meadows and the rest of the House Freedom Caucus - is being added to the plan to give GOP leaders a chance to muscle the bill across the finish line with Republican-only votes - a necessity for defense hawks who have grown increasingly uneasy about the Pentagon relying on short-term resolutions. "We have to break this logjam some way," said Rep. Greg Walden, the Oregon Republican who chairs the House Energy and Commerce Committee, of the fifth short-term funding measure. Freedom Caucus Chairman Mark Meadows said he supports this strategy, and several GOP lawmakers said they expect it to pass the House with zero Democratic votes.

GOP to play hardball with Dems on funding bill | TheHill: House Republicans are moving to pair a full year of defense spending with a short-term measure to avoid a government shutdown on Friday, effectively daring Democrats in the Senate to block it. Democrats have demanded that any increase in defense spending be matched with increases to nondefense spending. They also want to reach an immigration deal before they agree to a broader deal on lifting the budget spending caps.But House GOP leadership's decision puts Senate Democrats in an unenviable position. Following last month's government shutdown, House Republicans are betting that Minority Leader Charles Schumer (N.Y.) and his fellow Democrats in the Senate won't have the nerve to force another closure by blocking the bill. Senate Republicans need at least nine Democratic votes to beat back a Democratic-led filibuster. Schumer declared the House GOP measure dead on arrival in a floor speech. "Sending a cromnibus to the Senate, one that just funded defense and cut programs crucial to the middle class, would be barreling head-first into a dead-end," Schumer said, referring to a cross between an omnibus spending bill and short-term continuing resolution (CR) to keep the government open.   Speaker Paul Ryan (R-Wis.) and other GOP leaders will pitch the plan at an emergency GOP conference meeting Monday night, GOP sources told The Hill.

Senate leaders near two-year budget deal to prevent shutdown | TheHill: Senate leaders are close to a two-year budget deal that would avert a government shutdown, Senate Democratic Leader Charles Schumer (N.Y.) announced Tuesday. The deal would set spending levels for fiscal 2018 and 2019 and avoid the prospect of a government shutdown when a stopgap spending measure expires on Thursday. “There are still some outstanding issues to be resolved, but we are closer to an agreement than we have ever been,” Schumer announced on the Senate floor.He met with Senate Majority Leader Mitch McConnell (R-Ky.) in McConnell’s office Tuesday morning and an aide familiar with the meeting said both leaders were pleased with the progress made.The current plan is for the Senate to vote on a stand-alone, yearlong defense appropriations bill either Tuesday or Wednesday. That vote is expected to fail.The vote is intended to demonstrate that a six-week spending measure expected from the House that would fund military programs for a full year does not have enough votes to pass the Senate, according to a senior Senate aide familiar with internal deliberations.If Democrats block a stand-alone defense spending bill, showing that the House stopgap can’t pass the Senate, McConnell could amend the House resolution to include whatever deal he and Schumer work out in the next 24 hours.If Senate leaders fail to finalize the deal within the next day, McConnell could amend the House resolution with a fallback option to keep federal agencies open. Either way, leaders don’t expect another shutdown this week.

Trump calls for shutdown if Congress doesn't pass border-security measures -- President Donald Trump on Tuesday called for a government shutdown if Congress does not pass what he considers adequate border-security measures. “If we don’t get rid of these loopholes where killers are allowed to come into our country and continue to kill ... if we don’t change it, let’s have a shutdown,” Trump said at a White House roundtable focused on the gang MS-13. “We’ll do a shutdown, and it’s worth it for our country. I’d love to see a shutdown if we don’t get this stuff taken care of.” Story Continued Below ..Trump’s statement followed a parade of remarks from state, local and federal law enforcement officials about violence propagated by MS-13, which was founded in Los Angeles by refugees from El Salvador. His demand for border-security measures did not match the current efforts to avoid a government shutdown on Capitol Hill. Lawmakers still hope to reach an immigration deal, but debate around keeping the government open has focused on defense spending this time around, not the border. "We have to strengthen our borders, not by a little bit but by a lot," Trump said. "We are so far behind the time. And by the way, the world is laughing at us because they can’t believe these policies. We’re going to get it stopped. And if we have to shut it down because the Democrats don’t want safety — and unrelated but still related, they don’t want to take care of our military — then shut it down. We’ll go with another shutdown.” 

Congress Seeking Bigger Budget Deal While Avoiding Shutdown - The short-term spending bill passed by the House to avoid a government shutdown this Friday may get replaced with a longer-term budget plan that raises spending caps for defense and domestic programs if congressional leaders can wrap up a deal in the next two days. The House bill, passed 245-182 Tuesday, would keep the government open only until March 23 while funding the Pentagon through September. But Republican and Democratic leaders in both chambers are working on a two-year budget plan that -- if that comes together -- may be combined with other important but stalled measures, including lifting the federal debt ceiling and hurricane disaster aid. Some lawmakers said they would rather take one big controversial vote than a series of them. “I believe doing a bigger bill is often easier,” said Representative Charlie Dent, a Pennsylvania Republican. Current government funding runs out at the end of the day Thursday. Senate leaders said they don’t want to bring the government to the brink of a shutdown and see little risk that it would occur. Last month, the government was closed for three days after Democrats demanded action on immigration legislation. The threat of another hang-up dissipated after Senate Majority Leader Mitch McConnell agreed to an open debate on immigration. A two-year budget deal under discussion would cost more than $250 billion for this fiscal year and the next one that begins Oct. 1. Defense caps for each year would be raised by about $80 billion, while non-defense spending limits would be raised by about $60 billion. Budget maneuvers would be used to add more domestic spending, allowing Democrats to claim that defense and non-defense are being treated equally. There still is a chance that the broader budget accord won’t be settled before the government funding runs out at the end of the day Thursday. In that case the Senate could pass a temporary spending bill without the added money for the Pentagon. Any Senate revisions to the House bill, H.R. 1892, would mean the House would have to vote again before Friday. Democrats canceled plans for a retreat on Maryland’s Eastern Shore that was scheduled to begin on Wednesday. 

Senate Leaders Reach Deal to Raise Spending Over Two Years — Senate leaders, disregarding President Trump’s threats to shut down the government, struck a far-reaching agreement on Wednesday that would add hundreds of billions of dollars to military and domestic programs over the next two years, breaking the cycle of fiscal crises that have bedeviled the Capitol since last summer. The accord between Senators Mitch McConnell of Kentucky, the majority leader, and Chuck Schumer of New York, his Democratic counterpart, would raise strict caps on military and domestic spending that were imposed in 2011 as part of a deal with President Barack Obama that was once seen as a key triumph for Republicans in Congress. The deal also includes an increase to the federal debt limit, according to Representative Chris Collins, Republican of New York, though Senate leaders did not immediately announce that piece of the agreement. The deal would raise the spending caps by about $300 billion over two years, according to a congressional aide. The limit on military spending would be increased by $80 billion in the current fiscal year and $85 billion in the next year, which begins Oct. 1, the aide said. The limit on nondefense spending would increase by $63 billion this year and $68 billion next year. The deal will cause federal budget deficits to grow even larger, on top of the effects of the sweeping tax overhaul that lawmakers approved in December. But because the agreement gives both parties what they wanted most, the deficit impact appears to be of little concern. Defense Secretary Jim Mattis, White House Press Secretary Sarah Huckabee Sanders and Speaker Paul D. Ryan all quickly embraced it. From the increase in domestic spending, Mr. Schumer said the deal includes $20 billion for infrastructure, $6 billion for the opioid crisis and mental health, $5.8 billion for child care and $4 billion for Veterans Affairs hospitals and clinics. It also includes disaster relief for areas hit by last year’s hurricanes and wildfires. The deal also includes $4.9 billion — two years of full federal funding — for Medicaid in Puerto Rico and the United States Virgin Islands, helping to avoid a looming Medicaid shortfall. There is additional money to repair infrastructure, hospital and community health centers severely damaged by Hurricanes Irma and Maria. The relief aid also includes $28 billion in community development block grants, including $11 billion for Puerto Rico, with $2 billion of that going to repair the power grid.  The agreement includes an additional four-year extension of funding for the Children’s Health Insurance Program, on top of the six-year extension that Congress approved last month, according to Mr. Schumer. 

Senate deal includes $64B for disaster relief efforts - — Senate leaders have unveiled a budget agreement that includes $64.2 billion to help states and U.S. territories recover from last year's hurricanes, wildfires and other disasters. "This budget deal also includes long-awaited disaster relief for Texas, Louisiana, Florida, the western states, Puerto Rico and the U.S. Virgin Islands," according to Senate Minority Leader Charles Schumer, D-N.Y. "Many of these places are still taking their first steps in the long march to recovery. Much of Puerto Rico and the Virgin Islands remains damaged and in the dark. This recovery aid could not come a moment too soon." Majority Leader Mitch McConnell, R-Ky., announced the funding agreement Wednesday morning. The House already passed an $81 billion disaster relief bill in December. The bipartisan agreement specifically provides $2 billion to help Puerto Rico and the U.S. Virgin Islands rebuild and improve their electric grids and other critical infrastructure. Bloomberg News The aid package includes $23.5 billion for the Federal Emergency Management Agency disaster relief fund for recovery efforts, repairs and future mitigation. According to a summary, the budget deal also provides $28 billion for Community Development Block Grant funds for housing, infrastructure repairs, economic revitalization and other needs, including $12 billion for mitigation and $15 billion for the Army Corps of Engineers to fund mitigation and resiliency projects. The bipartisan agreement specifically provides $2 billion to help Puerto Rico and the U.S. Virgin Islands rebuild and improve their electric grids and other critical infrastructure. In addition, the aid package includes $2.36 billion to provide disaster assistance for Florida's citrus industry and other major agricultural losses incurred because of the 2017 hurricanes and wildfires. 

Nancy Pelosi Won't Back Bipartisan Spending Plan Without Immigration Commitment From Ryan --While Senate leaders are reportedly close to a deal to pass a long-term budget and raise the country's borrowing limit, House Democratic leader Nancy Pelosi has thrown a wrench in the works by demanding that Speaker Paul Ryan commit to bringing an immigration bill vote to the floor after the Feb. 8 deadline. Pelosi said Democrats in the House would be "reluctant" to hand over their votes without a commitment from Ryan. During the brinksmanship to reopen the government after last month's brief shutdown, McConnell promised to open a freewheeling immigration floor debate if no deal has been struck before then. But Ryan refused to make the same commitment, according to the Hill.  Still, Pelosi said the Senate agreement "includes many Democratic priorities," including disaster aid, opioid funding and parity for defense and non-defense spending.As part of the deal to end the three-day government shutdown last month, McConnell said that he would bring up immigration legislation after Feb. 8. But Ryan would not make any similar promise that whatever passed in the Senate would be considered by the House.  Have we finally seen the last continuing resolution?While nothing is finished until it's finished, Axios reports that Senate leaders are nearing an agreement on a two-year budget deal - what would be the first full budget of the Trump era - that would also include a provision to raise the debt ceiling.According to Axios, Senate Democrats and Republicans are increasingly likely that a debt-ceiling increase will be attached to a budget deal that Senate negotiators from both sides hope to announce as soon as today. The upshot of this is that DACA will now likely be dealt with on its own terms - and won't be used as a bargaining chip in a government shutdown showdown.

McConnell, Schumer Announce Bipartisan Budget Deal To Avoid Shutdown -- In a deal that will spare the American people the anxiety inducing last-minute political brinksmanship that precipitated last month's government shutdown, the leaders of Senate Democrats and Republicans have announced a two-year budget deal that will include funding for opioid abuse treatment, badly needed disaster relief and funding for some of President Trump's infrastructure plan. According to Bloomberg, the plan will allocate nearly $300 billion more for defense and non-defense spending. While BBG said the deal will likely avert a shutdown and end months of squabbling over funding the federal government, To be sure, leaders in the House haven't signed on yet. As it stands, the agreement would raise defense spending by $80 billion over current law in this fiscal year and $85 billion in the one that begins Oct. 1, an unnamed "Congressional official" told Bloomberg. Non-defense spending would rise by $63 billion this year and $68 billion next year.Of course, Congress must still finish the appropriations for this fiscal year, then complete the 2019 appropriations. While the agreement provides a framework to lift spending caps, Fox reported that lawmakers will still need to pass an omnibus spending bill by March 23. The compromise also includes defense spending that is a top priority of conservative Republicans, while raising domestic spending by a commensurate amount.

Republican Fiscal Hawks Revolt Against Budget Deal, Suspension Of Debt Ceiling - As more details emerged about today's bipartisan Senate budget deal, which will lift spending caps by $300 billion above the current limit and which prompted today's sharp Treasury selloff, it was revealed that the agreement would suspend the federal debt ceiling through March 1, 2019.This, together with the generous spending terms which are sure to blow out the US budget deficit even more than recent troubling forecasts such as those from Goldman, which recently predicted  US debt issuance would more than double, rising from $488bn in 2017 to $1,030 billion in 2018..... prompted a revolt among GOP conservatives against the massive bipartisan deal, who complained that the GOP could no longer lay claim to being the party of fiscal responsibility."I’m not only a 'no.' I’m a 'hell no,'" snapped Rep. Mo Brooks (R-Ala.), one of many members of the conservative Freedom Caucus who left a closed-door meeting of Republicans saying they would vote against the deal.According to The Hill, one of the Freedom Caucus leader, Rep. Dave Brat (R-Va.), called the budget "a Christmas tree on steroids.""This spending proposal is disgusting and reckless — the biggest spending increase since 2009," conservative Rep. Justin Amash Mich.) tweeted after the meeting. “I urge every American to speak out against this fiscal insanity."But the focal issue appears to be the debt hike, which is giving conservatives “heartburn,” said Rep. Dennis Ross (R-Fla.), a member of the GOP vote-counting team.The swift backlash from fiscal hawks means that Speaker Paul Ryan (R-Wis.) and his leadership team will need dozens of Democratic votes to help get the caps-and-funding deal through the lower chamber to avert a government shutdown set for midnight Friday. At the same time, some Republicans predicted a majority of the majority would back the package.Opinions were split on the chance of the budget's passage: Former Republican Study Committee (RSC) Chairman Rep. Bill Flores (R-Texas), who said he will probably support the agreement, estimated that about two-thirds of the lawmakers who spoke at the microphones during the closed-door meeting actually voiced support. Meanwhile, Rep. Mark Meadows (R-N.C.), the current Freedom Caucus chairman, predicted that the budget deal will get support from a majority of the majority, but not enough to pass without Democratic votes.

This moment in deficit spending -- Jared Bernstein -- There’s an interesting argument in play right now as to whether current deficit spending is welcomed or problematic, and what its impact might be. The motivation for the argument is the deficit financing of the tax cut and the new budget deal (which adds at least $300-$400 billion to the debt over the next decade), particularly at a time when the economy is closing in on full employment. As I recently pointed out, deficits of around 5-6% of GDP, which is what we’re probably looking at over the next few years, are highly unusual at such low unemployment. On average, going back many decades, the deficit/GDP at such low unemployment has hovered around zero. The figure below makes the point: The figure is a little tricky, because the unemployment rate is inverted, meaning when the line goes up, unemployment’s going down. The reason to do it that way is to show how closely linked the jobless rate usually is with the def/GDP.  “These are both highly cyclical variables. When unemployment goes up a lot, the deficit tends to go up as well, as various “countercyclical” spending programs kick in, while tax revenue take a hit. So, outside of wars, when deficit spending goes up for noneconomic reasons, the two lines hug each other pretty tightly.  Until recently. The timing of the tax cuts [and now the budget deal] is such that they’re throwing a lot of fiscal stimulus—hundreds of billions in new, deficit spending—at an economy that’s already, on its own, closing in on full employment. Based on the already strong, negative trend in the unemployment rate, and the added stimulus, the unemployment rate could be in the mid-3s by the end of this year (it’s currently 4.1 percent). That’s a jobless rate we haven’t seen since the late 1960s.”

Groans as Congress again uses Fed’s capital fund to plug holes — A provision tucked away in the Senate’s two-year budget deal would cut the Federal Reserve's operating surplus by $2.5 billion, the second time in recent years that Congress has diverted Fed funds to pay for unrelated legislation.The deal announced Wednesday — which would avert a government shutdown on Thursday night and raise the debt ceiling — includes a provision that would amend the Federal Reserve Act to reduce the central bank’s operating surplus from $10 billion to $7.5 billion. That would result in an extra one-time remittance of $2.5 billion from the Fed to the Treasury.  But critics say the plan is yet another example of Congress turning to the Fed as a source of funding rather than finding more constructive ways to plug budget holes.

Congress expected to vote on budget to avert government shutdown (Reuters) - The U.S. Senate and House of Representatives were expected to vote on a proposed budget deal on Thursday that would avert another government shutdown but that has angered fiscal conservatives who complain it would lead to a $1 trillion deficit. The plan to keep the government operating and to increase spending over the next two years faced resistance from conservatives in the Republican Party, who favor less spending on domestic government programs. At the same time, many liberal Democrats wanted to withhold their support as leverage to win concessions on immigration policy. That meant the bill’s passage was not assured in the House and would need some Democratic support. House Speaker Paul Ryan, a Republican who has backed the agreement, said on Thursday he believed the chamber will pass the budget deal. “I think we will,” Ryan told radio host Hugh Hewitt. “This is a bipartisan bill. It’s going to need bipartisan support. We are going to deliver our share of support.” Mark Meadows, chairman of the conservative House Freedom Caucus, called the deal “eye-popping and eyebrow-raising.” “We took an official position last night to say we can’t support this,” he told CNN on Thursday. The rare bipartisan deal reached by Senate leaders on Wednesday raises spending on military and domestic programs by almost $300 billion over the next two years. It would allow for $165 billion in extra defense spending and $131 billion more for non-military programs, including health, infrastructure, disaster relief and efforts to tackle an opioid crisis in the country. It would stave off a government shutdown before a Thursday night deadline and extend the federal government’s debt ceiling until March 2019, putting off for more than a year the risk of a debt default by the United States. 

Budget Deal Hits Turbulence in House From Pelosi, Conservatives -- The Senate is poised to quickly pass a bipartisan budget deal Thursday that would avert a government shutdown and suspend the federal debt ceiling, but the bill faces less certain prospects in the House because of objections from the chamber’s top Democrat and GOP conservatives. Democratic leader Nancy Pelosi, who emphasized her opposition with an unprecedented eight-hour address on the House floor Wednesday, called it “a good bill” Thursday morning, but said she won’t vote for it without a promise of an open immigration debate. And some conservatives, particularly members of the House Freedom Caucus, oppose the deal because it calls for increased domestic spending.  Asked whether she’s pressing House Democrats to vote against it, Pelosi said, “I’m just telling people why I’m voting the way I’m voting.” The dissent in the House was in stark contrast to the comity in the Senate, where Majority Leader Mitch McConnell and Democratic leader Chuck Schumer delivered laudatory back-to-back speeches on the accord, which would add nearly $300 billion for government programs and suspend the debt ceiling until March 2019. The bill, released overnight, authorizes the sale of 100 million barrels from the Strategic Oil Reserve to pay for some of the new spending, and raises customs and airport security fees in the next decade. It also renews a host of expired tax breaks for calendar 2017 including for cellulosic biofuel, while extending a nuclear power tax credit that was scheduled to expire so that it is available after 2020. The Senate may begin voting on the deal, titled the Bipartisan Budget Act of 2018, as soon as 11:30 a.m. Thursday. Passage in both chambers of Congress would end a months-long impasse on government spending priorities and head off a shutdown on Friday. Although Republicans have a 238 to 193 majority in the House, the Freedom Caucus, which numbers about three dozen Republicans, announced they would oppose the accord. Lawmakers from both parties will be picking over the agreement with an eye on how it might play in congressional elections coming in November. 

20 Years Of Congress’s Budget Procrastination, In One Chart - Every year, Congress faces an Oct. 1 deadline to pass a spending package that will pay for our government through the following fiscal year. And every year since 1998, Congress has blown straight past that deadline. The government is prohibited from operating without funding, so lawmakers rely on stopgap legislation, called “continuing resolutions,” to temporarily approve funding and avoid a shutdown while they negotiate a longer-term deal. But those resolutions don’t buy Congress a lot of time, sometimes as little as one day. The result — to use the go-to cliché for government funding — is that Congress repeatedly kicks the can down the road. If the two-year, bipartisan spending deal that the Senate announced Wednesday is any indicator, legislators appear to have had enough of the recurring budget drama. House members will vote on the bill just ahead of a looming Thursday deadline, which was set when the most recent continuing resolution was signed into effect, ending last month’s three-day shutdown. This is an old dance for legislators — there have been an average of 4.6 continuing resolutions per fiscal year since 1977. But keeping the government open for a few weeks at a time has its costs. A new study by the Government Accountability Office describes how these temporary deals create inefficiencies in contracting, hiring and clinical research. And when the government does shut down, the productivity losses can add up. The Bureau of Economic analysis estimated that the growth of the country’s gross domestic product was slowed by 0.3 percentage points in the fourth quarter of 2013 as a result of that year’s shutdown. Setting spending levels for the next two years might open up space for more compromise on next year’s appropriations bills because a breakdown in negotiations won’t result in a government shutdown. Or the longer-term bill might just free lawmakers from the pressure of being in Washington next October — right before the midterm elections.

Rand Paul holds up vote on government funding bill as Congress approaches shutdown deadline -- Sen. Rand Paul on Thursday night is holding up a vote on a bill that would keep the government funded in order to avert a government shutdown early Friday morning. Paul can hold the vote until 1 a.m., and his aides tell CBS News' chief congressional correspondent Nancy Cordes that he intends to do so.  If the Kentucky Republican is successful, then the House and the Senate won't vote until 1 a.m. -- or one hour after the shutdown is set to begin. That would put the Senate vote around 2:30 a.m. Senate leadership aides say they think they could get the continuing resolution over the Senate about an hour after the House votes -- which means the earliest the House could vote is between 3 and 5 a.m.This means that a short term shutdown of just a few hours could be over by the time government workers wake up Friday morning.Paul explained in an interview with Fox News Thursday afternoon why he's blocking the vote on the measure, that includes a bipartisan budget deal to lift spending caps. He demanded that GOP leaders allow a 15-minute vote on an amendment he crafted to maintain current spending ceilings, but GOP leaders did not seem inclined to give him that vote.  "I'm not advocating for shutting down the government. I'm also not advocating for keeping the damn thing open and borrowing a million dollars a minute," Paul said on Fox News. Congress is aiming to prevent a government shutdown on Friday by passing a new spending bill by Thursday at midnight. The House had already voted on a short-term funding measure, known as a continuing resolution (CR), earlier this week that also expired March 23, but provided a boost in funding to the Pentagon through September. The measures will not provide a fix for undocumented immigrants brought to the U.S. as children. Nor will they increase border security or provide funding for a southern border wall.

Paul Ryan Doubles Down: Won't Call For DACA Vote Without Trump's Approval - In a statement that could create problems for Democratic and Republican leaders in the Senate, Paul Ryan said Thursday that he won't call a vote on DACA unless he receives the president's approval - putting a bipartisan agreement to suspend the borrowing limit and start the process to lock in a two-year budget deal in jeopardy.Though he told MSNBC's Hugh Hewitt that he thinks he has the votes to push the bill through the House, the party's conservative wing - the Rep. Mark Meadows-led House Freedom caucus - has balked at the senate plan, which they argue would lead to an unacceptable blowout of the deficit (of course, this didn't stop them from supporting the president's tax-reform plan).Meanwhile, Democratic House leader Nancy Pelosi has said she and her caucus will oppose the spending bill unless Ryan commits to bringing an immigration compromise bill that includes DACA protections to the floor next week.Paul Ryan said he won't call a vote on DACA unless the President supports it. This is the same President whose Chief of Staff just called these young immigrants 'lazy.'Paul Ryan puts his party and the President ahead of working people just trying to get by, yet again.— Randy Bryce (@IronStache) February 7, 2018 If lawmakers can't pass a spending bill tonight, the government will shutdown at 12:01 am Friday morning. Though Trump has said in the past that he would support legislation to enshrine protections for the so-called Dreamers - undocumented immigrants who were brought to the US as children - he has said he won't approve of any bill that doesn't also include generous allocations for border security, changes to certain legal immigration rules and of course, funding for his signature border wall. In what appears to be an attempt to placate House conservatives, Paul Ryan tweeted that the House would vote on a bill that includes long-term defense spending provisions today..

Another Government Shutdown? - From CNBC: White House instructs government agencies to prepare for shutdown. The Trump administration instructed federal agencies to get ready for a possible government shutdown as Congress moved closer to the midnight Thursday deadline without passing a funding bill, CNBC confirmed.An Office of Management and Budget official said the office is preparing for funding to lapse as a Senate stalemate drags on with only hours until current funding expires. The Trump administration supports the massive bipartisan budget deal working its way through Congress and wants lawmakers to pass it, the official said. Some government agencies will run  out of money and have to furlough workers if Congress lets funding lapse. A shutdown would be the second in less than a month.Hundreds of thousands of workers would not go into work Friday if a shutdown takes place through the start of the day. Others would have to work without getting paid at first.  If the shutdown happens - and doesn't end quickly - several agencies will probably not release regular government reports. There are no major economic releases scheduled for tomorrow (Friday), so there will probably be no impact on data if the shutdown ends before Monday morning.If the shutdown continues, the following week Housing Starts, CPI and Retail Sales will all probably be delayed.  Also, next week is the reference week for the February employment report, and that report will probably be delayed if the data isn't gathered on a timely basis.Private data will still be released. All Federal Reserve data will  continue to be released (separate funding).Also, the DOL will continue to process unemployment claims and release the weekly initial unemployment claims report.

Congress votes to end brief government shutdown (Reuters) - The U.S. House of Representatives joined the Senate early on Friday morning in approving a bill to end an overnight federal shutdown, sparing Republicans further embarrassment and averting serious interruption of the government’s business. The stopgap funding and budget measure, approved by a 240-186 House vote, will go next to President Donald Trump. The White House said in a statement that he will sign it into law, which would extend government funding through March 23. The shutdown, which started at midnight, was the second this year under the Republican-controlled Congress and Trump, who played little role in attempts by party leaders earlier this week to head it off and end months of fiscal squabbling. A carefully crafted, bipartisan stopgap funding and budget package was introduced with confidence earlier this week by Senate leaders, who predicted swift passage before the expiration at midnight on Thursday of current funding authority. But in an unexpected turn of events, the deadline was missed because Kentucky Republican Senator Rand Paul, objecting to deficit spending in the bill, engaged in a nine-hour, on-again, off-again protest and floor speech that leaders could not stop. Paul’s dissent dragged the Senate proceedings into the wee hours past the deadline, underscoring the persistent inability of Congress and Trump to deal efficiently with Washington’s most basic fiscal obligation of keeping the government open. After an all-night session of debating and voting, the bill ending the shutdown finally won House passage only after Democrats provided enough votes to offset the opposition of 67 Republicans, a remarkable rebellion in the party’s ranks. While Paul’s performance in the Senate strained the patience of his colleagues, he focused on the same concern that caused so many House Republicans to oppose the bill - deficit spending. The budget bill raises military and domestic spending by almost $300 billion over the next two years. With no offsets in the form of other spending cuts or new tax revenues, that additional spending will be financed by borrowed money. 

Congress votes to reopen government, passes massive budget deal -- Congress approved a major budget deal early Friday morning, voting to end a brief government shutdown overnight and sending the measure to President Donald Trump for his signature. The House of Representatives voted 240-186. The GOP-controlled chamber needed help from House Democrats to clear the bill, and 73 Democratic members gave it. Sixty-seven House Republicans voted against the plan.The colossal bill, which lawmakers have been negotiating for months, is a game-changing piece of legislation, clearing the decks for Congress in dealing with major spending issues as well as doling out disaster relief money and hiking the debt ceiling which was set to be reached next month.The Senate approved the measure earlier on Friday morning. The federal government briefly shuttered for the second time in less than a month overnight, after Kentucky Republican Sen. Rand Paul prevented the deal from passing Thursday.The shutdown came just weeks after Democrats and a handful of Republicans, including Paul, refused to support the last continuing resolution, causing a shutdown that lasted a weekend. The effects from the overnight shutdown were expected to be minimal, but it will remain until Trump signs the funding plan. Trump is expected to sign the bill before noon Friday, a senior administration official said, but it's unlikely to happen before 9 a.m. ET, when federal workers are expected back at work. It's not clear what it means for those workers, and the Office of Personnel Management, which manages the federal workforce, still had an alert on its website early Friday morning that states that due to a "lapse in appropriations, federal government operations vary by agency." A second official said White House employees are expected to come to work as usual.   Just how many Democrats would come on board was a key question up until the final moments, as liberals were unhappy about the bill not addressing immigration and conservatives oppose the increased spending. After the vote succeeded in the Senate, Senate Majority Leader Mitch McConnell kept his word to move to open an immigration debate next week. The majority leader moved to call a vote Monday to proceed to an unrelated House bill that will serve as a vehicle for a process unlike the Senate has seen in recent memory, where senators will be able to offer a number of amendments on competing immigration proposals to see which ones will secure the 60 votes needed to advance. But that will only happen if the House passes the continuing resolution later Friday morning.

Bipartisan Budget Deal Sets Stage for Rising Deficits, CBO Shows - The bipartisan budget deal President Donald Trump hopes to sign this week would set the stage for a massive increase in the federal deficit in coming years, a Congressional Budget Office report shows. An increase in discretionary spending caps would add $296 billion in spending authority over the next two years -- with a follow-up massive spending bill due by March 23 that will allocate which accounts get the extra money. The plan includes $84.4 billion in discretionary emergency spending for disaster relief, though only about $25 billion of that will be spent in the next two years, CBO estimates. The CBO estimated that nearly $17 billion of the spending won’t even occur in the coming decade. There also are additional tax cuts for assorted business interests and other changes to mandatory spending, alongside some modest spending trims that will mostly affect fiscal 2026 and 2027 -- a couple of presidential terms away. CBO says that over 10 years the deficit would increase $38 billion by counting only "direct spending and revenue," but that figure doesn’t consider budget cap adjustments. The nonpartisan Committee for a Responsible Federal Budget, analyzing the CBO’s report, said the deal would add a net $320 billion to deficits over a decade, or $418 billion counting the additional interest costs. The deficit-hawk group now expects the deficit will soar to $1.2 trillion in fiscal 2019 alone. 

Budget deal is brimming with special tax breaks | TheHill: The Bipartisan Budget Act that Congress is set to pass Thursday is brimming with tax provisions for a variety of special interests, including racehorse owners, small private colleges and television and film companies. At least two of the tax breaks help the constituents of Senate Majority Leader Mitch McConnell (R-Ky.), who negotiated the deal with Democratic Leader Charles Schumer (N.Y.). Altogether, the special tax provisions amount to $17.4 billion over the next four years, with most of the costs incurred — $13.3 billion — in fiscal year 2018, according to an analysis released by the Joint Committee on Taxation (JCT).One provision limits the excise tax on investment income at private colleges and universities to schools with at least 500 tuition-paying students, shielding smaller institutions and costing the government an estimated $2 million a year in revenue over the next decade. It’s a win for small schools such as Berea College, which is based in Kentucky. Senate Republicans tried to exempt small colleges such as Berea in the tax-reform bill that passed in December, but the provision was removed after the parliamentarian said it violated procedural rules. Another provision in the deal extends the three-year tax depreciation for racehorses, allowing owners to depreciate the value of their investment over the most productive span of their racing careers instead of the old seven-year schedule. That provision was a top priority of the National Thoroughbred Racing Association, which also happens to be based in McConnell’s home state. It also extends special expensing rules for film and television productions, giving a boost to Hollywood, a Democratic fundraising hub, and to live theater productions, a boon to Schumer’s home state of New York. Schumer has argued that live theater productions should reap the same tax benefits as film and television and warned in the past that without tax incentives, production companies would move away from costly New York City. That provision will cost the government $1.3 billion in fiscal year 2018. NASCAR track owners will get to share in $37 million in tax benefits thanks to an extension of the seven-year recovery period for motorsports entertainment complexes. That tax break has been supported by Sen. Debbie Stabenow (D-Mich.), one of Schumer’s closest allies. Her state is home to major automobile manufacturers and the Michigan International Speedway. 

Merrill: "The $1 trillion dollar budget deficit" -- A few brief excerpts from a note by Merrill Lynch economists: The $1 trillion dollar budget deficitThe latest developments in Washington imply that the budget deficit will continue to swell in the coming years. The bipartisan Senate agreement would boost spending cap levels for defense and non-defense programs over the next two years by roughly $300bn. As a first pass at estimating the impact on the deficit forecast, we think it would [bring] deficits to $825bn and $1,070bn. This will translate to one of the largest budget deficits during an expansion and, by far, the largest when the economy is at full employment. The Senate agreement also suspends the debt limit and staves off a potential Treasury default, which we projected would occur in early March without an increase. The “suspension” of the debt limit does not set a new level for the amount of debt outstanding, but instead sets a date on which the debt limit will be reinitiated. Press reports indicate that the debt limit will be suspended until March 2019, which removes this issue until Congress gets beyond the mid-term elections in November. ... What do higher deficits mean for the economy and markets? The first order impact is greater Treasury supply ... [Merrill] expect the Treasury will look to boost its bill financing and see risks to more near-term supply due to a higher cash balance. These developments further the view of our rates strategy team for higher Treasury rates and a steeper curve. For the economy, a higher deficit will boost near term growth, though it will also threaten to “crowd out” private investment.  The US had trillion dollar deficits in the fiscal years during and just following the great recession. Those deficits peaked at close to 10% of GDP; this deficit will be around 5% of GDP, but still very high during the later stages of an expansion.

Moody's Threatens US Downgrade Due To Soaring Debt, "Fiscal Deterioration" -  Back in 2011, Standard & Poors' shocked the world, and the Obama administration, when it dared to downgrade the US from its vaunted AAA rating, something that had never happened before (and led to the resignation of S&P's CEO and a dramatic crackdown on the rating agency led by Tim Geithner). Nearly seven years later, with the US on the verge of another government shutdown and debt ceiling breach (with the agreement reached only after the midnight hour, literally) this time it is Warren Buffett's own rating agency, Moody's, which on Friday morning warned Trump that he too should prepare for a downgrade form the one rater that kept quiet in 2011. The reason: Trump's - and the Republicans and Democrats - aggressive fiscal policies which will sink the US even deeper into debt insolvency, while widening the budget deficit, resulting in "meaningful fiscal deterioration." In short: a US downgrade due to Trumponomics is inevitable. And incidentally, with today's 2-year debt ceiling extension, it means that once total US debt resets at end of day - unburdened by the debt ceiling - it will be at or just shy of $21 trillion. We expect if not a full downgrade, then certainly a revision in the outlook from Stable to Negative in the coming  months. Here's Moodys: The stable credit profile of the United States (Aaa stable) is likely to face downward pressure in the long-term, due to meaningful fiscal deterioration amid increasing levels of national debt and a widening federal budget deficit. However, the US economy is very strong, wealthy, dynamic and well diversified, and its role in the global financial system is unmatched. These factors help compensate for the impending fiscal weakness, Moody's Investors Service says in a new report. Moody's has already indicated that rising entitlement costs and rising interest rates will cause the US's fiscal position to further erode over the next decade, absent measures to reduce those costs or to raise additional revenues. The recently-agreed tax reform will exacerbate and bring forward those pressures.Moody's current baseline forecast is that the sovereign balance sheet will continue to weaken over the coming decade. Absent corrective fiscal measures, the US's Aaa rating will rely increasingly on its unparalleled economic base and the central role it plays in the global financial system.

Pentagon Auditor Can't Account For $800 Million In Spending - The Pentagon’s Defense Logistics Agency (DLA) has reportedly "lost track" of hundreds of millions of dollars it spent,  said Ernst & Young, the accounting firm conducting the first-ever Pentagon audit, according to Politico.E&Y discovered that DLA "failed to properly document more than $800 million in construction projects," said Politico, which also reported this is just one of the many instances where millions of dollars went missing as the accountability system inside the Pentagon is broken. Worse, according to Politico, the first-ever audit, covering the fiscal year that ended Sept. 30, 2016, signals complete incompetence about how the Pentagon handles its $700 billion annual budget.While these comments from Ernst & Young are mindnumbing, the Trump administration is set to ask Congress for $716 billion for defense spending for fiscal 2019, a 7% increase over the 2018 Budget. Budget analysts have sounded warnings this would be a significant surge in spending for the Pentagon at a time when the organization can barely keep track of its current expenditures.“If you can’t follow the money, you aren’t going to be able to do an audit,” Sen. Chuck Grassley, an Iowa Republican and senior member of the Budget and Finance committees, who has suggested to past administrations that hemorrhaging of wasteful spending at the Pentagon must stop. Army Lt. Gen. Darrell Williams, the agency’s director, wrote in response to Ernst & Young’s bombshell findings that the audit has “provided us with a valuable independent view of our current financial operations.” “We are committed to resolving the material weaknesses and strengthening internal controls around DLA’s operations,” he said, according to Politico. The DLA is a $40 billion-a-year logistics agency within the Pentagon with some 25,000 employees and processes about 100,000 orders a day, said Politico.  Ernst & Young’s auditors found significant accounting errors in DLA’s process of tracking expenditures. There are minimal accounting records of where the money is going said the report. This does not bode well for accountability at the Pentagon, which has combined assets of $2.2 trillion.The Politico describes one section of the audit where Ernst & Young’s auditors found misstatements for some $465 million in construction projects. Another section described that there was very little documentation for another $384 million worth of spending.

Trump considers “bloody nose” strike on North Korea -- The Trump administration, or a powerful military-intelligence faction within it, is pushing for a pre-emptive military strike on North Korea, in the wake of, or possibly even during, the Winter Olympics due to start in South Korea on Friday.The “bloody nose” option—a limited attack on the North Korean nuclear missile arsenal and infrastructure—is supposed to overawe the Pyongyang regime and bully it into surrendering to Washington’s demands to denuclearise.Unprovoked US aggression, however, would almost certainly trigger retaliation, rather than submission, with incalculable consequences. Even if nuclear weapons were not immediately used, the death toll in South Korea alone is estimated in the tens of thousands on the first day, in a conflict that could rapidly draw in nuclear-armed powers such as China and Russia.Yet, such an act of recklessness and savagery is precisely what is being discussed, debated and prepared in the upper echelons of the White House and the US security-intelligence apparatus. Within top military-foreign policy circles, the advanced nature of the plans is so well known that it is generating fears and opposition. Last week, the Trump administration abruptly dumped its appointee for US ambassador to South Korea, Victor Cha, after he voiced opposition to a pre-emptive strike on North Korea. Cha subsequently went public, penning a comment in the Washington Post in which he warned that a US attack would put 230,000 Americans in South Korea at risk—equivalent to a medium-sized city like Pittsburgh or Cincinnati. A letter to Trump last Friday signed by 18 Democratic senators, including Martin Heinrich, who sits on the Senate Armed Services Committee, expressed concern that Cha had been passed over. It declared that to take military action before exhausting diplomatic options would be not only “extremely irresponsible” but would lack “either a Constitutional basis or legal authority.” The Democrats’ letter, far from expressing genuine opposition to war, is part of the intense debate raging within the US political establishment over whether Russia or China represents the greater immediate danger. The escalating campaign against Trump over alleged collusion with Russia during the 2016 presidential race is aimed at placing Moscow first in the cross-hairs, rather than North Korea and China.

Trump’s Nuke Plan Raising Alarms Among Military Brass -- The Trump administration’s Nuclear Posture Review (NPR), to be released Friday, will include a call for the deployment of low-yield, “more usable” nuclear warheads, a move widely anticipated when a draft of the document was leaked to the Huffington Post on January 11. So while the recommendations won’t necessarily be a surprise, what is less public is the bitter battle during its drafting that pitted senior Army and Navy warriors against nuclear wonks inside the Defense Department. That fight—over the exorbitant costs associated with the NPR, and charges that it could make nuclear war more likely—are bound to continue through implementation.  “It’s one thing to write a policy,” a senior Pentagon civilian privy to the NPR fight told The American Conservative, “and it’s another thing to have it implemented. What the NPR is recommending will break the bank, and a lot of people around here are worried that making nuclear weapons more usable isn’t what we should be doing. The conventional military guys have dug in their heels, they’re dead-set against it. This battle isn’t over.”   In effect, the congressionally mandated review calls for the U.S. to deploy two new types of lower yield nuclear warheads, generally defined as nuclear bombs below a five kiloton range (the one dropped on Hiroshima was 20 kilotons), that could be fitted onto a submarine-launched ballistic missile, and one, yet to be developed, that would be fitted onto a submarine-launched cruise missile. Additionally, the NPR calls for “recapitalizing” the complex of nuclear laboratories and plants, which, taken together with the proposed modernization program of the U.S. nuclear arsenal (the “triad”), will almost certainly cost in excess of the estimated price tag of $1.2 trillion over the next 30 years. 

A nuclear first strike of North Korea is ‘tempting’, says legendary U.S. diplomat Henry Kissinger as Kim Jong-un warns Trump is pushing towards war Daily Mail (KW). Yves: “Shows the error in not having locked him up as a war criminal.” Former Secretary of State Henry Kissinger has said that the temptation to launch a pre-emptive strike on North Korea 'is strong and the argument rational'. He told a meeting of the Senate Armed Services Committee last week that North Korea poses the most immediate threat to global security, arguing that denuclearization of the regime must be a 'fundamental' American foreign policy goal. The veteran diplomat was speaking before North Korea warned that the U.S. is pushing the whole world towards a 'nuclear war' in its latest letter submitted to the UN. It said that joint military exercises between the U.S. and South Korea - coupled with American rhetoric in the Korean peninsula region - were bound to derail improving relationships between the two Koreas. The Trump administration's aims are 'to provoke a nuclear war, which will undermine the improvement of inter-Korean relations and the easing of tensions,' North Korean Foreign Minister Ri Yong Ho said in the letter to U.N. Secretary-General Antonio Guterres. Mr Kissinger said that relations between the U.S, and north Korea had reached 'a fork in the road' in which the Trump administration may consider pre-emptive military action or increasingly tighter sanctions against Kim Jong-un's regime.

Democratic senators: Trump lacks ‘legal authority’ for preemptive, ‘bloody nose’ strike on North Korea -- A group of Democratic senators is warning President Trump that he lacks the “legal authority” to carry out a preemptive strike on North Korea, amid questions over whether the White House is considering a risky “bloody nose” attack. In a letter to be sent to Trump on Monday, the 18 senators said they are “deeply concerned about the potential consequences of a preemptive military strike on North Korea and the risks of miscalculation and retaliation.” They emphasized that it is an “enormous gamble” to believe that such an action, even if it were modest in scope, would not provoke an escalation from dictator Kim Jong Un. “Moreover, without congressional authority, a preventative or preemptive U.S. military strike would lack either a constitutional basis or legal authority,” the senators wrote in the letter organized by Sen. Martin Heinrich (D-N.M.), a member of the Senate Armed Services Committee. Congressional aides said the letter was prompted by the circumstances surrounding the sudden derailment of the White House’s original choice for ambassador to South Korea, a post that has remained vacant since Trump took office. The Washington Post reported last week that Trump’s original choice, Victor D. Cha, was no longer expected to be nominated after more than six months of vetting. In December, the administration had sent Cha’s name to Seoul and received quick approval from the South Korean government, a formal process called “agrément” that typically is the final step before a candidate is nominated to the Senate. The senators called his derailment “disturbing” and expressed “serious concerns” over Trump’s handling of the post. 

Who Let Dr. Strangelove Write The Pentagon's Nuclear Posture Review? - The Pentagon’s official outline for its use of nuclear force was denounced as “radical” and “extreme” by prominent anti-nuclear weapons groups when it was released Friday afternoon—confirming peace advocates’ worst fears that the Trump administration would seek to expand the use of nuclear force.“Who in their right mind thinks we should expand the list of scenarios in which we might launch nuclear weapons?” asked Peace Action in a statement. “Who let Dr. Strangelove write the Nuclear Posture Review?” The Nuclear Posture Review (NPR) calls for the development of smaller warheads that the military believes would be seen as more “usable” against other nations. “In support of a strong and credible nuclear deterrent, the United States must…maintain a nuclear force with a diverse, flexible range of nuclear yield and delivery modes that are ready, capable, and credible,” reads the report, which serves as the first updated document the U.S. has released regarding its perceived nuclear threats since 2010. In addition to “diversifying” its nuclear arsenal, the Pentagon notes that it will seek to “expand the range of credible U.S. options for responding to nuclear or non-nuclear strategic attack,” raising concerns that President Donald Trump will argue for the use of nuclear force as a deterrent—a significant departure from previous administrations which saw nuclear weapons as an option only for retaliation. “The risk of use for nuclear weapons has always been unacceptably high,”  “The new Trump Nuclear Doctrine is to deliberately increase that risk. It is an all-out attempt to take nuclear weapons out of the silos and onto the battlefield. This policy is a shift from one where the use of nuclear weapons is possible to one where the use of nuclear weapons is likely.” Derek Johnson, head of Global Zero, called the NPR “a radical plan written by extreme elements and nuclear ideologues in Trump’s inner circle who believe nuclear weapons are a wonder drug that can solve our national security challenges.” As Paul Craig Roberts summed up so eloquently, the new US nuclear posture is a reckless, irresponsible, and destabilizing departure from the previous attitude toward nuclear weapons. The use of even a small part of the existing arsenal of the United States would be sufficient to destroy life on earth. Yet, the posture review calls for more weapons, speaks of nuclear weapons as “usable,” and justifies their use in First Strikes even against countries that do not have nuclear weapons

Department of Energy: Continued Actions Needed to Modernize Nuclear Infrastructure and Address Management Challenges – GAO -- The Department of Energy's (DOE) National Nuclear Security Administration (NNSA) manages the U.S. nuclear weapons stockpile and supports nonproliferation efforts. DOE's Office of Environmental Management addresses contamination at nuclear weapons production sites. We testified that:

• NNSA’s plans to modernize its nuclear weapons do not align with its budget, raising affordability concerns
• DOE's environmental cleanup liability may cost billions more than anticipated
• DOE continues to face challenges managing its contracts, projects, and programs
• NNSA has faced management challenges implementing its nonproliferation programs

`The Increasing Likelihood Of Nuclear War Should Straighten Out All Our Priorities - A Russian pilot has been killed by US-armed terrorists in Syria. The Ron Paul Institute‘s Daniel McAdams writes the following about this new development: “The scenario where a US-backed, US-supplied jihadist group in Syria uses US weapons to shoot down a Russian plane and then murders the pilot on the ground should be seen as a near-nightmare escalation, drawing the US and Russia terrifyingly closer to direct conflict.” McAdams is not fearmongering; he is stating a plainly obvious fact. The Trump administration has just announced that it is restructuring its nuclear weapons policy to take a more aggressive stance toward Russia than that which was held by the previous administration. This is coming after this administration’s decision to arm Ukraine against Russia, a move Obama refused to take for fear of escalating tensions with Moscow, as well as its decision to continue to occupy Syria in order to effect regime change, along with numerous other escalations. The Council on Foreign Relations, which is without exaggeration as close to the voice of the US establishment as you can possibly get, is now openly admitting that the “United States is currently in a second Cold War with Russia.” In a recent interview with The Real News, leading US-Russian relations expert Stephen Cohen repeated his ongoing warning that “this new Cold War is much more dangerous, much more likely to end in Hot War, than was the 40-year of Cold War, which we barely survived.” In a previous interview with the same outlet, Cohen elaborated more extensively: “ the new cold war today, as we talk, includes three fronts. U.S.-Russian fronts, they’re fought with hot war. That’s Syria. That’s the reckless NATO military build-up on Russia’s western boarders, which has resulted in a situation today that ordinarily artillery, not missiles, ordinary artillery, can hit Russia’s second city of Saint Petersburg. Just think about that and the instability. And the third front is Ukraine.” Cohen explains how the political pressures placed on Trump by the ongoing fact-free allegation that he is a Kremlin puppet makes it far more difficult for him to negotiate on these multiple fronts agilely, thus making it much more likely that Trump will choose to advance when he should retreat, hold his ground when he should back down, and generally be locked into patterns of aggression and forward movement rather than the back-and-forth finesse required for safe cold war negotiations with a nuclear superpower.

Pence avoids Olympics encounter with North Korean official as Korean athletes march together (Reuters) - U.S. Vice President Mike Pence made only a brief appearance at a reception marking the start of the Winter Olympics on Friday, avoiding a potentially awkward encounter with the ceremonial leader of North Korea attending the same event. The reception in the mountain resort of Pyeongchang came hours before North and South Korean athletes marched together at the opening ceremony, the culmination of months of work by Seoul, which seeks to use the Olympics to ease tension spurred by North Korea’s pursuit of nuclear weapons. Ahead of the reception, hosted by South Korean President Moon Jae-in, South Korean media said Pence was expected to be seated opposite Kim Yong Nam, North Korea’s nominal head of state, at the 12-seat head table. But South Korea’s presidential Blue House said Pence had a meeting scheduled with U.S. athletes and had only planned to stay briefly to greet other officials. Pence shook hands with other leaders, including close ally Japanese Prime Minister Shinzo Abe, but not Kim Yong Nam, according to a Blue House pool official. Earlier on Friday, Pence said Moon gave his backing to additional measures the United States is planning to try to curb North Korea’s missile and nuclear programs, speaking after paying tribute at a South Korean memorial. At the opening ceremony, Kim Yong Nam and North Korean leader Kim Jong Un’s sister, Kim Yo Jong, waved to North and South Korean athletes who marched under a unified peninsula flag for the first time in a decade. Moon later officially declared the Olympics open, followed by a burst of fireworks. South Korea’s figure skating superstar and Olympic gold medalist Kim Yuna lit the Olympic cauldron. 

Mattis Warns: "If You Threaten Us, It Will Be Your Longest And Worst Day" - Retired Marine general and U.S. Secretary of Defense James Mattis is no stranger to strong talk (and strong actions) but, as The Daily Caller's Justin Caruso reports, 'Mad-dog' put America’s enemies on notice while speaking before the House Armed Services Committee this week...“If you threaten us, it will be your longest and worst day.”“Our first line of effort emphasizes that everything we do must contribute to the lethality of our military,” Secretary Mattis stated. “In war, an enemy will attack a perceived weakness. Therefore, we cannot adopt a single pre set of warfare. If deterrence fails, we must win.”“To defend our way of life, our military will embrace change while holding fast to traditional proven attributes that make us the most formidable force on any battlefield. Those who would threaten America’s experiment in democracy must know if you threaten us, it will be your longest and worst day."“We will prioritize rebuilding readiness while modernizing our existing force,” he continued. “We will also be changing our force’s posture to prioritize readiness for war fighting and major combat, making us strategic predictable for our allies and operationally unpredictable for any adversary.”Of course this is not the first time Mattis has been so quotable, as we noted in the past...“I don’t have concerns. I create them” The quote follows in a long tradition of magnificent Mattis quotes, including his answer to what keeps him awake at night: “Nothing. I Keep Other People Awake At Night.”  And these classics:

• “It’s quite fun to shoot them, you know. It’s a hell of a hoot. It’s fun to shoot some people.”
• “There are some assholes in the world that just need to be shot.”
• “Be polite, be professional, but have a plan to kill everybody you meet.”

Trump tells Israel peace means compromise; U.S. envoy under fire (Reuters) - U.S. President Donald Trump told Israel on Friday that it too would need to make “significant compromises” for peace with the Palestinians, even as they accused one of his Middle East envoys of bogging down diplomacy with what they see as pro-Israel bias. The Palestinians were outraged by Trump’s Dec. 6 recognition of Jerusalem as the Israeli capital, a move overturning decades of U.S. reticence on the city’s status, and say they are looking at additional world powers as potential mediators. In an interview with an Israeli newspaper that was excerpted ahead of its full publication on Sunday, Trump described his Jerusalem move as a “high point” of his first year in office. The language of Trump’s announcement did not rule out a presence in Jerusalem for the Palestinians, who want the eastern part of the city - captured by Israel in a 1967 war and annexed in a move not recognized internationally - as their own capital. “I wanted to make clear that Jerusalem is the capital of Israel. Regarding specific borders, I will grant my support to what the two sides agree between themselves,” he told the conservative Israel Hayom daily, in remarks published in Hebrew. “I think that both sides will have to make significant compromises in order for achieving a peace deal to be possible,” Trump added, without elaborating.

 Pentagon sees potential for cooperation with China in Afghanistan: official | Asia Times: The US Defense Department sees room to work with China in the fight against jihadists in Afghanistan, a top Pentagon official told lawmakers on Tuesday. The comments were made by assistant secretary for Asian and Pacific Affairs Randall Schriver in response to a question from Democratic Senator Chris Coons about whether China could be a constructive partner in the country. “I think there is the possibility that China on the counterterrorism front could be a partner. They certainly have their own concerns about terrorism within China and the potential for linkages between terrorist groups operating elsewhere and for that to seep into China,” Schriver said. “Historically, we have run into some difficulties — what they define as a terrorist, particularly inside China and the way we look at things, there’s an important difference there — but they do have an interest in stability in Afghanistan,” he added. “In our discussions with China, it is an agenda item how we promote our cooperation and how we can ensure that they are a constructive participant in the process that’s underway in Afghanistan,” Schriver said. In his testimony at the hearing, Deputy Secretary of State John Sullivan suggested that investments in the country under China’s Belt and Road Initiative might be a motivating factor for China. With respect to economic development, Sullivan said, China has already invested billions of dollars in a copper mine, but they have yet to be able to start production from it.

Trump’s ‘marching orders’ to the Pentagon: Plan a grand military parade -- President Trump’s vision of soldiers marching and tanks rolling down the boulevards of Washington is moving closer to reality in the Pentagon and White House, where officials say they have begun to plan a grand military parade later this year showcasing the might of America’s armed forces.Trump has long mused publicly and privately about wanting such a parade, but a Jan. 18 meeting between Trump and top generals in the Pentagon’s tank — a room reserved for top-secret discussions — marked a tipping point, according to two officials briefed on the planning.Surrounded by the military’s highest-ranking officials, including Defense Secretary Jim Mattis and Joint Chiefs of Staff Chairman Gen. Joseph F. Dunford Jr., Trump’s seemingly abstract desire for a parade was suddenly heard as a presidential directive, the officials said.“The marching orders were: I want a parade like the one in France,” said a military official who spoke on the condition of anonymity because the planning discussions are supposed to remain confidential. “This is being worked at the highest levels of the military.” Shows of military strength are not typical in the United States — and they don’t come cheap. The cost of shipping Abrams tanks and high-tech hardware to Washington could run in the millions, and military officials said it was unclear how they would pay for it.

Senior US diplomat pitches arms sales in China’s backyard - AP — — The top U.S. diplomat overseeing arms sales said Monday she would be promoting American weaponry at the largest air show in Asia, where China's military footprint and political influence are surging. A large U.S. delegation at the Singapore Air Show is doing "everything we can" to encourage Southeast Asian governments to purchase U.S.-made arms like the F-35 fighter jet, Ambassador Tina Kaidanow told reporters in a telephone briefing. She repeatedly sought to dispel the notion that U.S. influence was in retreat. The Trump administration in December outlined a new national security strategy that placed an emphasis on countering China's rise. The strategy calls for reinforcing the U.S. presence in the Indo-Pacific region, where Beijing and Washington have accused each other of stoking a dangerous military buildup while vying for influence. Washington has been seeking to woo countries like Vietnam, a former foe, with arms sales and transfers at a time when China has bolstered its territorial claims in the South China Sea with extensive construction projects on man-made islands. Kaidanow said the transfer last year of a coast guard cutter to Vietnam, which often contests China's maritime claims, was an "incredible positive." "They will be able to use our equipment for maritime domain awareness, for maritime security ... that's important for them," said Kaidanow, who visited Hanoi last week shortly after U.S. Defense Secretary Jim Mattis, on a visit to Vietnam, announced plans to send an aircraft carrier to the country in a show of solidarity.

It’s a matter of time before Trump and China embrace the TPP -  It is STRANGE that the world’s two largest economies are excluded from a regional free-trade pact. And it is all the more ridiculous that the United States and China, also the world’s largest trading powers, are supposed to be opposed to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which was recently agreed to by 11 Pacific Rim countries. The pact was finalised and signed by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam in Tokyo on January 23. The original deal (then known as the TPP) in 2016 was also signed by the US. China was not part of the framework. The trade deal aims to deepen economic ties between member countries, slashing tariffs and fostering trade. The pact, had it included the US, would have had a collective population of 800 million, almost double that of the EU’s single market and would have represented about 40 per cent of global output and 40 per cent of world trade. With higher standards, the trade deal shows remarkable progress in areas of open markets, level playing fields, environmental protections, workers’ rights and regulatory coherence. It will scrap some 18,000 tariffs. Since the end of the second world war, the US has been the torch-bearer of global free trade. China has only recently become an active proponent since it implemented its opening-up in the early 1980s. US President Donald Trump announced the US pull-out from the TPP soon after taking office in January last year, saying Americans would lose jobs if it joined the multilateral free trade deal. The withdrawal came as a shock to the other members, given that the pact was a landmark pillar of Trump’s predecessor Barack Obama’s “pivot to Asia” policy. 

A day of reckoning for Trump’s signature trade promise -  President Donald Trump traveled around the country in 2016 pledging to reduce the trade deficit by tearing up trade deals and slapping tariffs on trading partners. But that promise is one that Trump, at least in his first year, has failed to keep, Commerce Department figures set for release this morning will show. The Commerce report will include data showing the overall trade deficit for 2017 as well as monthly figures for December. In the last version of the report, which showed total figures through the first 11 months of the year, the deficit was already on track to surpass the level set the year before, totaling $513 billion compared with $460 billion for the same period in 2016. Trump actually did little to try to “fix” the trade deficit in 2017 and arguably made it worse by signing new tax legislation that is expected to add $1.5 trillion to the U.S. budget deficit over the next 10 years. At the same time, the economy has consistently done well throughout Trump’s first year in office, which in turn tends to push the trade gap ever wider because Americans are spending more on goods and services, many of which are imported from abroad. Still, the jury is not completely out after only 12 months because of the number of trade negotiations and investigations still underway. “They’ve got a lot of irons in the fire and some of the things that they are proposing are good ideas” that could help balance trade, said Lori Wallach, director of Public Citizen’s Global Trade Watch. Others are skeptical Trump will be able to significantly cut the trade deficit, even if he slaps tariffs and quotas on aluminum and steel imports and takes aggressive action against China over its industrial policies. “I think it’s unlikely that any of that stuff would really dramatically impact the trade deficit beyond at the margins,” said Clark Packard, trade policy counsel at the R Street Institute, a policy research group that favors free markets and limited government.

Trade Deficit Up 5 Percent in Trump’s First Year, Raising Stakes for Quick NAFTA Replacement Deal that Stops Outsourcing, China Trade Action - Public Citizen -  Contrary to candidate Donald Trump’s pledge to speedily reduce the U.S. trade deficit, in Trump’s first year in office the goods trade deficit is up 5 percent overall from last year, with the China trade deficit larger than last year and a 8 percent increase in the North American Free Trade Agreement deficit. Trump has not exercised his available executive authority to fulfill campaign pledges to limit imports, including those from firms that outsource jobs; label China a currency manipulator; revoke trade agreement waivers on “Buy America” procurement policies that outsource U.S. tax dollars to purchase imports for government use; or limit government contracts to firms that outsource jobs. “Right now, the same trade policy that Trump attacked ferociously and promised to speedily replace is still in place,” said Lori Wallach. “The first-year Trump jump in the U.S. trade deficit adds urgency to the administration actually securing a NAFTA replacement deal that ends NAFTA’s job outsourcing incentives and implementing a new China trade policy.” The overall 2017 U.S. goods trade deficit was $796 billion in 2017, up 5.4 percent or $40.9 billion from 2016. The U.S. trade deficit is now larger than at any time since 2008. This was led by a U.S.-China goods deficit of $375 billion in 2017, up 5.5 percent and $19.5 billion from 2016. The 2017 U.S-NAFTA goods trade deficit was up 7.8 percent or $13.8 billion from 2016.

Lawmakers set a course for GSP renewal -- House lawmakers introduced bipartisan legislation to renew the Generalized System of Preferences on Thursday, putting the lapsed program on a path to be extended for another three years. The bill, which will maintain tariff cuts to imports from developing countries, is expected to be voted under suspension of rules next week, according to industry sources. The path for the bill is still unclear on the Senate side. A GSP renewal would likely only move as an attachment to a larger piece of legislation, such as an expected omnibus spending bill, according to Senate aides and industry sources. That opportunity could come near the end of March if lawmakers end up approving a budget agreement. One Senate aide said the “most likely scenario” is that the Senate uses any House-passed GSP bill as the basis for the Senate legislation instead of introducing a separate measure.Also waiting in the wings is a House-passed bill to renew the Miscellaneous Tariff Bill program, which industry sources hope will move with GSP in the Senate.“The chairman recognizes the importance of this program, which enjoys strong bipartisan support in Congress. He is talking with members on how to best move forward and ensure the program is renewed as soon as possible,” said Julia Lawless, spokeswoman for Senate Finance Chairman Orrin Hatch. The GSP bill introduced Thursday would renew the program retroactively, covering any tariffs paid since it expired at the end of 2017. The bill would also alter the process for obtaining waivers for exceeding quantitative limits for GSP benefits by country and product. The law right now states that the waiver has to be based on whether "like or directly competitive" domestic products were available as far back as 1995. The changes would shorten the look-back period to the three preceding years. “GSP expiration has already cost American companies approximately $100 million, a figure that grows by several million dollars every day,” Dan Anthony, executive director of the Coalition for GSP, said in statement. “A three–year extension will provide American businesses with the certainty needed to continue growing and investing in their workers and communities.”

Americans abroad hit by Trump’s new repatriation tax rules - Expatriate Americans face unexpected tax bills on their overseas business interests under repatriation rules Congress designed to persuade the likes of Apple and Google to bring back to the US profits they had accumulated in lower taxed countries. Tax experts in Washington, Tel Aviv and London told the Financial Times large numbers of their clients would be hit by a clause in the tax reforms signed into law by President Donald Trump in December.  The Tax Cuts and Jobs Act imposes a one-time “deemed repatriation tax” of 15.5 per cent on the profits businesses have accumulated overseas, whether or not they choose to repatriate them as Apple has with its pledge to bring $38bn back to the US.  Any individual US citizen or green card holder owning more than 10 per cent of a “controlled foreign corporation”, or CFC, will be forced to pay this tax within eight years, according to an analysis by Charles Bruce, a former tax counsel at the Senate finance committee who now serves as legal counsel to American Citizens Abroad, an advocacy group in Washington. A CFC is an overseas business in which US shareholders control more than 50 per cent of the voting rights. “The problem is, the way the law is worded treats every American citizen and green card holder in the world [operating through a foreign corporation] the same as Google,”  but “the problem is expats have no political clout”. 

Brad Setser explains how corporate tax policy affects the balance of payments - FT Alphachat -  American corporations are far more internationally-oriented than they used to be. Some of this is a natural extension of the boom in global trade in the past few decades following the collapse of the Communist empire in 1989.The rest, however, is what happens when motivated multinationals find flaws in the tax law. Much of what is considered corporate income from “foreign direct investments” comes from a handful of tiny countries known to be tax havens. America’s corporate tax code experienced some big changes at the end of last year — changes that were partly (but only partly) motivated by the desire to remove some of these distortions. In this week’s episode, Matt Klein talked with Brad Setser, the Steven A Tananbaum senior fellow for international economics at the Council on Foreign Relations and a former deputy assistant secretary for international economic analysis in the US Treasury, about all of these issues. We discussed everything from the implications of “trillions of cash held offshore” to the ways the new rules could, counterintuitively, encourage American companies to invest more abroad than they would want to at home.

Here’s the Trump Tax Loophole Your Accountant Can Blow Wide Open -- If exploiting a tax loophole is as much an art as a science, then the tax planning profession is poised for a creative renaissance. The inspiration is the tax law signed by President Donald Trump in December. The patrons are affluent Americans who can afford advice from the nation’s more ingenious accountants, tax lawyers and financial advisers. And the new medium they’re experimenting with? A 20 percent deduction for so-called pass-through businesses, whose income is taxed on firm-owners’ personal returns. It’s early days, and the Internal Revenue Service has yet to issue guidance on how to interpret the hastily passed law. That hasn’t stopped tax pros from circulating proposals and riffing on each other’s ideas, as the industry seeks to coalesce around strategies that will save their clients money while standing up to scrutiny by the IRS and judges. Some pass-through owners may be instructed to group together their diverse businesses to minimize their tax bills, while others may be told to split pieces off. “I’m sure folks will try to push the edge of the envelope,” said Mark Nash, a tax partner at PricewaterhouseCoopers LLP. “They always do.” Trump and Congressional Republicans have said middle-class Americans and small businesses will be the biggest beneficiaries under the $1.5 trillion tax cut. But the strategies under consideration to take advantage of the 20 percent pass-through deduction show how top earners could ultimately reap the biggest gains. All taxpayers who earn less than $157,500, or $315,000 for a married couple, can now deduct 20 percent of the income they receive via pass-through businesses from their overall taxable income. If taxpayers earn above those amounts and aren’t service professionals, they must meet tests to take the full deduction -- the size of their deduction depends on how much they pay in employee wages or how much they’ve invested in capital like real estate.

There are Ajit Pai “Verizon puppet” jokes that the FCC doesn’t want you to read - The Federal Communications Commission is refusing to release the draft versions of jokes told by Chairman Ajit Pai at a recent FCC dinner, claiming that releasing the drafts would "impede the candid exchange of ideas" within the commission.In December, Pai gave a speech at the annual FCC Chairman's Dinner and played a video that attempts to lampoon critics who accuse Pai of doing the bidding of Verizon, his former employer. The video was shown less than a week before the FCC voted to repeal net neutrality rules, a favorable move for the broadband industry requested by Verizon and other ISPs.The satirical skit shows Pai planning his future ascension to the FCC chairmanship with Verizon executive Kathleen Grillo in 2003, the last year Pai worked as a Verizon lawyer. The video shows Pai and the Verizon executive plotting to install a "Verizon puppet" as FCC chair.Gizmodo subsequently filed a Freedom of Information Act (FoIA) request for "any communications records from within the chairman's office referencing the event or the Verizon executive," the news site wrote yesterday. "Nearly a dozen pages worth of emails were located, including draft versions of the video's script and various edits," Gizmodo wrote. "The agency is refusing to release them, however; it is 'reasonably foreseeable,' it said, that doing so would injure the 'quality of agency decisions.'"

Trump Creates 'National Vetting Center' For Immigrants, Refugees And Travelers -- President Donald Trump is finally making good on his promise to implement "extreme vetting" practices for immigrants, refugees and anybody else trying to enter the US.Late Monday, CNN reported Trump is expected to sign a national security memorandum on Tuesday establishing a "National Vetting Center" that will help coordinate information between various federal agencies. The order will allow the Department of Homeland Security and other agencies involved in the process six months to establish the center, which administration officials said is intended to streamline vetting and improve the flow of information between various federal agencies.  While the agency is expected to focus on immigrants, refugees and visa applicants, it will reportedly also assist in deportation cases.The memorandum Trump is expected to sign on Tuesday will not establish any new authorities or call for any new funding to establish the vetting center, which will be an effort between DHS, the State Department, Justice Department and intelligence agencies, a National Security Council official said.It's unclear how this effort will change the way travelers and immigrants to the US are vetted.While the center's efforts are largely expected to focus on visa applicants, immigrants and others looking to enter the US, the center will also look to streamline vetting of certain individuals who are already in the US, including those subject to deportation proceedings, according to the National Security Council official. In an attempt to fend off a spate of lawsuits from federal appeals courts that have so far stymied most of his immigration-reform efforts, Trump will order the creation of an independent civil liberties panel to oversee the new agency. The center will also be overseen by a board that's expected to include at least one cabinet minister. The National Vetting Center is part of the Trump administration's broader efforts to tighten immigration screenings, following Trump's calls for "extreme vetting" during his presidential campaign.Trump has repeatedly pointed to the need for tighter immigration controls, amplifying his calls in the wake of terrorist attacks -- even when the terrorist in question was born in the US or was radicalized after entering the United States.

Trump’s chief of staff mocks young immigrants as “afraid” and “lazy” as DACA deadline approaches - The anti-immigrant charade playing out in Washington on the eve of the February 8 deadline for a federal budget deal gives a sense of the xenophobic climate that will follow from whatever right-wing agreement the two parties reach on immigration.After a meeting with Republican Senate Majority Leader Mitch McConnell yesterday, Trump’s Chief of Staff John Kelly denounced 1.1 million immigrant youth who did not sign up for Deferred Action for Childhood Arrivals (DACA), calling them “too afraid” or “too lazy to get off their asses.”Kelly made these statements after denouncing the DACA program, which covers roughly 800,000 of the 1.9 million undocumented young people brought to the United States in their childhoods, calling it “unconstitutional.” Trump would not extend the program beyond the March 5 deadline, at which point recipients will face deportation, Kelly said.This deadline is fast approaching, and President Trump indicated yesterday that he was willing to provoke a shutdown to secure far right-wing anti-immigration proposals in any appropriations deal. “I’d love to see a shutdown if we can’t get this stuff taken care of,” Trump said at a roundtable meeting highlighting the dangers of the Salvadoran gang MS-13 in an attempt to portray immigrants as criminals. If “we don’t have a wall, we’re never going to solve this problem,” he said yesterday, referring to MS-13. “I would shut it down over this issue. If we don’t straighten out our border, we don’t have a country.”

Mattis vows 'Dreamers' serving in military will not be deported | TheHill: Defense Secretary James Mattis said Thursday that “Dreamers” serving in the military will not be deported, even if the Deferred Action for Childhood Arrivals (DACA) program expires. “We would always stand by one of our people,” Mattis told reporters at the Pentagon. Matts said the protections apply to those who benefit from the program who are on active duty, in the active reserves, have already signed a contract with the military and are waiting to go to boot camp and veterans who left with an honorable discharge. “They will not be subject to any kind of deportation,” he said. There are two exceptions to the protection, Mattis noted: If someone has committed a serious felony, or if a federal judge has signed a final deportation order. “That would be a judicial action that obviously we obey in the court system. We don’t have veto authority over a court,” Mattis said of the latter. Mattis also said he spoke with Homeland Security Secretary Kirstjen Nielsen earlier in the day to confirm the protections. “We have been through this in great detail before … so it’s really just a confirming call,” he said. 

Exclusive: Trump administration may target immigrants who use food aid, other benefits (Reuters) - The Trump administration is considering making it harder for foreigners living in the United States to get permanent residency if they or their American-born children use public benefits such as food assistance, in a move that could sharply restrict legal immigration. The Department of Homeland Security has drafted rules seen by Reuters that would allow immigration officers to scrutinize a potential immigrant’s use of certain taxpayer-funded public benefits to determine if they could become a public burden. For example, U.S. officials could look at whether the applicant has enrolled a child in government pre-school programs or received subsidies for utility bills or health insurance premiums. The draft rules are a sharp departure from current guidelines, which have been in place since 1999 and specifically bar authorities from considering such non-cash benefits in deciding a person’s eligibility to immigrate to the United States or stay in the country. “Non-citizens who receive public benefits are not self-sufficient and are relying on the U.S. government and state and local entities for resources instead of their families, sponsors or private organizations,” the document states. “An alien’s receipt of public benefits comes at taxpayer expense and availability of public benefits may provide an incentive for aliens to immigrate to the United States.” Receiving such benefits could weigh against an applicant, even if they were for an immigrant’s U.S. citizen children, according to the document. 

Conway freezing out experts, relying on political staff in drug policy office: report | TheHill: White House counselor Kellyanne Conway's work at the administration's opioid abuse policy office has led to policy experts being frozen out of the decision-making process in favor of political appointees, according to a report in Politico. The news site reports that President Trump is expected to propose massive budget cuts this year to the Office of National Drug Control Policy (ONDCP) as it struggles to function without a director or chief of staff, who was fired in December. "It’s fair to say the ONDCP has pretty much been systematically excluded from key decisions about opioids and the strategy moving forward,” a former Trump administration staffer told Politico. The agency's acting director, Rich Baum, has not been invited to Conway's opioid cabinet meetings despite serving in the office for decades, Politico reports, and instead two political appointees without any relevant experience attend on his behalf. One political appointee working on a public education campaign with the office is Andrew Giuliani, the 32-year-old son of former New York City Mayor Rudy Giuliani (R), who the White House told Politico has no background in drug policy. Giuliani, 32, works with the White House Office of Public Liason, a spokesman told The Hill in an email. Republicans in Congress who represent states hit hardest by the opioid crisis say they are unsure as to what Conway's actual role is at the ONDCP. 

Democrats defend FBI as Republican memo shows anti-Russia campaign built on illegal spying ---Democratic Party and intelligence officials rushed to defend the “integrity” of the FBI over the weekend, following Friday’s release of a memo by Republican Congressman Devin Nunes concerning FBI spying on Trump associates. The memo shows that the Obama administration relied on politically biased information to obtain a Foreign Intelligence Surveillance Act (FISA) court wiretap of former Trump campaign adviser Carter Page just weeks before the 2016 election.The memo details illegal conduct by a ruling class that governs by conspiracy. In an escalation of infighting between two equally reactionary sections of the ruling class, one section is letting the public in on a dirty secret.The response from Democrats expressed fear that the memo will undermine the credibility of the fraudulent investigation by Special Counsel Robert Mueller into Trump’s alleged ties to Russia.The entirety of Sunday’s press coverage was turned over to this single issue, with each speaker talking as though he or she was reading from a script. Appearing on ABC’s “This Week with George Stephanopoulos,” California Democrat Adam Schiff called the report “misleading” and “one-sided” and expressed fear that the memo would “undermine the FBI, discredit the FBI [and] discredit the Mueller investigation.”Former Obama administration Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland said on “Face the Nation,” “When we fight with each other, when we question our institutions, that is a great day for Vladimir Putin.” “The release of this memo did not have to happen,” added former Acting CIA Director Michael Morrell on the same program. The release “undermines the credibility of the FBI in the public’s eyes,” he said.

The Nunes-Ryan Civil Liberties Sham - Marcy Wheeler - For the last three weeks, privacy advocates have been buffeted by two political whirlwinds. First, the reauthorization of the FISA Amendments Act two weeks ago, authored by House Intelligence Committee Chairman Devin Nunes. And then today, the release of a partisan memo, authored by Nunes’ staffers, purporting to show FBI and Department of Justice abuses of the individual Foreign Intelligence Surveillance Act application process.   Because Nunes and others ― up to and including House Speaker Paul Ryan ― claimed to be motivated by a concern about civil liberties, it was generally assumed the privacy community would join the clamor. But those of us who’ve been through several surveillance fights with these posers know the reality is far more complex. Ultimately, two principles are at issue: the rule of law and privacy. In both instances, Nunes and Ryan are on the wrong side of the issue. The FISA Amendments Reauthorization Act extended a key part of FISA, called Section 702, that lets the government ask domestic telecommunications and tech providers for help spying on foreigners overseas. But that word “target” is misleading, because under the program, the government obtains the American side of any conversation with a targeted individual. The FBI can obtain that information in raw form and routinely queries the data when it gets leads to find out if Americans have been speaking to suspicious foreigners. That amounts to warrantless access of Americans’ communications, and exposes certain groups, like Chinese-Americans and Muslims, to far more scrutiny than others.  Also under Section 702, the government obtains certain entirely domestic communications that have obscured their location. While it has to purge most of those communications, the NSA can keep any that it shows are evidence of eight enumerated crimes. Again, this is warrantless surveillance of Americans, done in the guise of foreign intelligence collection.

It’s Time to Audit America’s Secrets - Eric Posner - The battle over the disclosure of the memo on the Russia investigation prepared by Republican Rep. Devin Nunes has been analyzed mostly in narrow partisan terms, but it has much larger significance for the health of American democracy. A key weakness of the U.S. democratic system, and indeed all democracies, is the paradox of secrecy: voters need to know what the government does in order to evaluate it but the government needs secrecy to effectively serve the public. As parties have polarized, the tensions inherent to that paradox have become increasingly impossible to ignore. These tensions now demand some attempt at a resolution, even if any such answer will inevitably demand sacrifices from current stakeholders. The most plausible solution may be one that nobody in the political establishment has yet seriously contemplated — the creation of a system of public audits for government secrets.  Everyone knows that secrecy is a problem for democracy because voters cannot easily evaluate the government if the government acts in secret. This leads to endless calls for greater transparency, with the obligatory invocation of Supreme Court Justice Louis Brandeis’s memorable line that “sunlight is said to be the best of disinfectants.” What this trite sentiment overlooks is that secrecy is also essential to democracy. No democracy can function unless the government is permitted to act in secret.  And now in the Trump administration, we see a conflict between those who argue that the confidentiality of FBI investigations must be respected so that the FBI can rely on secret sources and those who argue that if the FBI is given confidentiality, it can investigate in a politically biased way. How do we resolve this dilemma? One popular solution is to kick the can to a government official who we can supposedly trust, such as a judge or inspector general. This is a kind of compromise between the demands of democracy and secrecy — the official is not elected, and so insulated from political pressures, but for that reason can be trusted to act fairly. But as we have just seen, this solution is not a complete one. If you don’t trust an IRS agent, why would you trust an IRS inspector general?

Famously agreeable FISA court reportedly turned down FBI request to monitor Trump officials   -- FBI Director James Comey was personally aware of reports from a "credible" Western former intelligence agent about Russia's alleged "cultivating, supporting, and assisting" of President-elect Donald Trump and his campaign, The Guardian reported late Tuesday, because Sen. John McCain (R-Ariz.) personally handed them to Comey in a Dec. 9 meeting, according to "a source aware of the meeting." The Russia-Trump dossier began as opposition research during the campaign, but "its author was sufficiently alarmed by what he discovered to send a copy to the FBI," The Guardian says, and McCain, who was informed about the allegations from "an intermediary from a Western allied state," then "dispatched an emissary overseas to meet the source," whom he was "sufficiently impressed" with to feel obliged to pass the allegations on to Comey. But FBI agents were already concerned enough about ties between Trump's inner circle and Russia that they had sought court approval to monitor campaign officials, The Guardian reports:The Guardian has learned that the FBI applied for a warrant from the foreign intelligence surveillance (FISA) court over the summer in order to monitor four members of the Trump team suspected of irregular contacts with Russian officials. The FISA court turned down the application, asking FBI counter-intelligence investigators to narrow its focus. According to one report, the FBI was finally granted a warrant in October, but that has not been confirmed, and it is not clear whether any warrant led to a full investigation. [The Guardian]  The Foreign Intelligence Surveillance Act (FISA) court is famously compliant with surveillance requests, declining just 11 of the more than 33,900 it had received in 33 years as of 2013 — or an approval rate of 99.97 percent (though that may be a slightly misleading number) — and no requests were denied in 2014 and 2015, according to the Electronic Privacy Information Center. Comey, when pressed by senators on Tuesday, would not say if the FBI is still investigating any ties between Russia and the president-elect.

Panetta on memo: ‘FISA judges are no pushovers’ | TheHill: Former CIA Director Leon Panetta on Sunday defended the judges of a clandestine surveillance court after a newly released GOP memo from the House Intelligence Committee detailed allegations of Justice Department authorities abusing a U.S. surveillance program during the 2016 campaign. "The [Foreign Intelligence Surveillance Act] FISA judges are no pushovers. They are responsible individuals in my experience who carefully review all the evidence that is presented to them," Panetta said on "Fox News Sunday with Chris Wallace." The controversial document, drafted by staff for Intelligence Committee Chairman Devin Nunes (R-Calif.), lays out a series of allegations that it says "raise concerns" about the Justice Department and FBI's dealings with the Foreign Intelligence Surveillance Court when seeking a warrant to surveil Trump campaign aide Carter Page.“The committee has discovered serious violations of the public trust, and the American people have a right to know when officials in crucial institutions are abusing their authority for political purposes," Nunes said in a statement. The memo claims then-Deputy FBI Director Andrew McCabe told the committee in a December testimony that had it not been for the "Steele dossier," opposition research funded in part by the Democratic National Committee and Hillary Clinton's campaign, the warrant on Page would not have been granted.Democrats, however, contest whether McCabe made such remarks.Panetta pointed out that such warrants rarely hinge on one piece of evidence.  "And it isn't just a little bit of evidence, these applications to FISA are sometimes 50 or 60 pages long, highly classified information and a great deal of support investigation in order to justify those warrants," Panetta continued.

Kasich: Memo release does 'disservice to our country' | TheHill -- Republican Gov. John Kasich (Ohio) on Friday condemned the release of a House Intelligence Committee memo which alleges the Justice Department abused its powers to hurt President Trump's campaign.Kasich called the release of the memo a “disservice to our country,” and that holding the FBI and Justice Department accountable should be a bipartisan responsibility, not one for “political gain.”“While we must maintain oversight of these institutions, it has to be done in a bipartisan manner,” Kasich said in the statement. “The manner in which this was done was wrong and does a disservice to our country.”The manner in which this was done was wrong and does a disservice to our country. My full statement on the release of the memo: pic.twitter.com/AuwIpLDaBz— John Kasich (@JohnKasich) February 2, 2018The House Intelligence Committee on Friday released the Republican-drafted memo after President Trump declassified it without redactions despite strong objections from Democrats and top Justice Department and intelligence officials. The memo alleges anti-Trump bias in the FBI and Justice Department, accusing officials of improperly using opposition research to obtain a surveillance warrant on Trump campaign aide Carter Page.

Ex-GOP lawmaker slams Nunes in op-ed: He's a 'partisan hack' | TheHill: Former Rep. Joe Walsh (R-Ill.) is slamming House Intelligence Committee Chairman Devin Nunes (R-Calif.) as a “partisan hack” and accusing him of acting like “the chairman of the president’s reelection campaign” by pushing release a classified intelligence memo. “The Nunes I knew was a purely partisan animal,” Walsh wrote in an op-ed for The Washington Post. “When it comes to exercising good judgment and discharging his duties in service of the Constitution, he’s just not up to the task.” Walsh, a former Tea Party congressman, said he often clashed with Nunes during his time in Congress. He said Nunes labeled Tea Party members as “obstinate obstructionists on many occasions, trying to bend us to leadership’s will on votes that went against our principles.” “With Nunes, I found it was all about politics, almost never about policy,” Walsh wrote. “He wants to please whomever he sees as the person or people running the show. Back then, it was House GOP leadership. Now it’s President Trump.” Walsh blasted Nunes for his “careless and dangerous rush” to release the memo, which House Republicans say contains evidence of bias against Trump in the ongoing investigation into Russian interference in the 2016 election, as well as allegations that the Justice Department abused its powers in the surveillance of Trump campaign staffer Carter Page. “Oversight for security threats to this country is too great a responsibility to let committee business devolve into finger-pointing and score-settling along party lines, but that’s exactly where the level of discourse has gone under Nunes’s ‘leadership,’” Walsh wrote. “He’s not searching for truth, he’s running interference for the White House, abdicating his role as a member of a coequal branch of government, dragging his fellow committee members down with him and exposing House leadership as ineffectual and foolish.” 

Rod Rosenstein Reportedly Threatened Nunes, House Intel Members With Subpoena: Report - Deputy Attorney General Rod Rosenstein threatened to subpoena the "texts and messages" of House Intel Committee Chairman Devin Nunes and other members of Congress, according to legal analyst Greg Jarrett.I can tell you a congressional source tells me that Rod Rosenstein in a meeting three weeks ago threatened Chairman Nunes and members of Congress he was going to subpoena their texts and messages because he was tired of dealing with the intel committee. That’s threats and intimidation and retaliation. -Greg JarrettWatch:Rosenstein was named in the four-page FISA memo as both signing off on one or more FISA applications on behalf of the DOJ, and working closely with then-Associate Deputy Attorney General Bruce Ohr - who was demoted for failing to reveal his ties to the author of the infamous 35-page "Trump-Russia" dossier. Moments after the announcement that the memo was declassified, Trump spoke to reporters and was asked if the memo makes it more likely that he will fire Deputy AG Rod Rosenstein, to which Trump responded:When asked if the memo makes it more likely he will fire Deputy Attorney General Rod Rosenstein, Trump responds: "You figure that one out." pic.twitter.com/8eyAtm8uKF— BuzzFeed News (@BuzzFeedNews) February 2, 2018

Memo Co-Author Trey Gowdy Says It "Won't Have Any Impact" On Mueller's Russia Probe - Accusations that the firing of Special Counsel Bob Mueller would provoke a "constitutional crisis" have percolated since the release of the long-anticipated "FISA memo" two days ago, as at least one House Republican has said he will push for a probe into "abuses" and possible"treason" by several senior DOJ officials. But increasingly, some of the White House's most steadfast political allies have played down the memo's impact, with Chief of Staff John Kelly saying he thought House Intel Committee Chairman Devin Nunes' claims were overblown. And now, South Carolina Rep. Trey Gowdy - who has presumably been freed to speak his mind after announcing his retirement from Congress - is saying he doesn't expect the memo to impact the Mueller probe. Gowdy, the chairman of the House Oversight Committee, was asked about Trump's claim that the memo "totally vindicates" him in the Russia probe. As Trump's political allies so often must do, Gowdy tried to sanitize the leader of his party's comments by saying Trump was probably just "frustrated" by House Intel Committee ranking member Adam Schiff "prejudging" the investigation. Asked to clarify whether he believes the memo will have an impact on the Russia probe, Gowdy probably surprised his interviewer when he answered "not to me it doesn't".As Gowdy explains, the "Trump dossier" has nothing to do with Don Jr.'s meeting with a Russian lawyer at Trump Tower, it doesn't apply to a certain email sent by Cambridge Analytica to Wikileaks, and it has nothing to do with George Papadopoulos. "There is a Russia investigation without a dossier… the dossier has nothing to do with the meeting at Trump Tower. The dossier has nothing to do with an email sent by Cambridge Analytica. The dossier really has nothing to do with George Papadopoulos' meeting in Great Britain. It also doesn't have anything to do with obstruction of justice...so there's going to be a Russia probe even without the dossier."

House committee votes to release Democrats' Russia memo - (Reuters) - A U.S. House of Representatives committee voted unanimously on Monday to approve the release of a classified document that Democrats say will rebut a contentious Republican memo alleging FBI bias against President Donald Trump. The vote will send the 10-page Democratic memo to the White House as soon as Monday night, giving Trump until Friday to decide whether to allow its release. If he declines, after approving the release of the Republican memo despite strong objections by the Federal Bureau of Investigation, it could set up an angry dispute pitting the White House and many of Trump’s fellow Republicans in Congress against Democrats, law enforcement and intelligence agencies. A week ago, Republicans, who control a majority on the committee, joined together to block the release of the Democrats’ memo and approve the Republican memo, despite unanimous Democratic opposition. But Republican committee members said on Monday they were comfortable with releasing the Democratic document now that it had been reviewed by House members. The Republican memo accused senior FBI and Justice Department officials of not revealing that portions of a dossier used in seeking a secret Foreign Intelligence Surveillance Court warrant to eavesdrop on former Trump campaign aide Carter Page were partly paid for by Democrats. Trump allowed its release to the public last Friday. Democrats said the Republican memo was intended to undermine Special Counsel Robert Mueller’s criminal probe into possible collusion between Moscow and the Trump campaign, and that Trump might try to use it to justify firing Mueller or Rod Rosenstein, the No. 2 official at Justice, who signed off on at least one warrant application for Page. The dispute, an extraordinary breach between the White House and law enforcement, has also deepened partisan rancor over congressional investigations of Russia and the 2016 U.S. election, prompting concern about lawmakers’ ability to produce unbiased reports.

The Memo: Nunes ‘bombshell’ fails to move debate - The GOP memo alleging FBI and Department of Justice (DOJ) misdeeds, emanating from House Intelligence Committee Chairman Devin Nunes (R-Calif.), has not proved to be the game-changer that some of President Trump’s most ardent supporters had hoped for.Even before the memo was released last Friday, media reports suggested that even some figures within the White House considered the document underwhelming. That judgment seems to have been borne out, as the memo has begun to fade from the headlines with the political landscape not fundamentally altered.“I don’t think it is the bombshell it was billed as being,” said Joyce White Vance, a former United States attorney for the Northern District of Alabama. Other experts in the field argue that the memo has actually helped the FBI and DOJ.  For example, it stated that the initial impetus for opening a counterintelligence investigation into the Trump campaign and Russia was not the disputed dossier prepared by a former British spy, Christopher Steele.Steele was employed by Fusion GPS, which was in turn being paid in part by the Democratic National Committee and Hillary Clinton’s campaign. But the probe had been opened because of separate suggestions of Russian meddling emanating from former Trump campaign adviser George Papadopoulos, according to the Nunes memo, though Steele approached the FBI around the same time. The memo “helps the FBI and the DOJ rather than advance the conspiracy theory that is being advanced by Nunes,” said Jimmy Gurulé, a former assistant attorney general who served in senior law enforcement positions under Republican and Democratic presidents.

Russiagate Narrative Undercut by Nunes Memo -- The so-called Nunes Memo prepared for the Republican majority on the House of Representatives Intelligence Committee – even if possibly overblown – provides strong reason to believe that there was unwarranted and quite possibly illegal FBI surveillance of a former Trump staffer over completely legal Russian business dealings. Meanwhile, regarding the key allegations of election meddling at the heart of Russiagate, the nine month-long investigation of Special Counsel Robert Mueller into Moscow’s possible interference has so far only shown that it was Israel rather than Russia that meddled with the campaign by meeting with Trump associates and seeking favors. Notably missing is any evidence that the Russian government did anything beyond the usual probing that intelligence agencies worldwide do when confronted by important developments in another country that is either a competitor or adversary. An aspect of the Republican memo that has been scarcely commented upon in the avalanche of news reporting centered on the story is how the mainstream media is continuing to exercise a dangerous obsession with Russia and is insisting that the Russiagate inquiry should continue even more aggressively in spite of the concerns that the entire process has been politicized. There is nothing in the memo itself that indicates that Moscow actually tried to recruit any Trump associate as an agent or interfere in the U.S. election. The raison d’etre for both the Congressional and Special Counsel Robert Mueller investigations therefore appears to be lacking. It might eventually emerge that Russia did little or even nothing beyond the usual probing and nosing around that intelligence agencies routinely do. President Donald Trump, who had campaigned on a sensible pledge to seek better relations with Moscow, has provided only feeble resistance to the onslaught of the media and political class. He has recently allowed the Justice Department and Treasury to punish Russia’s two major news outlets operating in the United States, RT America and Sputnik. They both have been forced to register as foreign agents, even though no other non-American news service operating in the United States has been compelled to do the same, while new allegations about perfidious Moscow surface weekly.

Frank Rich: GOP Has Become the Anti-Law Enforcement Party - In the fallout from the Nunes memo (and amid promises of more Nunes memos), the GOP finds itself in opposition to federal institutions of both law enforcement and national security. Isn’t this a radical shift for the party that once presented itself as the champion of law and order and portrayed the Democrats as soft on crime? It is indeed stunning that the party which routinely trashed the Democrats for championing “criminals’ rights” (a.k.a. civil rights) is now, at its highest levels, vilifying the FBI and the Department of Justice. Of course, the immediate goal in this anti–law enforcement jihad, led by the White House and abetted by congressional stooges like Devin Nunes and Paul Ryan, is to discredit the Mueller investigation before it nails Donald Trump. But to say this cultural shift is a sudden metamorphosis for the GOP, brought on by Trump’s supposed hijacking of the party, is revisionist history. Trump pushed an open door. His assault on Justice and the FBI is merely heightening and exploiting the dangerous anti-government toxins that GOP leaders humored in the Republican base well before he arrived — much as his administration’s overt white supremacism and xenophobia is the apotheosis of a racist Republican strain dating back to Barry Goldwater’s opposition to the Civil Rights Act of 1964 and Richard Nixon’s Southern Strategy.Let’s not forget that in the 1990s the GOP and its rabid talk-radio auxiliary winked, nodded, and at times endorsed a gun-crazy right-wing militia movement that demonized Justice Department law-enforcement agents as “jack-booted thugs.” (That alt-right movement had more than a little in common with the “fine people” who congregated at Charlottesville.) Newt Gingrich, then House Speaker, went so far as to appoint one of his caucus’s most reckless anti-government radicals, Representative Helen Chenoweth of Idaho, to a congressional gun task force; Chenoweth had floated a bill that would require armed federal agents to seek the permission of local sheriffs to enter their counties when pursuing law enforcement. The GOP retreated from tacit tolerance of the crazies in their ranks only after Timothy McVeigh’s bombing of a federal building in Oklahoma City in 1995, leaving 168 dead. But only temporarily.

Trump blocks release of Democratic Russia memo – President Donald Trump blocked the public release Friday of a classified House Democratic memo written in response to Republican claims that the FBI inappropriately spied on a Trump campaign adviser in 2016, prompting furious Democratic charges of hypocrisy and political exploitation of intelligence secrets. The House of Representatives can still vote to release the memo despite Trump’s action, which could set the stage for a partisan brawl in the House next week over the document’s fate. The dueling Republican and Democratic memos are part of a larger fight over the legitimacy of special counsel Robert Mueller’s probe into Russian election meddling. Many Democrats consider the fight a Republican diversion meant to distract from the underlying question of whether the Kremlin infiltrated the Trump campaign. Democrats on the House Intelligence Committee issued their memo to rebut an earlier House Republican document which accused the FBI of misleading a federal judge to obtain an October 2016 warrant to spy on Trump campaign foreign policy adviser Carter Page. Trump approved the release of the GOP memo, despite the FBI’s public objection, and insisted that it “totally vindicates” him — even though the Republican document only speaks to one component of the FBI’s sprawling probe into Russian election meddling. Democrats were furious at Trump’s decision, which they called proof that Republicans are exploiting classified information for political ends. A Friday night statement from White House Counsel Don McGahn said that Trump was “inclined” but “unable” to declassify the 10-page memo because it “contains numerous properly classified and especially sensitive passages.” The statement was accompanied by a letter from FBI Director Christopher Wray and Deputy Attorney General Rod Rosenstein that identifies “information for which national security or law enforcement concerns are especially significant.”

 Robert Mueller Makes Unexpected Shift: Trump’s Suspicious Michigan/Wisconsin Wins -- Congressional Republicans have been trying their best to undermine Robert Mueller for weeks. Until recently, it was just a few of them going after Mueller, but now that he’s investigating the RNC for their potential involvement in the Trump-Russia scandal, more Republicans have turned on him. Hmmm…wonder why? Well, it just got worse.  Apparently, the Russians targeted voters in Wisconsin and Michigan by feeding them fake political news to influence their votes in the presidential election. These trolls had knowledge that allowed them to specifically target voters in specific areas using information that they could not have had on their own. They clearly got the data they used for targeting voters from somewhere. New York Magazine is now reporting that Robert Mueller is looking into the Republican National Committee to see if they provided this voter data to the Russians. Mueller’s team is trying to determine if members of the Trump campaign and Republican National Committee, who worked together on the digital arm of Trump’s campaign, provided assistance to Russian trolls attempting to influence voters. It’s the latest scare for Trump son-in-law Jared Kushner, who managed the digital campaign and has already come under scrutiny by the special counsel for his foreign contacts

George W. Bush: Russia meddled in election - Former President George W. Bush on Thursday said that there is “clear evidence” of Russian meddling in the 2016 presidential election. Bush made the comments while speaking at a summit in Abu Dhabi, according to The Associated Press, at a time when tensions are rising between President Trump and U.S. intelligence agencies over the investigation into Russian meddling. “There’s pretty clear evidence that the Russians meddled,” Bush said, the news service reported. “Whether they affected the outcome is another question.” “It’s problematic that a foreign nation is involved in our election system,” he added. “Our democracy is only as good as people trust the results.” U.S. intelligence agencies concluded last year that Russia interfered in the election, and evidence that Russian operatives used social media platforms to influence voter opinions continues to build.

Trump Jr. Escalates Twitter War Against Probe and Father’s Foes -- Donald Trump Jr. is tweeting like a man with nothing to fear from Special Counsel Robert Mueller.Never shy about defending his father on Twitter, the younger Trump dialed up his outrage starting Jan. 19. That’s the day after Republicans on the House Intelligence Committee drafted a memo alleging misconduct by the FBI and Justice Department in the Russia probe. Since then, he has tweeted or retweeted more than 200 times about the GOP memo, the Democratic response, warrants issued by secret intelligence courts, the FBI and Mueller’s Russia investigation.His statements channel the sentiments of President Donald Trump’s most fervent supporters -- and possibly the president himself -- who believe the Russia investigation has been engineered by Democrats to undermine his presidency. In tweets and on television, Trump Jr. has compared the Russia inquiry to McCarthyism, the Salem witch trials and “the stuff you read about from banana republics.”He called House Republicans’ release of the memo after his father declassified it “a little bit of sweet revenge” for the Trump family, in a Feb. 3 appearance on Fox News.  Trump Jr., who declined to comment, is himself a central figure in the Russia saga. The special counsel is investigating a meeting he held with Russians at Trump Tower in June 2016, as well as a misleading statement the White House issued a year later in defense of that meeting. House and Senate lawmakers on committees conducting their own Russia investigations want Trump Jr. to testify in public.

Steele Goes Dark; Ditches London Court Appearance Following Criminal Referral By US Senate -- Former British MI-6 intelligence officer Christopher Steele was a no-show on Monday at a London courthouse, reports Fox News. Steele was expected for a long-requested deposition in a multi-million dollar civil case brought against Buzzfeed, which published a salacious and unverified "Trump-Russia" dossier. Steele may have skipped out over concerns that he would be asked questions about his contacts with various media outlets in connection with at least two dossiers he had a hand in assembling and disseminating - for which he stands accused by Senators Chuck Grassley (R-IA) and Lindsey Graham (R-SC) of misleading the FBI about his contacts with journalists at various news outlets during the 2016 election. "There is substantial evidence suggesting that Mr. Steele materially misled the FBI about a key aspect of his dossier efforts, one which bears on his credibility," reads the unredacted document that refers Steele for criminal prosecution in the US.  It therefore stands to reason that Steele wanted to avoid any uncomfortable questions which might apply to ongoing investigations in US House and Senate. Separately, records obtained and reviewed by Fox News from related civil litigation in Florida reveal that Steele maintains that even showing up for a deposition would “implicate state secrets in London.”

EXCLUSIVE: Adam Schiff sent his staff to try and collect ‘classified materials for the FBI’ after Russian pranksters told him Putin has NAKED blackmail pictures of Trump -  The ranking Democrat on the House Intelligence Committee was the victim of a prank phone call by Russian comedians who offered to give him 'compromising' dirt on Donald Trump – including nude photos of the president and a Russian reality show star.  DailyMail.com can disclose that after the prank, his staff engaged in correspondence with what they thought was a Ukrainian politician to try to obtain the 'classified' material promised on the call. On an audio recording of the prank call posted online, Adam Schiff can be heard discussing the committee's Russia investigation and increasingly bizarre allegations about Trump with a man who claimed to be Andriy Parubiy, the chairman of the Ukrainian Parliament. The call, made a year ago, was actually from two Russian comedians nicknamed 'Vovan' and 'Lexus' who have become notorious for their phony calls to high-ranking American officials and celebrities, including UN Ambassador Nikki Haley and Elton John. Its existence was first reported by The Atlantic but not how a staff member working for the minority on the House Intelligence Committee pursued the information after the call.Schiff's office said the congressman suspected the call was 'bogus' from the beginning and reported it to authorities afterward. But in a recording of the eight minute conversation, Schiff appeared to take the call seriously – or at least played along convincingly - and emails from the Democrat's staff to the fake politician afterwards said he had found it 'productive'.

Schiff Pranked By Russians Offering Naked Pics Of Trump With Moscow "Special Service" Escort --Ranking House Intel Committee Democrat Adam Schiff appears to have fallen for a prank by famous Russian comedy duo "Vovan" and "Lexus," posing as a Ukrainian politician who claimed to have photos of President Trump having sex with Russian model Olga Buzova after the 2013 Miss Universe pageant in Moscow. In an audio recording of the April 10, 2017 phone call, Schiff can be heard discussing the Russia investigation with Vovan who was impersonating Andriy Parubiy - chairman of the Ukrainian Parliament."I would caution that our Russian friends may be listening to the conversation so I wouldn't share anything over the phone that you wouldn't want them to hear," said Schiff at the beginning of the call. Undeterred, "Parubiy" continued:  “In November 2013, Mr. Trump visited Moscow, he visited competition Miss Universe, and there he met with Russian journalist and celebrity Ksenia Sobchak,” Vovan said in a heavily accented English, going on to explain that in addition to having ties to Putin, Sobchak is “also known as a person who provides girls for escort for oligarchs. And she met with Trump and she brought him one Russian girl, celebrity Olga Buzova.” Schiff asked for clarification, and Parubiy kicked it up a notch, telling Schiff that Sobchak is a “special agent of Russian secret service.”  Buzova “got compromising materials on Trump after their short relations,” Parubiy said. “There were pictures of naked Trump.”Schiff then asks “And so Putin was made aware of the availability of the compromising material?” to which Vovan replied "Yes, of course," adding  “all those compromising materials will never be released if Trump will cancel all Russian sanctions.” The biggest bombshell: He had obtained a recording of Buzova and Sobchak talking about the kompromat while the two were visiting Ukraine. He told Schiff, “We are ready to provide [those materials] to FBI.”Schiff thanked the prankster for the call, after which his office engaged in correspondence to arrange for the transfer of the "classified" material.  Listen below:

Uranium One informant makes Clinton allegations to Congress | TheHill: An FBI informant connected to the Uranium One controversy told three congressional committees in a written statement that Moscow routed millions of dollars to America with the expectation it would be used to benefit Bill Clinton William's charitable efforts while Secretary of State Hillary Clinton Hillary quarterbacked a “reset” in U.S.-Russian relations. The informant, Douglas Campbell, said in the statement obtained by The Hill that he was told by Russian nuclear executives that Moscow had hired the American lobbying firm APCO Worldwide specifically because it was in position to influence the Obama administration, and more specifically Hillary Clinton. Democrats have cast doubt on Campbell’s credibility, setting the stage for a battle with Republicans over his testimony. Campbell added in the testimony that Russian nuclear officials “told me at various times that they expected APCO to apply a portion of the $3 million annual lobbying fee it was receiving from the Russians to provide in-kind support for the Clintons' Global Initiative." “The contract called for four payments of $750,000 over twelve months. APCO was expected to give assistance free of charge to the Clinton Global Initiative as part of their effort to create a favorable environment to ensure the Obama administration made affirmative decisions on everything from Uranium One to the U.S.-Russia Civilian Nuclear Cooperation agreement." APCO officials told The Hill that its support for the Clinton Global Initiative and its work with Russia were not connected in any way, and in fact involved different divisions of the firm. They added their lobbying for Russia did not involve Uranium One but rather focused on regulatory issues aimed at helping Russia better compete for nuclear fuel contracts inside the United States.

Has Trump Killed More Regulations Than Any Other President? -- "We have eliminated more regulations in our first year than any administration in history," Trump said in his first State of the Union address (Climatewire, Jan. 31). That's not necessarily true. But in some ways, it's not necessarily false. While Trump took credit for a number of economic gains and claimed victory in bureaucratic battles, officials from prior administrations said the heavy lifting is just beginning. Year one marked the easy, achievable goals. Years two, three and four are about making them stick. "If the claim is that he slowed the pace of new regulations, yes, I think that's something that is true. But I do think the hard work is ahead for actually changing, modifying or eliminating existing regulations," said Susan Dudley, who ran the Office of Information and Regulatory Affairs under President George W. Bush. "I think this administration has been more focused on removing regulations than any president except possibly for [Ronald] Reagan. So whether they're effective at that still takes time." Trump is often hyperbolic. On energy, that trait manifests itself when he declares major policy squabbles squelched before they're truly done. Simply put: There's a long, legal process for undoing a regulation, let alone issuing a new one. Rather, Trump has mostly halted regulations, dashed those that were left unfinished by President Obama and reversed executive orders. Energy and environmental agencies have been the administration's prime targets for regulatory removal, according to the regulatory agenda filed this fall. The Interior and Agriculture departments saw the third-most deregulatory actions—43—in Trump's first year, followed by U.S. EPA at 41, according to a study by George Washington University's Regulatory Studies Center, which Dudley leads. The Transportation Department topped the list at 83—which includes some provisions to streamline environmental reviews—followed by the Department of Health and Human Services with 54. But starting a rollback is not the same as finishing one.

Pink slips coming for big chunk of Dodd-Frank agency staff - A little-noticed agency tucked inside the Treasury Department is bracing for big cuts. The Office of Financial Research, an independent bureau charged with supporting the Financial Stability Oversight Council and conducting research about systemic risk, is beginning a significant round of layoffs, according to internal documents obtained by American Banker. Agency staff have been asked to attend one of several two-hour sessions this week with an official from the Office of Personnel Management “to discuss RIF process at OFR,” according to an internal meeting notice sent to employees. (RIF stands for “reduction in force,” more generally known as layoffs.) The plan has been in the works for some time. President Trump's budget proposal last May called for a reduction of up to 84 full-time workers — roughly 38% of its total staff — and a 25% budget cut. The changes come despite the fact that the agency’s budget comes from assessments on the largest banks, not federal tax dollars. An announcement about upcoming cuts was made to employees late last year.  Another internal message, obtained by American Banker, was circulated to employees several weeks ago with informational links to Office of Personnel Management sites describing RIF procedures and severance. It also contained links on retirement and early retirement as well as voluntary separation incentive payments. Layoffs are expected to be finalized later this year.

Five regulators release proposal to alter swaps requirements   Five federal agencies on Monday issued a proposal that would harmonize a 2015 rule establishing swap margin requirements with a later policy that imposes restrictions on certain qualified financial contracts. The proposal — released by the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., Farm Credit Administration and Federal Housing Finance Agency — would exempt certain legacy swaps from the 2015 margin rules if those swaps have changed in order to comply with QFC rules, which were finalized in 2017. The Federal Reserve Board was among five agencies issuing a proposal Monday to harmonize swaps rules. Bloomberg News The agencies are also proposing to harmonize the definitions for “master netting agreements” between the two rules. In swap arrangements, netting is generally meant to simplify the amount two parties pay and receive in a deal. The plan would also ensure that netting agreements covered by the swap margin rules do not fall outside the definition of “Eligible Master Netting Agreement” based only on their complying with the QFC rules. The comment period for the new proposal will be open for 60 days.

FSOC will float proposal before revamping SIFI process: Mnuchin — Treasury Secretary Steven Mnuchin on Tuesday provided new details on Financial Stability Oversight Council efforts to revise its nonbank designation process.  Mnuchin, testifying before the House Financial Services Committee, indicated that the FSOC will issue a proposal on criteria for designating firms before enforcing a new methodology. He also provided comments about steps to reform the Volcker Rule, revealed work on a report dealing with the Orderly Liquidation Authority and fielded questions on housing finance reform.  The Treasury Department released a report last year with recommendations on reforming how the FSOC determines that a nonbank firm is a "systemically important financial institution," which must then follow banklike supervisory requirements.   “We’ll now be working with the [House] committee on suggestions in terms of changing the criteria” for SIFI designations, Mnuchin, who chairs the council, said during the hearing. “I believe we will have to put out a notice of proposed rulemaking before we enforce it but this is something we’re very focused on for this year.”   Rep. Blaine Luetkemeyer, R-Mo., has proposed legislation under which the FSOC would adopt the same risk-scoring system that the Federal Reserve Board uses to assign ratings to systemically important banks. Currently, any bank above $50 billion in assets is considered "systemically important," but the bill would substitute the Fed’s risk-scoring system for that numeric threshold, which many groups argue unfairly captures smaller banks that pose less risk than the megabanks. “We don’t need to reinvent the wheel if the Fed is already doing the analytical work,” Luetkemeyer told Mnuchin. “It would seem to be a very helpful tool for FSOC to be able to utilize that.”  Mnuchin responded that he has not seen the Fed’s risk scoring system “but we will look into that.”

Fed’s stinging Wells Fargo enforcement order puts all banks on notice –- The Federal Reserve on Friday slapped Wells Fargo with an unprecedented enforcement action — one of the harshest it has ever handed down — but the message it sent went far beyond a single institution. The order bars the nearly $2 trillion-asset bank, the third biggest in the U.S., from growing any larger, though Fed officials and the bank itself were quick to clarify that it could still take deposits and make loans. In a concurrent decision by Wells’ board of directors, three members of the Wells board will be replaced by April and a fourth will be replaced by the end of the year. (Neither the bank nor the Fed would reveal which board members were leaving.) Reaction to the news was swift and severe. Wells’ share price dropped more than 6% in after-hours trading, and Sen. Elizabeth Warren, D-Mass., praised the recently departed Fed Chair Janet Yellen for removing members of the bank’s board of directors in response to its phony-accounts scandal, which came to light in 2016. “For months, I have repeatedly pressed Janet Yellen to hold Wells Fargo accountable for its fake-accounts scam and push out responsible board members,” Warren said. “Today she did it — in her last act as Fed chair. Fines alone will never rein in fraudulent behavior at the big banks and by pushing out board members at Wells Fargo, Chair Yellen sends a strong message.” The Fed’s order does not require any members of Wells Fargo’s board of directors to be removed, nor did Yellen or the Fed take credit for their ouster. But the announcement sent ripples through the financial regulatory world, signaling a new era at the Fed and continuing trouble for Wells and other big banks. "The Fed’s actions were likely meant to serve as a warning to other banks just as much as they were meant to discipline Wells," said Brian Tayan, a researcher with the corporate governance research initiative at Stanford Graduate School of Business. "Severe actions are likely to get a lot of bank board members’ attention, and it looks like they succeeded."

Banks Wince as Wells Fargo Gets a Harder Than Usual Wet Noodle Lashing from the Fed --  Yves Smith - On her way out the door, Janet Yellen administered a punishment to serial miscreant Wells Fargo that she’d threatened if they hadn’t cleaned up their act sufficiently, which at a minimum translates to putting on a really good show of being contrite. As we’ll describe, while it was a bit tougher than what financial regulators have seen fit to dole out since the bank-friendly Clinton Administration, and other banks were whinging as a result, it is lame even by not-all-that-remote historical standards.  The Fed is forcing Wells to find three new directors by April and one more by year end, following through on a threat made last July. That is a necessary but far from sufficient condition for effecting real change at the bank, which has the hallmarks of having created a toxic culture that will take a concerted effort to change. However, with a CEO who was promoted internally, Tim Sloan, there’s every reason to expect that all will happen are cosmetic changes, and Sloan’s conduct to date is consistent with that. The Fed also took the unusual step of putting a hard balance sheet cap on Wells Fargo, and saying it stays in place until the Fed sees fit to lift it. That move appears to have created a wee frisson across the banking world, even though Wells Fargo claims will cost them an estimated $300 to $400 million a year, which is still a “cost of doing business” level punishment. And mind you, Wells Fargo has every incentive to play up how much they are supposedly losing. Bloomberg’s Gadfly column questioned Wells Fargo’s claim that it would suffer financially, at least in the near term:The Fed also took the unprecedented step of prohibiting Wells Fargo from growing any larger than its total asset size at the end of 2017, or $2 trillion, without clearance from the central bank. Ironically, this sanction actually provides an element of cover for the lender, which has found growth to be a challenge lately.

What the Fed's Wells Fargo order means for bank directors - — The Federal Reserve’s enforcement action against Wells Fargo on Friday laid the blame for the bank’s various scandals at the feet of its board, but the agency’s order and additional recent actions may make it easier for other banks’ boards to avoid a similar fate.   The order, which restricts Wells from growing beyond its size as of yearend, was issued alongside uncommonly pointed letters to the bank's board, former CEO John Stumpf and former independent board member Stephen Sanger highlighting their ultimate responsibility for Wells' management failures. When the order was announced, Wells said it had ousted four board members, three to be replaced in April and one in December, without detailing who would be rotated off the board. Taken together, the actions by the Fed and bank were seen as a warning for board members of other institutions, according to interviews with several industry observers, many of whom declined to speak on the record.  "That's a question for bank board members — are they more vulnerable now than they were before?” said David Baris, president of the American Association of Bank Directors.  "The intent is to enable directors to spend less board time on routine matters and more on core board responsibilities," said Fed Chair Jerome Powell last year, of recent attempts to streamline bank boards' responsibilities.   At the same time, however, the Wells order helps provide clarity as to what the Fed expects of board members. The Fed has also taken steps in recent months to streamline boards’ activities, reducing the volume of supervisory matters that a bank board must sign off on directly. Those moves have been criticized as enabling boards to turn a blind eye to malfeasance. But in remarks delivered in August, then-Fed Gov. Jerome Powell, who was sworn in as Fed chair on Monday, said that those changes, rather than easing the reins on bank boards, would give them even less of an excuse for not knowing what was going on at their institutions.

Misdeeds force megabanks to engage in stealth lobbying - The Federal Reserve’s latest crackdown on Wells Fargo is another blow for the bank, which has been dealing with its phony accounts scandal for nearly a year and a half. But the parade of negative headlines following Friday’s announcement is hardly good news for any of the country’s largest financial institutions — which have tried to remain out of the spotlight since the financial crisis. Each time a big bank finds itself in trouble, it sets off another round of questions about whether these institutions are “too big to manage.”  While there’s a sense that the regulatory climate has improved for Wall Street with the election of President Trump — big banks are likely to catch a break with the eventual easing of mandates like the Volcker Rule — there’s still little political will when it comes to openly helping them. And with each major scandal, that position gets further ingrained.  “The public focus on bashing big banks has decreased, but I don’t think there’s any increased public affection — or political affection — for big banks,” said Brandon Barford, a partner at Beacon Policy Advisors. It’s notable that the Senate’s regulatory relief package, spearheaded by Banking Committee Chairman Mike Crapo, R-Idaho, along with a handful of moderate Democrats, has marketed itself as focusing almost exclusively on helping community and regional banks.  Yet those on the left have still criticized the bill as a “bailout" for Wall Street — even if that’s not actually the case. Last week’s news is likely to further that narrative, although the bill does not appear to do anything to help the bank directly. Wells is “likely to become a bloody shirt in any campaign to derail the Crapo bill,” Brian Gardner, a policy analyst at Keefe, Bruyette & Woods said Monday in a note to clients. Such complaints may not derail the legislation — or broader efforts to deregulate — but they do provide yet another distraction for those seeking change.

Payment fraud on the rise at U.S. banks, credit unions: Fed survey - U.S. financial institutions recorded higher fraud losses in 2016 across almost all major payment types, according to a new survey of 283 banks and credit unions. The results, released Tuesday, suggest that even as financial institutions implement more sophisticated fraud-mitigation techniques, they have not been keeping pace with criminals. The challenges are particularly acute at smaller banks and credit unions, which comprised a majority of the survey’s respondents.  Still, the Federal Reserve Bank of Minneapolis, which conducted the survey, said that its findings provide valuable insights about the usefulness of various fraud-fighting tools. Of the banks and credit unions that participated, 63% said that fraud losses on signature-based debit cards were higher in 2016 than they were a year earlier, while only 15% said that losses were lower. Similarly, 50% of the respondents said that fraud losses on PIN-based debit cards increased in 2016, while only 12% said that they decreased.  When asked about credit cards, 41% of the financial institutions said that losses rose, while 16% said that they fell. The survey found that when financial institutions were asked about paper checks, wire transfers and prepaid cards, they were also more likely to report higher losses than lower losses.  The only exception to the trend was fraud involving funds credited to accounts using the automated clearing house network. Only 2% of survey respondents said that type of fraud increased in 2016, while 4% said that it decreased.

Senate panel approves Trump’s pick for FDIC chair, two other nominees  — The Senate Banking Committee approved the nomination of Jelena McWilliams, by a vote of 24 to 1, to a six-year term as Federal Deposit Insurance Corp. chair on Thursday. Sen. Elizabeth Warren, D-Mass., was the only panel member to vote against the Trump administration's choice to lead the FDIC, while the rest of the committee voted in favor by voice vote.  The panel also approved Marvin Goodfriend, an economist at Carnegie Mellon University’s Tepper School of Business, to a Federal Reserve Board seat, but his nomination moved along party lines with not a single Democratic vote. Thomas Workman, a former president of the Life Insurance Council of New York, was approved for the Financial Stability Oversight Council seat reserved for someone with insurance expertise.  The panel's top Democrat, Sen. Sherrod Brown, D-Ohio, supported McWilliams, the chief legal officer at Fifth Third Bancorp, but said, “I caution the next [FDIC] chair not to deviate from a path that has served our economy well.”“Ms. McWilliams has a deep background in banking. I hope she’ll follow the example of her predecessors,” said Brown.McWilliams was previously a Senate Banking Committee aide to Sen. Richard Shelby, R-Ala., and before that an attorney at the Federal Reserve Board. If confirmed, she would succeed current FDIC Chair Martin Gruenberg. But Brown said he "cannot support Dr. Goodfriend’s nomination today," pointing to a nomination hearing last month where Goodfriend appeared to try to moderate previously stated views about the Fed. The Senate is able to approve nominees with a simple majority, but Goodfriend’s confirmation is somewhat on shaky ground. Republicans currently hold just a one-vote majority in the Senate, and several news outlets reported Thursday that Sen. Rand Paul, R-Ky., planned to oppose the Fed nominee. Sen. John McCain, R-Ariz., meanwhile, has been away from the Senate for health reasons.

S&P Warns High Corporate Debt Could Trigger Next Default Cycle - Easy liquidity and underwriting together with low interest rates have contributed to a spike in the number of highly leveraged firms, creating a risk masked by relatively low default rates. Removing the “easy money punch bowl” could trigger the next default cycle since high corporate debt levels have increased the sensitivity of borrowers to elevated financing costs, the ratings agency said in a Feb. 5 report. Based on a global sample of 13,000 entities, the agency estimates that the proportion of highly leveraged corporates -- those whose debt-to-earnings exceed 5x -- stood at 37 percent in 2017, compared to 32 percent in 2007 before the global financial crisis. Over 2011-2017, global non-financial corporate debt grew by 15 percentage points to 96 percent of GDP. The masked discrepancy between leverage and defaults is so wide that the recent pick-up in corporate earnings and financial metrics -- especially thanks to tax reforms in the U.S. -- “won’t be enough to offset” the significant credit risks, S&P said. “When debt is this steep and default rates are low, something’s gotta give,” wrote the firm’s Terry Chan. “A material repricing in bond markets or faster-than-expected normalization in money market rates could impact credit profiles.” There has also been a rebalancing of credit levels in terms of sectors, according to Chan. Companies in highly leveraged industries such as infrastructure, capital goods and building materials either maintained or decreased their debt levels while those in oil and gas, metals and mining and telecommunications accumulated more leverage.

The Dow Just Erased All the Gains for 2018 in a Single Day - The Dow Jones industrial average plunged 1,175 points, or 4.6 percent, erasing its gains for the year. The Dow’s drop Monday was its biggest in terms of points, but it had a larger percentage drop as recently in 2011. The Dow is down 8.5 percent from the record high it hit in late January. The slump began Friday as investors worried that higher inflation and interest rates could derail the long-running rally. At one point the Dow was down as much as 1,600 points. The Dow ended at 24,345. The Standard & Poor’s 500, the benchmark for many index funds, fell 113 points, or 4.1 percent, to 2,648. The Nasdaq fell 273, or 3.8 percent, to 6,967. Bond prices rose. The yield on the 10-year Treasury fell to 2.73 percent. 

Mr. Market Has a Meltdown - Yves Smith - As all good news junkies at Naked Capitalism no doubt have figured out, Mr. Market had a bad day yesterday, and still seems not too happy overnight. The Dow dropped 4.6%, or 1,175 points, bouncing back from a decline of over 1,600 points. All major US and foreign stock indices are down for the year. Today’s fall puts the Dow down 8.5% from its peak in January. The drop in the S&P 500 and the NASDAQ were slightly less dramatic, at 4.1% and 3.8% respectively. The VIX more than doubled. The CBOE Volatility Index rose by 124% at its intraday peak, and closed up nearly 116%, at 37.82.WTI fell 2% to $64.15, and Treasury bond prices rose, as the yield on the 10-year fell from 2.852% to 2.794%,. And in the background, Bitcoin fell by 20% to below $7,000 and closed barely above that level at the end of the day. From Bloomberg:Bitcoin tumbled for a fifth day, dropping below $7,000 for the first time since November and leading other digital tokens lower, as a backlash by banks and government regulators against the speculative frenzy that drove cryptocurrencies to dizzying heights last year picks up steam… Overnight, as of this hour (3:30 AM) the Nikkei closed down 4.7% and the FTSE is nearly 3% lower. The Dow and S&P 500 futures had been down when I kept checking (the NASDAQ would occasionally rise into positive territory) and as of now, Dow futures are down 119 while the S&P is up 6 points and NASDAQ futures, up 36 points.The US stock market selling was largely algo-driven as the market dropped through technically important levels, triggering more selling. Bloomberg says traders weren’t panicked while a Wall Street Journal headline blared the reverse, so you can decide which version of yesterday you like better.Regardless,some automated services did better than others. Business Insider reports that two of the biggest roboadvisers, Uses of Betterment and Wealthfront, had their sites go down during the market swoon.The bigger question is what if anything this means. The simplest version is the markets had gotten way too frothy (even sober types like Mohamed El-Erain had been pretty alarmed for months) and the nature of lots of algo in the market means that downturns are more likely to be violent than in the past.

Stock Market Panics on Treasury Yields, Fed and Trump’s Domestic Wars - Pam Martens - In little more than a week, $4 trillion in global stock market value has vanished as quickly as a snow cone in July. The heretofore uncanny calm of a U.S. stock market setting regular new highs was punctured Friday with a 665.7 point selloff in the Dow Jones Industrial Average. That was followed by yesterday’s bungee dive in late afternoon that took the Dow down 1597 points followed by a quick partial retracement that left the Dow down 1,175 points on the day. (That plunge and retracement brought back memories of the Flash Crash of 2010. See charts above and our coverage: Flash Crash Report Raises Flags on Quasi Stock Exchanges Inside Wall Street Firms.) On a point loss basis, yesterday’s decline was the largest in Dow history. On a percentage basis, it paled in comparison to the 22.6 percent decline on October 19, 1987 when the Dow lost 507.99 points. As we began reporting on January 22 (see Rising Treasury Yields Pose Risk for Those Over-Weighted in Stocks) the stock market had become overly complacent toward the fierce rise in U.S. Treasury yields. We warned that this could “turn out to be a dangerous, slippery slope for those heavily weighted in stocks.” We also cautioned that: “The stock market has been riding the euphoria of anticipating the tax cut benefit to corporate earnings. It seems to have forgotten about what the attendant budget deficits would mean for rising Treasury yields and those higher yields providing a competitive seduction to investors who increasingly see the stock market as asset bubble terrain.”  On January 30 we took a hard look at how Trump’s tax cut plan would drive the yields on Treasuries by impacting the supply and demand at a time when the Federal Reserve was cutting back on its own purchases of Treasuries in order to normalize its bloated balance sheet left over from its interventions following the 2008 financial crash. We wrote: “The recent market action suggests that investors are about to get a serious investing lesson in the concept of supply and demand. According to research from the major Wall Street banks, there is going to be a stunning doubling of the net issuance of U.S. Treasury securities in the current Federal fiscal year versus last year. Net issuance of Treasuries in the last fiscal year was approximately $500 billion. For the coming year, Goldman Sachs projects the amount will be $1.03 trillion; Deutsche Bank thinks it will be about $1 trillion while JPMorgan Chase is floating the breathtaking figure of $1.42 trillion.

Kochtopus Wants the Little Guy to Buy Stocks as the Market Plunges - Pam Martens -- Last Friday, the stock market, as measured by the Dow Jones Industrial Average, plunged 665.7 points. This morning, after just one minute of trading at 9:31 a.m. in New York, the Dow had bled another 307 points. You can expect a big push for the balance of the day by the shills who want to keep the dumb money in the market as a prop for the 1 percenters as they take profits and run. One member of the Kochtopus (short-hand for the secretive political network and nonprofit front groups backed by billionaire brothers, Charles and David Koch) is Stephen Moore, who has somehow secured himself the position of Senior Economics Analyst on CNN, the 24/7 cable news network whose tagline is “The Most Trusted Name in News.” After the market plunge on Friday, Moore was on air at CNN by Saturday afternoon urging the little guy to stand pat.  When queried about the Friday stock market selloff Moore stated: “Well, I want to try to walk people off the ledge here…I mean, it was a terrible day, no question about it, 670 points. A lot of points to lose on the Dow. But remember the Dow has been up 6,000 points or so over the last 14 months or so. So it’s given up about 10 percent of the gains. Look, the worst thing people could do right now is go out and sell their stock, especially if you are in a retirement fund, a 401(k). Just you know, in fact, I would say, you know, a lot of times you want to buy on the dips because stocks fell, and I would anticipate next week they will go up.” First of all, no serious economist would ever predict what the stock market will do in a timeframe as short as a week — which raises questions about Moore’s real agenda.

Did Wall Street Get Hacked, Back Away or Just Get Overwhelmed on Monday? -- Pam Martens -- The U.S. Senate Banking Committee needs to get its act together and immediately schedule hearings on the trading outages that occurred at numerous discount brokers and mutual funds on Monday. According to thousands of on-line complaints, customers of major firms like TD Ameritrade, Fidelity, Vanguard, and T. Rowe Price could not access their accounts using the firms’ websites on Monday and thus could not place sell or buy orders as the market dove 1,597 points in mid afternoon, then partially recovered to close down 1,175 points.At online outage tracker, downdetector.com, both TD Ameritrade and Fidelity were verbally brutalized by outraged customers, many of whom said they had lost thousands of dollars as a result of the outage. Others commenters were stirring up momentum for a class action lawsuit.Complaints against Fidelity included this one from a poster calling himself Lee Yih: “The Fidelity Active Trader Platform finally loaded after 80 minutes of trying. I put in 4 orders, but nothing. No indication of orders received, no indication of an execution. I do have the order numbers, however. The website should not be giving the appearance it is up, when orders entered are swallowed up and we do not know where we stand. I called them and waited for 32 minutes on hold before giving up.” The posts against TD Ameritrade included many people who said they were fed up and planning to find a new broker. A woman identifying herself as Stephany Crawford wrote:“CLASS ACTION LAWSUIT! We need to make them pay for all our losses while the system’s been down. It is their fault. They cannot deny that. Let’s make them accountable!!! Gary and I have lost thousands of dollars because of this! Count us in!!!!!!!!!!!” Angry Vanguard customers who were blocked from trading took to the popular BogleHeads.org (named after the founder of Vanguard, John Bogle) to vent their outrage. One customer, using the online ID of “Choy,” expressed what was on millions of Wall Street investors’ minds. He wrote: “C’mon guys. It’s not a bug. It’s a feature. They call it ‘stay the course protection’ for days like this.”

"Worst Case" Confirmed: Biggest Weekly Fund Outflow In History - If it seems like it was just a few days ago  that we reported of the biggest ever inflow into equities, it's because that's precisely when it happened. It was then that according to BofA CIO Michael Hartnett, we observed a "non-stop euphoria cabaret" in which markets saw a record $33.2bn inflow to equity funds, record $12.2bn inflow to active funds, $1.5bn into gold (50-week high), as well as record inflows to tech & TIPS.  Incidentally, that was the day the S&P hit its all time high, and more importantly, the day BofA also said that its euphoria and panic-buying driven "sell signal" was just triggered for the first time in 5 years, and predicted a 12% selloff in the next three months. In retrospect, it took just two weeks because that post marked the peak of the market, and it has been non-stop selling since. But much more troubling than the selling, is the composition: after all, as we showed earlier, the "worst case scenario" according to both JPMorgan and Morgan Stanley is if the liquidation panic was not just systematic funds and various quants puking as a result of the surge in the VIX, but if ordinary retail investors had also joined in: that would be a nightmare outcome for the bulls, as it would mean that the sharp but concentrated relentless selloff, had spread to the broader investing world, and institutions would have no choice but to join. Specifically, this is what JPM said over the weekend when observing the recent record fund inflows: If these equity ETF flows start reversing, not only would the equity market retrench, but the resultant rise in bond-equity correlation would likely induce de-risking by risk parity funds and balanced mutual funds, magnifying the eventual equity market sell-off. And then there was Morgan Stanley: Today’s moves lower are likely not being driven by systematic supply – this appears to be more discretionary selling. Systematic supply from vol target strategies is largely out of the way now, while consensus trades are getting hit:  NDX is underperforming SPX, momentum is down 1%, and the Passive Factor is up, indicating actively held names are underperforming names better held by passive funds. Well, we now have confirmation. According to the just released EPFR weekly fund flow data, what was just two weeks ago a record equity inflow has become a record equity outflow, as the 10% drop in the US stock market has officially launched a selling panic.

US Stock Markets Enter Correction Territory as Dow Falls More Than 1000 Points -  Yves Smith - That buying on the dip idea yesterday doesn’t look so hot today.  Markets had another wild ride yesterday. The Wall Street Journal’s overview:The Dow Jones Industrial Average and S&P 500 entered correction territory for the first time in two years on Thursday as worries about rising interest rates and newfound volatility continued to rattle the markets… “We opened around the highest levels of the day and closed at the lows, and that’s telling us the sellers aren’t quite done yet,” said Jonathan Corpina, senior managing partner at broker-dealer Meridian Equity Partners…Mr. Corpina said the pace of Thursday’s declines, at hundred-point intervals, seemed to be driven by large sell orders from institutional investors, as well as by algorithmic orders triggered after major indexes broke through certain levels. The S&P 500 fell 100.66 points, or 3.8%, to 2581.00 and is now down more than 10% from its record close on Jan. 26.The decay towards the close does not bode well for tomorrow. The S&P 500 and the NASDAQ lost 3.75% and 3.9%, respectively, in the last hour. But even after the recent swan dive, the S&P 500 is still 12.5% higher than it was a year ago. Now that this decline has proven to be more than a one-day, algo-driven affair, commentators are looking harder for explanations, particularly since that will give them a rationale for What To Do Next. Bloomberg helpfully offers six interpretations.

Peter Schiff Warns "Trump's The Fall Guy... There's No Way To Stop This" - Peter Schiff, a market analyst who had accurately predicted the 2008 recession and the recent stock market plunge says more is coming.  Wait until you hear what he says is on the horizon for America and the global economy in the Trump era.  In an interview with Infowars‘ Alex Jones, Schiff details what we can all expect from the economy.  And even though Trump has fought to save the economy, the federal reserve is working against the president. “Unfortunately, he is the fall guy. There’s no way to stop this,” Shiff begins. “The problem is so big that the minute the Fed has to try to solve it, it’s gonna unleash a much bigger one [problem],” Shiff says.  Jones begins his intro by not sugar coating the problem the economy is in thanks to government interference. The economy is a giant bubble and it will pop at some point, not just deflate. “The Fed were dragging their feet in raising rates while Obama was president.  They talked about raising rates but at the end of the day, they barely moved them up. The pace of hikes has increased since Trump was elected, but part of the reason for that…I mean, the media is not talking down the economy; if anything they’re overhyping the economy.  Everybody’s talking about how strong the economy is, how everything is great. Everybody is taking credit for this great economy. …in order to keep up the pretense that the economy is as strong as everybody thinks, the Fed is in this box where it has to raise rates. But they [the Fed] can’t tell the truth that it’s really a bubble, and if we raise rates, we’re gonna prick it, so they’re kinda in this bind.  And they are still telegraphing that they’re gonna raise rates three or four times this year.  And that is the problem.“ Schiff then goes on to explain some of the problems Trump inherited from Obama that will be difficult, if not impossible to solve without a crisis. “All of a sudden, deficits are skyrocketing and they’re about to explode out of control. Yet, we have no way to finance them. So interest rates have no place to go but way up. Not just a little up.”

Yesterday’s Stock Market Plunge Saw Indiscriminate Dumping of Stocks - Pam Martens - The Dow Jones Industrial Average (Dow) has now had two days of losses of more than 1,000 points in the last four trading sessions: Monday and yesterday. The Dow consists of some of the oldest companies in America and, to a large degree, what are regarded as the safest stocks to hold by investors because of their liquidity, large capitalization and steady dividends. The Nasdaq, on the other hand, consists primarily of much younger companies, many in the roller-coaster technology field, and far shorter histories of paying dividends. Typically, in a market panic, one would expect the Nasdaq to show a deeper dive than the Dow. But as the top chart above indicates, on Monday and Tuesday it was actually the Dow that saw a deeper selloff. Then yesterday, Thursday, February 8, the two widely disparate markets traded in almost complete lockstep. (See second chart above.) Why would a far riskier market trade in lockstep with the far safer Dow during a market panic? Surely memories are not so short that they can’t recall how the Nasdaq fared versus the Dow in the dot.com bust that began in March 2000. (See third chart above.) Logic suggests that what we saw yesterday was the indiscriminate, wholesale dumping of stock portfolios by traders desperate to raise cash any way they could. That then raises the next question: is there something out there that regulators and the public can’t see that is fueling a mass liquidation of stocks by traders who made a wrong-way bet on volatility, interest rates or some other trading strategy. The monster difference between the volume of advancing stocks versus the volume on declining stocks also suggests wholesale dumping. Dow Jones’ MarketWatch reports that yesterday the New York Stock Exchange (NYSE) saw 2,683 stocks decline while only 342 stocks advanced. Similarly, Nasdaq saw 2,525 stocks decline while 453 advanced. Trading volume was swamped by declining shares. On the NYSE, declining share volume reached 4.74 billion while advance volume came in at a meager 556.45 million. Nasdaq’s volume tallied out at 2.35 billion in decliners versus 363.15 million in advancers.Exchange-traded products that have shorted the volatility index known as VIX have been widely blamed for causing at least some of the stock market rout. But their cumulative size is minuscule compared to the dollar amount of selling we are seeing in the stock market. Hedge funds, however, may have mimicked that strategy to a far larger degree and taken on massive amounts of leverage to do so. If hedge funds are liquidating stock portfolios to meet margin calls, that would help to explain the inability of the stock market to sustain a rally.

No, the stock market isn’t throwing a tantrum because the economy is “overstimulated” -- Conventional wisdom is firming up quickly around the story that recent stock price declines are a result of the market realizing (in proper Wile E. Coyote fashion) that the economy has overheated. This conclusion is far too premature and ignores plenty of contrary evidence. The story goes that the 2.9 percent year-over-year wage growth in last Friday’s jobs report is a signal that a tsunami of inflation is heading our way. This would force the Fed to step in and stop the inflationary wave by sharply hiking interest rates. Higher interest rates, in turn, can depress stock prices both by restraining overall growth and by attracting people towards buying bonds rather than stocks. The fiscal stimulus provided by theTax Cuts and Jobs Act (TCJA) and new higher spending caps is thought to add fuel to an already raging economic fire (side note: the TCJA is expensive in budgetary terms, but is so inefficient as fiscal stimulus that its effect is very easy to overstate).  People have gotten way ahead of the facts on this. Yes, the unemployment rate is low, but it’s certainly beenthis low or lower for a longer span of time without the economy overheating. In 1999 and 2000, the unemployment rate averaged 4.1 percent for two years (and sat below 4 percent for five months), and core inflation nudged up for sure but never broke 2 percent (and the Fed had not even specified a 2 percent target in those years).  Other quantity-side labor market indicators, like the share of “prime-age” adults (between 25 and 54) with a job, have recovered steadily for years, but are still firmly below pre-Great Recession levels—and have certainly not reached historically low levels.

 Why Stocks May Still Have a Long Way to Fall - The scary market action over the past week may not be over yet, nor for a while. In fact, the Dow’s 567-point bounce on the traditional “Turnaround Tuesday,” may turn out to be only a very brief respite in the beginning of a months-long decline in equities that could last through the summer.The main problem is that liquidity in the banking system is drying up at a time when the quarterly increase in money supply is typically at its strongest. The Federal Reserve’s current Money Stock Measures report, which measures M2 money stock on a weekly basis, shows M2 growing at only 3.3% on a seasonally adjusted quarterly basis. See the small table immediately below table 2 at the link above.That number itself is not so dangerous, since it has happened before without much consequence, particularly in 2010 when seasonal M2 quarterly expansion rates were even lower at this time of year. However, keep in mind that stock prices in 2010 were still much lower than they were in 2007 when the absolute M2 measure was 17% lower than it was three years later in 2010. That means the ratio of available liquidity to equity levels was still much higher in 2010 than it was in 2007 despite the very low growth rates at the time. Still, from January through September 2010, the Dow Jones was nevertheless stuck in a trading range and didn’t break out until October. This time, stocks are — or rather just were — at all-time highs, so this is the first time since the Fed has records available on its website that M2 growth rates are this low, at this time of year, with stocks still in the nosebleed section. But there are more worrisome pieces to this puzzle. The seven weeks from the second week of January until the first week of March has consistently shown a shrinking M2 figure for every year since 2009. From that year until 2017, the one-week snapshot M2 average during these seven weeks has fallen anywhere from 0.23% in 2015 to as much as 1.5% in 2013 compared to the second week of January. If that repeats again this year, the already anemic liquidity growth could shrink even further into March.

Jim Rogers Says Next Bear Market Will Be Worst in His Life - Jim Rogers, 75, says the next bear market in stocks will be more catastrophic than any other market downturn that he’s lived through.The veteran investor says that’s because even more debt has accumulated in the global economy since the financial crisis, especially in the U.S. While Rogers isn’t saying that stocks are poised to enter bear territory now -- or making any claim to know when they will -- he says he’s not surprised that U.S. equities resumed their selloff Thursday and he expects the rout to continue.“When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime,” Rogers, the chairman of Rogers Holdings Inc., said in a phone interview. “Debt is everywhere, and it’s much, much higher now.” The plunge in equity markets resumed Thursday, as the S&P 500 Index sank 3.8 percent, taking its rout since a Jan. 26 record past 10 percent and meeting the accepted definition of a correction. The Dow Jones Industrial Average plunged more than 1,000 points, while the losses continued in early Asian trading Friday as the Nikkei 225 Stock Average dropped as much as 3.5 percent.

State regulators launch joint multistate licensing process - A group of state regulators will soon begin offering a simpler licensing process for money-services businesses, including fintech firms, to operate across multiple states. The pilot for licensing money servicers will initially be offered by seven states including Washington, Georgia, Texas and Illinois, the Conference of State Bank Supervisors announced Tuesday. The move is mainly in response to fintech firms that have long argued that the main route to doing business is by getting a license in each state, which can be a cumbersome and repetitive process.  “This is something that we can do to create licensing efficiencies with these companies, hopefully help get them off the ground and it doesn’t sacrifice consumer protection,” Charlie Clark, agency deputy director and director of consumer services at the Washington Department of Financial Institutions, said in an interview. “This MSB licensing agreement will minimize the burden of regulatory licensing, use state resources more efficiently, and allow for broad participation by other states across the country,” said CSBS president and CEO John Ryan. Kansas, Massachusetts and Tennessee are the other state regulators that are part of the pilot. The Conference of State Bank Supervisors plans to launch a pilot program in April, when regulators will begin identifying companies as potential candidates, Clark said. “Our goal is that this will be a model for an agreement that other states can adopt and sign onto,” he added.  Each state will keep its own differences in licensing laws, but there are ways of using the same paperwork and sharing exams, for example, that regulators are currently reviewing. The Conference of State Bank Supervisors aims to have all 50 states agree to a uniform licensing process by 2020.

Bitcoin Newbies Are Getting Crushed While Old Timers Bemoan `Weak Hands’ - For Bitcoin investors, these are the times that try one’s soul. After surging to almost $20,000 in December following the introduction of regulated futures contracts in the U.S., the world’s largest cryptocurrency has lost more than half its value, plummeting to as low as $7,614 on Friday. It regained some ground on Saturday, rising 7.5 percent to $9,290.15 as of 2:58 p.m. in New York, according to coinmarketcap.com. Particularly hard hit have been those who got swept up in the mania just before what skeptics ranging from Jamie Dimon to Nouriel Roubini have labeled as one of the biggest asset bubbles in history began showing signs of deflating. Selling by “weak hands,” as latecomers are sometimes called across the investing world, contrasts with the view of early advocates pledging to HODL -- one frenzied trader’s misspelled entreaty to hold onto the tokens during an earlier rout that’s become the mantra of Bitcoin purists. Bitcoin’s rise in mainstream consciousness was brought on in part by retail investors’ fear of missing out after viewing the approval of futures as an endorsement by the establishment. As more novice investors jumped in, Bitcoin shot above $10,000, then $15,000, then as high as $20,000 on some exchanges, in a span of only a few weeks. 

As Bitcoin Bubble Loses Air, Frauds and Flaws Rise to Surface— You did not have to be a technophobe to worry that the virtual-currency boom of the past year papered over plenty of problems. The scale of those problems is starting to become clear as digital tokens have slid more than 50 percent in value from their peaks in early January, with steep drops on Monday pushing the value of Bitcoin specifically below $7,000. Hackers draining funds from online exchanges. Ponzi schemes. Government regulators unable to keep up with the rise of so-called cryptocurrencies. Signs of trouble have appeared at nearly every level of the industry, from the biggest exchanges to the news sites and chat rooms where the investment frenzy has been discussed. On Tuesday, the leaders of the two main regulatory agencies in the United States that oversee the technology, the Securities and Exchange Commission and the Commodity Futures Trading Commission, are to testify before the Senate banking committee about their efforts to police virtual currency markets. In the past two weeks, both have brought major cases, but people in the young industry said regulators had barely made a dent. Some virtual currency enthusiasts argue that the problems are no different from what has happened in other booms, like the internet bubble of the 1990s. But even true believers say the design of virtual currencies — meant to cut out middlemen and government authorities — has made bad behavior more prevalent amid this particular bubble. “Cryptocurrencies are almost a perfect vehicle for scams,” said Kevin Werbach, a professor at University of Pennsylvania’s Wharton School. “The combination of credulous buyers and low barriers for scammers were bound to lead to a high level of fraud, if and when the money involved got large. The fact that the money got huge almost overnight, before there were good regulatory or even self-regulatory models in place, made the problem acute.” The fall from the peaks of early January has been dizzying. The value of all outstanding virtual currencies has been cut by more than half, down over $400 billion as of Monday, according to the website Coinmarketcap.com.

How Do You Hide Stolen Cryptocurrency? -- The anonymous nature of digital wallets continues to stymie investigators in last week's theft of 58 billion yen ($530 million) worth of NEM cryptocurrency from a Tokyo exchange, the biggest cryptocurrency heist in history.Authorities know which user accounts were affected by the Jan. 26 hacking, and the accounts holding the pilfered funds can be immediately identified because the virtual coins are traceable. And, as the Nikkei writes, if the Coincheck exchange case were a regular bank robbery, identifying the bank accounts holding the stolen money would let law enforcement easily return the funds to victims. But individuals who open a bank account must identify themselves, and no such requirement exists for opening a digital wallet. Anyone can obtain an anonymous digital wallet as easily as walking into a store and paying cash for an actual wallet.That helps explain why Coincheck and the NEM Foundation, the international organization that manages and promotes the currency, are having trouble identifying the owners of the wallets and demanding the restoration of funds. The foundation, which tags the NEM coins, could rewrite the blockchain virtual ledgers and forcibly return the stolen funds to Coincheck. But the NEM group has pledged never to rewrite blockchain records, so even those "transactions" resulting from a hack will remain valid.

Head of BIS calls for clampdown on bitcoin - Central banks must clamp down on bitcoin and other cryptocurrencies to stop them “piggybacking” on mainstream institutions and becoming a “threat to financial stability”, the head of the Bank for International Settlements has warned. Agustín Carstens, general manager of the BIS - known as the bank for central banks because it is where they hold accounts - condemned bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster”.His comments came as growing signs of a backlash against cryptocurrencies by mainstream financial institutions contributed to another steep fall in the price of bitcoin, which means it has lost almost two-thirds of its market value in the past month.Bitcoin extended its recent losses on Tuesday morning to briefly fall below $6,000 per coin, down more than $13,000 from its peak in December.“To date, many judge that, given cryptocurrencies’ small size and limited interconnectedness, concerns about them do not rise to a systemic level,” said Mr Carstens in a speech at Goethe University in Germany on Tuesday morning.“But if authorities do not act pre-emptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial s tability.”

The US government is trying to get coordinated in its efforts to regulate bitcoin -- Treasury Secretary Steven Mnuchin is taking the lead on bringing together federal government agencies to coordinate regulation of cryptocurrencies, the chairmen of two financial regulatory commissions said Tuesday. "The Treasury secretary has been out in front on this. He's formed a virtual currency working group of ourselves, the SEC, the Fed" and the Financial Crimes Enforcement Network, said J. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission. He was speaking in response to a question at a hearing on cryptocurrencies held by the Senate Banking, Housing and Urban Affairs Committee. Bitcoin has lost half its value this year after surging 2,000 percent in just 12 months to a record high above $19,000 in mid-December. Sales of new digital coins, called initial coin offerings or ICOs, have raised more than $4 billion in sales of new digital coins for projects based on the same blockchain technology behind bitcoin. However, critics say many of the projects barely exist beyond whitepapers or are outright scams, and both the Securities and Exchange Commission and the CFTC have increased their crackdown on fraudulent schemes. "We've had a number of preliminary conversations and workstreams developed," Giancarlo said. "We are going to be coordinating our various responses. It's begun with just some broad conversations just establishing our different jurisdictions so we're all clear as to what we're doing, and what we're not doing, where the gaps are." Giancarlo added that he and Mnuchin have had a number of one-on-one conversations about virtual currencies. Mnuchin said in a mid-January speech that the Treasury Department's Financial Stability Oversight Council has formed a virtual currency working group, according to CoinDesk. Mnuchin has also said he wants to make sure that "bad people" cannot use bitcoin for illegal activities. "We may be back with our friends from Treasury and our friends from the Fed to ask for additional legislation," SEC Chairman Jay Clayton said at Tuesday's Senate hearing. 

Regulators may need more authority to catch up with crypto: SEC chief -  — Market regulators acknowledged to Senate lawmakers on Tuesday that they are falling behind the curve when it comes to virtual currency regulation and may need Congress to help them catch up.Testifying before the Senate Banking Committee, the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission said the two agencies are not ignoring the fast-growing cryptocurrency sector and they have some oversight powers. But they indicated that they might need more.Treasury Secretary Steven Mnuchin has led an interagency working group of financial regulators that is looking at virtual currencies, but it is not clear whether the group has enough regulatory authority to handle issues within the sector. “Do you need additional legislation in this area?” Sen. Richard Shelby, R-Ala., asked SEC Chairman Jay Clayton.Clayton responded that regulators might opt to request greater powers.  “We may be back with our friends from Treasury and the [Federal Reserve] and ask for additional legislation," said Clayton, who added that regulators need to gather more information. “We should all come together, the federal banking regulators, CFTC, the SEC — there are states involved as well — and have a coordinated plan for dealing with virtual currency trading markets,” said Clayton.In his prepared remarks, CFTC Chairman Christopher Giancarlo said a relatively hands-off approach is worth considering for distributed ledger technologies, but he noted that a tougher approach might be worthwhile for virtual currencies. “'Do no harm' was unquestionably the right approach to development of the internet. Similarly, I believe that 'do no harm' is the right overarching approach for distributed ledger technology," Giancarlo said. "Virtual currencies, however, likely require more attentive regulatory oversight in key areas, especially to the extent that retail investors are attracted to this space."

Cryptocurrencies are far from unregulated - The chairmen of the Securities and Exchange Commission and the Commodity Futures Trading Commission will testify before Congress Tuesday on one subject and one subject alone: cryptocurrencies. Panic, hype, price swings and an inane rush to tokenize everything may be the impetus for this hearing, but the message we will likely get from the chairmen won’t be apocalyptic. Instead, expect a confident duet: “We got this.” The fact is that federal regulators have been thoughtfully on top of cryptocurrency issues for years. And if more oversight is needed in new digital currency markets, that power would best rest with the federal authorities, rather than with the states.   The SEC has rightly shown that several public sales of new tokens inspired by bitcoin fit the definition of securities issuance and, therefore, should have been registered offerings. They started with a warning shot — a thoughtful investigative report last summer — rather than a fusillade of enforcement actions. They have since followed up with targeted enforcement actions. First against clear scammers, and later against naive entrepreneurs who had real products but a poor understanding of regulation, and with those more innocent cases they have not sought civil monetary penalties. They have also begun an important process of drawing a distinction between “initial coin offerings” that are securities on the one hand, and decentralized cryptocurrencies on the other, which don’t fit the bill and are more suitably regulated as digital commodities such as digital gold (bitcoin), digital fuel (ether), or digital real estate (filecoin/storj).  The CFTC has already classified bitcoin and similar cryptocurrencies as commodities and it has, accordingly, been regulating derivative financial products, such as swaps and futures offerings from several exchanges, such as the CME, CBOE and LedgerX. The CFTC has also been clear that it has the authority to police cryptocurrency spot markets for fraud, market manipulation and insider trading — and investigations are underway.

Lawmaker urges cryptocurrency groups to restrict hate groups -- —Rep. Emanuel Cleaver, D-Mo., sent a letter to two virtual currency associations on Thursday asking them to adopt practices to curb hate groups from using anonymous payment technologies to fund themselves.  Cleaver, a member of the House Financial Services Committee, cited reports that some of the hate groups that surfaced during the violent Charlottesville, Va., “Unite the Right” rally in August are reportedly using cryptocurrencies to fund their operations after getting shut out by other financial services providers.  “I am concerned both that the bitcoin ecosystem may be providing a welcoming environment for the funding of campaigns of hatred and hostility, and that the movement of funds among anonymous white supremacist accounts will be increasingly difficult to monitor,” Cleaver said in the letter to Perianne Boring, founder and president of the Digital Chamber of Commerce, and Brock Pierce, chairman of the Bitcoin Foundation.

U.S. announces takedown of $530 million cyberfraud network  The U.S. charged 36 people in a takedown of an international cybercrime ring that prosecutors say used the slogan “In Fraud We Trust” and stole $530 million with the help of pilfered identities and malware. The Justice Department on Wednesday announced the racketeering conspiracy along with the arrest of 13 people, eight of whom the government will seek to extradite from Australia, the U.K., France, Italy, Kosovo and Serbia. Five members of the group, known as the Infraud Organization, were arrested in the U.S.  “Today’s indictment and arrests mark one of the largest cyberfraud enterprise prosecutions ever undertaken by the Department of Justice,” said acting Assistant Attorney General John Cronan. “Infraud operated like a business to facilitate cyberfraud on a global scale.” Prosecutors in the case, which was unsealed in Nevada, allege that the group was created in October 2010 by Svyatoslav Bondarenko, a Ukranian who sought to create “the premier destination” for purchasing retail items on the internet with counterfeit or stolen credit card information. The group’s members were directed to “vending” websites that served as conduits to traffic in stolen identities and banking information along with malware and other stolen illicit goods, prosecutors said. It also provided an escrow service to facilitate digital currency transactions among its members, according to the government.

Get Ready for Most Cryptocurrencies to Hit Zero, Goldman Says -- The tumble in cryptocurrencies that erased nearly $500 billion of market value over the past month could get a lot worse, according to Goldman Sachs Group Inc.’s global head of investment research. Most digital currencies are unlikely to survive in their current form, and investors should prepare for coins to lose all their value as they’re replaced by a small set of future competitors, Goldman’s Steve Strongin said in a report dated Feb. 5. While he didn’t posit a timeframe for losses in existing coins, he said recent price swings indicated a bubble and that the tendency for different tokens to move in lockstep wasn’t rational for a “few-winners-take-most” market. “The high correlation between the different cryptocurrencies worries me,” Strongin said. “Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.” Today’s digital coins lack long-term staying power because of slow transaction times, security challenges and high maintenance costs, according to Strongin. He said the introduction of regulated Bitcoin futures hasn’t addressed those concerns and he dismissed the idea of a first-mover advantage -- noting that few of Internet bubble’s high fliers survived after the late 1990s. “Are any of today’s cryptocurrencies going to be an Amazon or a Google, or will they end up like many of the now-defunct search engines? Just because we are in a speculative bubble does not mean current prices can’t increase for a handful of survivors,” Strongin said. “At the same time, it probably does mean that most, if not all, will never see their recent peaks again.” Strongin was more upbeat about the blockchain technology that underlies digital currencies, saying it could help improve financial ledgers. But even there he sounded a note of caution, arguing that current technology doesn’t yet offer the speed required for market transactions. 

Fintechs find another untapped market: New immigrants needing credit -- For new immigrants, buying a home or getting a cellphone is complicated and expensive. Even if they have financial identities and wealth in their home countries, they have no credit history in the U.S. It’s a challenge for millions of people, and a handful of fintechs, including Nova Credit, CreditStacks, and Petal, see an opportunity to help with some creative solutions.“When they come over here, they start over,” Misha Esipov, co-founder and chief executive of Nova Credit, said of the new arrivals. “They are a blank slate.”His San Francisco-based startup bills itself as a cross-border credit reporting agency. Its big ambition is to help people move their financial identity with them around the world by selling its product to lenders.Others, like Deserve (formerly SelfScore) and Petal have been hoping to woo immigrants and other thin files with their own credit products, while still others like eCredable are crunching alternative data to help people build up their credit history.  And in January, CreditStacks announced a credit card product aimed at immigrant professionals who want to have a U.S. credit card in hand when they arrive in America.

U.S. consumer protection official puts Equifax probe on ice (Reuters) - Mick Mulvaney, head of the Consumer Financial Protection Bureau, has pulled back from a full-scale probe of how Equifax Inc failed to protect the personal data of millions of consumers, according to people familiar with the matter. Equifax (EFX.N) said in September that hackers stole personal data it had collected on some 143 million Americans. Richard Cordray, then the CFPB director, authorized an investigation that month, said former officials familiar with the probe. But Cordray resigned in November and was replaced by Mulvaney, President Donald Trump’s budget chief. The CFPB effort against Equifax has sputtered since then, said several government and industry sources, raising questions about how Mulvaney will police a data-warehousing industry that has enormous sway over how much consumers pay to borrow money. The CFPB has the tools to examine a data breach like Equifax, said John Czwartacki, a spokesman, but the agency is not permitted to acknowledge an open investigation. “The bureau has the desire, expertise, and know-how in-house to vigorously pursue hypothetical matters such as these,” he said. Three sources say, though, Mulvaney, the new CFPB chief, has not ordered subpoenas against Equifax or sought sworn testimony from executives, routine steps when launching a full-scale probe. Meanwhile the CFPB has shelved plans for on-the-ground tests of how Equifax protects data, an idea backed by Cordray. The CFPB also recently rebuffed bank regulators at the Federal Reserve, Federal Deposit Insurance Corp and Office of the Comptroller of the Currency when they offered to help with on-site exams of credit bureaus, said two sources familiar with the matter. Equifax has said it is under investigation by every state attorney general and faces more than 240 class action lawsuits. The Federal Trade Commission is examining the breach and the company may face financial penalties. The last time the FTC penalized a major credit bureau was in 2012, a $393,000 settlement with Equifax. In contrast, the CFPB fined credit bureaus more than $25 million just last year for over-marketing its monitoring services, which generated monthly fees.

Is CFPB punting on Equifax? It's complicated - A report Monday indicating that the Consumer Financial Protection Bureau is pulling back from a "full-scale probe" of Equifax led to wide-ranging Democratic criticism of the CFPB and revived scrutiny of the credit bureaus. But it is unclear whether the CFPB is abandoning its supervisory oversight of Equifax or just taking a back seat to the Federal Trade Commission as the latter investigates the credit bureau over its massive data breach last year.On Monday, Reuters reported that acting CFPB Director Mick Mulvaney has not ordered subpoenas against Equifax or taken any sworn testimony from its executives. Reuters cited unnamed sources who said the CFPB rebuffed prudential banking regulators that had offered to help with on-site supervisory exams. Yet the story appears more complicated than that. Last year, the FTC took the unusual step of announcing that it was taking the lead in investigating Equifax. Per a prior agreement between the two agencies, to avoid overlapping roles, only one of them is tasked with probing any of the credit reporting giants when it is suspected of potential potential wrongdoing."Equifax is a company that falls into a weird regulatory space," said Kirk Nahra, a partner at the law firm Wiley Rein. "There is no particular need for two agencies to do an investigation. Equifax right now is not in the supervisory space, where you are checking on weaknesses."While a pullback by the CFPB plays into the current narrative that Mulvaney will not push the envelope on enforcement actions, lawyers cautioned that the CFPB likely is coordinating with the FTC and that regulatory oversight of cybersecurity issues is far more nuanced. Lawyers said the FTC issued a civil investigative demand to Equifax last year in coordination with the CFPB, which is why the bureau did not issue its own, separate subpoena.

Equifax misled public on data breach, Warren claims - Equifax's cybersecurity regime was grossly inadequate and the company misled the public about the removal of data from its systems during a hack last summer, according to a report by Sen. Elizabeth Warren. The Massachusetts Democrat released the 15-page report on Wednesday as part of an effort to gain backing for legislation to rein in the credit bureaus. The report claims that hackers removed, rather than simply accessing, the Social Security numbers, addresses and birth dates of 145 million consumers.   "After months of investigation, our office finally learned that hackers exfiltrated — not just accessed — the data of millions of Americans," the report stated. "Rather than just having access to the data, this means the hackers removed the data from the Equifax system and potentially has access to it forever. Equifax failed to make this distinction in any of its public statements, effectively misleading the American people."  The report also alleges that passport numbers were taken in the data breach, though an Equifax spokeswoman, Meredith Griffanti, denied that had occurred. Equifax otherwise declined to comment on the report. Equifax has been harshly criticized for waiting 40 days before notifying consumers and regulators about the data breach, which occurred last year on May 13, but was not reported until Sept. 7.  The Warren report also describes the hardball tactics that Equifax used in protesting an IRS contract to a rival credit bureau, Experian, even after the data breach was disclosed. By filing a protest, Equifax set in motion a 100-day delay that forced the IRS, in the interim, to agree to a $7.2 million "bridge" contract with Equifax.

The Equifax hack could be worse than we thought - CNN - The Equifax breach may have exposed more personal information of customers than previously thought. Additional information, including tax IDs and driver's license details, may have been accessed in a hack that affected 145.5 million customers, according to confidential documents Equifax provided to the Senate Banking Committee seen by CNN.  The disclosure follows Equifax’s original announcement of the breach in September, which compromised sensitive data like names, date of birth, Social Security numbers and home addresses.  In its original announcement of the hack, the company had revealed that some driver's license numbers were exposed. The new documents show that the license state and issue date might have also been compromised.  The new documents now raise questions of how much information hackers may have accessed in Equifax's cyberattack.   Democratic Senator Elizabeth Warren on Friday sent a letter to CEO Paulino do Rego Barros Jr. on the incomplete information provided to Congress following a story in The Wall Street Journal.  "As your company continues to issue incomplete, confusing and contradictory statements and hide information from Congress and the public, it is clear that five months after the breach was publicly announced, Equifax has yet to answer this simple question in full: what was the precise extent of the breach?" Warren wrote in the letter.  In its response to lawmakers, Equifax said the pieces of information compiled is "not exhaustive," but represents common personal information that hackers usually search for.  Criminals can use personal information like this to open bank accounts and lines of credit, like a credit card or mortgage, without the victim's knowledge.  "The more information scammers have about you, the easier it is for them to impersonate you,"  "And the easier it is for them to get by the protocols that banks and others use to make sure they are dealing with the right individual."

OCC's Otting heaps praise on CFPB's Mulvaney - Comptroller of the Currency Joseph Otting met Tuesday with acting Consumer Financial Protection Bureau Director Mick Mulvaney to discuss ways to reduce regulatory burden and coordinate supervision of financial firms. The two banking regulators met for 45 minutes at the CFPB to discuss ways to make the financial system more efficient. The job of regulators "is to help our system fulfill its important role in society by ensuring it operates in a safe and sound manner and treats customers fairly," Otting said in a press release issued by the Office of the Comptroller of the Currency. "But, unnecessary regulatory burden is a waste that places a drag on our entire economy without making the system safer or fairer."  Otting, the former president and CEO of OneWest Bank, in Pasadena, Calif., now part of CIT Group, heaped praise on Mulvaney, who has faced a Democratic backlash for many of his moves and is the target of a legal challenge by Leandra English, the deputy director and former aide to previous Director Richard Cordray, who claims she is the rightful acting director. Otting praised steps by Mulvaney such as halting the CFPB's payday rule as a well as a rule that expands the amount of mortgage data lenders must collect. "Acting Director Mulvaney has helped reduce the burden on the banking system by delaying implementation of his agency’s Home Mortgage Disclosure Act rule, committing to reconsidering its payday lending rule, and deferring action on additional regulations until completing a more thorough review of those matters," Otting said in the release. "I also applaud him for realigning his agency’s mission to the current needs of the nation, making its processes more transparent and fair."

Mulvaney can’t just kill CFPB payday rule, but here’s what he can do --  Banking rules cannot be rewritten overnight, and so acting Consumer Financial Protection Bureau Director Mick Mulvaney has a tall order remaking the payday loan regulation crafted under his predecessor. But observers say Mulvaney has options for altering the rule to the industry's favor.  One option would be to refocus the rule on disclosure requirements, which would be several steps short of a repeal but more amenable to lenders than the current CFPB regulation.  Another option would be for Mulvaney to suspend the current rule while considering changes but prolong the process as long as possible to delay implementation, kicking the can down the road to give lenders a longer reprieve from a rule they abhor.  Mulvaney announced on Jan. 16 that the bureau intended to reconsider the rule, the same day that the first phase of the CFPB rule technically went into effect. The agency noted it also may waive an April 16 registration deadline under the rule. The most substantive requirements do not go into effect until August 2019. The Dodd-Frank Act authorized the CFPB to write payday lending rules, but left the agency plenty of latitude on how to structure such a regulation. Mulvaney could hit the pause button on compliance to give the agency more time to consider changes, thereby delaying any effect on the industry. With 21 months left until the core requirements take effect under the existing rule, which was devised under former Director Richard Cordray, Mulvaney could also begin a new rulemaking process that a new Senate-confirmed director could complete before the 2019 deadline. That lengthy lead time gives the CFPB an opportunity to solicit comments on a new, as-yet-unknown payday plan.

CFPB seeks input on ways to reform enforcement process -- The Consumer Financial Protection Bureau is seeking comment on all aspects of its enforcement processes as the bureau continues to be reshaped under the leadership of acting Director Mick Mulvaney.The CFPB said in a request for information Wednesday that it is seeking public comment "on how best to achieve meaningful burden reduction or other improvement to the processes used by the bureau to enforce federal consumer financial law." The examination of its enforcement policies is part of a comprehensive review of all agency procedures that Mulvaney launched last month. The CFPB specifically is seeking feedback on issues such as coordinating enforcement activity with other federal or state agencies that may have overlapping jurisdiction. Mulvaney discussed this issue on Tuesday with Comptroller of the Currency Joseph Otting.

House clears bill to ease limits on QM points and fees — The House passed a bill Thursday that would loosen regulatory restrictions on the mortgage points and fees charged by lender-affiliated title insurers and other companies.  The Consumer Financial Protection Bureau caps points and fees at 3% for “qualified mortgages” that are in compliance with the agency’s ability-to-repay rule. However, certain real estate-related fees, such as for title insurance or appraisals, do not count toward the cap if they are paid to a company unaffiliated with the lender.  The Mortgage Choice Act, which passed the House 280-131, with support from both sides of the aisle, would exclude certain fees regardless of whether the company is an affiliate or not. It would also exclude insurance premiums that are held in escrow. A similar bill also passed the House in the previous Congress. "By excluding these items from the calculation, it will allow more loans to qualify as QM and open up more credit to potential homebuyers," Rep. Keith Rothfus, R-Pa., said in the House floor debate Wednesday.  Supporters of the bill argue that leaving lender-affiliated companies out of the exemption can increase the cost of the mortgage, even if the loan is QM. That is counter to the intent of the CFPB rules, they say.

What happens to CFPB if Mulvaney becomes Trump's chief of staff?  -- Leadership of the Consumer Financial Protection Bureau was unexpectedly thrown into turmoil Friday with multiple reports that President Trump is considering naming acting Director Mick Mulvaney to replace White House Chief of Staff John Kelly. If that happens, Mulvaney, who is also the head of the Office of Management and Budget, would almost certainly have to give up both of his current jobs.   It would also force President Trump to immediately name a successor at the CFPB or risk having a Democratic appointee take temporary control of the agency.   "Handing the chief of staff job to Mulvaney forces Trump to very quickly approve a new acting CFPB director," said Richard Gottlieb, a partner at Manatt, Phelps & Phelps.  To be sure, Trump's plans are far from certain. According to The New York Times, Trump has been asking friends about the possibility of replacing Kelly with Mulvaney. A spokesman for Mulvaney has said no such conversations have taken place.  If Mulvaney is taken from the CFPB, it could cause complications for the Trump administration.  For one, absent any other action by Trump, Mulvaney's departure would theoretically leave CFPB Deputy Director Leandra English as acting agency head. Under the Dodd-Frank Act, the deputy director automatically becomes acting director in the absence of a CFPB chief.  But the Trump administration would almost certainly move to prevent such an occurrence. English would likely attempt to reverse recent actions by Mulvaney, including reopening the CFPB's rule restricting payday lending.

Lenders to Treasury: Allow alternative to IRS income verification — To prevent a slowdown in mortgage application processing due to problems with the Internal Revenue Service's income verification system, an industry group is urging the Treasury Department to allow lenders and servicers to use an alternative.Problems with the IRS-managed Income Verification Express System, or IVES, have stoked concerns about delayed mortgage closings when volume picks up this spring. The Consumer Mortgage Coalition wants the Treasury Department to allow mortgage lenders to access the National Directory of New Hires that is maintained by the Department of Health and Human Services to compensate for flaws with the IRS verification system. To prevent a slowdown in mortgage application processing due to problems with the Internal Revenue Service's income verification system, an industry group is urging the Treasury Department to allow lenders and servicers to use an alternative. Bloomberg News This proposal would enable qualified mortgage lenders “to pull the current and past year's income information only from the NDNH database and transmit the information in an encrypted format” to Fannie Mae and Freddie Mac's underwriting systems, according to a Jan. 31 letter that Anne Canfield, executive director of the coalition, sent to Treasury Secretary Steven Mnuchin and acting IRS Commissioner David Kautter. "Unlike the IVES system, the NDNH database also has current year income information to the past quarter, so underwriters would be able to verify mortgage applicants' current and past year's income within seconds," Canfield wrote. "We would like to stress that the information pulled from the National Directory of New Hires database would be limited solely to verifying the mortgage applicant's income and only with the consumer's signed consent." Canfield also noted that many people in today's economy have multiple jobs and sources of income.

Housing group lawsuit alleges racial discrimination in REO property preservation - A group led by National Fair Housing Alliance is suing Deutsche Bank, Ocwen Financial Corp., Altisource Portfolio Solutions, and related entities, alleging racial discrimination in their real estate owned property management practices.At issue in the suit are the housing group's longstanding complaints that Deutsche Bank, Ocwen and Altisource violated the Fair Housing Act by keeping properties in predominantly white census block groups in better condition than those in black and Latino areas."Defendants discriminated against communities of color in the exterior maintenance and marketing of properties owned by Deutsche Bank after foreclosure in 30 metropolitan areas," the alliance alleged in the suit, which was filed in a United States District Court in Illinois. A Deutsche Bank representative declined to comment. Representatives for Ocwen and Altisource both said the lawsuit's allegations have no merit. Deutsche Bank is named in the suit because of its role as a mortgage-backed securities trustee and property owner of record following foreclosures. Ocwen is the servicer of the properties in question, while Altisource is a property preservation vendor. Altisource was formerly a division of Ocwen, but is now its own publicly traded company. The alliance filed a similar lawsuit against Fannie Mae in 2016, and the group previously attempted to resolve similar complaints against Fannie, Deutsche Bank and other companies by meeting with them, according to Shanna Smith, president and CEO of NHFA. The group only files lawsuits after other efforts to get the trustee and servicing companies to follow through on basic maintenance of the foreclosure properties fails, she said. The alliance filed a federal housing discrimination complaint against Deutsche Bank in 2014. "We're saying 'mow the lawns and fix the doors,'" said Smith.

MBA Chair Motley urges 'caution' on overhauling servicer compensation - Mortgage servicers should approach efforts to overhaul their compensated structure with caution, as changes to the status quo "could have ripple effects across the entire real estate finance industry," warned Mortgage Bankers Association Chairman David Motley. Servicers typically receive 25 basis points of borrowers' monthly mortgage payments as a fee for managing loan accounts. With enough scale and automation, the cumulative fee revenue from a servicing portfolio can sustain operations. But when delinquencies and defaults soar, as they did during the financial crisis, many servicers found themselves in a cash crunch, particularly as investors and regulators demanded greater levels of loss mitigation and foreclosure timelines grew incredibly lengthy. That's led to calls for an overhaul of how servicers get paid, with many calling for a "fee for service" model where servicers would receive a base fee (though perhaps smaller than they receive now) to manage performing loan accounts, plus add-on fees to compensate servicers for the additional work involved when a borrower falls behind or defaults.  "I suggest we be very cautious here. There is a lot to consider," Motley said during a speech at the MBA's Servicing Conference, ongoing this week in Dallas. "What is the right amount of servicing fee? Do you set the amount now and have it adjust with some index? How do you estimate what future costs there might be?"  "This is a very complicated topic and one for which we need to be very thoughtful and deliberate after having received a lot of input from the entire industry — originators, servicers, guarantors and investors," he added.

FHFA extends comment period on credit scoring changes— The Federal Housing Finance Agency said Friday it will give commenters more time to weigh in on a potential update to the credit scoring requirements for Fannie Mae and Freddie Mac.  The deadline was extended by a little over a month, from Feb. 20 to March 30, for stakeholders to respond to the agency’s request for input on updating the credit scoring model.  Since 2003, the government-sponsored enterprises Fannie and Freddie have used the Classic FICO score, also known as FICO 5. The FHFA has sought industry feedback on whether an updated model should use the new Fair Isaac Corp. score — FICO 9 — or VantageScore 3.0, or both. VantageScore is a joint venture owned by the three credit bureaus, Equifax, Experian and TransUnion.  Industry sources had indicated that the GSE regulator was likely to extend the comment period. Among the questions the FHFA asked in its Dec. 20 request for input was what scoring options it should adopt.  “FHFA will consider all information that is provided in response to the RFI, along with supporting analysis and outreach, before reaching any conclusion,” the agency said in its Dec. 20 request. “After FHFA has reached a decision, the Enterprises will work with stakeholders on an implementation plan that will take into account the potentially substantial effort needed to make necessary changes.”

How FHFA could reform housing finance if Congress doesn't  — If Congress can’t get a housing finance reform bill passed by the midterm elections, the Trump administration and Federal Housing Finance Agency may chart a future for Fannie Mae and Freddie Mac without lawmakers’ input.   As conservator, FHFA Director Mel Watt has substantial leeway to remake the government-sponsored enterprises.   The Housing and Economic Reform Act of 2008 gives the FHFA "almost unlimited authority over what it can do to Fannie, Freddie, creditors and shareholders in extremis,” according to a report by Federal Financial Analytics. The report details how the FHFA could move forward on GSE reform on its own. While Treasury would have input on the future state of the enterprise, significant authority resides with Watt, whose term expires in January 2019. That gives him added incentive to act before he can be replaced by the White House.

Wells Fargo Loses Top US Mortgage Lender Title To Quicken Loans -- Mortgage lending has long been a "bread and butter" business for Wells Fargo, Warren Buffett's favorite bank. But between the months of September and December - while the bank's PR department was busy fending off another incipient scandal - demand for the bank's loans declined to its weakest level since the financial crisis. While we initially pegged this as a sign that the average US consumer can't afford to take out a loan with interest rates just 1% higher. But as the CEO of Quicken Loans revealed today during a conversation with Crain's Detroit Business, another factor might also be at play.Sales figures released by Quicken show that it surpassed Wells Fargo in volume of mortgage originations during the fourth quarter of 2017, bolstering the lender's claim that it is a viable alternative to the banks that have traditionally dominated the business (and also leveraged it to blow up the US economy a decade ago).Quicken revealed that it originated $25 billion in home loans during the quarter, compared with Wells Fargo's $23 billion in home mortgages. Wells is the country's leading bank in home mortgages; Bank of America and JP Morgan Chase & Co. reported $13 billion and $11 billion that quarter, respectively. "I don't think we set out to close $25 billion - we just set out to do what we always do, which is take care of our clients and take care of our team members," Quicken Loans CEO Jay Farner said Thursday in an interview with Crain's. Still, Farner disclosed that Wells' $114 billion in loans for 2017 surpassed the Quickens' full-year total. Quicken, which was founded by billionaire Dan Gilbert, is privately held, and doesn't disclose its annual earnings.

MBA: Mortgage Delinquency Rate increases in Q4 mostly due to Hurricanes -- From the MBA: Mortgage Delinquency Rate Up in 4th Quarter; Hurricanes Drive Up 60-Day and 90-Day Delinquencies The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 5.17 percent of all loans outstanding at the end of the fourth quarter of 2017. The delinquency rate was up 29 basis points from the previous quarter, and was 37 basis points higher than one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.25 percent, unchanged from the previous quarter, and three basis points lower than one year ago. Mortgage delinquencies increased across all loan types – FHA, VA and conventional – on a seasonally-adjusted basis. The 30-day delinquency rate actually dropped by 15 basis points in the fourth quarter of 2017, as homeowners affected by Hurricanes Harvey, Irma and Maria either became current on their payments or moved to later stages of delinquency,” according to Marina Walsh, MBA’s Vice President of Industry Analysis. “However, while the earliest-stage delinquency rate dropped, the 60-day and 90-day delinquency rates did increase in the fourth quarter of 2017. Despite the hurricanes and these quarter-over-quarter results, most states are seeing overall mortgage delinquency rates at lower levels than a year ago.” “The FHA overall delinquency rate in the fourth quarter of 2017 is higher compared to the fourth quarter of 2016 in all but three states. FHA borrowers appear to be impacted not only by the storms but other factors that could be stretching their ability to make payments,” Walsh continued. “Regardless of the hurricanes, an increase in delinquencies - particularly FHA delinquencies - off historic lows is not particularly surprising given the seasoning of the loan portfolio, expected higher interest rates, declining average credit scores on new FHA endorsements since 2014 and rising debt-to-income ratios.”  “Storm-related foreclosure moratoria continue to play a large factor in keeping foreclosure starts at bay, as the fourth quarter saw little movement in either foreclosure starts, or foreclosure inventory. As forbearance periods expire, an increase in the percent of loans in foreclosure is likely. We anticipate it will be several more quarters before the effects of the September hurricanes on the survey results dissipate, especially given extended forbearance periods.”  This graph shows the percent of loans delinquent by days past due.

Black Knight Mortgage Monitor: '“Hurricane Effect” Aside, Mortgage Performance Continued to Improve in 2017' -- Black Knight released their Mortgage Monitor report for December today. According to Black Knight, 4.71% of mortgages were delinquent in December, up from 4.42% in December 2016. The increase was primarily due to the hurricanes. Black Knight also reported that 0.65% of mortgages were in the foreclosure process, down from 0.95% a year ago.This gives a total of 5.36% delinquent or in foreclosure. Press Release: Black Knight’s Mortgage Monitor: “Hurricane Effect” Aside, Mortgage Performance Continued to Improve in 2017; Foreclosure Starts, Completions at 17-Year Lows Black Knight’s examination of year-end trends in mortgage performance found that – as expected – the year’s multiple major hurricanes have left lasting effects. However, as Black Knight Data & Analytics Executive Vice President Ben Graboske explained, when taking the storms’ impacts into consideration, 2017 continued a long-term trend of improvement for the market. “Hurricanes Harvey and Irma significantly impacted 2017 mortgage performance metrics,” said Graboske. “Overall, there were approximately 164,000 more past-due loans at the end of 2017 than the year before, pushing the national delinquency rate to a 23-month high. When Black Knight isolated non-hurricane-impacted areas – which represent 90 percent of the entire active U.S. mortgage universe – we see the national delinquency rate actually fell to 11 percent below long-term norms. Likewise, the 90-day delinquency rate was also up six percent from last year, with roughly a third more seriously delinquent loans than we'd expect in a healthy market. Excluding the hurricane impact, though, we see that there were 84,000 fewer loans 90 or more days past due than last year; a 14 percent reduction. The national non-current rate – which tracks all loans 30 or more days past due or in active foreclosure – edged down slightly from 2016, even including the effects of the storms. Isolating those non-hurricane areas, though, we see that the total number of past-due mortgages fell by more than 140,000 – which brought the non-current rate in these areas down 10 percent below long-term norms.

 Stock market pandemonium drives up mortgage rates - Mortgage rates hit their highest mark since December 2016 as bond yields were affected by the roller coaster stock market, according to Freddie Mac. The 30-year fixed-rate mortgage averaged 4.32% for the week ending Feb. 8, up from last week when it averaged 4.22%. A year ago at this time, the 30-year fixed-rate mortgage averaged 4.17%. "The U.S. weekly average 30-year fixed mortgage rate rocketed up 10 basis points this week. Following a turbulent Monday, financial markets settled down with the 10-year Treasury yield resuming its upward march. Mortgage rates have followed. The 30-year fixed mortgage rate is up 33 basis points since the start of the year," Len Kiefer, Freddie Mac's deputy chief economist, said in a press release. "Will higher rates break housing market momentum? It's too early to tell for sure, but initial readings indicate housing markets are sustaining their momentum so far. The MBA reported that purchase applications are up 8% from a year ago in their latest Weekly Mortgage Applications Survey."The 15-year fixed-rate mortgage this week averaged 3.77%, up from last week when it averaged 3.68%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.39%.The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.57% this week with an average 0.4 point, up from last week when it averaged 3.53%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.21%.

CoreLogic: House Prices up 6.6% Year-over-year in December -  The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA). From CoreLogic: CoreLogic Reports December Home Prices Up More Than 6 Percent Year-Over-Year for Fifth Consecutive MonthCoreLogic® ... today released its CoreLogic Home Price Index (HPI™) and HPI Forecast™ for December 2017, which shows home prices are up both year over year and month over month. Home prices nationally increased year over year by 6.6 percent from December 2016 to December 2017, and on a month-over-month basis home prices increased by 0.5 percent in December 2017 compared with November 2017, according to the CoreLogic HPI.Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 4.3 percent on a year-over-year basis from December 2017 to December 2018, and on a month-over-month basis home prices are expected to decrease by 0.4 percent from December 2017 to January 2018. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.“The number of homes for sale has remained very low,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Job growth lowered the unemployment rate to 4.1 percent by year’s end, the lowest level in 17 years. Rising income and consumer confidence has increased the number of prospective homebuyers. The net result of rising demand and limited for-sale inventory is a continued appreciation in home prices.” Note: The YoY increase has been in the 5% to 7% range for the last couple of years.  This is towards the top end of that range. The year-over-year comparison has been positive for almost six consecutive years since turning positive year-over-year in February 2012.

MBA: Mortgage Applications Increase Slightly in Latest Weekly Survey - From the MBA: Mortgage Applications Slightly Increase in Latest MBA Weekly Survey: Mortgage applications increased 0.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 2, 2018. .. The Refinance Index increased 1 percent from the previous week. The seasonally adjusted Purchase Index remained unchanged from one week earlier. The unadjustedPurchase Index increased 7 percent compared with the previous week and was 8 percent higher than the same week one year ago. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since April 2014, 4.50 percent, from 4.41 percent, with points increasing to 0.57 from 0.56 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990.

 "It's Just Not The Same" - People Are Fleeing The Bay Area At The Fastest Rate In Years -- As the avalanche of tech money dramatically inflates the value of even sub-par housing stock - and the state's Democratic political hegemony has seven some Republicans in the state's more rural counties rooting for a breakup - residents of the Bay Area are taking off for more affordable areas where they can more comfortably mesh with the local culture.As CBS San Francisco reported, the number of people packing up and leaving the Bay Area has reached its highest level in more than a decade. And fo the first time in ages, the number of people leaving are outnumbering the people coming in.   The exodus has gotten so severe, that a San Jose-based U-Haul company business says one of the biggest problems is getting its rental moving vans back because so many are on a one-way ticket out of town. Carole Dabak spent 40 years living in San Jose and now she’s part of the mass exodus that is showing no signs of slowing down.  Dabak cites crowding, crime and politics as the reasons for her own exodus. Another departing resident, Russell Hancock who works with Joint Ventures Silicon Valley (JVSV), said even professionals can't afford a home in the Bay Area - let alone service workers.  JVSV's own study of the out-migration says workers are moving to Sacramento, Austin, and Portland for a number of reasons. But the number one reason is the lack of housing.  One woman who spoke with CBS says she plans to sell her home for about $1 million, buy a much larger place near Nashville for less than half the price, and live closer to family and friends.  Of course, in a city where couples making $138,000 qualify for subsidized "affordable housing" - and are willing to attend countless meetings and wait hours in line to enter their names into lotteries with little chance of success - none of this should be surprising.

The Michigan town where only Christians are allowed to buy houses -- Tucked away in Michigan’s Lower Peninsula, somewhere along the winding roads that hug Great Lakes shores, is an idyllic town named Bay View. For more than a century, generations of “Bay Viewers” have congregated here to share in summer activities. What started out as a modest camping ground for Methodist families 140 years ago has quietly developed into a stunning vacation spot for people who can afford the upkeep of a second home. Streets named Moss, Fern and Maple are dotted with impeccably maintained century-old gingerbread cottages. Over the horizon, residents can watch lifelong friends sail their boats across the water. But this paradise is not open to all. In Bay View, only practicing Christians are allowed to buy houses, or even inherit them. Prospective homeowners, according to a bylaw introduced in 1947 and strengthened in 1986, are required to produce evidence of their faith by providing among other things a letter from a Christian minister testifying to their active participation in a church. Last summer, a dozen current and former resident members filed a federal lawsuit against the town, its ruling Bay View Association and a real estate company, claiming the Christian litmus test was illegal and unconstitutional. Is Bay View a religious community simply seeking to practice its own beliefs, in peace, as it has always desired? Or is it, as the lawsuit claims, a community in clear violation of constitutional, civil and religious rights – to say nothing of federal housing rights? 

There Are 2 Vacant Investor-Owned Homes for Every Homeless Person in America - The difference between the greed of the wealthy and the precariousness of American workers is painfully stark when looking at vacant homes.2016 figures from ATTOM Data Solutions — which publishes comprehensive housing data — show that wealthy investors are buying up more and more real estate as a moneymaking venture while housing prices and homelessness continue to skyrocket across America.According to ATTOM, 76 percent of all vacant homes in America are owned by investors — amounting to approximately 1.1 million vacant residential investment properties. Many of these vacant homes are in economically distressed Rust Belt cities with high poverty rates, like Detroit, Michigan, neighboring Flint, and Youngstown, Ohio. The states with the highest investment property vacancy rate also have high poverty rates. Michigan leads the pack with 10.3 percent vacancy, Indiana at 9.8 percent, Alabama at 6.9 percent, and Mississippi at 6.6 percent.Meanwhile, in December of 2017, the Associated Press reported that homelessness increased in America for the first time since 2010 — the height of the Great Recession. 2017 data from the U.S. Department of Housing and Urban Development showed that local counts of homeless Americans reached approximately 554,000 nationwide, which is a 1 percent increase from 2016 (and roughly half of the number of vacant residential investment properties in America today). Approximately one-third of those counted as homeless had no access to nightly shelters and were sleeping on streets, and in vehicles and tents. 2017 was also a record-high year for rent prices, according to housing figures from Zillow. Tenants across America paid landlords an estimated $485.6 billion, with more than $100 billion of that coming from just the New York/New Jersey market, the Los Angeles/Long Beach/Anaheim market, and the Chicago market. Approximately 97,000 of America’s homeless persons are in New York City (63,169 homeless) and Los Angeles (34,000 homeless). Cities like San Jose, California and Denver, Colorado are seeing double-digit rent increases on average each year, according to Forbes.

Leading Index for Commercial Real Estate "Falls" in January -- Note: This index is possibly a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing. From Dodge Data Analytics: The Dodge Momentum Index Falls as Year Begins The Dodge Momentum Index dropped 5.1% in January to 143.7 (2000=100) from the revised December reading of 151.5. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The commercial component of the Momentum Index was 7.8% lower in the month, while the institutional component was down 0.9%. The fourth quarter of 2017 was particularly strong for the Momentum Index, and January’s retreat returns it to a more sustainable level. On a year-over-year basis, the Momentum Index is 7.7% higher, with both the commercial and institutional components showing growth over January 2017. This suggests that nonresidential building construction should continue to post moderate gains in 2018.This graph shows the Dodge Momentum Index since 2002. The index was at 143.7 in January, down from 151.1 in December.The index is up 7.7% year-over-year. According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further growth in 2018.

U.S. Courts: Bankruptcy Filings Decline Slightly in 2017, Lowest since 2006 -- From the U.S. Courts: Bankruptcy Filings Fall 0.7% – Smallest 12-Month Decline Since 2010 Bankruptcy filings in the 12-month period ending December 31, 2017, fell just 0.7 percent, compared with bankruptcy cases filed in calendar year 2016. According to newly released data, 789,020 cases were filed in 2017, compared with 794,960 in the previous year.  The percentage decline is the smallest for a 12-month period since bankruptcy filings reached a peak in 2010. The number of bankruptcy filings is the lowest for any calendar year since 2006, and the seventh consecutive calendar year that filings have fallen. This graph shows the business and non-business bankruptcy filings by calendar year since 2001.The sharp decline in 2006 was due to the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". (a good example of Orwellian named legislation since this was more a "Lender Protection Act"). Other than 2006, this was the lowest level for filings since 1995. This is another indicator of an economy that has mostly recovered from the housing bust and financial crisis.

Credit Card, Student And Auto Debt All Hit Record Highs In December -- The US consumer closed out 2017 with a credit bang. While we reported last month that in November US credit card debt had just surpassed the previous all time high hit in July 2008 just before all hell broke loose when Lehman filed for bankruptcy two months later, there was a slight chance that in December this number had declined after the record surge in November credit-funded spending (which was just revised from $28BN to $31BN). Well, that did not happen, and while December total consumer credit increased by less than the expected $20BN, it was still an impressive $18.45BN, of which $5.1billion was credit card debt and $13.3 billion non-revolving - or student and auto - loans. More importantly, with the latest $5.1 billion increase in revolving, or credit card, debt the total is now $1.027.9 trillion, the highest number on record. Meanwhile, non-revolving credit which with the exception of one definition change month, has never gone down, also hit a new all time high of $2.813 trillion, a monthly increase of $13.34 billion. What about its components? Well, with everything else going for record highs, we doubt it will be a surprise to anyone that both student debt and auto loans hit a new all time high in the quarter ending December 2017, with $1.491 trillion for the former, and $1.11 trillion for the latter. So for anyone still wondering why the US economy closed 2017 with an upward GDP burst, here is your answer. The problem is that with the personal savings rate just shy of all time lows... ... and with US consumers deep in the red on their household debt, just what will keep the US economic expansion going from this point on is far less clear, especially if the stock market has now peaked, as recent events suggest.

Update: Framing Lumber Prices Up Sharply Year-over-year, At Record Prices -- Here is another update on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs - and now prices are above the bubble highs.This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through early February 2018 (via NAHB), and 2) CME framing futures. Right now Random Lengths prices are up 31% from a year ago, and CME futures are up about 39% year-over-year.There is a seasonal pattern for lumber prices. Prices frequently peak around May, and bottom around October or November - although there is quite a bit of seasonal variability. Rising costs - both material and labor - will be headwinds for the building industry this year.

US Gasoline Prices Up, Diesel Price Soars -  U.S. retail gasoline prices rose last week to a national average of $2.60, up two cents from the prior week, and diesel fuel hit $3.00 a gallon, the highest level in nearly four months. Month over month, the price rose 11 cents and is more than 33 cents a gallon higher year over year. Last month the national average was $2.49, while the year-ago average was $2.27. Barring a major surprise in Wednesday’s inventory report from the U.S. Energy Information Administration’s (EIA) weekly report, the national average may stabilize because gasoline prices in most parts of the country have caught up with higher crude oil prices. Add to that a likely price cut to gasoline as refiners empty their tanks to prepare for the production of summer-grade fuel. Crude oil inventories have fallen by more than 76 million barrels over the past 12 months, largely due to stronger demand. Refinery utilization dipped again last week from 91% in the prior week to 88%. Gasoline inventories fell by 2 million barrels last week, now down about 6 million barrels over the past 12 months.  Patrick DeHaan, head of petroleum analysis at GasBuddy, said: High oil prices continue to push gasoline prices to territory that Americans haven’t seen for years, aside from Hurricane Harvey last September. While oil production in the U.S. reaches highs not seen since the 1970’s, OPEC’s production cuts for the last year have weighed heavily on global inventories, mitigating any small rise in U.S. production. And the damage could get even worse with refinery maintenance season and the transition to summer gasoline on the horizon. This has been a storm brewing since the Obama administration legalized oil exports and OPEC decided to forgo market share to tighten global supply. All of this and more will lead to average gas prices being 25-50 cents per gallon higher by Memorial Day.

AAR: Rail Carloads Declined YoY, "Best January Ever" for Intermodal - From the Association of American Railroads (AAR) Rail Time Indicators.   January wasn’t the best start of the year in terms of volume that railroads could hope for, but there’s certainly no reason to panic yet either. Total U.S. carloads were down 3.4%, or 42,431 carloads, in January 2018 from January 2017. The overall decrease was due largely to declines for coal (down 5.8%, or 25,083 carloads), motor vehicles and parts (down 10.1%, or 8,372 carloads), and grain (down 5.8%, or 6,917 carloads). ... Intermodal picked up where it left off last year (when it set a new annual record) with volume in January 2018 up 3.5%, or 44,183 containers and trailers, over January 2017 and marking the best January for intermodal in history. Winter weather negatively impacted rail traffic in January in many areas, but it’s impossible to precisely calculate how much, if any, of January’s decline is weather related.  This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Light blue is 2018.  Rail carloads have been weak over the last decade due to the decline in coal shipments.U.S. railroads originated 1,217,405 carloads in January 2018, down 3.4% (42,431 carloads) from January 2017. It’s the sixth year-over-year monthly decline in the past seven months and the largest percentage decline. Total carloads averaged 243,481 per week in January 2018; since 1988, when our U.S. data begin, only 2016 had a lower weekly average in January. This year, extreme cold and blizzards negatively impacted carloads in January in many parts of the country, though to be fair winter weather is a problem most years. It’s not possible to precisely determine how much of January’s decline might be attributable to the weather.  The second graph is for intermodal traffic (using intermodal or shipping containers): Following up on a record-setting 2017, 2018 started well for intermodal. Volume in January 2018 was 1.31 million containers and trailers, up 3.5%, or 44,183 units, over January 2017. Average weekly volume in January 2018 was 262,028 units, the most for a January in history.

December Trade Deficit at $53.12B, Up 5.3% MoM -- The U.S. International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with data going back to 1992. The monthly reports include revisions that go back several months. This report details U.S. exports and imports of goods and services.  Here is an excerpt from the latest report:The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $53.1 billion in December, up $2.7 billion from $50.4 billion in November, revised. December exports were $203.4 billion, $3.5 billion more than November exports. December imports were $256.5 billion, $6.2 billion more than November imports.The December increase in the goods and services deficit reflected an increase in the goods deficit of $2.6 billion to $73.3 billion and a decrease in the services surplus of $0.1 billion to $20.2 billion.For 2017, the goods and services deficit increased $61.2 billion, or 12.1 percent, from 2016. Exports increased $121.2 billion or 5.5 percent. Imports increased $182.5 billion or 6.7 percent. Today's headline number of -53.12B was worse than the Investing.com forecast of -52.10B. Revisions were made going back to January 2017. This series tends to be extremely volatile, so we include a six-month moving average.

Trade Deficit at $53.1 Billion in December -- From the Department of Commerce reported:The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $53.1 billion in December, up $2.7 billion from $50.4 billion in November, revised. December exports were $203.4 billion, $3.5 billion more than November exports. December imports were $256.5 billion, $6.2 billion more than November imports.Both exports and imports increased in December.Exports are 23% above the pre-recession peak and up 7% compared to December 2016; imports are 10% above the pre-recession peak, and up 10% compared to December 2016.Trade has been picking up. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $52.10 in December, up from $50.10 in November, and up from $41.40 in December 2016. The petroleum deficit had been declining for years (although the petroleum deficit has been fairly steady for the last few years) this is the major reason the overall deficit has mostly moved sideways since early 2012 - although the overall deficit is increasing again.  The trade deficit with China increased to $30.8 billion in December, from $27.7 billion in December 2016

Q4 GDP Hopes Fade As US Trade Deficit Hits Widest Since Oct 2008 - Hopes for a resurgent Q4 GDP may be stymied as the US trade balance dropped to a new post-Trump wide deficit in December of -$53.1bn (worse than expected $52.1bn) as trade imbalances with Europe and China both worsened. December also brings the annual revision and final data for 2017. For 2017, the goods and services deficit was $566.0 billion, up $61.2 billion from $504.8 billion in 2016. Exports were $2,329.3 billion in 2017, up $121.2 billion from 2016. Imports were $2,895.3 billion in 2017, up $182.5 billion from 2016. And finally, the trade deficit excluding petroleum at $49.84b in December - the widest trade deficit ever. Full Breakdown: Exports of goods and services increased $3.5 billion, or 1.8 percent, in December to $203.4 billion. Exports of goods increased $3.4 billion and exports of services increased $0.1 billion. The increase in exports of goods mostly reflected increases in industrial supplies and materials ($1.5 billion) and in capital goods ($1.2 billion). The increase in exports of services mostly reflected increases in travel (for all purposes including education) ($0.1 billion) and in maintenance and repair Imports Imports of goods and services increased $6.2 billion, or 2.5 percent, in December to $256.5 billion. Imports of goods increased $6.0 billion and imports of services increased $0.3 billion. The increase in imports of goods mostly reflected increases in consumer goods ($3.2 billion), in automotive vehicles, parts, and engines ($1.1 billion), and in capital goods ($0.8 billion). The increase in imports of services mostly reflected increases in travel (for all purposes including education) ($0.2 billion) and in charges for the use of intellectual property ($0.1 billion). The December figures show surpluses, in billions of dollars, with South and Central America ($3.7), Hong Kong ($2.5), Brazil ($1.1), Singapore ($0.9), and United Kingdom ($0.3). Deficits were recorded, in billions of dollars, with China ($34.0), European Union ($17.2), Mexico ($6.1), Germany ($5.7), Japan ($5.5), Italy ($3.7), South Korea ($2.1), India ($2.1), France ($2.1), Taiwan ($1.6), Canada ($1.4), Saudi Arabia ($0.6), and OPEC ($0.5). The deficit with the European Union increased $3.8 billion to $17.2 billion in December. Exports increased $1.2 billion to $25.1 billion and imports increased $4.9 billion to $42.3 billion. The deficit with China increased $0.6 billion to $34.0 billion in December. Exports increased $1.1 billion to $11.9 billion and imports increased $1.7 billion to $45.9 billion.

US wholesale inventories for December revised higher (Reuters) - U.S. wholesale inventories rose more than initially estimated in December, helped by a sturdy rise in auto stocks. The Commerce Department said on Friday that wholesale inventories rose 0.4 percent after a revised 0.6 percent rise in November. The department reported last month that wholesale inventories rose 0.2 percent in December. Auto inventories rose 1.7 percent after increasing 0.9 percent in November. The component of wholesale inventories that goes into the calculation of gross domestic product - wholesale inventories excluding auto stocks - rose 0.2 percent in December. U.S. financial markets were little moved by the data. Inventory investment cut 0.67 percentage point from GDP growth in the fourth quarter, according to the government’s advance estimate released last month. GDP grew 2.6 percent in the October-December quarter. Sales at wholesalers rose 1.2 percent in December after gaining 1.9 percent in November. Inventories in December were up 3.4 percent from the year-earlier period, while sales jumped 9.1 percent. At December’s sales pace it would take wholesalers 1.22 months to deplete stocks, compared with 1.23 in November. The inventories-to-sales ratio for motor vehicles rose to 1.72 in December from 1.69 in the prior month. 

ISM Non-Manufacturing Index increased to 59.9% in January -- The January ISM Non-manufacturing index was at 59.9%, up from 56.0% in December. The employment index increased in January to 61.6%, from 56.3%. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management: January 2018 Non-Manufacturing ISM Report On Business® "The NMI® registered 59.9 percent, which is 3.9 percentage points higher than the seasonally adjusted December reading of 56 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 59.8 percent, 2 percentage points higher than the seasonally adjusted December reading of 57.8 percent, reflecting growth for the 102nd consecutive month, at a faster rate in January. The New Orders Index registered 62.7 percent, 8.2 percentage points higher than the seasonally adjusted reading of 54.5 percent in December. The Employment Index increased 5.3 percentage points in January to 61.6 percent from the seasonally adjusted December reading of 56.3 percent. The Prices Index increased by 2 percentage points from the seasonally adjusted December reading of 59.9 percent to 61.9 percent, indicating that prices increased in January for the 23rd consecutive month.

ISM Non-Manufacturing: Continued Growth in January -- The Institute of Supply Management (ISM) has now released the January Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 59.9 percent, up 3.9 from 56.0 last month. Today's number came in below the Investing.com forecast of 56.5 percent. Annual revisions were made.Here is the report summary:"The NMI® registered 59.9 percent, which is 3.9 percentage points higher than the seasonally adjusted December reading of 56 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 59.8 percent, 2 percentage points higher than the seasonally adjusted December reading of 57.8 percent, reflecting growth for the 102nd consecutive month, at a faster rate in January. The New Orders Index registered 62.7 percent, 8.2 percentage points higher than the seasonally adjusted reading of 54.5 percent in December. The Employment Index increased 5.3 percentage points in January to 61.6 percent from the seasonally adjusted December reading of 56.3 percent. The Prices Index increased by 2 percentage points from the seasonally adjusted December reading of 59.9 percent to 61.9 percent, indicating that prices increased in January for the 23rd consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth. The non-manufacturing sector reflected strong growth in January after two consecutive months of pullback. Overall, the majority of respondents’ comments are positive about business conditions and the economy. They also indicated that recent tax changes have had a positive impact on their respective businesses." [Source] Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

Markit Services PMI: Growth Eases in January -- The January US Services Purchasing Managers' Index conducted by Markit came in at 53.3 percent, down 0.4 from the final December estimate of 53.7. The Investing.com consensus was for 53.5 percent. Markit's Services PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release:January survey data indicated a solid rise in U.S. service sector business activity, though the rate of growth eased for a third month running to reach a nine-month low. That said, new business continued to expand strongly, with the upturn accelerating to the fastest since last September.The seasonally adjusted final IHS Markit U.S. Services Business Activity Index registered 53.3 in January, down from 53.7 in December. The latest index reading signalled a solid expansion in business activity among service providers, albeit the slowest since April 2017. Anecdotal evidence linked the latest upturn to more favourable economic conditions. [Press Release] Here is a snapshot of the series since mid-2012.

Employment: January Diffusion Indexes -- The BLS diffusion index for total private employment was at 57.9 in January, down from 65.5 in December. For manufacturing, the diffusion index was at 53.9, down from 60.5 in December. Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.  Above 60 is very good.  From the BLS: Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.  Overall both total private and manufacturing job growth was fairly widespread in January.

Jobless claims make another record low - One reason not to get excited about the last week's stock market swoon is that it isn't being confirmed by any other short term leading indicators.  Most significantly, jobless claims. The 4 week moving average of new jobless claims has fallen below 225,000. This is yet another 40 year record low. In fact, with the exception of six weeks in the early 1970s, it's a new 50 year low. And adjusted for population growth, it is a new all-time low.    As a practical matter, virtually nobody is getting laid off.  This is not an economy that is about to roll over.

BLS: Job Openings "Little changed" in December - From the BLS: Job Openings and Labor Turnover Summary The number of job openings was little changed at 5.8 million on the last business day of December, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were little changed at 5.5 million and 5.2 million, respectively. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.2 percent and 1.1 percent, respectively. ... The number of quits was little changed at 3.3 million in December. The quits rate was 2.2 percent. The number of quits was little changed for total private and for government. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS. This series started in December 2000. Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for December, the most recent employment report was for January. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.Jobs openings decreased in December to 5.811 million from 5.978 in November.The number of job openings (yellow) are up 4.9% year-over-year.Quits are up 5.6% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). Job openings are mostly moving sideways at a high level, and quits are increasing year-over-year.  This is a solid report.

Job Openings Continue To Decline, Confirming Labor Market Slowdown - After a burst of record high job openings which started in June of last year and declined in the fall, today's December JOLTS report  - the favorite labor market indicator of now former Fed chair Yellen - showed another modest drop in job openings across most categories as the year wound down, with the total number declining from an upward revised 5.978MM to 5.8113MM, below the 5.950MM consensus estimate, the lowest print since May. After the recent breakout, which started with the near record 414K monthly spike in job openings in June after years of being rangebound between 5.5 and 6 million, the latest job opening prints suggests that increasingly more vacant jobs are getting filled, although it is unclear if that is due to higher wages or looser employer standards. In any case, the fact that job openings is dropping is likely another modest negative for future wage growth. The number of job openings was little changed for total private and for government. Job openings increased in information (+33,000) and federal government (+13,000), however job openings decreased in a number of industries with the largest decreases occurring in professional and business services (-119,000), retail trade (-85,000), and construction (-52,000). The number of job openings was little changed in all four regions. Now if only employers could find potential employees that can pass their drug tests... It wasn't just job openings that declined: total hires declined as well, although more modestly, dropping from a near record 5.493 million in November to 5.488 million in December. This is roughly the same as the May print of 5.472 million. The other closely watched category, the level of quits - which indicates workers' confidence they can leverage their existing skills and find a better paying job - reversed last month's decrease, and in December increased modestly from 3.161MM to 3.259MM, suggesting workers were feeling more confident about demand for their job skills than the previous month. The number of quits was little changed at 3.3 million in December. The quits rate was 2.2 percent. The number of quits was little changed for total private and for government. Quits decreased in federal government (-4,000). The number of quits increased in the Midwest region. And with a total 5.2 million separations (a 3.6% rate), this means that there were 1.6 million layoffs and discharges in December, virtually unchanged from November.The number of layoffs and discharges was little changed for total private and for government. Layoffs and discharges increased in state and local government education (+15,000). The number of layoffs and discharges was little changed in all four regions.

Tax bill beginning to deliver bigger paychecks to workers - The contentious tax overhaul is beginning to deliver a change that many will welcome — bigger paychecks. Workers are starting to see more take-home pay as employers implement the new withholding guidelines from the IRS, which dictate how much employers withhold from pay for federal taxes. Those whose checks have remained the same shouldn't fret — employers have until Feb. 15 to make the changes. Treasury Secretary Steven Mnuchin has estimated that the new rules will mean more take-home pay for about 90 percent of American workers. How much extra cash? It depends on several factors, such as workers' income, how often they are paid and the number of withholdings allowances they claim on their IRS Form W-4 with their employer. Those whose employers were quick to make the change welcomed the extra money — anywhere from a few dollars to a few hundred dollars. Wayne Love, who works in managed care in Spring Hill, Florida, got an extra $200 in his paycheck last week, which he said will help offset a $300 increase in the cost of his health insurance. "I have heard time and again that the middle class is getting crumbs, but I'll take it!" Love said by email. Julia Ketchum, a secretary at a public high school in Lancaster, Pennsylvania, said she was pleasantly surprised her pay went up $1.50 a week. She didn't think her pay would go up at all, let alone this soon. 

Links, High vs. Low Wages --Jared Bernstein -- The stock market opened way down, continuing last Friday’s selloff, though it has climbed back since the open–implying the return of volatility–as skittish investors continue to fear the sequence I describe in this AM’sWaPo: tight labor market, wage pressures, higher interest rates, inflation, lower profit margins. Underneath these swings is an unsustainable, inequitable economic model with serious political implications. BTW, in discussing last Friday’s 2.9% wage pop–which I tried to put in perspective here (Don’t Fear Wage Growth! Embrace It!)–many of us noted that the wage gains of the 80% of the workforce that’s blue-collar production workers or non-mangers in service jobs went up only 2.4% (call this the PNS wage, for production, non-supervisory). Well, given that we know the average private sector wage, the PNS wage, as well as PNS employment, we can back out the white-collar (WC) wage. (Caveat: I once asked BLS is they viewed this as kosher and they didn’t say ‘yes.’ Nor did they say ‘no’ or explain why not. At any rate, it’s gotta be ballpark, I think.)Over the past year, here are the three rates of nominal wage growth:

All: 2.9%
PNS: 2.4%
WC: 3.9%

It’s a noisy series and I’d want to see other evidence before concluding there’s much here, but the figure below shows the ratio of the backed-out WC wage to the PNS wage. It’s been growing lately and spiked last month, implying rising wage inequality.

Will wage growth boost price growth? Sure, but how much depends on whether the near past or the distant past is prologue. - Jared Bernstein - As the stock market works out its manic episode of the past few days, let’s get into a question of great importance: if wage growth is really accelerating, what will that mean for price growth?This relationship is at the heart of the market selloff that’s got everyone pretty freaked right about now. As I wrote in the WaPo this AM:The wage pop [last Friday’s 2.9% growth in hourly wages] spooked the markets because investors, already skittish as valuations were a bit steep (though not as bad as people have been saying, given strong current and expected corporate earnings), envisioned this sequence: wage growth gooses price growth (i.e., inflation), which raises both market and Federal Reserve interest rates, which slows growth and shaves corporate profit margins.I then wrote: “But there are many links in that chain. First, the correlation between wage and price growth has been low in recent years.” The figure below gets at what I mean by running a simple regression of price growth, using the core PCE, on wage growth, using the ECI wage measure for private sector workers (annualized quarterly growth rates). With data back to 1980, I ran a rolling regression with 10 year samples, so the first coefficient plotted below is for 1980q2-1990q1, the second is for 1980q3-1990q2, etc. to track the movement in this correlation, with a 95% confidence interval around the estimates. As you see, it goes up and down, was essentially zero for a while, and has been sliding down in recent years.

Amazon Patents Ultrasonic Tracking Wristbands To Control Workers - Amazon is seeking to boost worker efficiency through a new set of patents squarely aimed at improving its inventory management system using radio frequency based tracking of a worker’s hand to monitor their performance of inventory tasks. Of course, the only thing more troubling than robots replacing human workers is the idea of robots tracking human workers’ hands, but i) there are profit margins to be optimized and ii) this is the same concept of being under house arrest with an ankle bracelet, it just happens that Amazon wants to put the device on the worker’s wrist. On January 30, 2018, the U.S. Patent and Trademark Office (USPTO) issued Amazon two patents for wristbands that would use ultrasonic tracking technology to identify the precise location of a workers’ hand as they perform tasks within the Amazon warehouse.

1. The United States Patent 9,881,276: “Ultrasonic bracelet and receiver for detecting position in 2D plane.”
2. The United States Patent 9,881,277:  “Wristband haptic feedback system.”

ICE conducts 77 workplace raids in Northern California --Last Monday through Wednesday, US Immigration and Customs Enforcement (ICE) agents initiated a targeted crackdown on immigrants in cities across Northern California, carrying out workplace audits at 77 businesses primarily in San Francisco, San Jose and Sacramento, the three largest cities in the region.The raids involved ICE agents issuing notices of inspection to the businesses, mandating that within three days they provide I-9 records proving that their employees are legally allowed to work in the US. If businesses are found to have undocumented employees, employers could face criminal charges and fines, and any undocumented workers could be arrested and face deportation.Though there have been no reports of employers or employees being charged or arrested as a result of the ICE raids, the purpose of the raids is to incite a climate of general fear among immigrants and discourage business owners from hiring immigrants in the future. Arrests could begin at any moment, as ICE notoriously gives no warning prior to its deportation roundups. The searches are believed to be the largest localized raids since the election of Donald Trump. In fiscal year 2017, ICE conducted 1,360 I-9 audits across the US, or roughly 26 per week; last week’s raids in Northern California alone roughly tripled that figure.

ICE agents arrest Kansas chemistry professor while taking his daughter to school --On January 24, Immigration and Customs Enforcement (ICE) agents arrested Syed Ahmed Jamal at his home in Lawrence, Kansas as he was preparing to take his daughter to school. Jamal, a 54-year old adjunct professor of chemistry at Park University in Parkville, Kansas, has been charged with being in the United States illegally.The manner in which the arrest was carried out as well as the details of the case have drawn the attention of local, national and international media. Jamal was arrested in his own front-yard in the presence of his young daughter, handcuffed and taken to the car before his family could reach him. As his wife rushed out along with their teenage son and tried to hug Jamal, she was warned by an ICE agent that she could be charged with interfering with an arrest. For two weeks Jamal has been held in a Missouri jail, 160 miles away from his wife and three children.Jamal arrived in the United States 30 years ago on a student visa from Bangladesh. After completing his degree at Kansas University, and a brief return to Bangladesh, he acquired an H1-B visa to work at Children’s Mercy Hospital in Kansas City, Missouri. He continued his education, pursuing a doctoral degree at Kansas University in molecular biosciences and pharmaceutical engineering, exchanging the H1-B for a student visa. At the time of his arrest, Jamal was on a temporary work permit that enabled him to get an adjunct position at Park University, while carrying out research at various local hospitals. According to ICE, while Jamal entered the country legally, he twice overstayed a visa and in 2011 violated a judge’s order to leave the country. As reported in the Washington Post, the agency initially also claimed that Jamal had been arrested on a misdemeanor charge in 2012, but issued a new statement Monday night after it could not confirm the charge.

America's poor subsidize wealthier consumers in a vicious income inequality cycle -- Being poor is expensive. This problematic paradox is evident with basic financial services. And judging by Bank of America’s recent decision to impose fees of almost $150 a year on what were free checking accounts, the problem is getting worse. Too bad (almost) no one is paying attention.In January, The Atlantic’s Gillian White noted that, “free checking is basically a thing of the past.” White’s headline captures a reality for many Americans who regularly live near the bottom of their bank account. But it also misses the other side of the coin: financial services are cheaper the richer you are. This hidden driver of income inequality is embedded in something that we use every day and never think twice about: the payment system. It isn’t what or where you buy, but rather how you pay that determines whether you ultimately benefit or lose from our economy's payment system. Antiquated and unnecessarily slow, this system indirectly imposes large costs on middle and working class families, in the process actually redistributing money up the income scale. Indeed, substantial portions of the $14 billion that people pay in overdraft fees a year, and the $9 billion in payday loans fees, are partially the result of a U.S. payment system that isslower than similar ones used in Mexico or Poland. Meanwhile, credit cards that lower-income consumers are ineligible to receive reward wealthy users for money spent. The richer you are, the better your rewards.

The Payback: Why Aren’t Black Voters Rewarded by the Party That Depends on Them to Win Elections? - Democrats need to do more to protect black Americans from institutionalized racism. At his State of the Union address last Tuesday, President Trump sent out a clarion call that portends where he will set his legislative sights next. “We can lift our citizens from welfare to work, from dependence to independence, and from poverty to prosperity,” Trump insisted. Translation: Expect cuts in the social safety net. As the path of the Republican tax plan toward passage grew clearer, so did the threat to the social safety net. With major, permanent tax cuts for corporations, and by extension the wealthiest Americans, and (temporary) tax cuts to individuals that also disproportionately benefit the wealthy, experts argue this bill will contribute as much as $1.5 trillion to the deficit. House Speaker Paul Ryan and his Republican colleagues have made clear that they intend to use the social safety net to finance the tax cuts. Said Republican Representative Rod Blum, “For us to achieve three percent GDP growth over the next 10 years from tax reform, we have to have welfare reform.  Now that the bill has passed and been signed into law, the threat to the social safety net is existential. While making the rounds on the various morning talk shows boasting of the Republicans’ “accomplishment,”Speaker Ryan argued (and Trump later echoed), “People want able-bodied people who are on welfare to go to work, they want us to get people out of poverty, into the workforce.” It’s hard to understand the logic behind undermining the funding streams for programs that keep people out of poverty in order to “get people out of poverty,” but clearly the Speaker is not the only one who subscribes to that line of thinking. Reports suggest that the White House is finalizing an executive order demanding a review of the federal programs that comprise the social safety net. One can only presume that the conclusions of this review will justify major changes to the programs conservatives have derided for years as wasteful and ineffective. On the potential chopping block are the traditional targets: the Supplemental Nutrition Assistance Program (SNAP, often called food stamps), housing assistance programs, Temporary Assistance for Needy Families (TANF, a cash assistance program), and health care. Even now the White House is allowing states to apply new work requirements to certain Medicaid enrollees, potentially undermining their access to care. Meanwhile, congressional Republicans are reportedly quietly writing legislation that could tighten eligibility standards for social safety net programs, in ways that could collectively remove millions from the rosters.

Citing U.S. Prison Conditions, British Appeals Court Refuses to Extradite Accused Hacker Lauri Love to the U.S. -- A British appeals court on Monday rejected demands from the U.S. government for the extradition of an accused British hacker, Lauri Love, citing the inability of U.S. prisons to humanely and adequately treat his medical and mental health ailments. Extradition to the U.S., the court ruled, would be “oppressive by reason of his physical and mental condition.”Rejecting the prosecutor’s pleas that “the British courts should trust the United States to provide what it said it would provide” in order to secure Love’s health and safety, the court instead invoked extensive medical and psychological testimony that conditions inside American prisons are woefully inadequate to treat Love’s ailments. As a result, extradition and incarceration inside the U.S. prison system would exacerbate those health issues and produce a high risk of suicide. Love, 33, is accused by the U.S. government of participating in the 2012 and 2013 hacking of the computer systems of various U.S. military agencies and private companies. The U.S. Justice Department, citing a confidential FBI source who claimed to have accessed chat rooms in which Love plotted with others on how to use the stolen data, indicted Love in three different states (New Jersey, New York, and Virginia) on felony hacking and theft charges. Love (pictured above after Monday’s victory) was arrested in 2013 by British authorities and released on bail. Ever since, the U.S. government has sought his extradition from the U.K. for him to stand trial, and ultimately be imprisoned, in the U.S.

Tennessee police deliberately murder fleeing unarmed suspect, as sheriff boasts, “I love this sh*t” -- A lawsuit is being brought against a Tennessee sheriff after footage revealed him encouraging other officers involved in a vehicle pursuit to shoot the suspect with deadly force rather than attempt to subdue him.The widow of suspect Michael Zennie Dial II brought the case against Sheriff Oddie Shoupe of White County. In the aftermath of the shooting, Shoupe can also be heard in body cam footage taking great pleasure in Dial’s killing. “I love this shit,” Shoupe said. “God, I tell you what, I thrive on it. If they don’t think I’ll give the damn order to kill that motherf--ker, they’re full of shit. Take him out.”During the course of the pursuit, Shoupe provided instructions to the police dispatcher. Audio on the dash cam footage reveals that his order to kill was also motivated by a desire to keep patrol cars dent- and scratch-free. “They [other officers] said, ‘We’re ramming him;’ I said, ‘Don’t ram him, shoot him.’ F--k that shit. Ain’t gonna tear up my cars,” Shoupe said. Videos of the incident can be found here and here. Police began pursuing Dial after reports of shoplifting at a Wal-Mart in the nearby town of Smithville. The suspect, believed to be 33-year-old Dial of nearby Clarksville, had a revoked driver license, while his license plate did not match the vehicle he was driving, a 1976 Ford pickup. The pursuing officers were able to successfully run Dial off the road, at which time Reserve Deputy Adam West and Officer Charlie Simms fired at least three shots at Dial, killing him as his truck slid down a nearby embankment.

Puerto Rico reports 78 killings in one of deadliest months — One of Puerto Rico's deadliest months in recent years has closed, with 78 killings reported in January as the U.S. territory struggles with a surge in violent crime and growing discontent among thousands of police officers. The killings included a 20-year-old woman found kneeling and burned to death inside a car in the upscale city of Guaynabo and a triple homicide reported in the eastern mountain town of San Lorenzo. Puerto Rico's homicide rate is roughly 20 killings per 100,000 residents, compared with 3.7 per 100,000 residents on the U.S. mainland. "I'm gravely concerned about these violent incidents reported in recent days," said Sen. Miguel Laureano. "It's a dramatic situation that requires immediate attention." The majority of people killed last month were young men shot to death. The central mountain town of Caguas reported the highest number of homicides at 18, followed by the capital of San Juan with 14. Police have issued warrants or arrested suspects in only a handful of the cases. On Thursday, authorities asked the public for help in solving the case of the young woman found burned inside the car. Police said they believe she was on her way to pick up a family member the day she was killed. 

Little Barbies: Sex Trafficking Of Young Girls Is America's Dirty Little Secret - They’re called the Little Barbies. Children, young girls—some as young as 9 years old—are being bought and sold for sex in America. The average age for a young woman being sold for sex is now 13 years old. According to the National Center for Missing & Exploited Children, “Children are being targeted and sold for sex in America every day.”Sex trafficking—especially when it comes to the buying and selling of young girls—has become big business in America, the fastest growing business in organized crime and the second most-lucrative commodity traded illegally after drugs and guns.As investigative journalist Amy Fine Collins notes, “It’s become more lucrative and much safer to sell malleable teens than drugs or guns. A pound of heroin or an AK-47 can be retailed once, but a young girl can be sold 10 to 15 times a day.”Consider this: every two minutes, a child is exploited in the sex industry. According to USA Today, adults purchase children for sex at least 2.5 million times a year in the United States. Who buys a child for sex? Otherwise ordinary men from all walks of life.“They could be your co-worker, doctor, pastor or spouse,” writes journalist Tim Swarens, who spent more than a year investigating the sex trade in America.In Georgia alone, it is estimated that 7,200 men (half of them in their 30s) seek to purchase sex with adolescent girls each month, averaging roughly 300 a day.On average, a child might be raped by 6,000 men during a five-year period of servitude. It is estimated that at least 100,000 children—girls and boys—are bought and sold for sex in the U.S. every year, with as many as 300,000 children in danger of being trafficked each year. Some of these children are forcefully abducted, others are runaways, and still others are sold into the system by relatives and acquaintances.

A New Push for Play-Based Learning: Why Districts Say It’s Leading to More Engaged Students, Collaborative Classmates … and Better Grades - Purposeful or guided play is work that requires a skilled teacher who can analyze and steer students through their play to spontaneous learning.  It’s also in alignment with the state of New York’s new standards for early learners, which encourage play and “active, joyful engagement.” “This is an intentional effort to remain within developmentally appropriate parameters that do not pit play against ‘academic’ learning,” the state’s Board of Regents said after voting in September to adopt the Next Generation math and English standards to replace the Common Core. That makes sense to early-learning researchers, who have long argued for play-based education for young students. Years of research have demonstrated the importance of play for childhood development, yet the “either/or” argument between play and academics, with their strict standards and assessments, has inhibited making playtime more prominent in the early grades. No Child Left Behind was “a play killer,” while pre-NCLB, standards were too “laissez-faire,” said Temple University professor Kathy Hirsh-Pasek, an expert in developmental psychology. “What we need is something in the middle, what we call guided play and a playful learning approach.” In fact, it’s playtime that prepares students for classes like math and reading, Hirsh-Pasek said: Learning how to play teaches collaboration and community building, which aids language development through listening and talking. Language, in turn, is necessary for reading, writing, math, and every subject after. Critical thinking skills are also developed by creativity and innovation learned through play. And play teaches skills such as the confidence to learn from failures. “We don’t recognize the complexity of what children are learning,” said Larissa Mulholland, master teacher at Educare Chicago/The Ounce. “It’s so hard for people outside who don’t understand to see how it’s supporting learning later on.”  This child-directed learning has been shown to deliver the best results for academic outcomes, according to a study of three preschool programs in Washington, D.C. Students who had been in a formal, traditional academic environment during preschool earned lower grades after several years of schooling than their peers who had been in preschools where active, child-initiated learning was more common, the study found.

This Policy Will Let Kids In School Choose Whatever Gender Or Race They Want Without Their Parents’ Knowledge -- Delaware is considering adopting a policy that will let young students in school choose whatever name, gender, or race they want under a veil of school protection mandating that the parents not be informed of these decisions unless the student explicitly wishes the parent be included. Drafted by Delaware Gov. John Carney, the anti-discrimination policy states that children from K-12 can choose their own name, identify with whatever race or gender they feel most comfortable with, and even access hormone blockers necessary to transition without the consent of their parents. Regulation 225 “Prohibition Of Discrimination” also indicates that students will be able to join any sports team they choose and can use bathrooms and showers according their chosen identity.Many parents have become outraged over this proposed policy, charging that it violates their right as parents to care for their children without government intrusion. “As a parent, I have fundamental rights to the care, custody, control, upbringing and information regarding my child,” said concerned parent Kay Fox, according to WBOC.Critics of the policy also worry that it puts the privacy and safety of all students at risk, given that it will allow students to claim a certain gender so that they can access the locker rooms, showers, restrooms, and overnight quarters of the opposite sex.“It opens Pandora’s Box,” Rep. Rich Collins said, according to Delaware State News. “It has the potential to twist schools up in knots,” he added. Proponents of the policy however, see it as a necessarily thorough measure that will protect transgender students and minorities from discrimination.

Duluth schools remove 'To Kill a Mockingbird,' 'Huckleberry Finn' from curriculum - The novels "To Kill a Mockingbird" and "The Adventures of Huckleberry Finn" will no longer be required reading in the Duluth school district due to the books' use of a racial slur, a curriculum change supported by the local NAACP chapter. The two books will continue to be available in school libraries and can be optional reading for students, but beginning next school year, they'll be replaced as required reading by other literature that addresses the same topics in ninth- and 11th-grade English classes, said Michael Cary, the district's director of curriculum and instruction. The district's intent is to be considerate of all of its students, Cary said. The district owes it to its students to not subject them to a racial slur that marginalizes them in their required learning, he said. He added that district leaders felt that there are many other options in literature that can teach the same lessons as the two novels without containing a racial slur. "We felt that we could still teach the same standards and expectations through other novels that didn't require students to feel humiliated or marginalized by the use of racial slurs," Cary said.  Superintendent Bill Gronseth said the Duluth school district was hearing from students that the book's use of a racial slur created an uncomfortable atmosphere for them in the classroom. 

 Idaho lawmakers hear strong support for new science standards, but delay decision  – Idaho lawmakers heard from more than two dozen people over two days of hearings on proposed school science standards. All supported adopting the new standards, though some lawmakers continue to resist.Last year, lawmakers approved the standards only after removing five sections regarding climate change; those now have been revised and are back before lawmakers again.“Science is not about what we wish the world would be. It describes how the world actually is,” Sharon Bosley of Coeur d’Alene told the House Education Committee, urging support for the new standards. “Robust science standards will help Idaho’s economy by preparing students for professional careers. These students who are proficient in science will then become leaders and employees who can understand and use science in their careers.”Trent Clark, a former Idaho Republican Party chairman, told the lawmakers, “I represent Monsanto, an employer of roughly 1,000 Idahoans, most of whom are in the field of science. I’m here to support these revised science standards as presented by the Department of Education. … They describe the very kind of knowledge that we will interview for when we interview an Idahoan … to get a job. And if in fact they do not possess that kind of knowledge, they would be ill-fitted for a job at Monsanto.”Veronica Richmond, age 12, told the lawmakers, “My generation, we are the leaders, the innovators, the inventors and problem solvers of Idaho tomorrow. … We need these standards … so that we will be prepared and equipped. “Pulling out these science standards is pulling out valuable chunks of my precious education.” Though the panel had been scheduled to make a decision Friday, its chair, Rep. Julie VanOrden, R-Pingree, announced at the start of Friday morning’s hearing that the decision would be delayed until later, and Friday’s hearing would be solely to hear testimony. Twenty-two people testified, all in support of the standards. A day earlier seven spoke, also all in support.

Idaho Lawmakers Strike Climate Change Language From New Science Standards -- The Idaho House Education Committee voted 12-4 Wednesday on a motion to strip references to human-caused climate change in the state's proposed new science education standards.The motion, proposed by Rep. Scott Syme, R-Caldwell, strikes a section* from the Idaho Content Standards that includes the language : "energy and fuels are derived from natural resources and their uses affect the environment." Several paragraphs of "Supporting Content"** that delves further into climate science were deleted as well.   Boise Republican Rep. Patrick McDonald, the committee's vice chairman, joined the panel's three Democrats that opposed the motion to scrub climate-related passages from the standards. "I want to support these standards as written," McDonald said , referring to the work that local teachers put in developing the standards. "There has been a lot work involved in putting these things together."  Idaho is the only state in the nation where legislators have removed references to the established science of climate change and the impact of human activity on the environment from the K-12 science curricula. That decision sparked an ardent effort from teachers, parents and students across Idaho who want to revise public school education standards to include climate science.

Coal’s demise in Appalachia leaves education in the lurch -  Declining coal production in many Appalachian communities is contributing to state and local governments generating less revenue to support education and other social services. This is especially true in areas where the local economy lacks diversification. With poorer education standards and a steady trend of people moving out of rural communities, areas of Appalachia are failing to attract companies from non-coal industries, including the clean energy sector, according to a new report. The result will be an inability to invest the necessary state and local dollars in traditional K-12 education, creating dire consequences for students in parts of coal country. Education is one of the most important ingredients to regional development and individual prosperity. “Unfortunately, education attainment in the Appalachian regions lags the national average,” researchers found in the new analysis, commissioned by the Appalachian Regional Commission (ARC). With a less-educated and skilled workforce, the region has become a “less attractive place” for companies to move their operations to after coal mines shut down, the report said. The five-part study, “An Economic Analysis of the Appalachian Coal Industry Ecosystem,” highlighted that coal production in Appalachia fell nearly 45 percent between 2005 and 2015, more than double the rate of the national decline during the same period. Prior to the start of the decline, U.S. coal production had been steadily increasing over the previous century. Coal jobs, on the other hand, have been declining in Appalachia for decades. Appalachia lost a total of 33,500 coal mining jobs between 2011 and 2016. More than 67 percent of these jobs – about 22,500 jobs – were in coalfield counties in eastern Kentucky and West Virginia. 

Studying outdoors is better -- "There is still a conceptual gap between teaching science and environmental education," says Dr. Ulrich Dettweiler, Associate Professor of Education at the University of Stavanger in Norway, formerly employed at TUM. To close this gap and to get pupils excited about the natural sciences is a goal of the "researcher weeks" at the Berchtesgadener Land student research center. Between 2014 and 2016, approximately 300 students participated in the program which is based on the curriculum for science subjects in secondary level I.  Students are prepared for the one-week stay in the classroom. This is then continued on site during the research week, culminating in a two-day research expedition with experiments. Both before and after the course, the students completed a questionnaire on their satisfaction and overall motivation in relation to their autonomy for a study developed at TUM. At the end of the week, the students again shared their experiences during the outdoor class.  In the pedagogical context, the basic psychological needs to experience autonomy and competence as well as positive social relationships exert the primary influences on motivational behavior. The study showed that motivational behavior in both contexts was influenced equally strongly by these three needs, albeit at different levels: Basic needs are met to a significantly higher degree during outdoor instruction than in the classroom. A sense of achievement particularly increases motivation during outdoor instruction. On the other hand, the student-teacher or student-student relationships had little or no influence on this increase. Nor did gender have any influence on the results.

Three thousand Pittsburgh schoolworkers vote on strike - Nearly 3,000 teachers, paraprofessionals and technical/clerical workers working for the Pittsburgh Public Schools are taking a mail-in strike vote. There has not been a strike in the city since the 1975-76 school year, over 40 years ago.The teachers and the other school employees have been working without a contract since June 30, 2017. Their last contract expired in June 2015. For two years they have worked under a contract extension.The vote, which does not mandate a strike but merely authorizes the Pittsburgh Federation of Teachers (PFT) to call one, will be counted on Monday. The union’s executive board will reportedly hold a meeting on Wednesday to review the results. The PFT has stated that it doesn’t want to call a strike and that it is hoping that the vote will get the Pittsburgh School Board to negotiate with the union.There is growing anger among teachers at the massive budget cuts which have been destroying education in Pittsburgh and throughout Pennsylvania.“This is ridiculous,” said one elementary teacher. “They say they care about the students, but our classes are overcrowded. We don’t have the teaching support and many art and music programs are still cut. “We were told to vote for [Pennsylvania Governor Tom] Wolf, but we still don’t have the money we need. They can give all these tax cuts for the rich, but we need money for the students.”

Columbia University refuses to recognize graduate student union -- On January 30, Columbia University in New York City announced it would not recognize the Graduate Workers of Columbia-United Auto Workers (GWC-UAW) Local 2110 as the bargaining agent for student workers on campus. Columbia’s announcement is a response by the recent ruling by the regional National Labor Relations Board (NLRB), which accepted the result of a 2016 vote by graduate students to join the UAW. The university has challenged the results of the certification vote—which was 1,602 to 623 in favor—and has steadfastly refused to recognize the right of student workers to organize. Columbia Provost John Coatsworth acknowledged in an open letter that the administration’s decision would create “disappointment and dispute” but made it clear the university would not back down. “While the National Labor Relations Board’s position on student assistants has shifted repeatedly with changes in political administrations, the University’s view has remained constant.” Administrators no doubt hope the NLRB will reverse its decision once the Trump administration appoints a fifth member to the board. Responding to the decision, the GWC-UAW bargaining committee said, “While it is deeply disappointing to continue putting legal hurdles in the way of justice, their action merely underscores the need to continue building majority support until they finally respect our choice and start bargaining.” On February 1, the union organized a protest of a few hundred Columbia students, as well as students from nearby universities and medical assistants from the Columbia University Medical Center, on the university’s main campus. Graduate students are highly exploited. According to glassdoor.com a base salary for a teaching assistant is $22,686, while the university estimates that the cost of tuition and living expenses for a master’s student in 2017-2018 is $79,890. In addition to trying to get by on these poverty wages, in one of the most expensive metropolitan areas in the world, grad students must pay $1,000 for health insurance premiums.

Student-Loan Crisis Worsens; Looming Defaults Strain Govt Bailout Program -- As the student loan bubble continues to burst, record numbers of Americans enrolling in government subsidized student loan debt-forgiveness plans, known as income-driven repayment, are on track to send the US student-loan program into negative territory, according to a report by the Department of Education's inspector general.  The plans, known as income-driven repayment, set monthly payments as a percentage of a borrower’s earnings and typically forgive balances after 10 or 25 years, depending on the borrower’s career field and debt amounts. Overall, borrowers in income-driven repayment will repay less than what they originally borrowed, the report said, draining the program of billions of dollars in expected revenue. –WSJ  As we reported last month, nearly 40% of student loans taken out in 2004 may default by 2023 according to a report by the Brookings Institute - blowing past all previous projections.Of note, approximately 5% of undergraduates took out private student loans in 2004, which swelled to 14% of undergraduates by 2008 - 2,901,000 students according to ticas.org. Private student loans, as opposed to federal student loans, are unable to participate in income-driven government repayment programs. The federal student loan system had originally been projected to turn a profit of $25 billion on all loans made up to Sept. 30, 2015 - however that number has been revised down to $5 billion, according to the IG report. The income-driven repayment program alone will cost the government $11.5 billion in revenue. “The data show the total costs for all loans...approaching an overall positive subsidy,” which translates to a net cost to taxpayers, i.e. the program going into the red - according Patrick Howard, the department’s assistant inspector general for audit.

New Study Finds Cancelling Student Debt Provides Broad Economic Benefits at Low Cost -- Yves Smith -  A new study out of Bard will no doubt produce a hissy fit among orthodox economists…assuming they don’t succeed in ignoring it instead.   In The Macroeconomic Effects of Student Debt Cancellation, Scott Fullwiler, Stephanie Kelton, Catherine Ruetschlin, and Marshall Steinbaum present a detailed examination of the costs of cancelling all student debt, public and private. Their main findings:A program to cancel student debt executed in 2017 results in an increase in real GDP, a decrease in the average unemployment rate, and little to no inflationary pressure over the 10-year horizon of our simulations, while interest rates increase only modestly. Our results show that the positive feedback effects of student debt cancellation could add on average between $86 billion and $108 billion per year to the economy. Associated with this new economic activity, job creation rises and the unemployment rate declines….It is important to note that the macroeconomic models used in this report cannot capture all of the positive socioeconomic effects associated with cancelling student loan debt. New research from academics and experts has demonstrated the relationships between student debt and business formation, college completion, household formation, and credit scores. These correlations suggest that student debt cancellation could generate substantial stimulus effects in addition to those that emerge from our simulations, while improving the financial positions of households.The study examines two possible routes for wiping out student debt, via having either the Administration or the Federal Reserve cancel the debt, and it also considers the operational issues in depth. They also use two different macroeconomic models to estimate the impact. Because the idea of cancelling debt is such a third-rail issue, it is not hard to imagine that if this study does get the attention it warrants, it will elicit a great deal of pushback. It is going to be interesting to see how much if any is intellectually honest and analytically sound.

We Must Cancel Everyone’s Student Debt, for the Economy’s Sake - Late last year, congressional Republicans passed a $1.5 trillion tax cut, which delivered the lion’s share of its benefits to the wealthy and corporations. The GOP did not justify this policy on the grounds that all corporate shareholders and trust-fund hipsters deserved to have their wealth increased. Rather, the party argued that, however one felt about making the rich richer, the tax cuts would ultimately benefit allAmericans by increasing economic growth and lowering unemployment.But what if we could have achieved those objectives, at roughly the same price, by forgoing tax cuts — and wiping out every penny of student debt in the United States, instead?  A new research paper from the Levy Economics Institute of Bard College suggests this was, in fact, an option. In America today, 44 million people collectively carry $1.4 trillion in student debt. That giant pile of financial obligations isn’t just a burden on individual borrowers, but on the nation’s entire economy. The astronomical rise in the cost of college tuition — combined with the stagnation of entry-level wages for college graduates — has depressed the purchasing power of a broad, and growing, part of the labor force. Many of these workers are struggling to keep their heads above water;11 percent of aggregate student loan debt is now more than 90 days past due, or delinquent. Others are unable to invest in a home, vehicle, or start a family (and engage in all the myriad acts of consumption that go with that). Thus, if the government were to forgive all the student debt it owns (which makes up more than 90 percent of all outstanding student debt), and bought out all private holders of such debt, a surge in consumer demand — and thus, employment and economic growth — would ensue.  According to the Levy Institute paper, canceling all student debt would increase GDP by between $86 billion and $108 billion per year, over the next decade. This would add between 1.2 and 1.5 million jobs to the economy, and reduce the unemployment rate by between 0.22 and 0.36 percent.

CalPERS Manages to Get Pretty Much Everything Wrong in Its Latest Asset Reallocation -- Yves Smith -  Long-term investors are not supposed to make market timing bets. That means you, CalPERS. Even though CalPERS has an army of high-priced investment professionals giving it advice, staff has somehow managed to get the board to give it latitude to make some marked changes in asset allocation on a discretionary basis. And as I understand CalPERS’ pay formulas, the worst is that staff has upside for taking bets that pay off, but they don’t get dinged if their wagers hurt beneficiaries. Even if the system is loath to dock salaries of give zero bonuses (although that calls into question what “bonus” means), you would think CalPERS would come up with a quasi-clawback method, like having, say, 1/2 of bonuses held back over a five year period and docked if staff underperformed return targets. For instance, in his reinsurance unit, Warren Buffett pays out 15% of profits as bonuses….five years in arrears to make sure that all possible costs and losses have been charged against them. CalPERS under its chief investment officer Ted Eliopoulos has been too clever, in a bad way, over the last eighteen months. It cuts its allocation to US stocks just before Trump took office, getting less benefit from that rally than it could have. CalPERS has had a 50% allocation to foreign stocks for years, betting on a weak dollar environment when the dollar has been strong. It cut its foreign investment targets, and if my recollection is right, not long before the dollar started to weaken. Below we have the latest CalPERS asset allocation screw-up:

Medicaid work requirements will reduce care for mentally ill | TheHill: The Department of Health and Human Services recently issued new guidelines encouraging states to implement work requirements in their Medicaid programs. Kentucky has already moved to impose these requirements and several other states are considering similar rules. Proponents and opponents of work requirements disagree about the net effects on employment and the risks to the access to health care of vulnerable groups. One important group to consider in evaluating the effects of work requirements is adults with mental and addictive illnesses. These conditions are prevalent among Medicaid recipients — they affect nearly one-third of working-age adult beneficiaries and they directly affect functioning in ways that compromise the ability to work. About 36 percent of Medicaid-eligible low-income people with any mental illness and 44 percent of those with a serious mental illness do not work. Some in this group will not be required to work, because they qualify for Medicaid because of a work disability under the Social Security criteria and are automatically exempt from work requirements. However, only about half of Medicaid-eligible adults who have a mental illness and do not work are classified as disabled according to these criteria. What will happen to the others?

After approving Medicaid work requirements, Trump’s HHS aims for lifetime coverage limits - After allowing states to impose work requirements for Medicaid enrollees, the Trump administration is now pondering lifetime limits on adults’ access to coverage. Capping health care benefits — like federal welfare benefits — would be a first for Medicaid, the joint state-and-federal health plan for low-income and disabled Americans. If approved, the dramatic policy change would recast government-subsidized health coverage as temporary assistance by placing a limit on the number of months adults have access to Medicaid benefits. The move would continue the Trump administration’s push to inject conservative policies into the Medicaid program through the use of federal waivers, which allow states more flexibility to create policies designed to promote personal and financial responsibility among enrollees. However, advocates say capping Medicaid benefits would amount to a massive breach of the nation’s social safety net designed to protect children, the elderly and the impoverished.In January, the Trump administration approved waiver requests from Kentucky and Indiana to terminate Medicaid coverage for able-bodied enrollees who do not meet new program work requirements. Ten other states have asked to do the same.“We must allow states, who know the unique needs of their citizens, to design programs that don’t merely provide a Medicaid card but provide care that allows people to rise out of poverty and no longer need public assistance,” said a statement posted on Twitter on Monday by Medicaid administrator Seema Verma. At least five states — Arizona, Kansas, Utah, Maine and Wisconsin — are seeking waivers from the Trump administration to impose lifetime Medicaid coverage limits. The Department of Health and Human Services said it could not comment on the pending applications.

Trump administration ponders lifetime benefit limits for Medicaid -- After allowing states to impose work requirements for Medicaid enrollees, the Trump administration is now pondering lifetime limits on adults’ access to coverage. Capping health care benefits — like federal welfare benefits — would be a first for Medicaid, the joint state-and-federal health plan for low-income and disabled Americans. If approved, the dramatic policy change would recast government-subsidized health coverage as temporary assistance by placing a limit on the number of months adults have access to Medicaid benefits. The move would continue the Trump administration’s push to inject conservative policies into the Medicaid program through the use of federal waivers, which allow states more flexibility to create policies designed to promote personal and financial responsibility among enrollees. However, advocates say capping Medicaid benefits would amount to a massive breach of the nation’s social safety net designed to protect children, the elderly and the impoverished. In January, the Trump administration approved waiver requests from Kentucky and Indiana to terminate Medicaid coverage for able-bodied enrollees who do not meet new program work requirements. Ten other states have asked to do the same. 

Trump administration to allow lifetime limits on Medicaid, coverage for thousands at risk - The Trump administration is taking aim at Medicaid yet again, specifically with lifetime coverage limits, according to a McClatchy report Monday evening. Just weeks after unveiling guidance that will allow states to impose Medicaid work requirements, Trump’s Health and Human Services agency is reportedly attempting to limit the number of months adults have access to the safety net program. The cap, if approved, would be the first of its kind in Medicaid’s history.Medicaid, which is jointly funded by states and the federal government, provides health insurance to low-income and disabled people. Steps to cap benefits are another attempt in a long line of crack-downs by the Trump administration, which hopes to reduce the government’s obligation to help the needy.Since Trump took office, the administration has worked to slash the safety net program in its attempts to repeal the Affordable Care Act (ACA) and through federal waivers. The lifetime coverage limit is the latest federal waiver proposal, which the administration and their allies claim would allow states more flexibility and encourage fiscal responsibility for both governing entities and those who are covered by the program.  In reality, many of the federal waivers mean that thousands of people will lose vital coverage.  Last month, the administration approved waiver requests from Indiana and Kentucky, allowing them to impose work requirements, but five states — Arizona, Kansas, Utah, Maine, and Wisconsin — want to take that a step further by implementing the aforementioned lifetime limits as well. Arizona and Utah are both seeking a five-year lifetime limit on Medicaid coverage. Utah’s restrictions would apply only to childless adults and would come “with the expectation that [recipients] do everything they can to help themselves before they lose coverage,” McClatchy reported.

Trump wants to cap lifetime Medicaid benefits, even for disabled people, the chronically ill, and people with Alzheimer’s -- If Trump gets his way, your elderly relatives will be evicted from nursing homes after their Alzheimer's care eats up their lifetime Medicaid benefits; as Yves Smith writes, "are family members supposed to let them wander out into traffic and have nature take its course?"Of course, the Republicans have a handy rejoinder: uncapped Medicaid benefits just incentivize people to have parents who develop Alzheimer's, children who are born with chronic illnesses, and partners who become disabled. Unless we cap this benefit, people will just go on recklessly choosing to be born into families that don't have unlimited budgets for their loved ones' health care. Capping the benefit will force them to confront their bad life choices and --- shit, you know what? I fucking give up. The move would continue the Trump administration’s push to inject conservative policies into the Medicaid program through the use of federal waivers, which allow states more flexibility to create policies designed to promote personal and financial responsibility among enrollees. However, advocates say capping Medicaid benefits would amount to a massive breach of the nation’s social safety net designed to protect children, the elderly and the impoverished.

Unnecessary Medical Care Is More Common Than You Think - It’s one of the intractable financial boondoggles of the U.S. health care system: Lots and lots of patients get lots and lots of tests and procedures that they don’t need. Women still get annual cervical cancer testing even when it’s recommended every three to five years for most women. Healthy patients are subjected to slates of unnecessary lab work before elective procedures. Doctors routinely order annual electrocardiograms and other heart tests for people who don’t need them. That all adds up to a substantial expense that helps drive up the cost of care for all of us. Just how much, though, is seldom tallied. So, the Washington Health Alliance, a nonprofit dedicated to making care safer and more affordable, decided to find out. The group scoured the insurance claims from 1.3 million patients in Washington state who received one of 47 tests or services that medical experts have flagged as overused or unnecessary. What they found should cause both doctors and their patients to rethink that next referral. In a single year: •More than 600,000 patients underwent a treatment they didn’t need, treatments that collectively cost an estimated $282 million. •More than a third of the money spent on the 47 tests or services went to unnecessary care. •Three of four annual cervical cancer screenings were performed on women who had adequate prior screenings — at a cost of $19 million. •About 85 percent of the lab tests to prep healthy patients for low-risk surgery were unnecessary — squandering about $86 million. •Needless annual heart tests on low-risk patients consumed $40 million. 

Trump’s Paid Family Leave Plan Would Punish Those Who Choose To Have Kids - Consider the paid parental leave plan teased in President Trump’s State of the Union address, which has now gained traction with Sen. Marco Rubio (R-Fla.) and Ivanka Trump. The plan, described as “a budget-neutral approach to parental leave” by advocates, would allow parents to draw from their Social Security benefits early to fund their parental leave, then require them to delay the collection of retirement benefits by some yet-to-be-calculated period of time. Participation would be strictly voluntary.It’s a highly individualized way of dealing with the facts of family life — which by their nature are communal issues: Babies and children need caregivers, mothers and fathers need time and money to give care, elderly grandparents and great-grandparents need companionship and assistance. Babies and children learn and grow, adults work and produce, and the elderly help and rest. There is a place for every stage of the life cycle in the grand order of things, and a just state would ideally defer to that natural rhythm. Instead, conservatives’ plan would penalize the elderly for their decision to have raised families, all in the interest of making parental leave a self-contained option, no burden to anyone but the parents themselves.  The proposal would penalize bigger families more than smaller ones; couples with more children would face working further into old age before receiving retirement benefits. Moreover, it would likely mean that lower-wage workers would end up putting off retirement longer than wealthier workers with ample company benefits, an especially perverse outcome given that America’s poor suffer significantly reduced life expectancies compared with the country’s rich. If you’re not particularly well-to-do and you want a family, in other words, you’ll need to be prepared to pay for it in your old age: your family, your choice, your problem.

U.S. Pays Billions for ‘Assisted Living,’ but What Does It Get? - — Federal investigators say they have found huge gaps in the regulation of assisted living facilities, a shortfall that they say has potentially jeopardized the care of hundreds of thousands of people served by the booming industry.The federal government lacks even basic information about the quality of assisted living services provided to low-income people on Medicaid, the Government Accountability Office, a nonpartisan investigative arm of Congress, says in a report to be issued on Sunday.Billions of dollars in government spending is flowing to the industry even as it operates under a patchwork of vague standards and limited supervision by federal and state authorities. States reported spending more than $10 billion a year in federal and state funds for assisted living services for more than 330,000 Medicaid beneficiaries, an average of more than $30,000 a person, the Government Accountability Office found in a survey of states. States are supposed to keep track of cases involving the abuse, neglect, exploitation or unexplained death of Medicaid beneficiaries in assisted living facilities. But, the report said, more than half of the states were unable to provide information on the number or nature of such cases. Just 22 states were able to provide data on “critical incidents — cases of potential or actual harm.” In one year, those states reported a total of more than 22,900 incidents, including the physical, emotional or sexual abuse of residents. Many of those people are “particularly vulnerable,” the report said, like older adults and people with physical or intellectual disabilities. More than a third of residents are believed to have Alzheimer’s or other forms of dementia.  Assisted living communities are intended to be a bridge between living at home and living in a nursing home. Residents can live in apartments or houses, with a high degree of independence, but can still receive help managing their medications and performing daily activities like bathing, dressing and eating.

Public health workers find surprise cuts in paychecks - Politico - Doctors, nurses, physician assistants and others in the corps work in underserved parts of the country, including on Native-American reservations and in prisons, as well as abroad on projects to combat HIV/AIDS and promote vaccinations. There are more than 6,500 health care workers in the corps. Some officers saw cuts of up to $1,700 a month, according to anecdotal evidence from the Commissioned Officers Association of the USPHS, which advocates for corps officers. “We understand that the approximately 3,000 officers of the U.S. Public Health Service Commissioned Corps who are impacted by the new Health Professions Special Pay plan are concerned," an HHS spokesperson said. "The special pay will be retroactively restored. We are committed to re-establishing the special pay for those impacted as quickly as possible." The cuts stemmed from a change in the monthly bonuses that commissioned corps officers get on top of what they earn at the normal military pay scale, to partly offset the cost of their medical training and provide an incentive to keep them from going to the more lucrative private sector. Congress in 2008 converted existing pay rates into the Health Professions Special Pay Plan and ordered it to be implemented by Jan. 28, 2018. Adams told officers that long-term plans called for finishing the work on time but that the work got delayed. He did not detail reasons why.

Is the CDC Losing Control? --- To say the agency has taken a step back in Trump’s first year would be an understatement. On Wednesday, the new secretary of Health and Human Services, Alex Azar, announced the resignation of CDC Director Brenda Fitzgerald, citing “complex financial interests that have imposed a broad recusal limiting her ability to complete all her duties.” According to a recent report from Politico, some of those holdings included eyebrow-raising investments in companies directly related to Fitzgerald’s work, including thousands of dollars in drug and insurance companies. Close ties with these industries aren’t unusual among Trump administration officials: Former Health Secretary Tom Price had stock in biotech and pharmaceuticals companies, and Azar is a former executive with pharmaceutical giant Eli Lilly. But Fitzgerald’s financial activity went even beyond this new norm. Politico reported that she’d held stock in tobacco companies Reynolds American, British American Tobacco, Imperial Brands, Philip Morris International, and Altria Group before she took office in July. As director, she purchased over $1,000 worth of stock in Japan Tobacco. That means that before she dumped the stocks in October, Fitzgerald held ownership in four of the “Big Five” tobacco companies in the world. This particular fiasco comes during a time when the agency is facing a growing number of public-health threats. Smoking rates have dipped significantly in the past year, but the disparities in smoking rates between rich and poor have actually increased—differences that threaten to further entrench income inequality. Antibiotic resistance is on the rise, and more than likely portends a new wave of infectious threats that will test the American public-health system, including the imminent threat of a resurgence of sexually-transmitted diseases. The country is in the grip of one of the worst flu seasons in years, and the unprecedented opioid crisis decreasing the lifespans of millions of Americans shows no signs of relenting.

Nursing homes sedate residents with dementia by misusing antipsychotic drugs, report finds - Children complained about parents who were robbed of their personalities and turned into zombies. Residents remembered slurring their words and being unable to think or stay awake. Former administrators admitted doling out drugs without having appropriate diagnoses, securing informed consent or divulging risks.These are just some of the findings outlined in a new Human Rights Watch report, "'They want docile:' How Nursing Homes in the United States Overmedicate People with Dementia." The 157-page report, released Monday, estimates that each week more than 179,000 people living in US nursing facilities are given antipsychotic medications, even though they don't have the approved psychiatric diagnoses -- like schizophrenia -- to warrant use of the drugs. Most of these residents are older and have dementia, and researchers say the antipsychotic medications are administered as a cost-effective "chemical restraint" to suppress behaviors and ease the load on overwhelmed staff. What's revealed in this report echoes the findings of a CNN investigation published in October. The CNN story described how one little red pill, Nuedexta, was being misused and overprescribed in nursing homes. What's more, CNN learned that this overuse benefited the drugmaker to a tune of hundreds of millions of dollars, largely at the expense of the US government. The CNN report prompted an investigation into a California-based pharmaceutical company.  The Human Rights Watch report shows that concerns about overmedicating nursing home residents with inappropriate drugs extends beyond this one pill. Researchers visited 109 facilities in six states between October 2016 and March 2017. They interviewed 323 people, including residents, family members, nurses, social workers, pharmacists, long-term care experts and more. What they found wasn't just disturbing, it was dangerous. Researchers heard from family members who hadn't been informed of the dangers. Others felt they had no choice but to agree to the administration of drugs for fear that their loved ones would be otherwise evicted from their facilities. When residents were taken off antipsychotic drugs, they and their family members often saw improvement.

Fueled by Broken Social Contract, Study Finds Inequality and Despair Driving US Life Expectancy Down -- A new report finds that a lack of social services including universal healthcare, public health crises, and declining social mobility have all contributed to growing despair and failing health in the United States, resulting in a decrease in life expectancy for the second year in a row. According to the study, completed by researchers at Virginia Commonwealth University and the Urban Institute, a suicide rate that went up 24 percent between 1999 and 2014, and abuse of drugs and alcohol have contributed largely to the decline. "We are seeing an alarming increase in deaths from substance abuse and despair," Steven Woolf, a co-author of the report, told USA Today. The study shows one of the richest countries in the world falling behind other industrialized nations in terms of health and life expectancy, even as officials continue to further the narrative of the U.S. as "exceptional." "Recent legislation and regulations may prolong or intensify the economic burden on the middle class and weaken access to healthcare and safety net programs."—Steven Woolf and Laudan Aron, "Failing Health of the United States"With average American life expectancy at 78.6 years in 2016—down .1 years from the year before—Americans are expected to live 1.5 fewer years than people in other Organization for Economic Cooperation and Development (OECD) nations, including the U.K., Canada, France, and 31 others. In 1960, the U.S. had the highest life expectancy on Earth, 2.4 times higher than the rest of the OECD. "It may not sound like much, but the alarming story is not the amount of the decrease but that the increase has ended,"

San Francisco Unveils 'Safe Spaces' For Injecting Heroin - Four decades and counting: The continued failure of the War on Drugs has led the government to waste hundreds of billions of dollars in taxpayer dollars and turned America’s prison system into a dystopian nightmare. Prohibition of drugs is not only ineffective, but counterproductive, at achieving positive outcomes for society. Given the fact that the War on Drugs has contributed to an increase in drug overdoses and fostered the creation of powerful drug cartels domestically and internationally. We have to ask the question: What can America do differently since the War on Drugs has failed?  The answer could be in the city of San Francisco, as the Department of Public Health is on pace to open two safe injections sites this July, which could become the nation’s first legal, safe injection site aimed at curbing the opioid epidemic. The facilities are considered safe spaces where drug abusers can inject drugs, such as heroin and fentanyl, under the careful supervision of trained medical staff to respond in the event of an overdose or other medical emergencies, said CNN. While San Francisco Mayor Mark Farrell believes the controversial facilities are not the ideal solution, he thinks the city has no other choice in arresting the out of control overdose deaths ravaging the region. “I understand the misgivings around it and some of the rhetoric from people who don’t support it,” Farrell said last week. “But we absolutely need to give it a try.”  Other cities — including Seattle, Baltimore, and Philadelphia — are discussing safe injection facilities with their community leaders, but San Francisco could be the first in the next few months. For some time, facilities in Australia, Canada, and Europe have been providing a friendly environment for drug users to chase the dragon. More than 63,000 people overdosed and died in 2016, according to the US Centers for Disease Control and Prevention, which is more than the number of Americans killed in Vietnam. Over the next decade, it is projected that half of million people will overdose and die in the United States, exceeding the number of Americans killed in World War II.

Can over-the-counter pain meds influence thoughts and emotions?  --Over-the-counter pain medicine such as Ibuprofen and acetaminophen may influence how people process information, experience hurt feelings, and react to emotionally evocative images, according to recent studies. Examining these findings and how policymakers should respond, a new article is out today in Policy Insights from the Behavioral and Brain Sciences, a Federation of Associations in Behavioral & Brain Sciences (FABBS) journal published in partnership with SAGE Publishing. Article authors Ratner et al. reviewed previous research suggesting that over-the-counter pain medicine may influence individuals':

• Sensitivity to emotionally painful experiences: Compared to those who took placebos, women who took a dose of ibuprofen reported less hurt feelings from emotionally painful experiences, such as being excluded from a game or writing about a time when they were betrayed. Men showed the opposite pattern.
• Ability to empathize with the pain of others: Compared to those taking placebos, individuals who took a dose of acetaminophen were less emotionally distressed while reading about a person experiencing physical or emotional pain and felt less regard for the person.
• Ability to process information: Compared to those who took placebos, individuals who took a dose of acetaminophen made more errors of omission in a game where they were asked, at various times, either to perform or to not perform a task.
• Reactions to emotional objects: Individuals who took a dose of acetaminophen rated pleasant and unpleasant photographs less extremely than those who took placebos.
• Discomfort from parting with possessions: When asked to set a selling price on an object they owned, individuals who took a dose of acetaminophen set prices that were cheaper than the prices set by individuals who took placebos.

US flu epidemic rages on, with more deaths and record hospitalizations- The US Centers for Disease Control and Prevention (CDC) reported Friday that at least 16 more children died of the flu over the previous week, with 42 states reporting high levels of the flu activity, up from 39 states the week before. This brings the number of child deaths this flu season to at least 53. “Hospitalizations are now the highest we’ve seen,” said CDC Acting Director Dr. Anne Schuchat in the Friday briefing. CDC officials expect to see numbers similar to or greater than those from the 2014-2015 flu season, when 710,000 Americans were hospitalized and about 56,000 died, including nearly 150 children. Hospitalizations are one of the key measures of the severity of an outbreak. The rate currently stands at 51.4 per 100,000 people, already significantly higher than the 43.5 rate for the same period during the 2014-2015 season. In California, hospitalization rates are four times higher than they were two years ago. Under these epidemic conditions, the CDC has been hit by a scandal forcing the head of the agency to resign and the Trump administration is proposing drastic cutbacks to the programs that fight epidemics both domestically and internationally. Dr. Brenda Fitzgerald, a former OB-GYN doctor and Georgia health commissioner, who was tapped by President Trump last summer to head the CDC, stepped down from the post Wednesday after a report in Politico that she traded in tobacco and health care stocks. These included Japan Tobacco, a multinational that sells Winston and Camel cigarettes around the globe, pharmaceutical giants Merck & Co. and Bayer, and health insurer Humana. In other words, the top official at the helm of the government agency charged with preventing and fighting disease has been trading in stocks that promote tobacco use, a known carcinogen, and private drug companies and health care insurers that are reaping billions in profits at the expense of the well-being of ordinary Americans.

Former Stuyvesant High School students raise awareness of 9/11 health rights (WABC) -- The students who attended Stuyvesant High School want other students, teachers and people who worked in Lower Manhattan to know their health care rights after being exposed to toxins. Tens of thousands of people were sickened in the days, weeks, months and even years after September 11th. Among them are students who went back to class in Lower Manhattan, in the middle of all the toxic dust and debris. Former students of Stuyvesant High School on Chambers Street say they are suffering from 9/11 related illnesses, from breathing issues to various forms of cancer. They along with the United Federation of Teachers and 9/11 activists are part of the coalition "Know your Rights." They want to make sure that anyone who thinks he or she may have gotten sick from exposure knows about the World Trade Center Health Fund. Lila Nordstom attended Stuyvesant High School during 9/11 and is now being treated for several illnesses. "From a building that had not been properly cleaned, to a neighborhood that was filled with smoke and still filled with dust and debris, to a school building that was located next to the barge where all of the debris from Ground Zero was being taken," Nordstrom said.   Advocates estimate there are 400,000 people eligible for compensation. So far, 80,000 first-responders and ordinary residents have registered. 

Food may influence cancer spread - BBC - There is mounting evidence the food on your plate can alter cancer's growth and spread, say Cambridge scientists.Animal research, published in the journal Nature, showed breast tumours struggled without the dietary nutrient asparagine. It is found in the foodies' favourite asparagus, as well as poultry, seafood and many other foods. In the future, scientists hope to take advantage of cancer's "culinary addictions" to improve treatment. Asparagine is an amino acid - a building block of protein - and takes its name from asparagus.  The study, conducted at the Cancer Research UK Cambridge Institute, took place on mice with an aggressive form of breast cancer.   Normally they would die in a couple of weeks as the tumour spread throughout the body. But when the mice were given a low-asparagine diet or drugs to block asparagine then the tumour struggled to spread. "It was a really huge change, [the cancers] were very difficult to find," said Prof Greg Hannon. Last year, the University of Glasgow showed cutting out the amino acids serine and glycine slowed the development of lymphoma and intestinal cancers.Prof Hannon told the BBC: "We're seeing increasing evidence that specific cancers are addicted to specific components of our diet.  "In the future, by modifying a patient's diet or by using drugs that change the way that tumour cells can access these nutrients we hope to improve outcomes in therapy."

U.S. body brokers supply world with torsos, limbs and heads  (Reuters) - On July 20, a Hong Kong-flagged cargo ship departed Charleston, South Carolina carrying thousands of containers. One of them held a lucrative commodity: body parts from dozens of dead Americans. According to the manifest, the shipment bound for Europe included about 6,000 pounds of human remains valued at $67,204. To keep the merchandise from spoiling, the container’s temperature was set to 5 degrees Fahrenheit. The body parts came from a Portland business called MedCure Inc. A so-called body broker, MedCure profits by dissecting the bodies of altruistic donors and sending the parts to medical training and research companies. MedCure sells or leases about 10,000 body parts from U.S. donors annually, shipping about 20 percent of them overseas, internal corporate and manifest records show. In addition to bulk cargo shipments to the Netherlands, where MedCure operates a distribution hub, the Oregon company has exported body parts to at least 22 other countries by plane or truck, the records show. Among the parts: a pelvis and legs to a university in Malaysia; feet to medical device companies in Brazil and Turkey; and heads to hospitals in Slovenia and the United Arab Emirates. Demand for body parts from America — torsos, knees and heads — is high in countries where religious traditions or laws prohibit the dissection of the dead. Unlike many developed nations, the United States largely does not regulate the sale of donated body parts, allowing entrepreneurs such as MedCure to expand exports rapidly during the last decade. No other nation has an industry that can provide as convenient and reliable a supply of body parts. 

India's farmed chickens dosed with world's strongest antibiotics, study finds -- Chickens raised in India for food have been dosed with some of the strongest antibiotics known to medicine, in practices that could have repercussions throughout the world. Hundreds of tonnes of an “antibiotic of last resort” – only used in the most extreme cases of sickness - are shipped to India each year to be used, without medical supervision, on animals that may not require the drugs but are being dosed with them nevertheless to promote the growth of healthy animals.  Routine use of some of the strongest antibiotics, which doctors have said should be preserved for the most extreme cases lest resistance to them should increase and prevent their use for the diseases for which they are intended, is now a common practice in farming in the developing world. The consequences will be felt throughout the world because resistance to strong antibiotics is spread among organisms.Germs with qualities that can make them dangerous to humans will, if untreated or poorly treated, mutate into more powerful pathogens that are resistant to treatment. Poor or inadequate public heath treatments assists this process, potentially spreading pathogens around the world.  A study by the Bureau of Investigative Journalism has found that hundreds of tonnes of colistin, described as an antibiotic of last resort, have been shipped to India for the routine treatment of animals, chiefly chickens, on farms. The finding is concerning because the use of such powerful drugs can lead to an increasing resistance among farm animals around the world. Colistin is regarded as one of the last lines of defence against serious diseases, including pneumonia, which cannot be treated by other medicines. Without these drugs, diseases that were commonly treatable in the last century will become deadly once again. There is nothing to prevent Indian farmers, which include some of the world’s biggest food producers, from exporting their chickens and other related products overseas. There are currently no regulations that would prevent such export to the UK on hygiene terms, except for those agreed under the EU.

Huge levels of antibiotic use in US farming revealed -- Livestock raised for food in the US are dosed with five times as much antibiotic medicine as farm animals in the UK, new data has shown, raising questions about rules on meat imports under post-Brexit trade deals. The difference in rates of dosage rises to at least nine times as much in the case of cattle raised for beef, and may be as high as 16 times the rate of dosage per cow in the UK. There is currently a ban on imports of American beef throughout Europe, owing mainly to the free use of growth hormones in the US. Higher use of antibiotics, particularly those that are critical for human health – the medicines “of last resort”, which the World Health Organisation wants banned from use in animals – is associated with rising resistance to the drugs and the rapid evolution of “superbugs” that can kill or cause serious illness.The contrast between rates of dosage in the US and the UK throws a new light on negotiations on Brexit, under which politicians are seeking to negotiate trade deals for the UK independently of the EU. Agriculture and food are key areas, particularly in trading with the US, which as part of any deal may insist on opening up the UK markets to imports that would be banned under EU rules.When negotiating outside the EU for a new trade deal, the UK will come under severe pressure to allow such imports. Over the summer, a row broke out over the potential for imports of US chlorinated chicken – bleaching chicken, according to experts in the UK, is a dangerous practice because it can serve to disguise poor hygiene practices in the food chain.But Ted McKinney, US under-secretary for trade and foreign agricultural affairs, told an audience of British farmers last month he was “sick and tired” of hearing British concerns about chlorinated chicken and US food standards, providing further indication that the US government is likely to strike a hard deal on agricultural products as part of any trade agreement.

Missouri Organic Family Farm Faces Ruin After Herbicide Drift - Herbicide drift has been a major problem last year damaging millions of acres of crops in the U.S. An organic farmer in Missouri has seen firsthand how destructive herbicide drift can be as it destroys his crops and threatens his livelihood and farm. Mike Brabo and his wife Carol own Vesterbrook Farm in Clarksville, Missouri, about an hour north of St. Louis near the Mississippi River. The farm has been in Carol's family for nearly a century. The couple and their two children have worked the farm since 2008 after Mike survived thyroid cancer. At that time Mike gained an appreciation for organic foods but found it difficult to afford them.  Mike and Carol decided to grow their own. It wasn't difficult to convert the farm to organic since no chemicals had been used on the land. A lot of vegetables can be grown on 24 acres, and the Brabos have planted more than 60 including lettuce, spinach, beets, kale, broccoli, cauliflower, asparagus, peppers, squash and tomatoes, among others. Some vegetables are grown in four high tunnel greenhouses. They also planted an orchard with apple, peach, plum and cherry trees and fruit bushes such as raspberries. They also grow herbs such as sage, parsley and cilantro. The Brabos have seen growing success with their organic farm and CSA with sales increasing 10 percent per year. That is until this year. In June, a conventional farmer neighbor sprayed his soybean field with herbicides. Wind blew the herbicides over the Brabos' land.This happened despite Mike having signs that say "Organic Farm, No Spray" signs and registering his farm with DriftWatch, a communication tool that enables farmers and pesticide applicators to work together to protect specialty crops using mapping programs.The damage from the herbicide drift was total. "We found damage across our farm, which is 500 yards wide, including on the far north side of the property," Mike said.Crops damaged included peppers, potatoes, tomatoes, basil; fruit trees were also damaged. "Everything on the farm, even ornamental trees, was damaged," Mike said. The herbicides also killed half of the farm's bees, an estimated loss of $12,000. Mike estimates the total loss at $300,000.

Siding With Monsanto, GOP Threatens to Cut Off WHO Funds Over Glyphosate Finding - During a House Science Committee hearing on Tuesday, Republican lawmakers sided with the chemical industry in questioning the International Agency for Research on Cancer's (IARC) classification of glyphosate —the key ingredient in the Monsanto-produced weedkiller Roundup —as a probable carcinogen and threatened to cut off the agency's funding. IARC, a branch of the World Health Organization, immediately came under fire from industry groups and right-wing lawmakers after arguing in 2015 that the scientific literature shows glyphosate "probably" causes cancer in humans. On Tuesday, Rep. Lamar Smith (R-Texas) continued these attacks, suggesting that IARC's conclusion about glyphosate is "unsubstantiated" and "not backed by reliable data"—a talking point that has been strongly disputed by independent scientists. "The selective use of data and the lack of public disclosure raise questions about why IARC should receive any government funding in the future," Smith said, citing government officials and a former scientist for the pesticide industry .  While one Monsanto official was quick to express his excitement "that serious questions are being asked about the discredited IARC opinion," other experts characterize GOP attacks on the IARC as the product of an industry-funded disinformation campaign aimed at undermining scientific findings that threaten corporate profits. During her testimony at Tuesday's hearing, Jennifer Sass, a scientist with the Natural Resources Defense Council , highlighted a 2015 paper by University of Southern California medical professor Dr. Jonathan Same, who argued that attacks on the IARC "can be traced to the 'playbook' of the tobacco industry for discrediting findings related to active and passive smoking."  "Fundamentally, this hearing is about the ability of a public health agency to call a carcinogen a carcinogen, even if it makes a huge amount of money for a powerful corporation," Sass said. "Are we willing to sell out the public's right to know about harmful chemicals in the places we work, live and play, just so that Monsanto can sell more glyphosate?"

Court grants EPA delay on animal waste emissions reporting | TheHill: A federal court granted the Environmental Protection Agency (EPA) a victory Thursday, allowing regulators to give U.S. livestock producers more time to comply with a mandate on reporting emissions from animal waste. The decision by the U.S. Court of Appeals will give farms and animal producers until at least May 1 to begin reporting emissions — mostly ammonia and hydrogen sulfide — emitted by animal waste. In a Jan 19 motion, the EPA argued that farmers were not yet ready to meet the requirements of the mandate which was scheduled to take effect Jan 22.The delay follows a court decision in April that the EPA must force farms to report air pollution for animal waste emissions. The decision invalidated a previous policy under then-President George W. Bush that exempted most farms from such reporting requirements. Most facilities are required by the Emergency Planning and Community Right-to-Know Act and the Comprehensive Environmental Response, Compensation, and Liability Act to report those emissions to federal, state and local authorities. But the EPA, under Bush, decided that it could not do anything to reduce or mitigate emissions from animal waste and that requiring reporting would not be useful. The court is expected to issue the mandate three months from now. No reporting is necessary until the mandate is issued. 

Senate Republicans Push Attacks on Endangered Species, Clean Water Under Guise of Farming - The Senate Committee on Environment and Public Works, led by Sen. John Barrasso (R-Wyo.), will hold a hearing Wednesday advancing its goals of repealing the Endangered Species Act and gutting the Clean Water Act.The hearing will highlight testimony from industrial-scale agribusinesses and preview environmental attacks likely to be included in the 2018 Farm Bill, including exempting pesticides from the protections of the Endangered Species Act and Clean Water Act."It's really disturbing to see Barrasso and other Senate Republicans bending over backward to please polluters and the pesticide industry," said Brett Hartl, government affairs director at the Center for Biological Diversity . "The price will be dirtier rivers and streams, and more wildlife on the fast track toward extinction."The pesticide industry is pushing sweeping legislation on Capitol Hill that would dismantle safeguards to protect endangered wildlife and continues to advance legislation to exempt pesticide users from the requirements of the Clean Water Act.  Meanwhile, at the request of Dow Chemical, U.S. Environmental Protection Agency ( EPA ) Administrator Scott Pruitt reversed the recommendation of career scientists to ban the toxic insecticide chlorpyrifos , which is believed to cause birth defects in children. And following a National Marine Fisheries Service analysis that chlorpyrifos is putting 38 species of salmon and sturgeon on both coasts in jeopardy of extinction, Pruitt hasannounced that the EPA is rejecting recommendations to protect those endangered species . "Senator Barrasso is using this hearing as a smokescreen to eviscerate these vital conservation laws, stoking fears that we'll all starve to death if we don't jettison our environmental safeguards," said Hartl. "What a despicable sideshow."

Attorneys general sue Trump administration over water rule  — Eleven Democratic state attorneys general on Tuesday sued President Donald Trump’s administration over its decision to delay implementation of an Obama-era rule that would have expanded the number of wetlands and small waterways protected by the Clean Water Act. New York Attorney General Eric Schneiderman said last week’s decision by the Republican administration to postpone implementation of the 2015 Clean Water Rule for two years is an assault on public health. “We will fight back against this reckless rollback and the Trump administration’s continued assault on our nation’s core public health and environmental protections,” Schneiderman said in a statement. Environmental Protection Agency Administrator Scott Pruitt has called the rule an overreach that could hurt farmers and ranchers. Mining and industry groups also opposed it. The lawsuit was filed in New York by Schneiderman and his counterparts in California, Connecticut, Maryland, Massachusetts, New Jersey, Oregon, Rhode Island, Vermont, Washington and the District of Columbia. It seeks to stop the government from blocking implementation of the rule while considering alternatives. The regulation was put on hold for the past two years by various court challenges that kept it from taking effect. Schneiderman said the delay jeopardizes protections for streams that help provide drinking water to more than half of New York state residents and more than 100 million other Americans. The attorneys general accuse the EPA and the U.S. Army Corps of Engineers of violating federal law. They claim the EPA does not have the authority to hold off on a regulation that “rests on a massive factual record,” according to the suit. 

Count marks sharp drop in monarch butterflies wintering in California (Reuters) - The number of monarchs wintering in California has dropped to a five-year low, despite more volunteers counting more sites in search of the orange-and-black insect that is arguably the most admired of North American butterflies, a report said on Friday. The latest tally of 200,000 monarchs in forested groves in California’s central coast has dropped from the 1.2 million counted two decades ago, indicating the number of butterflies found west of the Rocky Mountains, or the so-called western population, continues to sharply decline, the Xerces Society for Invertebrate Conservation said in a report. “It’s certainly concerning,” said Sarina Jepsen, endangered species program director for the Xerces Society. Western monarchs are born on milkweed plants in such states as Arizona, Idaho, Utah and Washington before embarking on a seasonal migration to California. The annual count in California, done at the end of autumn by dozens of volunteers and scientists, last saw a severe low in 2012, with 144,812 butterflies across 136 sites, she said.  In another troubling trend, the 200,000 butterflies found in the 2017 survey stemmed from monitoring of 262 sites, which were even more sites than were tracked the previous year when 300,000 monarchs were counted, Jepsen said. Factors that may have compounded monarchs’ plight in California in recent months include unseasonably warm temperatures, wildfires, smoke from wildfires and mudslides, all of which may have played roles in reports of monarchs migrating and breeding later than usual, she said. 

An aquarium accident may have given this crayfish the DNA to take over the world -- Science -- It sounds like a bad monster movie plot: A 10-legged mutant creature that reproduces asexually, escapes from confinement in Germany, and quietly begins a global invasion. Within 2 decades, clones of the voracious animal spread through Europe and Africa, bringing devastation to ecosystems and threatening native species. That appears to be the strange-but-true story of the marbled crayfish, an invasive freshwater species suspected to have been created through a reproductive accident in an aquarium around 1995. A new analysis of the crustacean’s genome supports this unlikely origin and may help explain how the animal has subsequently spread and adapted to so many new environments.  “In many ways, the invasive expansion of [the marbled crayfish] is analogous to a cancerous lineage spreading asexually at the expense of its host,” says Jean-François Flot, an evolutionary genomicist at the Free University of Brussels who was not involved with the work.   The marbled crayfish is the only decapod crustacean that reproduces asexually, with the all-female species making clones of itself from eggs unfertilized by sperm. It has been thought to have arisen when two slough crayfish, imported from Florida for the aquarium trade in Germany, mated. Since its discovery in 1995 in Germany, the marbled crayfish has spread across Europe and into Africa in huge numbers. “They eat anything—rotten leaves, snails or fish broods, small fish, small insects," says Frank Lyko, a molecular geneticist at the German Cancer Research Center in Heidelberg. “This crayfish is a serious pest,” adds Gerhard Scholtz, an evolutionary biologist at Humboldt University in Berlin, who has tracked its rapid spread across the globe, including Madagascar, where its success threatens the existence of the seven crayfish native to that island country. The European Union banned the species: It must not be sold, kept, distributed, or released to the wild.

Microplastics Pose Major Problems for Ocean Giants - Some of our oceans ' largest creatures are being threatened by the tiniest bits of plastic that litter our seas , a new analysis published in the journal Trends in Ecology & Evolution found.Filter-feeding marine animals such as manta rays and whale sharks swallow hundreds to thousands of cubic meters of water a day to capture plankton to eat. But at the same time, these gentle giants are swallowing upmicroplastics from plastic-filled waters or through contaminated prey .Ingesting these bits could be hazardous to filter feeders because of the toxic chemicals the particles contain.According to a review of the study, "plastic-associated chemicals and pollutants can accumulate over decades and alter biological processes in the animals, leading to altered growth, development and reproduction, including reduced fertility."The research was led by Elitza Germanov, a researcher at the Marine Megafauna Foundation and Ph.D. student at Murdoch University.The creatures happen to feed in microplastic pollution hotspots —including the Gulf of Mexico, the Mediterranean Sea, the Bay of Bengal and the Coral Triangle in South East Asian waters—and can swallow up a staggering amount of plastic. Per the BBC , whale sharks in the Sea of Cortez off Mexico's Baja Peninsula ingest about 200 pieces of plastic per day, while fin whales in the Mediterranean Sea swallow about 2,000 microplastic particles per day.

'Plastic in All Sizes' Found Everywhere in Once Pristine European Arctic -- A disturbing amount of plastic is building up in the once-pristine European Arctic .  According to a study from the Norwegian Polar Institute , "plastic in all sizes" can be found throughout the Norwegian Arctic and in the Svalbard islands, an archipelago between Norway's mainland and the North Pole that's also one of Earth's northernmost inhabited areas. The researchers estimated that nearly 194 trash objects—mostly plastic—can be found per square kilometer in the region, and weighs a total of 79,000 tonnes. As ABC.net reported from the study, "even in remote areas with relatively low human impact, it says the concentration of plastic waste in the European Arctic is now comparable or even higher than in more urban and populated areas." The researchers are most concerned about the amount of microplastics in the sea, said scientist Ingeborg G. Hallanger, who is urging for more research on the effects of plastics on the area's wildlife . "We lack knowledge about the effects on animals. Here we have to research more," she said. "But we know that as much as 90 percent of seabirds have a plastic in the stomach. 22.5 percent of the seahorses have more than 0.1 gram of plastic in the stomach."  "We know that animals confuse the microplastic with food and eat it," added Hallanger. "This can cause internal damage. We also see that animals get stuck in plastic thrown into nature; such as fishing nets and other plastic residues."

Cape Town Pushes Back 'Day Zero' - “Day Zero," the day drought -stricken Cape Town, South Africa is projected to run out of municipal water , has been moved to mid-May 2018 following a decline in agricultural usage, according to a statement from Alderman Ian Neilson, the city's executive deputy mayor. Day Zero was previously projected to fall on April 16.Capetonians, however, were urged to continue reducing consumption as "there has not been any significant decline in urban usage," Neilson said. The city's four million residents must continue to use no more than 50 liters of water per person per day.Total consumption is at 547 million liters per day—97 million liters above the target of 450 million liters per day. Current dam levels stand at 25.85 percent capacity, compared to 26.3 percent the week before. If the dams reach 13.5 percent, the municipal water supply shuts off for all but essential services, such as hospitals and key commercial areas.Neilson said that many of the agricultural users in the Western Cape Supply System, where the city also gets its water, have used up the water allocated to them per an agreement with the National Department of Water and Sanitation. Agricultural usage is therefore likely to drop significantly over the next weeks.The agriculture sector currently draws about 30 percent of the water in the supply scheme. It should fall to approximately 15 percent in March and 10 percent in April."This is a welcome decline in water usage and gives Cape Town and some of the other municipalities hope," Neilson said. However, he noted that water consumption still needs to come down so the remaining water supply does not run out before the arrival of winter rains.

Pruitt wants to ‘eradicate lead.’ Is that possible?  - U.S. EPA Administrator Scott Pruitt told lawmakers last week that he wants their help with what he's calling his agency's "war on lead." Testifying before the Senate Environment and Public Works Committee, he said that "investing in infrastructure challenges to eradicate lead in our drinking water within a decade should be a goal of this body and, I think, the goal of this administration." His bold statement drew support from Democratic Sens. Tammy Duckworth of Illinois and Ben Cardin of Maryland, but it flummoxed water experts. Lead contaminates drinking water primarily by leaching from pipes that carry water from treatment plants to homes. The potent neurotoxin — particularly harmful to children — can flake from pipes deemed "lead-free." "It's not just the lead service lines on public property, it's not just the lead service lines on private property, it's lead in fixtures in homes, its lead solder, too," G. Tracy Mehan III, executive director of government affairs for the American Water Works Association. While changes to monitoring and requiring some amount of lead pipe replacement are all options the administration is considering, no one has discussed removing other kinds of pipes that can contribute to lead contamination. Said an EPA employee who asked to remain anonymous: "There are steps you can take to make progress that are being considered, but getting lead to zero is probably impossible. "Unless you are going to physically replace every plumbing device in the country," the staffer added, "you're not going to get there."

 More U.S. drought in a second-year La Niña? --Currently, we are fully immersed in the second winter of a “double-dip” La Niña. When we look at the average surface temperatures in the Niño 3.4 region for the seven events prior to the current one, we see a tendency for the surface temperature departures from average to weaken in the second winter relative to the first (the current La Niña is an exception to this tendency, as the peak amplitude this winter is stronger than it was last winter). Given that Niño 3.4 temperature departures in the second winter tend to be weaker, shouldn’t we then expect the impacts of La Nina on our climate to be weaker in the second winter as well?  This is the question that Dr. Okumura’s team addressed.  They analyzed a larger pool of multi-year La Niña episodes dating back to 1900 (2), identifying 10 (not including the current one), and compared the average climate impacts in the first winter with those during the second winter (November – April). Consistent with the plot shown above, they found that sea surface temperature anomalies in the Niño3.4 region tend to be about 25-30% weaker in the second La Niña winter relative to the first.  Surprisingly, however, they also found that the atmospheric circulation departures from average over the North Pacific and North America region tend to be stronger in the second winter.  The anomalous high pressure over the North Pacific, a characteristic feature of La Niña, is, on average, stronger in the second winter.  These atmospheric circulation anomalies have big implications for the impacts over North America.  Most notably, the occurrence of drought conditions tends to be worse over regions like California and the U.S. Southeast, which also are regions that have been dry so far this winter.

Water forecast is bleak for major reservoir in Southwest US  — One of the most important reservoirs in the southwestern U.S. will likely collect less than half its normal amount of spring runoff this year because of a warm, dry winter across much of the region, forecasters said Wednesday. Lake Powell, which straddles Utah and Arizona, is expected to get 47 percent of its average inflow because of scant snow in the mountains that feed the Colorado River, said Greg Smith, a hydrologist with the Colorado Basin River Forecast Center, part of the National Oceanic and Atmospheric Administration. Smith said there is only a 10 percent chance that enough mountain snow will fall during the rest of the winter and spring to bring inflows back to average. It was the seventh-worst forecast for Lake Powell in 54 years. “Things are looking pretty grim” along some of the tributaries that feed the Colorado River, Smith said during an online conference on the spring outlook for Lake Powell. Powell, along with Lake Mead on the Nevada-Arizona border, helps ensure the Colorado River system has enough water to get through dry years. The river supplies water to about 40 million people and 6,300 square miles (16,000 square kilometers) of farmland in seven states: Arizona, California, Colorado, Nevada, New Mexico, Utah and Wyoming. The river also serves cities and farms in northwest Mexico. This winter’s snowfall in the mountains that feed the Colorado has been far short of average overall but varies widely. Along the Green River, a Colorado River tributary in Wyoming, the snowpack is 110 percent of average. Along the San Juan River in southwestern Colorado and northwestern New Mexico, it’s 32 percent of average.

California bakes as winter temperatures set new records across the state - Unseasonably warm and dry temperatures blanketed California over the weekend, shattering records across the state and bringing clear blue skies that were expected to linger through next weekend. At the resorts near Lake Tahoe, the weather was so warm — 12 to 18 degrees above average — that the snow was melting, leaving behind puddles of water and slush. Some would-be skiers opted to go hiking instead. It was a dramatic change from this time last year, when Tahoe had so much snow that figuring out where to put it all was a major challenge. In Northern California, residents in the famously foggy City by the Bay traded their winter coats and sweaters for T-shirts and shorts over the weekend. The high temperature in San Francisco was 74 on Saturday and Sunday, setting new records for both days.  About 100 miles south, Salinas also had two consecutive days of record-breaking heat, reaching 81 on Saturday and 80 on Sunday. Elsewhere around the Bay Area, new records were set Saturday at Oakland International Airport, with 76 degrees; in Santa Rosa, 76; and in San Jose, 78. Up in Sonoma County's wine country, temperatures in Healdsburg rose to 80 degrees on Saturday. That broke a record of 75 set 112 years ago, way back in 1906. The city of Ukiah in Mendocino County hit a high of 78 Sunday. It was the fourth consecutive day of tying or breaking the daily temperature record. Half Moon Bay also reached 78 degrees on Sunday, not only breaking a record for the day but tying the record-high temperature for the month of February. In downtown Los Angeles, where February is typically the wettest month of the year, temperatures Sunday peaked at 81 degrees. (That was still 10 degrees cooler than the record set in 1995, when it was 91 degrees on Feb. 4.) Sandberg reached 82 degrees, breaking a daily record of 74 set in 2015 and a monthly record of 78 set on Feb. 13, 2014. Record-breaking heat also hit Woodland Hills, where temperatures reached 89 degrees, and Palmdale, which saw a high of 77. 

January becomes hottest month ever recorded in New Zealand --  January was the hottest month ever recorded in New Zealand, according to figures released on Friday, and experts say climate change is one factor. The heat has led to a shortage of fans that prime minister Jacinda Ardern jokingly referred to as “fan-ageddon”. Ardern said that while many people were probably enjoying a great summer, they also needed to consider the long-term consequences of climate change, including sea-level rise. Figures released by the National Institute of Water and Atmospheric Research indicate the average temperature during January was 20.3C (68.5F). That was more than three degrees above normal and beat the previous record of 19.6C set in February 1998. Record-keeping began in 1909. Gregor Macara, a climate scientist with the weather agency, said that warmer seas, generally settled weather and more winds from the tropical north had led to the higher temperatures. He said climate change was an underlying and contributing factor. February began on a different note as New Zealand was hit by a tropical storm that brought heavy rainfall, flooding and cooler temperatures. But Macara said the agency still anticipates temperatures for the month will be higher than normal. New Zealand has a relatively mild climate that is moderated by the surrounding ocean. The warm temperatures and lack of rainfall in parts of the South Island have prompted the government to declare a drought in those areas. 

Brutal Cold turns skis into garbage in Pyeongchang (Reuters) - Brutally cold conditions in Pyeongchang are warping skis and forcing some athletes to toss them out after training runs, an Alpine skiing course worker told Reuters on Wednesday. “One of the coaches said they are throwing the skis out after today,” Craig Randell, a start crew technician working on his third Olympics, said on a chilly morning at the Yongpyong Alpine Centre, where the slalom, giant slalom and team events will be held later this month. “You can’t do anything about it but with the cold temperatures, the snow adheres to the ski base and twists it.” “They are turning their skis to garbage real fast,” he said. Austrian Alpine skier Marcel Hirscher said snow crystals that form amid the frigid weather are the primary culprits for so many skis meeting an untimely end. “Every run is a different pair of skis, but it’s not because of hard conditions but the cold conditions,” he said.  “Snow crystals get really sharp when temperatures go to -20 degrees and the base burns. It’s the same as lighting fire and burning your base because the snow crystals get such sharp edges,” said the slalom specialist who is favored to win gold in Pyeongchang.

Heaviest snowfall on record blankets Moscow - BBC News: Moscow has seen its heaviest snowfall in a day since records began, with more than 2,000 trees brought down and air travel disrupted, officials say. More than half the monthly average snow - 38cm (15 inches) - fell on Saturday, beating the previous record from 1957. A falling tree and collapsing power line killed one person and five others were injured. Snowfall is expected to ease off on Sunday night but the temperature is expected to drop. Dozens of flights have been delayed at the Russian capital's airports. Despite the disruption, many people on social media just seem happy to see a "real Russian winter" again after the unseasonal thaws of previous years, and have been sharing snowscape pictures.

The temperature in Siberia rose 100 degrees. The northern U.S. may pay a frigid price. -- As an antidote to the report of minus-88 degree weather in the Siberian outpost of Oymyakon earlier this month, we give you this: The temperature in a settlement just to its east was an astonishing 126 degrees warmer two weeks later. The mercury in Omolon, Russia, reached its highest January temperature ever recorded Monday: a relatively toasty 38.4 degrees. But the warmth flooding east Siberia and parts of the Arctic may, in turn, displace the frigid air that is normally pooled there sending it surging south into the north central and Northeastern U.S. through mid-February. The mild weather over east Siberia can be traced to the development of an enormous, bulging zone of high pressure over eastern Russia (see top image). Mashable science editor Andrew Freedman called it “one heckuva monster” on Twitter. Underneath this high pressure zone, models show temperature differences from normal exceeding 50 degrees over a broad area. Weather.US meteorologist Ryan Maue tweeted that these temperature anomalies are “off the charts.”  The Arctic seas, surrounding this region, including the East Siberia, Bering and Chukchi have historically low amounts of ice, which is likely intensifying this warm pattern. The decline in Arctic sea ice has also been linked to similar temperature spikes observed near the North Pole in recent years, when temperatures have surged to the melting point on repeated occasions even in the midst of winter.Strangely, this unusual warmth in Siberia could trigger a chain of events resulting in deep freeze over central and eastern North America. As the high-pressure zone builds east over Alaska in the coming week, it will probably force the jet stream to crash south over North America in response — like a seesaw. This will, in turn, probably lead to colder-than-normal conditions over parts of the central and eastern United States.

As tourism returns, hurricane recovery in the Virgin Islands is leaving some residents behind - More than four months after back-to-back hurricanes shredded the roof of his house, Charles Caines feels as if he’s “living in a tent in the jungle.” Sleeping under a blue tarp draped on the roof’s steel beams, he and his wife are fending off lizards, frogs, rats and mosquitoes in what remains of their home. With similar stories of grief and hardship throughout St. Thomas, St. John and St. Croix — the three major islands that make up the territory — there is growing concern that a ­decades-long drive to build up a broad middle class has been snuffed out by the storms. If Congress and the White House fail to deliver a massive infusion of cash to the islands, analysts warn, this Caribbean paradise could quickly unravel into a permanent decline that would send thousands of economic refugees to the mainland.   Residents of the U.S. Virgin Islands are American citizens, but they can’t vote in the presidential general election and have no voting representation in Congress. That can limit the attention that the territory — with a population of 103,000 and a land area about the size of Philadelphia — commands from the federal government. “When a hurricane hits a small part of [a] very large state or country, you just move resources,” said Damien King, an economist and executive director of the Caribbean Policy Research Institute. “On islands like the Virgin Islands, there is nowhere to move resources from.”

FEMA Contract Called for 30 Million Meals for Puerto Ricans. 50,000 Were Delivered --  The mission for the Federal Emergency Management Agency was clear: Hurricane Maria had torn through Puerto Rico, and hungry people needed food. Thirty million meals needed to be delivered as soon as possible. For this huge task, FEMA tapped Tiffany Brown, an Atlanta entrepreneur with no experience in large-scale disaster relief and at least five canceled government contracts in her past. FEMA awarded her $156 million for the job, and Ms. Brown, who is the sole owner and employee of her company, Tribute Contracting LLC, set out to find some help. Ms. Brown, who is adept at navigating the federal contracting system, hired a wedding caterer in Atlanta with a staff of 11 to freeze-dry wild mushrooms and rice, chicken and rice, and vegetable soup. She found a nonprofit in Texas that had shipped food aid overseas and domestically, including to a Houston food bank after Hurricane Harvey. By the time 18.5 million meals were due, Tribute had delivered only 50,000. And FEMA inspectors discovered a problem: The food had been packaged separately from the pouches used to heat them. FEMA’s solicitation required “self-heating meals.”  Four months after Hurricane Maria hit Puerto Rico, a picture is emerging of the contracts awarded in the earliest days of the crisis. And examples like the Tribute contract are causing lawmakers to raise questions about FEMA’s handling of the disaster and whether the agency was adequately prepared to respond. On Tuesday, Democrats on the House Oversight Committee, which has been investigating the contract, asked Representative Trey Gowdy, the committee chairman, to subpoena FEMA for all documents relating to the agreement. Lawmakers fear the agency is not lining up potential contractors in advance of natural disasters, leading it to scramble to award multimillion-dollar agreements in the middle of a crisis.

Special Report: In Puerto Rico, a housing crisis U.S. storm aid won’t solve (Reuters) - Among the countless Puerto Rico neighborhoods battered by Hurricane Maria is one named after another storm: Villa Hugo. The illegal shantytown emerged on a public wetland after 1989’s Hurricane Hugo left thousands homeless. About 6,000 squatters landed here, near the El Yunque National Forest, and built makeshift homes on 40 acres that span a low-lying valley and its adjacent mountainside.  After Maria, many are missing roofs; some have collapsed altogether.  Amid the rubble, 59-year-old Joe Quirindongo sat in the sun one recent day on a wooden platform - the only remaining piece of his home. Soft-spoken with weathered skin and a buzzcut, Quirindongo pondered his limited options.  “I know this isn’t a good place for a house,” said Quirindongo, who survives on U.S. government assistance. “Sometimes I would like to go to another place, but I can’t afford anything.”  Villa Hugo reflects a much larger crisis in this impoverished U.S. territory, where so-called “informal” homes are estimated to house about half the population of 3.4 million. Some residents built on land they never owned. Others illegally subdivided properties, often so family members could build on their lots.  Most have no title to their homes, which are constructed without permits and usually not up to building codes. The houses range in quality and size, from one-room shacks to sizable family homes. Many have plumbing and power, though not always through official means.  The concentration of illegal housing presents a vexing dilemma for local and federal authorities already overwhelmed by the task of rebuilding an economically depressed island after its worst natural disaster in nine decades.  Puerto Rico Governor Ricardo Rosselló has stressed the need to “build back better,” a sentiment echoed by U.S. disaster relief and housing officials. But rebuilding to modern standards or relocating squatters to new homes would take an investment far beyond reimbursing residents for lost property value. It’s an outlay Puerto Rico’s government says it can’t afford, and which U.S. officials say is beyond the scope of their funding and mission.  Yet the alternative - as Villa Hugo shows - is to encourage rebuilding of the kind of substandard housing that made the island so vulnerable to Maria in the first place.

Thousands of workers in Puerto Rico continue to live without running water -- February 20 will mark five months of life without power for thousands of us here on Puerto Rico since Hurricane María made landfall in September. It is not well known that it has in fact been even longer for many because the smaller Hurricane Irma caused major power outages the month prior to María. Hurricane María changed our way of life quite dramatically. In addition to being without power, many of us on the island have faced months without running tap water in our homes. As I explained in an earlier article, electricity is needed to pump water to the elevated rural areas and also to power treatment plants. In our community, as in other ones across the island, this means that we must look for alternate sources of water for our daily needs.   Not having access to clean running water, something so essential for life, has had a serious impact on us. For months we have had to go and fetch water from several resources on a daily basis. Water that is safe enough for cooking and drinking has to be from bottled sources or from an oasis in the downtown area shared by the entire community. The local city government took ages before it provided tank trucks from which we could gather and save drinking water for a few days. For the washing and tasks other than drinking, we head to the local stream or creek. I know of many places on the island where entire families had to gather at rivers and streams to do the washing, dishes, bathing and even drinking. To collect water from creeks and springs we would reuse an old PVC or metal pipe, improvise a funnel with a plastic bottle and use whatever was at hand to hold the pipe in place often with rocks. This made water collection from the stream efficient, given the circumstances. This was not potable water, so we couldn’t drink it or cook with it. Tragically, many people in other parts of the island didn't have such a choice; they had to use whatever source of water they could find. In the weeks following the hurricane, images emerged of residents in the town of Dorado collecting water from a federally designated hazardous-waste site. Water from this location could be potentially contaminated and be harmful if consumed.

Media Ignoring Puerto Rico’s ‘Shock Doctrine’ Makeover -Nearly five months after Hurricane Maria struck Puerto Rico, more than a hundred thousand US citizens there still lack clean drinking water, and almost one-third of the island has no reliable electric power. As initial life-sustaining recovery efforts still grind toward completion, Puerto Rico’s Gov. Ricardo Rosselló has wasted no time using his territory’s recovery as an opportunity to push a number of policy proposals right out of the “disaster capitalism” playbook: from privatizing the island’s power utility to converting nearly all of its public schools to charters. And while the mainstream US press has been mainly focused on the Trump administration’s woeful institutional response to the storm, it has barely noticed this much more radical political transformation of Puerto Rico, and the potentially disastrous long-term consequences for the citizens who live there. To be sure, major US news outlets have produced some notable pieces of accountability journalism about the storm’s aftermath.  However powerful, the focus of these breakout stories is mainly anecdotal, and the outrage they engender tends to fade from headlines and cable news talk shows after a few days. In her seminal report on “disaster capitalism” (The Nation,  4/14/05), author and activist Naomi Klein noted how these stories can also have the perverse effect of distracting from much larger, systemic transgressions happening out in the open: If anything, the stories of corruption and incompetence serve to mask this deeper scandal: the rise of a predatory form of disaster capitalism that uses the desperation and fear created by catastrophe to engage in radical social and economic engineering. And on this front, the reconstruction industry works so quickly and efficiently that the privatizations and land grabs are usually locked in before the local population knows what hit them.

Floods are getting worse, and 2,500 chemical sites lie in the water’s path - Anchored in flood-prone areas in every American state are more than 2,500 sites that handle toxic chemicals, a New York Times analysis of federal floodplain and industrial data shows. About 1,400 are located in areas at highest risk of flooding. As flood danger grows — the consequence of a warming climate — the risk is that there will be more toxic spills like the one that struck Baytown, Tex., where Hurricane Harvey swamped a chemicals plant, releasing lye. Or like the ones at a Florida fertilizer plant that leaked phosphoric acid and an Ohio refinery that released benzene.Flooding nationwide is likely to worsen because of climate change, an exhaustive scientific report by the federal government warned last year. Heavy rainfall is increasing in intensity and frequency.At the same time, rising sea levels combined with more frequent and extensive flooding from coastal storms like hurricanes may increase the risk to chemical facilities near waterways.The Times analysis looked at sites listed in the federal Toxic Release Inventory, which covers more than 21,600 facilities across the country that handle large amounts of toxic chemicals harmful to health or the environment. Of those sites, more than 1,400 were in locations the Federal Emergency Management Agency considers to have a high risk of flooding. An additional 1,100 sites were in areas of moderate risk. Other industrial complexes lie just outside these defined flood-risk zones, obscuring their vulnerability as flood patterns shift and expand.The presence of chemical sites in areas vulnerable to flooding is a holdover from an age where the advantages to industry of proximity to rivers and oceans — for transportation and trade, or for a ready supply of cooling water — seemingly outweighed the risks.

Trump applies Obama-era flood aid rules he axed six months ago- Six months ago, President Donald Trump revoked an Obama-era rule requiring federally funded projects to account for the increased flood risk associated with global warming. Critics charged that Trump’s decision would allow the construction of buildings, roads and other projects that could soon be underwater. On Tuesday, the U.S. Department of Housing and Urban Development told states how to spend the $7.4 billion in disaster-recovery money Congress approved after Hurricane Harvey. Tucked into the document’s 101 pages was the requirement that any new structures in a floodplain be built well above projected flood levels -- virtually the same requirements as those that Trump revoked last August. HUD also required the states that receive federal disaster money, which include Texas and Florida, to describe how they will "take into account continued sea level rise." Rob Moore, a senior policy analyst at the Natural Resources Defense Council, called the provisions "unprecedented for this administration." "The assumption was that these much-needed federal flood protection standards were dead," Moore said by email. "All of this is being done without mentioning the words ’climate change,’ but clearly these are the same types of actions." HUD’s decision reflects a reluctance to spend money "on stupid things," according to Eli Lehrer, president of the R Street Institute, a libertarian think tank. "And building in areas that are almost sure to flood in the near future is really stupid." A HUD spokeswoman, Shantae Goodloe, didn’t respond to a request for comment. 

‘Sinking’ Pacific island of Tuvalu is actually growing - The tiny Pacific nation of Tuvalu has grown over 180 acres in the past 40 years, despite scientists warning that the islands will be uninhabitable by 2050 due to rising sea levels. Last year, scientists warned that Tuvalu and several other Pacific nations were expected to sink by the end of the century if countries do not take measures to tackle climate change. Five reef islands in the Solomon Islands have already been lost to rising sea levels and a further six have been severely eroded.However, a new study by the University of Auckland has revealed that Tuvalu has actually grown significantly over the past 40 years.  The total land area of Tuvalu's small islands increased by 2.9% between 1971 and 2014, according to the study published in the journal Nature Communications.Tuvalu, which is made up of nine ring-shaped islands called atolls, has grown by over 180 acres, the size of around 73 rugby fields, since the 1970s. The growth rate is significant considering that sea levels in the region rose at twice the global average during that period. "We tend to think of Pacific atolls as static landforms that will simply be inundated as sea levels rise, but there is growing evidence these islands are geologically dynamic and are constantly changing," he said."The study findings may seem counterintuitive, given that [the] sea level has been rising in the region over the past half century, but the dominant mode of change over that time on Tuvalu has been expansion, not erosion," Kench added. The study found that factors such as wave patterns and sediment dropped by storms could offset the effect of erosion on the islands.

Oceans suffocating as huge dead zones quadruple since 1950, scientists warn -Ocean dead zones with zero oxygen have quadrupled in size since 1950, scientists have warned, while the number of very low oxygen sites near coasts have multiplied tenfold. Most sea creatures cannot survive in these zones and current trends would lead to mass extinction in the long run, risking dire consequences for the hundreds of millions of people who depend on the sea.Climate change caused by fossil fuel burning is the cause of the large-scale deoxygenation, as warmer waters hold less oxygen. The coastal dead zones result from fertiliser and sewage running off the land and into the seas.The analysis, published in the journal Science, is the first comprehensive analysis of the areas and states: “Major extinction events in Earth’s history have been associated with warm climates and oxygen-deficient oceans.” Denise Breitburg, at the Smithsonian Environmental Research Center in the US and who led the analysis, said: “Under the current trajectory that is where we would be headed. But the consequences to humans of staying on that trajectory are so dire that it is hard to imagine we would go quite that far down that path.”“This is a problem we can solve,” Breitburg said. “Halting climate change requires a global effort, but even local actions can help with nutrient-driven oxygen decline.” She pointed to recoveries in Chesapeake Bay in the US and the Thames river in the UK, where better farm and sewage practices led to dead zones disappearing. However, Prof Robert Diaz at the Virginia Institute of Marine Science, who reviewed the new study, said: “Right now, the increasing expansion of coastal dead zones and decline in open ocean oxygen are not priority problems for governments around the world. Unfortunately, it will take severe and persistent mortality of fisheries for the seriousness of low oxygen to be realised.”

Ozone Layer Recovery Falters Unexpectedly - The Earth's protective ozone layer is not recovering uniformly from the damage caused to it by industry and other human activities. And scientists are not sure why it isn't.An international research team says the ozone, which protects humans and other species from harmful ultraviolet radiation, is continuing to recover at the poles. But recovery at lower latitudes, where far more people live, is not.The layer has been declining since the 1970s because of the effect of man-made chemicals, chiefly chlorofluorocarbons (CFCs) and similar gases , used mainly in refrigerants and aerosols.There is a link between the CFCs and global warming , though they are different and neither is the main cause of the other. Some suggested CFC replacements themselves proved to be powerful greenhouse gases. CFCs and the other gases were banned under an international agreement, the Montreal Protocol , and since then parts of the layer have been recovering , particularly at the poles. But the latest research, published in the journal Atmospheric Chemistry and Physics , finds that the bottom part of the ozone layer at more populated latitudes is not recovering, for reasons so far unidentified.

The Ozone Layer Isn’t Healing After All—and Depletion May Be More Harmful Than Ever -The Earth’s ozone shield continues to thin across much of the planet, scientists have discovered. With the decline sited over some of the most populous places on Earth, this decrease could be even more damaging than the Antarctic hole.While the famous hole in the ozone layer may be shrinking, its recovery has been offset by this unexpected decrease in other parts of the atmosphere. Ozone forms in the section of the atmosphere called the stratosphere. It blocks a large amount of deadly UV radiation from the sun, which can damage the DNA of animals, plants and humans.  In the 1980s, scientists discovered a large hole in the ozone layer, exposing the Antarctic to far higher levels of UV radiation than other parts of the planet. Aerosols and refrigerators were blamed for spewing ozone-depleting substances like chloroflurocarbons (CFCs). The Montreal Protocol agreement of 1987 led to the phasing out of CFCs and the first signs of repair in the upper stratosphere over the Antarctic.But, for reasons as yet unknown, ozone seems to be disappearing from some parts of the lower stratosphere, a study published in Atmospheric Chemistry and Physics has found. The area affected stretches from latitude 60N—a line which traces the globe through Canada and Russia—all the way down to 60S, which sits above Antarctica. Study co-author Joanna Haigh explained in a statement: “The potential for harm in lower latitudes may actually be worse than at the poles. The decreases in ozone are less than we saw at the poles before the Montreal Protocol was enacted, but UV radiation is more intense in these regions and more people live there."

The Arctic is full of toxic mercury, and climate change is going to release it - We already knew that thawing Arctic permafrost would release powerful greenhouse gases. On Monday, scientists revealed it could also release massive amounts of mercury — a potent neurotoxin and serious threat to human health. Permafrost, the Arctic’s frozen soil, acts as a massive ice trap that keeps carbon stuck in the ground and out of the atmosphere — where, if released as carbon dioxide, the greenhouse gas would drive global warming. But as humans warm the climate, they risk thawing that permafrost and releasing that carbon, with microbial organisms becoming more active and breaking down the ancient plant life that had previously been preserved in the frozen earth. That would further worsen global warming, further thawing the Arctic — and so on. That cycle would be scary enough, but U.S. government scientists on Monday revealed that the permafrost also contains large volumes of mercury, a toxic element humans have already been pumping into the air by burning coal. There are 32 million gallons worth of mercury, or the equivalent of 50 Olympic swimming pools, trapped in the permafrost, the scientists wrote in a study published in the journal Geophysical Research Letters. For context, that’s “twice as much mercury as the rest of all soils, the atmosphere, and ocean combined,” they wrote. “As permafrost thaws in the future, some portion of this mercury will get released into the environment, with unknown impact to people and our food supplies, 

Sea ice tracking low in both hemispheres - January of 2018 began and ended with satellite-era record lows in Arctic sea ice extent, resulting in a new record low for the month. Combined with low ice extent in the Antarctic, global sea ice extent is also at a record low.The new year was heralded by a week of record low daily ice extents, with the January average beating out 2017 for a new record low. Ice grew through the month at near-average rates, and in the middle of the month daily extents were higher than for 2017. However, by the end of January, extent was again tracking below 2017. The monthly average extent of 13.06 million square kilometers (5.04 million square miles) was 1.36 million square kilometers (525,000 square miles) below the 1981 to 2010 average, and 110,000 square kilometers (42,500 square miles) below the previous record low monthly average in 2017. The pattern seen in previous months continued, with below average extent in the Barents and Kara Seas, as well as within the Bering Sea. The ice edge remained nearly constant throughout the month within the Barents Sea, and slightly retreated in the East Greenland Sea. By contrast, extent increased in the Gulf of St. Lawrence, off the coast of Newfoundland, in the eastern Bering Sea and the Sea of Okhotsk. Compared to 2017, at the end of the month, ice was less extensive in the western Bering Sea, the Sea of Okhotsk and north of Svalbard, more extensive in the eastern Bering Sea and in the Gulf of St. Lawrence. Overall, the Arctic gained 1.42 million square kilometers (548,000 square miles) of ice during January 2018.

Sea cables in a thawing Arctic -- China has made a significant foray into the Arctic with the creation of a data “silk road”. Strongly supported by a newfound closeness with Russia, preliminary planning of a Chinese and Finnish–led trans-Arctic cable along the Arctic’s Northeast Passage in partnership with Japan and Norway is underway. But the project, essentially a relaunch of a stagnated Russian initiative, presents stark risks in affording Moscow and Beijing potential influence over global telecommunications. Sea cables 101 Contrary to popular belief, satellites carry very little global data. Sea cables have been an important method of global communication since the mid-19th century. The advent of fibre optics in the 1990s made modern sea cabling even more critical. This vast network, comprising some one million kilometres in total, carries almost all data transfers and, according to a recent report, facilitates finance transfers of more than $10 trillion dollars every day. Beyond the significance to the global financial market, sea cables transfer nearly all our global telecommunications data. These cables are a matter of crucial national security. Historically, sea cables have only been vulnerable to damage from threats related to fisheries, anchors, earthquakes, and tsunamis. Being relatively void of these challenges, at least for now, the Arctic offers a unique environment for sea cables. But the increasingly assertive foreign policy agendas of some states means that these cables are at risk of purposeful interference, as per the emerging “hybrid” security threat.

Models Coming into Agreement on Widespread Effects of Arctic Sea Ice Loss - Computer models have long predicted that surface temperatures would rise more quickly in the Arctic than at lower latitudes, and observations show this happening already. There’s also been a significant drop in the extent of Arctic sea ice throughout the year, most notably in summer but also during the cold season. In the first few days of February 2018, Arctic sea ice extent has been running about 8-10% below the seasonal average for the period 1981-2010, and it’s been breaking record lows that were set just last year (in 2017).  A burst of widely publicized research over the past decade found that the depleted Arctic sea ice could be part of a chain of events weakening the stratospheric polar vortex and hiking the risk of cold outbreaks in northern midlatitudes. These findings have been far from unanimous, though. “The recent pace of [Arctic] sea ice loss has been nothing short of breathtaking, as about 80% of the volume has disappeared in a human genera­tion,” said Jennifer Francis (Rutgers University) in an overview for the December issue of the Bulletin of the American Meteorological Society (BAMS). Francis added: “Despite intense efforts to understand Arctic–mid­latitude [linkage], the controversy surrounding its sig­nificance and even its existence rages on.” The impact of depleted Arctic sea ice on climate isn’t so much from the absent ice itself as from the ocean that’s newly exposed. Heat propagates upward from the sea surface, and low-level winds flowing atop the exposed ocean thus end up warmer. Along with this direct influence, some more complex processes appear to be at work. The key to mapping out these indirect effects seems to be using more sophisticated (albeit more costly) computer models that allow the oceans and sea ice to interact with the atmosphere. For example, some studies have used “slab” ocean models that can’t depict deep ocean circulation. When a full-depth ocean model is used, something intriguing happens: the loss of Arctic sea ice triggers a far-flung response that mimics climate change itself, including a slowdown of the Atlantic Meridional Overturning Circulation (AMOC), a build-up of heat in the tropical oceans over several decades, and a warming of the atmosphere a few miles above the tropics. Clara Deser (National Center for Atmospheric Research) dubbed this a “mini-global-warming.”

Killings and threats against land rights defenders soar in 2017: rights group -- More than 120 activists campaigning to protect their land, environment and labor rights from business interests were killed last year - an almost 50 percent increase on 2016, a rights group said on Tuesday. The London-based Business & Human Rights Resource Centre (BHRRC) said it documented 388 attacks on campaigners in 2017, including beatings, threats, lawsuits and arbitrary detentions, up 34 percent from the previous year. The rise was partially due increased global attention, which led to more incidents being reported and documented, and came as rights group were coming under growing pressure worldwide, said BHRRC’s spokeswoman Ana Zbona. Charities in dozens of countries, from Angola to India and Tajikistan, have faced restrictions targeting their funding and operations over the past two years, according to an EU report. “We are seeing attacks on activists and civic freedoms in general increasing around the world,” Zbona told the Thomson Reuters Foundation. Brazil, Mexico, Colombia, Honduras, Guatemala and the Philippines were the most dangerous countries for activists confronting corporate interests, accounting for 212 of all incidents, BHRRC said. Victims, including the 127 killed, were activists, trade union representatives, indigenous leaders, journalists and lawyers - mostly involved in land rights campaigns opposing mines, plantations and power plants. Mining and agriculture remained the most affected sectors but attacks related to renewable energy projects, like dams and wind farms, were rising fast, fueled by growing investments in clean energy, the group said. 

Trump administration takes aim at California desert protection plan: The Trump administration is threatening to scrap a major Obama-era agreement that sought to protect millions of acres of the California desert by placing sensitive areas off-limits to major solar- and wind-energy installations. The Desert Renewable Energy Conservation Plan covers more than 10.8 million acres and was designed to guide energy facilities to parcels where they are least likely to cause environmental damage. The administration's announcement that it will reconsider the plan touched off an immediate backlash in the West. The Trump administration's action could also open up sensitive desert areas to off-road vehicles, mining and grazing. The California Energy Commission, which took a lead role in developing the desert management plan, says the state will have no problem meeting its aggressive clean-energy goals without rolling back the protections. The move by the administration comes as some energy firms and local governments complained the plan was too restrictive, placing off-limits land they have been seeking to develop. The bid to revise the plan threatens to set off new tensions between conservation groups crusading to protect habitat, such as the desert tortoise, and solar and wind developers eager to meet the West's escalating demand for clean energy. It also raises tensions between Washington and California. The Bureau of Land Management says it was moved to consider changing the plan "in response to President Trump's order to review regulations that unnecessarily impede energy development." It points out that under the conservation plan, only 7% of the millions of acres it covers is available for renewable energy leasing.

Reagan made a massive environmental mistake. Trump is repeating it, only worse  - To understand the true costs of the United States' abnegation of its international responsibilities, there's a useful analog in the story of another global environmental threat that arose in the last century. Then, too, the world was moving toward a united response when a U.S. presidential election intervened. Ultimately, the world dodged a bullet. This time, we may not be so lucky. In 1974, the world was facing the depletion of the ozone layer. The distinguished science journal Nature had published an article providing evidence that chlorine compounds called CFCs were migrating to the upper atmosphere and destroying the ozone molecules that formed a protective shield against harmful ultraviolet radiation (three scientists — Sherwood Rowland, Mario Molina and Paul Crutzen — were later awarded the Nobel Prize in chemistry for the discovery). Without the shield, UV radiation would reach the Earth's surface, causing an extraordinary range of harmful effects, including cancers in animals and people and the wholesale destruction of phytoplankton, the basis of the oceanic food chain. By the late 1970s, the Carter administration had banned the use of CFCs in aerosol sprays, and was moving to phase out their use in refrigeration. Then came the election of Ronald Reagan. CFC-using industries were already challenging the science and fighting regulation. They lobbied Congress, arguing that eliminating CFCs would cost tens of thousands of jobs. If this sounds a lot like the fossil fuel industry's posture toward global warming, it should: The playbook developed to slow efforts to combat climate change was developed during the CFC battle. Indeed, a number of the same scientists who disputed ozone depletion later showed up before Congress casting doubt on climate change. In the '70s, they discovered they didn't need to refute the science to delay action, they only needed to convince the public it was not yet settled. Before Reagan, CFC producers were preparing for a worldwide ban on the compounds. After the 1980 election, however, industry lobbyists found a friendly audience for their arguments. Anne Burford, Reagan's Environmental Protection Agency chief, dismissed the threat of CFCs as an "unsubstantiated scare story." DuPont halted work on the alternatives, and production of CFCs reached new highs.

Scott Pruitt Asks if Global Warming 'Necessarily Is a Bad Thing' -- Scott Pruitt , the head of the U.S. Environmental Protection Agency ( EPA ), suggested in an interview Tuesday that humans "flourished" during warm periods and climate change might not be so bad. "We know that humans have most flourished during times of what? Warming trends," Pruitt told Nevada news station News 3 . "So I think there's assumptions made that because the climate is warming that that necessarily is a bad thing." Ironically, Pruitt's remarks were made after News 3 host Gerard Ramalho listed a slew of very real and very dangerous climate-related consequences to the EPA administrator—southern Nevada has felt one of its hottest summers and warmest winters ever, the polar ice caps are melting , sea levels are rising , and hurricanes and tornadoes are intensifying . Pruitt's gaffe is comparable to the time he said carbon dioxide is " not a primary contributor " to climate change. But it is. It just is, as the overwhelming majority of climate scientists have concluded. "As the evidence becomes ever more compelling that climate change is real and human-caused, the forces of denial turn to other specious arguments, like 'it will be good for us,'" Penn State University climate scientist Michael Mann told the Guardian , which first flagged the interview. "There is no consistency at all to their various arguments other than that we should continue to burn fossil fuels ," Mann added.

Top Coal Lobbyist, Climate Skeptic Poised to Become No. 2 at EPA -- A leading lobbyist for the coal and oil industries, who is a staunch climate change skeptic, is a step away from being second in command at the U.S. Environmental Protection Agency (EPA).Andrew R. Wheeler's nomination by President Trump to be Deputy EPA Administrator was approved by a party-line vote in the Senate Environment and Public Works Committee Wednesday. The nomination will now go to the full Senate. His former clients include Robert Murray, CEO of the nation's largest coal mining company, whose wish list has set much of the agenda for the Trump administration's environmental rollbacks. And Wheeler raised money last year for two senators who approved his nomination, according to The Intercept ."Bob Murray and every other coal industry executive must be as giddy as kids the night before Christmas," said EWG President Ken Cook. "The idea that one of their own lobbyists would one day be a top EPA official in charge of 'regulating' the coal industry was sheer fantasy until now.""No one should think for a second Wheeler will shed his years of work for and allegiance to polluters, and instead take seriously his duty to safeguard public health and environmental protections," said Cook. Wheeler counts Murray Energy as one of his lobbying clients at the Washington law firm Faegre Baker Daniels. In May he hosted campaign fundraisers for the Environment and Public Works Committee chairman, Sen. John Barrasso, R-Wyo. and committee member Sen. James Inhofe, R-Okla., according to The Intercept. Before joining the law firm, Wheeler was an aide to Inhofe for 14 years.

Coal Lobbyist Hosted Fundraisers for Senators Evaluating His Nomination for Top EPA Post - While waiting for a nomination to the Environmental Protection Agency, Andrew Wheeler, a coal lobbyist, cozied up with the senators who would decide upon his appointment in the most direct way possible: giving them money.Wheeler, who was first rumored to be tapped for the EPA last March, raised funds for Republican senators on the committee that makes the preliminary decision on confirming appointments to the agency.  Fundraising documents obtained by The Intercept and the watchdog group Documented show that Wheeler hosted campaign fundraisers for two members of the Senate Committee on Environment and Public Works — Sens. John Barrasso, R-Wyo., and Jim Inhofe, R-Okla. — last May. The event for Inhofe was held at Rosa Mexicano, a Mexican restaurant in downtown Washington, D.C., and the event for Barrasso took place at Wheeler’s office on K Street in the capital. Federal Election Committee records show both senators received donations of Wheeler’s law firm PAC last year. Barrasso received $2,500 and Inhofe’s leadership PAC received $1,000.In October, Wheeler was formally nominated to serve as the deputy administrator of the EPA, the No. 2 slot at the agency. His confirmation hearing was in November; the Senate panel approved his nomination, but it never went before the full chamber for a final vote. His nomination came back before the committee at the start of the new legislative session last month and a vote is expected Wednesday.  Wheeler manages the energy and natural resources practice at the law firm of Faegre Baker Daniels. His lobbying energy clients have included the coal company Murray Energy, the largest privately owned coal firm in the United States, as well as Xcel Energy, a major utility interest group. Public disclosures show that Wheeler most recently lobbied for the firm in August 2017.

Fines Against Polluters Drop Sharply Under Trump EPA - The U.S. Environmental Protection Agency ( EPA ) announced Thursday its annual enforcement and compliance report that boasted $1.6 billion in administrative and civil judicial fines against polluters."A strong enforcement program is essential to achieving positive health and environmental outcomes," Susan Bodine, head of the agency's enforcement division said in a statement.However, analyses show that the penalties against polluters are significantly lower under President Trump 's EPA. According to The Hill , that $1.6 billion figure is roughly a fifth of the $5.7 billion in penalties collected the year before under President Obama's EPA.In addition to that, the Scott Pruitt -led agency is also taking credit for the previous administration's enforcement efforts. The EPA 2017 enforcement report covers the federal fiscal year from Oct. 1, 2016 to Sept. 30, 2017, meaning the final tally covers three and half months of the Obama administration, "when some of the E.P.A.'s biggest cases were settled," as the New York Times observed.The largest chunk came from Volkswagen's $1.45 billion to resolve civil claims for its "dieselgate" emissions scandal, which was announced on Jan. 11—before Trump was even sworn in.

California plans to reduce greenhouse gas emissions 40% by 2030 -- In July 2017, California’s state legislature passed assembly bill (AB) 398 to reauthorize and extend until 2030 the state’s economy-wide greenhouse gas (GHG) reduction program. The bill sets a new GHG target of at least 40% below the 1990 level of emissions by 2030. As of 2015, about 86% of California’s GHG emissions were related to the consumption of energy.  The original bill that established the state’s greenhouse gas reduction program, AB 32, passed in 2006 and authorized the California Air Resources Board (CARB) to monitor and regulate sources emitting greenhouse gases. The initial target was to reduce emissions to the 1990 level by 2020. An executive order from California’s governor targets an 80% reduction from 1990 levels by 2050. Overall, California’s total GHG emissions were 2% higher than 1990 levels as of 2015.  In 2016, CARB released a scoping plan for the 2030 target that involved continuing existing programs such as the Low Carbon Fuel Standard (LCFS) program and the state’s renewables portfolio standard. The LCFS program aims to increase the use of biofuels in the transportation sector. California’s renewables portfolio standard sets targets for specific technologies used to generate electricity in the state. The transportation and electric power sectors are the two largest sources of California’s emissions, responsible for 37% and 19% of the state’s GHG emissions, respectively, in 2015.  Under the current cap-and-trade program, affected emissions sources include electric generators, industrial facilities, and oil and natural gas distributors. Companies in the compliance program have the option to either purchase allowances or directly reduce their emissions. Companies also have the option to finance carbon offset credits, which are earned under a separate program for voluntary projects that lower overall GHG emissions.

The Renewable Energy Stall - Earlier this month, the Trump administration announced a decision to apply a 30 percent tariff on imported solar cells and panels. The Solar Industries Association denounced the measure, projecting job losses and cancellation of solar investments. But the solar tariff discussion hides a larger renewable energy issue. Global investment in renewables has stalled in the US, in Europe, and in many markets across the world.Since the 1990s, sustainable advocates have called for investment in wind, solar, and biofuel energy as the solution to global warming, pollution, and feared resource depletion. National, state, and provincial governments responded, promoting green energy with feed-in tariffs, renewable portfolio standards laws, renewable grid priority, and other subsidies and mandates. Carbon trading markets and carbon taxes were enacted to impose costs on hydrocarbon fuels to favor renewable energy.These efforts resulted in a rapid rise in renewable deployments across the world. From 2004 to 2011, global renewable energy investment grew at a 26.7 percent compounded annual rate. By the end of 2012, more than 200,000 wind turbines were operating worldwide. Germany alone boasted more than one million solar rooftop installations. But since 2011, investment in renewables has stalled. From 2011 to 2017, global green energy investment grew at only 0.7 percent per year—essentially flat. According to Bloomberg New Energy Finance, 2017 investment in renewables grew only 1 percent in the US, but was down 16 percent in Japan, down 20 percent in India, down 26 percent in Germany, and down 56 percent in the United Kingdom. Investment in China was up 26 percent, supporting a meagre 3 percent global renewable investment growth in 2017.

Elon Musk’s ‘virtual power plant’ will see 50,000 SA homes given free solar panels and Tesla batteries - Elon Musk has agreed to build what is being hailed the “world’s largest virtual power plant”, by rolling out solar panels and Tesla batteries to 50,000 homes in South Australia. The scheme, which will be completed over the next four years, will see any excess energy stored in each battery fed back into the grid to provide power to the rest of the state whenever required. The South Australian government claims participating households will generate a total of 250MW of electricity. In an initial trial a 5kW solar panel system and a 13.5kWh Tesla Powerball 2 battery will be installed free of charge in 1,100 state-owned properties. Future sales of electricity are expected to cover the costs.According to the state government, households involved in the scheme can expect to see their energy bills lowered by 30 per cent, and even those not taking part will benefit from lower costs and fewer blackouts. The government claims individual energy systems will generate a “significant” proportion of each household's electricity needs, day and night. It also says the system as a whole will produce 20 per cent of the entire state’s daily energy requirements,

China demands compensation for U.S. solar tariffs: WTO filings (Reuters) - China has sent the United States a demand for talks on compensation for steep U.S. tariffs imposed on imported solar panels and washing machines, World Trade Organization filings showed on Tuesday. China said it was asserting its right as a major exporter to demand compensation, and said it believed the U.S. measures broke numerous WTO rules. China’s move follows similar steps by Taiwan and South Korea. 

Bitcoin’s price crashed, but it’s still devouring an obscene amount of energy (Vox) Bitcoin is plummeting, with the price of a “coin” falling from a December high of $19,500 to $8,242 as of Tuesday morning. The crash came a day after Wall Street got its own long-overdue correction: The Dow Jones Industrial Average fell by 4.6 percent on Monday, the worst point drop for the index ever. Some Bitcoin enthusiasts and market analysts believe this is the start of a true crash, including Nouriel Roubini, a professor at New York University who is one of the world’s most well-known economists.  But others say the current decline is a typical seasonal event.  The drop in price, though, hasn’t had much of an effect on the massive amount of energy the Bitcoin network devours or its emissions. In fact, as of Tuesday, electricity consumption from Bitcoin rose to a record high of 47.4 terawatt-hours, according to Digiconomist, Alex de Vries’s Bitcoin analysis blog. That’s roughly the energy used by all of Singapore, a country of 5.6 million people. It brings the rate of carbon dioxide emissions from Bitcoin up to 23.2 million metric tons per year. And it’s not showing any signs of slowing down.  Mining bitcoins — or verifying transactions to get coins — is a hugely energy-intensive process because of all the electricity needed for computational processing. About 80 percent of mining costs go toward electricity. Every Bitcoin user conducts transactions in a public ledger, but since that ledger is distributed across thousands of computers, it’s immensely tedious to reconcile and verify transactions across the network. Transactions are grouped together in blocks that require finding a cryptographic key to verify. As I wrote last year, this process is like finding solutions to complicated math problems that become progressively more difficult. It’s a competitive process, with one miner receiving the award, currently 12.5 bitcoins, roughly every 10 minutes, so there’s a strong incentive to throw as much processor power — and thereby electricity — at the mining effort.  Or, as the Guardian’s Alex Hern wrote, it’s “a competition to waste the most electricity possible by doing pointless arithmetic quintillions of times a second.”

The Cost of Crypto Is Turning Miners Towards Green Power -- Renewable energy is becoming the preferred way of mining digital currencies like Bitcoin as prices surge and the industry seeks more computing power. While traditional fuels like coal remain staples for many utility grids, big miners including Bitmain Technologies Ltd., HIVE Blockchain Technologies Ltd. and Bitfury Group are tapping clean power in places like Canada, Iceland and Paraguay -- and luring investors worried about the industry’s carbon footprint. “To conquer the riches of cryptocurrency,” said Gogokhia, Golden Fleece’s 28-year-old chief executive officer and a former employee of the state-owned electricity grid, “we undertook the quest to build cheap, green and sustainable mining farms in Georgia.” It’s easy to see why energy sources are getting more attention. The increasingly difficult computations for creating new blockchains -- the encrypted digital ledgers that underpin cryptocurrencies -- require ever-more powerful computers. And many of the big server farms need air conditioning to keep from overheating. The industry’s electricity use jumped almost eight-fold in the past year, and spending on power can eat up 30 percent to 60 percent of revenues, Bloomberg New Energy Finance estimates. “The price of electricity mostly drives where mining is taking place,” said Christian Catalini, who founded the Cryptoeconomics Lab at the Massachusetts Institute of Technology outside of Boston. “If the price of electricity increases in one location, mining will likely just move somewhere else.”

Enel Will Not Sell Electricity to Crypto-Miners - Enel made a statement on Thursday that explains it will not sell power to data centers who plan to mine cryptocurrencies. According to the financial publication Bloomberg the company was allegedly discussing a deal with Switzerland-based cryptocurrency business Envion AG. The news outlet stated that “according to people with direct knowledge of the matter” Enel was evaluating the market to sell power to bitcoin and other digital asset miners. However, after the alleged discussions the power company changed its tune. Enel says it takes pride in providing “green power” deriving from biomass and incineration practices, geothermal resources, hydroelectricity, wind, and solar power, but does not believe that cryptocurrency mining can be maintained in an environmentally friendly way.

Russian Nuclear Scientists Used Supercomputers To Mine For Cryptocurrency - Russian security officials arrested a number of scientists working at a secret Russian nuclear weapons facility for allegedly using lab equipment to mine for cryptocurrencies, according to Russia's Interfax News Agency . The engineers arrested in the incident were working at the All-Russian Research Institute of Experimental Physics (RFNC-VNIIEF). No official criminal charges have been announced and law enforcement has not said how many members of the operation were detained. A spokesperson for the institute told Interfax that the group of scientists attempted to mine for cryptocurrency with “office computing resources”—a violation that put the operations of the lab at risk.  "There has been an unsanctioned attempt to use computer facilities for private purposes including so-called mining," Tatyana Zalesskaya, head of the Institute's press service, said. Zalesskaya also indicated there is a pending criminal case being launched against the engineers.

Self-Driving Cars Use Crazy Amounts of Power, and It's Becoming a Problem  --Today's self-drivers don't need extra engines, but they still use terrific amounts of power to run their onboard sensors and do all the calculations needed to analyze the world and make driving decisions. And it's becoming a problem.  A production car you can buy today, with just cameras and radar, generates something like 6 gigabytes of data every 30 seconds. It's even more for a self-driver, with additional sensors like lidar. All the data needs to be combined, sorted, and turned into a robot-friendly picture of the world, with instructions on how to move through it. That takes huge computing power, which means huge electricity demands. Prototypes use around 2,500 watts, enough to light 40 incandescent light bulbs.“To put such a system into a combustion-engined car doesn’t make any sense, because the fuel consumption will go up tremendously,” says Wilko Stark, Mercedes-Benz's vice president of strategy. Switch over to electric cars, and that draw translates to reduced range, because power from the battery goes to the computers instead of the motors.At first, companies may be able to write off the lost range or fuel. “It’s not a huge problem for the early applications, where we expect them to be used,” says Chris Urmson, who ran Google’s self-driving program and is now CEO of Aurora, a self-driving startup that has partnered with Volkswagen, Hyundai, and Chinese automaker Byton. That’s because the first robocars will likely be city-bound fleets of electric shuttles, moseying along at low speeds and able to recharge often.  Buyers of regular cars aren’t likely to be impressed though. Maybe you’re old enough to have dealt with a parent who turned off the car's AC to save gas. Now imagine having to turn off the self-driving abilities just to make it to your destination without running out of electrons.

Massachusetts seeks path forward after hydro project defeat  (AP) — A week after New Hampshire regulators soundly rejected the $1.6 billion Northern Pass hydropower project, Massachusetts officials are demanding to know whether it is still a viable option for delivering clean energy to their state by 2020. The project was set to deliver hydropower from Canada to customers in southern New England through a 192-mile transmission line in New Hampshire. But the New Hampshire Site Evaluation Committee, in a unanimous vote last week, cited the potential negative impact of the project on local communities, businesses and the region's tourism industry. Now both states, and a host of other bidders for Massachusetts' largest clean-energy procurement, are wondering what happens next. Judith Judson, commissioner of the Massachusetts Department of Energy Resources, has asked the three companies that would distribute the power from Northern Pass — Eversource, Unitil and National Grid — to advise her by Friday whether they want to continue negotiating over Northern Pass or turn to one of the dozens of other suitors for the contract. The New Hampshire vote "has the potential to significantly impact or render infeasible the project's ability to deliver clean energy with the timeframe proposed by the bidder," Judson wrote. Northern Pass is being built by Eversource and would get its power from Hydro-Quebec. Among the project's strengths was its original promise to be online by 2020.

FERC's resilience order may suggest reliability tweaks, rather than novel solutions - The Federal Energy Regulatory Commission has asked stakeholders to identify risks to grid resilience and propose solutions. Stakeholders may be tempted to frame resilience as a brand new problem requiring new market and regulatory responses. But could pre-existing reliability mechanisms get us most of the way there?In a January 8 order, the Federal Energy Regulatory Commission soundly rejected the notion that, to keep the lights on in regions served by bulk power markets, it was necessary to compensate power plants capable of housing 3-month fuel stores. In closing the docket directed by the Department of Energy’s Notice of Proposed Rulemaking (NOPR), however, FERC opened a “national conversation” about grid resilience. Regional Transmission Organizations (RTOs) have 60 days to respond to questions posed by FERC, followed by 30 days of “reply” comments from other stakeholders. This docket seems to suggest, at first blush, that system operators should pursue resilience as its own novel concept. In the new proceeding, FERC proposed that resilience means the “ability to withstand and reduce the magnitude and/or duration of disruptive events, which includes the capability to anticipate, absorb, adapt to, and/or rapidly recover from such an event.”  In engineering, resilience is — as FERC proposes — the capacity of a steady-state system to return to equilibrium after a disturbance. Another more dynamic definition — what some scholars call ecological resilience — references how much outside force a system can take before it changes structure and begins to follow a different, stable set of rules. Drawing on both concepts, economic resilience describes the capacity of an economy to recover or recreate itself after a shock, in ways that mitigate aggregate losses and negative distributional impacts. Given rising threats of a diverse range of unplanned traumas (ranging from extreme weather events to cyber attacks), it may be that resilience “[i]s an important issue that warrants further attention.” But before rushing headlong into characterizing resilience as a new problem for the grid and suggesting novel solutions, it is worth asking how well-defined concepts and long-standing grid management tools and standards can help address the challenge.

Coal chiefs mock reporter as critical West Virginia media voice goes bust - In a room packed with coal industry leaders in Charleston, West Virginia, a speaker held up a fake “pink slip” for a local newspaper reporter who covers the business, and mockingly said he wished the journalist could be in attendance. The crowd erupted into laughter because the reporter, Ken Ward, who has covered the industry with an unforgiving eye for years, was not there. The pink slip is a nod to the fact that his publication, the Charleston Gazette, recently filed for bankruptcy. The stunt was first reported by Taylor Kuykendall, a fellow coal reporter for the S&P Global Market Intelligence, the news and financial data website.The speaker, Robert McLusky, is lead attorney for Massey Energy, which owned the Upper Big Branch mine when it exploded in 2010, killing 29 workers. Ward, a 25-year reporting veteran led the Gazette’s aggressive and detailed coverage of the disaster, peppering the company with questions about the regulatory corner-cutting that led to the fatal explosion.But it was McLusky and other industry top brass who indulged in the last laugh on Wednesday, because the loss of news reporting as a check on their power has not been their only good news of late. The industry has also seen the prospect of government accountability on labor and environmental issues dwindle in the warm embrace of the Trump administration.“The good news is I’m with the federal government and I’m here to help,” energy department adviser Doug Matheney told the audience at the same event. “I went to Washington DC for one purpose, and that was to help create coal jobs in the United States. That’s my total purpose for being there. I’m not a researcher, I’m not a scientist, I’m an advocate for the coal industry.”

Black lung study finds biggest cluster ever of fatal coal miners' disease (NPR) Epidemiologists at the National Institute for Occupational Safety and Health say they've identified the largest cluster of advanced black lung disease ever reported, a cluster that was first uncovered by NPR 14 months ago.In a research letter published Tuesday in the Journal of the American Medical Association, NIOSH confirms 416 cases of progressive massive fibrosis or complicated black lung in three clinics in central Appalachia from 2013 to 2017."This is the largest cluster of progressive massive fibrosis ever reported in the scientific literature," says Scott Laney, a NIOSH epidemiologist involved in the study."We've gone from having nearly eradicated PMF in the mid-1990s to the highest concentration of cases that anyone has ever seen," he said.The clinics are operated by Stone Mountain Health Services and assess and treat coal miners mostly from Virginia, Kentucky and West Virginia, a region that includes what have historically been some of the most productive coalfields in the country."When I first implemented this clinic back in 1990, you would see ... five [to] seven ... PMF cases" a year, says Ron Carson, who directs Stone Mountain's black lung program.The clinics now see that many cases every two weeks, he says, and have had 154 new diagnoses of PMF since the fieldwork for the NIOSH study concluded a year ago. PMF, or complicated black lung, encompasses the worst stages of the disease, which is caused by inhalation of coal and silica dust at both underground and surface coal mines. Miners gradually lose the ability to breathe, as they wheeze and gasp for air.

Power plants' coal ash reports show toxins leaking into groundwater - Toxic substances including arsenic may be leaking from unlined pits and contaminating groundwater at hundreds of coal ash storage facilities nationwide, according to an analysis by the environmental law organization Earthjustice. The analysis, an initial review of recently released data from 14 power plants in eight states, comes as the Environmental Protection Agency is weighing whether to revise recently enacted groundwater monitoring rules at coal ash storage facilities. Nine of the 14 power plants noted "statistically significant increases" of toxic substances in groundwater near coal ash containment ponds, Earthjustice found. "This data tells a story, and the story is alarming," Earthjustice Senior Counsel Lisa Evans said. "If the present reports are any indication of the percentage of sites that are admitting significant contamination of groundwater, this is going to indicate a severe, nationwide problem." The ponds store coal ash, the ash left after a power plant burns coal. Under a 2015 rule governing coal ash disposal, utility companies were required to complete initial monitoring of groundwater near such sites by Jan. 31, 2018, and they are required to make their data publicly available by March 2. Earthjustice reviewed the reports of the first 14 power plants to post their data. About 1,400 such sites exist nationwide, according to Earthjustice.Any threat posed to human health and the environment would depend in part on where the contaminated groundwater flows. "It's very dangerous to human health if the groundwater is flowing to where the water is pumped for drinking water wells," Evans said. "It can also flow to small streams that could have a devastating impact on aquatic life in streams and lakes." Initial monitoring conducted by the companies did not assess where the contaminants moved once they entered the groundwater. Of the approximately 1,400 sites nationwide, the vast majority are unlined ponds, Evans said. Protective liners designed to limit leaks were first required for new ponds under the 2015 rule. 

Duke Energy wants to close case forcing groundwater cleanup -  (AP) — A North Carolina appeals court should keep alive a five-year-old lawsuit because it increases the pressure on Duke Energy Corp. to clean up groundwater contaminated by its coal ash pits, environmental lawyers argued Thursday. The Charlotte-based electricity utility admits coal ash has tainted underground water supplies, but says the potentially toxic brew hasn't harmed neighbors using water wells. Coal ash, the residue left after decades of burning coal to generate power, can contain toxic materials like arsenic and mercury. One of the country's largest electricity companies, Duke Energy is currently asking North Carolina utilities regulators to allow it to charge customers all costs associated with coal-ash cleanup, a price tag estimated at about $5 billion. A Duke Energy lawyer told a trio of judges on the state Court of Appeals the lawsuit filed by the state's environmental protection agency and joined by conservation groups should be dismissed. The company is following deadlines set by a state law passed in 2014 mandating coal-ash disposal at 14 North Carolina power plants, and only that law can enforce the clean-up, Duke Energy lawyer Nash Long said. The lawsuit filed in 2013 seeks to force the company to stop polluting and clean up contaminated water sources. The company was in court in part because Superior Court Judge Paul Ridgeway has refused to dismiss the lawsuit. Ridgeway has indicated he would review the remediation plan the state Department of Environmental Quality approves, then decide independently whether the agency is requiring enough from Duke Energy to clean up the pollution, Long said. That could lead to the judge laying out facts describing the extent of groundwater pollution that coal ash has caused and how long Duke Energy has known about it. 

Compromise coal ash bill would extend closure moratorium (AP) — A Virginia Senate panel advanced a measure Wednesday that would prevent Dominion Energy from capping its coal ash in place for at least another year while lawmakers study the issue, including recycling options. The bill would extend a moratorium on coal ash pond closures put in place last year, although it would allow Dominion to seek permits to close ponds that have already been excavated. The measure would also require Dominion to request bids from coal ash recycling companies and turn that information over to the General Assembly. Lawmakers will meet to evaluate the findings and take more time to consider long-term options for dealing with Virginia's millions of tons of the heavy metal-laden waste left over from decades of burning coal to produce electricity. "This is a big problem. This is not the final solution, but this, I think, will lead to more information," said Michael Town, executive director of the Virginia League of Conservation Voters. "We're committed to making sure that Dominion closes these ponds in an appropriate manner that protects people's groundwater and the environment." The measure advanced with bipartisan support after a hectic hearing in the Commerce and Labor committee. Bills from Democratic Sen. Scott Surovell and Republican Sen. Amanda Chase were rolled together and the language was amended on the fly.

A hard truth: Trying to build on the broken skeleton of King Coal - With hopes of a renewed coal industry rising in West Virginia along with coal severance numbers, a newly released study compiled by experts from West Virginia University and the University of Tennessee outlines what many of those in the Mountain State know in their hearts: King Coal has lost his crown for good. While the authors of the study believe that coal production has begun to level out, they clearly spell out that production numbers will remain much lower than historical figures, even more recent historical numbers.While compiled by state universities, the five-part, 350-page study was ordered by the Appalachian Regional Commission, the organization that was created in the 1960s as a federal-state partnership to battle poverty and to improve the socio-economic conditions among the mountains, hills and hollows of Appalachia.The study, "An Economic Analysis of the Appalachian Coal Industry Ecosystem," compiles the data of the downturn in coal and spreads the impacts of that downturn on what it calls the coal industry ecosystem, or CIE.The CIE is defined as the "relationship and interdependence among coal mining, its supply chain linkages, transportation service, coal-fired power generation, as well as the impacts on the supply-chain linked industry and human capital resources."While greater Appalachia has suffered from the downturn in coal, the study highlights how central Appalachia, including southern West Virginia, has felt the brunt of the downturn and continues to fall behind the other regions of Appalachia and the nation as a whole.According to the study, between 2005 and 2015, coal production fell in Appalachia by 45 percent or over 175 million tons, with central Appalachia production falling 61 percent, from over 235 million short tons in 2005 to below 91 million short tons in 2015.During the same time the combined national coal production fell by 21 percent. While that production drop led to a loss of coal mining jobs across all of Appalachia, central Appalachia has seen the most job loss by far with over 13,000 mining jobs lost, a nearly 40 percent cut.

In the shadow of oil, coal markets rise from the ashes (Reuters) - Far from entering the death throes predicted by some environmentalists and analysts, thermal coal miners are enjoying their best returns in years as strong Asian demand and tight supplies send prices soaring. Chinese thermal coal futures hit a record of 687 yuan ($108.49) this week, up five-fold from their 2016 lows. Coal cargo prices from Australia’s Newcastle terminal, meanwhile, have roughly doubled since 2016 lows to over $100 per tonne, not far off 2011/2012 levels. “The coal price improvement has thrown into stark relief the robustness of underlying demand in Asia,” . “This had been masked until recent times by the surplus of capacity constructed during the last cycle. This period has now passed.” While the spotlight of a broad energy market revival has been on oil and natural gas, specialist thermal coal miners are enjoying an even better run, suggesting investors think this much reviled fossil fuel has life in it still. Whitehaven, Indonesia’s Adaro Energy and global commodity merchant Glencore have all seen their share prices multiply from record lows in 2015/2016, hitting levels last seen during the mining boom before 2012. “We expect coal prices to remain meaningfully higher than expectations, and as such, believe Whitehaven can keep moving higher,” The rise in coal prices has taken many by surprise. Morningstar Equity Research said coal prices “have fared better than we expected due to continued strong growth in China”. As a result, Whitehaven has seen its share price soar 10-fold percent since its early 2016 low. Adaro and Glencore have enjoyed rallies of 330 percent and 290 percent, respectively. Shares in Thai coal miner Banpu are up 85 percent. That compares to increases of 18 to 45 percent for competitors specializing in exporting liquefied natural gas (LNG), including Australia’s Woodside Petroleum and Santos or U.S. firm Cheniere.

Coal production in NE Wyoming tops 300M tons again  (AP) — Coal production in northeast Wyoming's Powder River Basin exceeded 300 million tons (272 million metric tons) for the 17th time in the last 18 years in 2017. The region also saw its 7 billionth ton (6.3 billion metric tons) of coal mined during last year. The Gillette News Record reports that the milestone came in the second half of the year, which saw production slow slightly from the first six months of the year. According to production numbers reported to the Mine Safety and Health Administration, the basin's 12 mines produced 305.2 million tons (276.8 metric tons) of coal, which is a 6.7 percent increase over the 286.6 million tons (260 million metric tons) produced in 2016. Travis Deti, of the Wyoming Mining Association, says the numbers are encouraging. 

US coal exports surged 60% last year - According to US Census data released Tuesday, US coal exports totaled 88 million metric tonnes in 2017, a 60.9% increase from 2016.Annual export volumes climbed to the highest since 2014, when the nation’s exports reached 88.3 million tonnes in large part due to strong seaborne coal prices into Europe and Asia.Of the 88 million metric tonnes exported, 50.1 million tonnes was metallurgical coal, 29.7 million tonnes was bituminous, and the remaining 7.4 million tonnes was sub-bituminous coal according to Platts. Platts assessed thermal coal delivered to Northern Europe averaged $84.77/mt in 2017, the highest since 2012 while thermal coal delivered into Japan averaged $89.32/mt. Last year the Platts assessment for metallurgical coal averaged $173.95/mt, up 39% from 2016.

Colorado high court hands cities responsibility for cleaning up historic coal-tar contamination --  Colorado’s Supreme Court on Monday saddled cities with responsibility for century-old underground toxic messes from coal gas plants that made fuel for lanterns and street lights, ruling in favor of an arts and yoga center that for six years pushed city officials to clean up coal tar in central Colorado Springs. Cities can be held responsible for coal-tar cleanups, the justices ruled in a 21-page decision, rejecting municipal claims of sovereign immunity. “To the extent decisions like this protect public health, they send an important message,” said Michael Kosnett, a toxicologist at the University of Colorado’s school of public health. “Things like this have to be addressed. The presence of chemicals creates the potential for harm.” This decision will govern future cases and may reveal the posture of Colorado’s high court on environmental matters before it, including a review of whether state regulators of the oil and gas industry must prioritize protection of people and the environment. Cancer-causing waste from coal gasification plants has contaminated soil and water nationwide, according to a U.S. Environmental Protection Agency assessment. In Colorado, known sites also are located in Boulder, Sterling and La Junta. A disputed cleanup near the Dushanbe Tea House in downtown Boulder, led the city to federal court where it forced Xcel Energy to pay $3.6 million. 

Fossil fuel developments on U.S. public lands emit more greenhouse gases than most countries -- According to a report released by The Wilderness Society on Thursday, “If U.S. public lands were their own country, they would rank fifth in the world for greenhouse gas emissions.” There’s been a big hullaballoo over Interior Secretary Ryan Zinke’s plans to turn our public lands over to industry interests. But a lot of that land is already leased out to oil and gas companies, in transactions that have been largely shielded from public view. Here’s a breakdown of some of the report’s more alarming findings:

• Oil, gas, and coal projects on public lands are responsible for at least 20 percent of our country’s total emissions.
• There is currently no “systematic effort to track nor disclose the carbon consequences of energy leasing on public lands.” That means the American public has had little opportunity to weigh in on how its energy resources are managed.
• The Bureau of Land Management under President Trump has instructed land management agencies to forgo climate impact assessments in the interest of spurring new energy developments.

That’s all bad news for the climate. In fact, there isn’t really any good news here, but The Wilderness Society did provide this nifty Accountability Tool you can use to explore public lands emissions.

Perfect storm: China's blizzard exposes flaws in rail, coal policies (Reuters) - China’s worst blizzard this winter exposed a flaw in Beijing’s drive to create remote coal mining hubs as it tries to streamline heavy industries and clear the air in populated regions: a lack of railroads to get the fuel to market. Heavy snow storms snarled the world’s largest rail network this week, closing highways, freezing ports and cutting off critical supplies of thermal coal. The bottlenecks added to a month-long coal price rally and prompted four top utilities to warn of potential heating and electricity shortages ahead of the upcoming Lunar New Year. By Friday, rare heavy snow in south and central regions had eased, but railways were still clogged. State railway operator China Railway Corp has imposed more emergency measures to increase coal deliveries to southern power producers running low on stock. Rail experts and executives at utilities warn chaotic episodes like this may become more frequent over coming years until new freight lines are built. “China’s railway capacity is seriously inadequate, even though it has invested lots of money each year to build new lines,” said Zhao Jian, professor at Beijing Jiaotong University. Adding further strain to the system, the government last year required thousands of factories to use rail to ship cargo rather than roads, the nation’s favorite mode of transportation. Aside from rail capacity, the issue can also be traced back to central government policy that has closed small mines and reduced output in the south, limiting availability of regional spot supplies that could normally pick up the slack. By creating mining hubs in more remote northern and western regions, the fuel has further to travel to get to the coal-fired power plants that produce most of the nation’s electricity. 

Coalminers given approval to clear nearly 10% of endangered forest, commission told -  Coalmining companies were given approval to clear nearly 10% of what is now a critically endangered forest in the New South Wales Hunter Valley over the past decade, according to evidence before a government commission. It has prompted calls for politicians and bureaucrats to place greater weight on cumulative damage before giving developments the green light. Central Hunter Valley eucalypt forest and woodland was listed as critically endangered in 2015 after it was found 70% had been lost and what remained was highly fragmented. A federal government assessment found the area was vital habitat for 11 nationally threatened species including the regent honeyeater, brush-tailed rock wallaby and spotted-tail quoll, and important to the health and wellbeing of local residents.  The Lock the Gate Alliance is contesting a state planning department recommendation to allow mine operators Glencore and Peabody Energy to clear 250 hectares of the endangered area to allow two existing coalmines to become one open-cut mine.  The alliance says assessment of what is known as the United Wambo open-cut mine did not properly factor in the cumulative impact of nine previous decisions to allow miners to clear 3,109ha of lowland forest – about 9% of what remained. Two of the approvals, allowing the clearance of more than 600ha, have been made since the habitat was listed as critically endangered.  Speaking before a planning assessment commission hearing on Thursday, Lock the Gate’s state coordinator, Georgina Woods, said the federal government had warned the habitat could be extinct in 40 to 60 years. “This is a scandal,” she said. “The planning department never says the impact of a coalmine in this area is so great it should not go ahead. The result is towns are being depopulated, bush bulldozed and the alluvial aquifer drawn down 10m.

South African coal loses Europe, but gains South Asia: Russell (Reuters) - A decade ago South Africa sent the bulk of its coal exports to Europe, a market now disappearing right before its eyes. But far from being worried, South Africa’s coal exporters are confident that they can increase shipments in coming years by becoming the supplier of choice to new markets in Asia, particularly Pakistan and India. The common theme among speakers at last week’s South African Coal Export Conference, hosted by IHS Markit, was that South Africa is in pole position to take advantage of growth in South Asia. While India is currently the world’s second-largest coal importer behind China, the outlook for imports is far from certain, with the government officially targeting a goal of zero foreign purchases, a position in conflict with the views of several utilities that rely on imports to fuel coastal power plants. But even leaving aside India, South Africa looks better positioned than top exporters Australia and Indonesia to meet Pakistan’s rising demand, which may turn out to be quite significant. Pakistan imported 11.2 million tonnes of coal in 2017, Sajid Hussain, an executive at Pakistani trading company Agro Trading, told the conference. This is up sharply from the 3.42 million tonnes the South Asian nation imported in 2013, but Hussain said Pakistan’s coal imports are expected to soar to around 40 million tonnes by 2025. This is because of a huge programme of building coal-fired power plants being undertaken in conjunction with China as part of Beijing’s Belt and Road Initiative. This will see coal go from just under 10 percent of Pakistan’s current energy supply to around 30 percent by 2025, with Hussain stating that some 6.6 gigawatts of coal-fired power is currently under construction. 

If the world builds every coal plant that’s planned, climate change goals are doomed, scientists say -  The much-heralded demise of the coal industry may be overstated, a new scientific analysis asserts — finding that if all planned plants were constructed, the world would have little chance of meeting its climate change goals. The new study finds that nations including Turkey, Vietnam and Indonesia could increase their emissions from coal dramatically between now and 2030, based on current plans. In combination with already existing infrastructure, these planned or in-construction plants, if run for a standard plant lifetime, could burn up much of the remaining carbon budget for holding Earth’s temperature increase below two degrees Celsius, or 3.6 degrees Fahrenheit, the research concludes.   The study is based on a concept of “lock-in” or “committed” emissions: Once a coal plant is completed and put into service, the thinking goes, it’s likely to operate for long time to justify the cost of the investment. And based on an analysis of global coal plans, the research finds that five countries — India, China, Turkey, Vietnam and Indonesia — are home to “nearly three quarters (73 percent) of the global coal-fired capacity that is currently under construction or planned.” Vietnam, if plans are carried forward, could see 948 percent growth in coal emissions, the research asserts, by 2030. But even as this is happening, the study notes that we have only about 700 billion tons of carbon dioxide that can still be emitted, after the year 2016, to preserve good odds of holding the temperature increase below two degrees Celsius. Existing coal plants and other infrastructure are capable of consuming 500 billion tons on their own, assuming we use them until they are worn out. New coal plants that are underway or planned, meanwhile, could consume another 150 billion tons, the research finds, during their lifetimes. That pretty much accounts for the two degrees Celsius budget right there.

Utility Sues Nuclear Energy Institute For Extortion -- We aren’t lawyers, but extortion sounds like a serious charge. NextEra Energy, parent of Florida Power and Light and owner of several nuclear power stations around the country recently launched a lawsuit against the Nuclear Energy Institute (NEI), the nuclear industry’s trade group. NextEra, which is also a major player in the renewable energy business, withdrew from NEI after that group backed the Trump Energy Department's ill-fated proposed rulemaking. This measure was designed to prop up less-than-economically-viable nuclear and coal-fired power generating stations disguised as a reliability booster for the nation's power network. However, the proposed rule did not even pass muster with the President's own Federal Energy Regulatory Commission. Nevertheless NextEra was not happy about the NEI’s stance, accusing the organization of trying to instill a false panic about reliability. Disputes within trade organizations are not unusual, although the organization usually manages to keep them in house. Outright member withdrawals though occur less frequently. There are real downsides to withdrawing from a trade group like NEI. NextEra as a major nuclear plant operator depends on a data base maintained by the NEI on existing and prospective nuclear workers. Like many nuclear facilities operators, NextEra hires outsider contractors and consultants to aid in refueling its nuclear power stations. And it cannot do so without a thorough personnel evaluation--which NEI's data base conveniently provides. According to the lawsuit, NEI denied NextEra access to its nuclear personnel data base without an $860,000 payment. NextEra claimed this was like being forced to pay for membership yet again. That’s where the charge of extortion comes in. 

 Nuclear Reactors, Bankrupting Their Owners, Closing Early - On January 22, FirstEnergy Corporation announced that its faulty and nearly-self-destructed Davis-Besse power reactor east of Toledo, Ohio, will be closed well before its license expires. But the shutdown is not because the reactor represents reckless endangerment of public health and safety. FirseEnergy was fine with that. No, the old rattle trap can’t cover its costs any more, not with the electricity market dominated by cheaper natural gas, and renewable wind and solar.  CFO James Pearson of FirstEnergy Nuclear Operating Co., the corporate division in charge of the wreck, said the reactor will close if lawmakers don’t approve a taxpayer bailout. FirstEnergy had said the financial sky was falling in March 2017. Chief nuclear officer Sam Belcher [his real name] told the Toldeo Blade then — as the firm was floating the bailout measure (SB 128) through the Ohio legislature — “In the absence of something happening, [taxpayer-funded handout to the private, investor-owned firm] we’re going to have to make some tough decisions.” So far, state lawmakers have refused to save the decrepit reactor with state taxes. Serious accidents at David-Besse in 1977, 1985, 1998, and 2002 endangered its neighbors. The most hair-raising was the discovery in 2002 that corrosion had eaten through more than 6-inches of the reactor head’s carbon steel. The corrosion went undetected by federal and company inspectors for decades. Having gouged a hole in the reactor cover the size of a football, the corrosion left only 3⁄8 inch of steel holding back the high-pressure coolant. A break would have caused a massive loss-of-coolant accident and out-of-control overheating, resulting in catastrophic uranium fuel melting (known as a “meltdown”) and massive radiation releases. Repairs took two years and cost $600 million, during which the Department of Justice penalized FirstEnergy over operating and reporting violations. FirstEnergy paid $28 million in fines. Yet the NRC allowed the company to restart David-Besse in 2004, and then to run the rust bucket for 40 reckless years, even after the company tacked on another $600 million in repairs in 2014.

Trump administration is weighing emergency aid for some coal plants - After failing to win a bailout for cash-strapped coal plants, some Trump administration officials are considering emergency orders that could keep at least some coal generators online, people familiar with the discussions said.The approach would require Rick Perry to use his authority as U.S. energy secretary to spur emergency compensation for coal plants run by FirstEnergy Solutions that may be at risk of shutting, said the people, asking not to be identified because the information isn’t public. Some Energy Department officials are weighing this option after federal regulators rejected a proposal by Perry last month to pay coal plants more for their “resilience,” they said. FirstEnergy hasn’t formally requested the aid, one of the people said. When asked to confirm the talks, agency spokeswoman Shaylyn Hynes said “that is not correct information” but declined to provide further detail. The Energy Department’s press department later posted on Twitter that sources were “misinformed” on the consideration.  The FirstEnergy Solutions plants in question were at the heart of the Trump administration’s plan to compensate nuclear and coal generators more for their power. The proposal was rejected last month by members of the Federal Energy Regulatory Commission that President Donald Trump appointed. They said it would violate U.S. law. Coal mogul Bob Murray, an outspoken advocate for the bailout plan and a Trump supporter, warned that his company, which supplies some of the units, may face default if they shut.

Ohio and Iowa Are the Latest of Eight States to Consider Anti-Protest Bills Aimed at Pipeline Opponents - The Intercept -- Lawmakers in Ohio and Iowa are considering bills that would create new penalties for people who attempt to disrupt the operations of “critical infrastructure” such as pipelines. The bills make the states the latest of at least eight to propose legislation aimed at oil and gas industry protesters since Donald Trump’s election.The bills were proposed less than a week after the right-wing American Legislative Exchange Council, which has close ties to the fossil fuel industry, finalized a model policy titled the “Critical Infrastructure Protection Act,” which calls for more severe punishment for those who trespass on facilities including oil pipelines, petroleum refineries, liquid natural gas terminals, and railroads used to transport oil and gas.Iowa is one of four states through which the Dakota Access pipeline passes, and it was a center of anti-pipeline protests in 2016 and 2017. The state saw several incidents of property destruction carried out by pipeline opponents, but more common were trespassing arrests during demonstrations meant to halt construction.The Iowa bill — developed by a group that includes Dakota Access pipeline parent company Energy Transfer Partners — creates a new felony, “critical infrastructure sabotage,” punishable by up to 25 years in prison and a $100,000 fine.The Ohio bill includes clauses specifically dedicated to barring drones from flying over infrastructure projects. During the height of protests against the Dakota Access pipeline, a small number of Native American drone pilots used drones to monitor the progress of construction and the activities of police, as well as to publicly document an indigenous aerial perspective of events.  Ohio is home to the controversial Rover pipeline, which is also owned by Energy Transfer Partners. Rover’s builders have repeatedly spilled massive quantities of clay-based drilling mud as they’ve bored under waterways, leading environmental regulators to halt construction multiple times. The bills are part of a nationwide trend of states pushing legislation to quiet disruptive protests that beyond fossil fuel development, have centered on themes including police violence, white supremacy, and anti-immigrant policy. According to a database created by the International Center for Not-for-Profit Law, 56 bills that would restrict people’s right to peaceful assembly have been introduced in 30 states since the 2016 election.

Ohio bill would target pipeline protests - A proposed Ohio bill, introduced in the Senate by Frank Hoagland, mirrors attempts in seven other states to target pipeline protestors. Ohio, of course, is home to both the Nexus and Rover pipelines, which have faced stiff opposition from residents and which have already produced damaging environmental effects.Hoagland, a Republican representing District 30, is on the Ohio Senate Energy and Natural Resources Committee. In announcing the bill during the last week of January, a release from Hoagland's office claimed “a number of reports of tampering with valves and controls at pipeline facilities that can create extremely dangerous situations.” Senate Bill 250 — short title: Protect critical infrastructure facilities from mischief — would "prohibit criminal mischief, criminal trespass, and aggravated trespass on a critical infrastructure facility," and "impose fines for organizations that are complicit in those offenses, and impose civil liability for damage caused by trespass on a critical infrastructure facility." If that all sounds like an attempt to deter protestors, and possibly unduly punish those that protest anyway, you're not alone. Following Trump's election and protests of the Dakota Access Pipeline, lawmakers are keen on tamping down the opposition.Also, as The Intercept notes:The bills were proposed less than a week after the right-wing American Legislative Exchange Council, which has close ties to the fossil fuel industry, finalized a model policy titled the “Critical Infrastructure Protection Act,” which calls for more severe punishment for those who trespass on facilities including oil pipelines, petroleum refineries, liquid natural gas terminals, and railroads used to transport oil and gas.   Energy Transfer Partners, the company that owns the Rover pipeline, was part of the group that crafted a similar bill in Iowa.

A Toxic Tour Through Underground Ohio -- We begin on the wraparound porch of Michele Garman, who lives with her husband Tom and teenage son Dominic in the rural Ohio community of Vienna. Just 200 feet from the family’s house is a narrow shaft that the oil and gas industry uses to pump waste riddled with toxic chemicals deep into the earth, one of Ohio’s 217 active Class II injection wells … Garman is staring at a series of tanks, where the waste is temporarily held before being shot down the injection well. “The biggest thing,” she sighs, “is the worrying. What am I not hearing? What am I not seeing? What is being released into the air? The water? The soil? What does this mean for our health years down the road? That is the stuff that really eats away at me constantly.” Michele Garman and her family are not alone. We journey 200 miles south, to a land of low wooded hills not far from the Ohio River, where Phyllis Rienhart, 66, lives with her 78-year-old husband Ron in a stick frame house that Ron built with their son. The house is 1,800 feet from a mammoth injection well. Unlike Michele Garman, she has never heard an alarm. Instead, her injection well clangs. “One day we were outside here on the porch and I was thinking, it’s raining, because the bird bath was vibrating,” says Phyllis. “I went in the house but could still hear the noise — clang, clang, clang, clang, clang, clang — and it just got louder.” In 2016, she and some neighbors staked out the injection well for a period of 24 hours. They observed 108 tanker trucks come and go. The trucks discharge their fracking wastewater into holding tanks. Hydrocarbons in the waste emit flammable vapors that accumulate in the tanks and are vented off the tops. In April 2016, lightning struck an injection wastewater storage tank in Greeley, Colorado, “heating the metal to thousands of degrees, which ignited the vapors inside,” reported the local paper. “The tanks subsequently exploded, shooting up hundreds of feet into the air.” The thought of a similar fireball erupting in her backyard keeps Phyllis up at night. She fears thunderstorms. She sees a neurologist. “I have anxiety,” she says. Phyllis is trying to figure this thing out, but it is bigger than her. “What if they got it wrong?” she wonders. “What is it doing to our earth? What is it doing to our water? Not to mention the air that we breathe. I mean it is waste for god sakes, it is chemicals…And I ask them, are you going to have enough hazmat suits for all of my grandchildren? These people are dealing with paper and statistics, I am dealing with my family. They say it’s good for the economy, but I can’t find anything it is good for. And these things are popping up everywhere. There are more, and more, and more…”

Oil and gas association, environmental group team up on capping idle, abandoned wells - Toledo Blade --Ohio has more than 700 oil and gas wells that have never been plugged or were improperly plugged years ago, resulting in safety risks to children and environmental risks to groundwater and area streams. Nearly a third of them are in northwest Ohio, with most of the other problem areas near Cleveland and southeast Ohio.Now, two groups often at odds with each other believe they have come up with a solution. Their biggest challenge appears to be convincing the Ohio Senate and Gov. John Kasich they aren’t being overly ambitious.The Ohio Oil and Gas Association and the Ohio Environmental Council are solidly behind House Bill 225, which sailed through the Ohio House of Representatives by a 92-0 vote last month.It would require 45 percent of a state fund used for oil and gas programs to be dedicated to capping idle and abandoned wells — an increase from the current level of 14 percent. The bill also calls for multiple other changes intended to streamline Ohio Department of Natural Resources operations and reporting requirements, all with the goal of plugging wells faster.Fund revenue grew from $3.1 million in 2008 to $52 million in 2017, an upward spiral driven by taxes collected as the modern era of horizontal fracking took hold. The latest fracking technique has opened previously inaccessible Marcellus and Utica shale in eastern Ohio, bringing the state its biggest drilling frenzy since the 1800s. “We’ve got a unique opportunity to eradicate all idle and orphan wells across the state of Ohio,” Ohio was America’s leading oil-producing state from 1895 to 1903, preceding Texas.

Kucinich wants to eliminate oil and gas drilling - In the first major policy rollout of his gubernatorial campaign, Dennis Kucinich promised “a brand new day here in Ohio” with a goal of eliminating every last oil or gas well in the state. “Ohio taxpayers are facing a future of billions of dollars of debt and destruction as a result of the virtually unregulated nature of this industry. As Ohio’s governor, I will end the corrupt influence of these interests in the state capital,” the former congressman and Cleveland mayor said at a Columbus press conference. In a multi-faceted proposal, Kucinich pledged an immediate moratorium on hydraulic fracturing — a horizontal drilling process better know as fracking — and an outright ban on injection wells if he is elected. He said such a radical move is necessary to protect the state’s most precious resource: water. Such a proposal certainly would run into both ridicule and a solid wall of opposition from a GOP-controlled legislature so friendly to oil and gas interests that they wouldn’t even grant Republican Gov. John Kasich a modest increase in the severance tax on Ohio wells. Kucinich said he would order the State Highway Patrol to stop and inspect all trucks hauling fracking waste for disposal in Ohio, and turn them back. He would set up free public health screenings for all Ohioans living close to or downstream from fracking sites. And Kucinich would assemble a panel of physicians, scientists and economists to gather data on the impact of fracking and injection wells on Ohio for a class-action suit against drilling companies and others responsible for polluting and contaminating the state. “Those who have poisoned Ohio’s people and their land will be made to pay,” he said. “No longer will Ohio be the designated dumping ground for frack waste from here and other states with unregulated processing facilities operating for private profit at public expense.” Kucinich would use state’s power of eminent domain to acquire existing drilling sites, settle royalties, close the wells and assess severance fees on oil and gas companies. 

Seneca Nation opposes proposed fracking plan - The Seneca Nation is calling upon the Pennsylvania Department of Environmental Protection (PA DEP) to reject permit applications for a destructive water quality management and discharge plan at the headwaters of the Allegheny River that would have severe impacts on the Nation’s Allegany Territory, located 65 miles downstream from the project.In a letter to PA DEP officials, Seneca Nation President Todd Gates called for the denial of the proposed plan by Epiphany Allegheny, LLC (Epiphany) and the Coudersport Area Municipal Authority (CAMA) that would allow for the transport, treatment and release of thousands of gallons of dangerous wastewater from hydraulic fracturing (fracking) into the Allegheny River. “Allowing this plan to move forward would permit poisonous contaminants to travel downstream into New York State and onto the sovereign ancestral lands of the Seneca Nation, which sit upon the Ohi:yo (Allegheny River),” President Gates said. “The Seneca people have a deep spiritual connection with the land and we depend on our natural resources, including native plants, trees, wildlife, fish and water. These resources are critical components of our culture. We will zealously defend and protect what remains of our territories and our natural resources, which would be further threatened by this dangerous plan.” The current plan by Epiphany calls for wastewater created by fracking, a practice not legal in New York State nor authorized on Seneca Nation lands, to be transported to the CAMA wastewater plant in Eulalia Township, where it would be treated and released into the Allegheny River system. The proposed treatment facility would discharge up to 42,000 gallons of treated fracking water, with insufficient removal of radioactivity, into the river each day, although the plant can process between 20,000 – 80,000 gallons daily. Water used for fracking in Pennsylvania contains high levels of radiation.

Green Group Rebuked by Judge for Attempt to Block Fracking With Rights of Nature Argument - Instead of working through normal legal channels of permitting and suing, the new strategy seeks to enshrine a doctrine recognizing the fundamental right of community self-governance over their own natural resources,” explains Mark Hand of Think Progress. A key component of this approach is a curious legal strategy which attempts to argue that ecosystems have rights. Lawyers making the argument contend that if corporations have rights, then so should forests and streams. They compare it to children, who cannot file a lawsuit on their own, but can have guardians appointed to file one on their behalf. These environmental lawyers, including, most prominently Thomas Linzey of the Community Environmental Legal Defense Fund (CELDF), argue that natural ecosystems should be recognized as “people” that also have protected rights to flourish. In practice, these legal slights of hand do little to stop energy development and frequently end up costing businesses and taxpayers tens of thousands in legal costs. More recently, courts have begun to push back on these strategies. In Pennsylvania, a federal judge issued a striking condemnation from the bench in one case, recommending that Linzey be referred to the Disciplinary Board of the Supreme Court of Pennsylvania.In her opinion, Judge Susan Baxter lambasted the attorneys for pursuing a lawsuit which they understood was legally tenuous.“This Court has determined that Attorneys Linzey and Dunne have pursued certain claims and defenses in bad faith. Based upon prior CELDF litigation, each was on notice of the legal implausibility of the arguments previously advanced,” she wrote.  The judge also ordered CELDF to pay $52,000 in legal fees to the company they had sued. That firm had been trying to drill a fracking waste injection well.

Oil and Gas Industry’s 2017 Suing Spree Could Set Speech-Chilling Precedents -- In 2017, while the Trump administration absorbed media attention with its cries of “fake news,” the oil and gas industry was busy launching private legal actions across the U.S., attacking critics who presented information and opinions to the public.Those lesser-noticed legal maneuvers, if successful in 2018, could create chilling new precedents, keeping important facts away from the public eye and making it more expensive and risky to talk about the fossil fuel industry’s real and potential impacts on human health and the air, land, and water.The past year brought some of the most aggressive lawsuits by the oil and gas industry against environmentalists in recent decades. They included legal moves aimed at preventing researchers from discussing their findings, motions painting political movements as for-profit conspiracies, and even a $5 million dollar lawsuit brought against a cancer patient whose tap water, state investigators determined years ago, was contaminated by gas drilling — by the company that is now suing him.That lawsuit, filed by a shale gas drilling company, claims that a Pennsylvania landowner violated a non-disclosure agreement by talking to the press about his fouled drinking water, his home’s plummeting property value, the impacts of truck traffic on his community, the poor air quality around his home since drilling and fracking began in the area, or other problems he believes the company itself caused.These oil and gas industry cases — involving novel uses of conspiracy, defamation, and even wire fraud laws — represent new and concerted efforts by large corporations to make individuals and groups pay for presenting information and opinions to the public.

Pennsylvania pipeline work to resume; Sunoco fined $12M — Pennsylvania regulators are fining Sunoco more than $12 million for problems with a massive natural gas pipeline project, but letting work resume under a consent agreement. The Department of Environmental Protection said Thursday that Sunoco Pipeline has made changes since work on the $2.5 billion Mariner East 2 pipeline was halted Jan. 3. The 350-mile project has been plagued by spills and leaks of drilling fluid and improper construction methods. In stopping the work, the state agency said Sunoco demonstrated it couldn’t or wouldn’t comply with Pennsylvania’s clean streams law and other regulations. The company didn’t immediately respond to messages seeking comment. The 20-inch pipeline will move natural gas liquid products from Marcellus Shale drilling fields in western Pennsylvania to a terminal in Philadelphia. It’s scheduled for completion by summer.

Penneast proposal to use land for gas pipeline rejected  — New Jersey's attorney general rejected a proposal for use of state-controlled land for a $1.1 billion natural gas pipeline, slowing the years-long effort by the company to break ground on a project strongly opposed by environmental groups. Attorney General Gurbir Grewal said in a letter Friday that PennEast was "patently misleading" when it referenced multiple attempts at negotiating over the use of the land. PennEast has said it anticipates construction on the roughly 120-mile (193-kilometer) pipeline from northeastern Pennsylvania to Mercer County, New Jersey, could start this year and take about seven months. But the denial means that the company has not yet acquired rights for all the land in New Jersey it needs for the project. PennEast spokeswoman Pat Kornick said the latest communication from the state is a "step in the right direction" and PennEast is confident a settlement will be reached. The New Jersey Department of Environmental Protection Friday also rejected the company's application for water permits, citing missing information. Grewal said that PennEast's claim made in a letter to the state last month that it has "attempted on multiple occasions to negotiate an easement agreement" is "not true" and that the state has had no communication on specific property rights. The attorney general also cites a separate court challenge to the company's federal certificate of necessity as a reason for rejecting the company's offer to compensate the state for use of New Jersey's land. It's unclear what the company offered the state. Among the other areas of concern mentioned in the state's letter is a request from PennEast to keep details about the land use — known as a right of way — confidential. The letter asks that the provision be deleted because it's "contrary to public policy and numerous 'Sunshine' laws." 

US northeast becomes a net exporter of natural gas to Canada -- In 2017, the U.S. Northeast sent more natural gas to Canada than it received, making the region a net exporter for the first time on an annual average basis. That marks another milestone in the ongoing flow reversal happening in the Northeast, led by the growth of local gas supply from the Marcellus/Utica shales. For now, the region still relies on Canadian gas during the highest winter demand months, but imports from Canada in all the other months are increasingly unnecessary as Northeast gas production balloons further. Today, we look at evolving dynamics at the U.S.-Canadian border in the Northeast. This is Part 2 of a series updating our analysis of changing gas flows along the U.S.-Canada border, a topic we first covered in-depth in the Return To Sender blog series back in 2013. In Part 1 of this update series, we began with a macro view of total U.S. gas flows across the Canadian border. As we noted, Canadian gas production last year rebounded to the highest level in 10 years, spurred on by rising gas demand from gas-fired power generation, as well as the oil sands production in Alberta, which depends on large volumes of steam. At the same time, Canadian producers are facing ever-increasing competition from soaring U.S. gas supply, led by enormous growth in the Marcellus/Utica shales in the Northeast. Not only is that supply growth continuing to put the squeeze on any remaining inbound flows of supply to the Northeast from other regions, including Canada, but as inbound pipeline capacity is reversed and new capacity built (see our In a Northeast Minute series), it is increasingly overtaking market share of demand in other U.S. regions, as well as north of the border in Ontario, where gas-fired power generation demand has been growing.

More Oil And Natural Gas Invalidate 'Keep It In The Ground' Movement - There is a destructive "keep it in the ground" movement arising from environmental groups to block oil and natural gas development and the pipelines required to transport them. The center of this opposition is in New York and the New England states, where numerous policymakers seek to artificially constrain energy supply. Yet, despite producing none themselves, their reliance on gas electricity has surged. ISO New England now gets about 50% of its power from gas, versus 10% to 15% a decade ago. New York sits in the same boat: gas now generates ~45% of the state’s electricity, doubling its market share since 2005. It's no wonder, then, that blocking energy development and pipelines has established home power rates in New England and New York that are at least 50% higher than the national average. Industrial rates are more than double, and encourages companies to leave the area. This is unfortunate and illogical since U.S. natural gas prices have been at historic lows.  There is not enough non-fossil-fuel energy transported to the region to satisfy the needs of businesses and families. For example, Massachusetts has nearly 20 times more gas power capacity than wind and solar capacity combined. Not surprisingly, the "keep it in the ground" movement has no explanation on why those states with the most aggressive renewable energy goals are increasingly using more natural gas. In stark contrast, of course, I've already clearly explained it. Policies intended to reduce oil and gas consumption are dubious: Even if they work in the short term, over time they just lower oil and gas prices and encourage more usage. I've already clearly explained it. Oil and gas are so obviously ingrained in the U.S. and global economies, supplying over 60% of all energy. In the real world, this means that more economic growth ultimately means more oil and gas demand. That's why year after year demand continues to grow. There is no significant substitute for oil whatsoever. And know that natural gas power plants don't get retired with more wind and solar power, but get built even more because gas is flexible backup required.

China Is Financing a Petrochemical Hub in Appalachia. Meet its Powerful Backers. – Steve Horn - Over the past year, oil and gas industry plans to build a petrochemical refining and storage hub along the Ohio River have steadily gained traction. Proponents hope this potential hub, which would straddle Pennsylvania, Ohio, West Virginia, and Kentucky, could someday rival the industrial corridor found along the Gulf Coast in Texas and Louisiana.Those plans center around creating what is known as the Appalachian Storage Hub, which received a major boost on November 9 during a trade mission to China attended by President Donald Trump and U.S. Secretary of Commerce Wilbur Ross. At that trade mission, also attended by Chinese President Xi Jinping, the China Energy Investment Corp. announced the signing of a memorandum of understanding (MOU) to invest $83.7 billion into the planned storage hub over 20 years. For comparison, West Virginia's gross domestic product (GDP) in 2016 was $72.9 billion.Though called the Appalachian Storage Hub as a broad-sweeping term, in practice the hub could encompass natural gas liquids storage, a market trading index center, a key pipeline feeding epicenter, and a petrochemical refinery row. Its prospective development has been spurred by the current construction of a $6 billion petrochemical refining facility in Pennsylvania owned by Shell Oil.The proposed hub has come under fire from grassroots groups. But this proposal also has a powerful set of backers, including West Virginia's five-member congressional delegation, the state's Governor and Secretary of Commerce, West Virginia University, the chemical industry's trade association, Shell Oil, and the Trump administration, among others.Detractors of the planned petrochemical hub believe that its construction would buoy the oil and gas industry in its efforts to further develop drilling and hydraulic fracturing (“fracking”) projects in Pennsylvania's Marcellus Shale and Ohio's Utica Shale basins. A “major concern we have about the whole complex is that it will encourage a second or third wave of gas fracking in our region, from the Marcellus, the Utica, and the Rogersville field, which is a much deeper layer of shale gas and oil and has been recently tested and a few commercial wells have been built into it,” Robin Blakeman, project coordinator with the Ohio Valley Environmental Coalition, recently told the radio show Between the Lines. “It’s not commercially viable yet, but we think this complex will make it commercially viable.”

Seeking Treasure Underneath Trash: Wheeling Could Get $2M From Gas Leases for Old Landfills - Wheeling Intelligencer –– About $2 million up front plus a steady stream of production royalties for years to come should flow into the Friendly City, as Wheeling leaders plan to lease Marcellus and Utica shale natural gas fracking rights on approximately 336 acres of property. “While we understand that gas drilling can be controversial, we feel that we wouldn’t be acting in the most financially responsible manner if we passed up on over $2 million in up-front money that can be used for paving, playgrounds, economic development and other city functions,” Wheeling Vice Mayor Chad Thalman said. Thalman and other members of Wheeling City Council are expected to pass a resolution allowing City Manager Robert Herron to enter the lease agreement with Canonsburg, Pa.-based American Petroleum Partners. The vote is expected after a public hearing on the matter, set for noon Tuesday on the first floor of the City-County Building, 1500 Chapline St.This is a totally separate deal from the one in which the city joined with the Wheeling Park Commission several years ago to lease fracking rights at Oglebay Park to Chesapeake Energy. Chesapeake later sold most of its West Virginia operations to Southwestern Energy Co. for $5 billion.  “It it currently estimated that the city would receive approximately $2 million in up-front payments for this lease, plus future royalty payments,” Mayor Glenn Elliott said.

Wheeling could get $2M from gas leases for old landfills - — About $2 million up front plus a steady stream of production royalties for years to come should flow into the Friendly City, as Wheeling leaders plan to lease Marcellus and Utica shale natural gas fracking rights on approximately 336 acres of property. “While we understand that gas drilling can be controversial, we feel that we wouldn’t be acting in the most financially responsible manner if we passed up on over $2 million in up-front money that can be used for paving, playgrounds, economic development and other city functions,” Wheeling Vice Mayor Chad Thalman said.Thalman and other members of Wheeling City Council are expected to pass a resolution allowing City Manager Robert Herron to enter the lease agreement with Canonsburg, Pa.-based American Petroleum Partners. The vote is expected after a public hearing on the matter, set for noon today on the first floor of the City-County Building, 1500 Chapline St. This is a separate deal from the one in which the city joined with the Wheeling Park Commission several years ago to lease fracking rights at Oglebay Park to Chesapeake Energy. Chesapeake later sold most of its West Virginia operations to Southwestern Energy Co. for $5 billion.“It it currently estimated that the city would receive approximately $2 million in up-front payments for this lease, plus future royalty payments,” Mayor Glenn Elliott said.“I recognize that there are those in our community who have serious concerns about or are deeply opposed to natural gas fracking. As a private citizen, I, too, share some of those concerns,” Elliott added. “But as mayor, I have to weigh the pros and cons of any decision like this from the perspective of what’s best for the city’s taxpayers.” Elliott said the drilling and fracking would take on about 336 acres of city-owned property, a significant portion of which is “under old city landfills.”

Wheeling City Council Approves $2M Oil, Gas Lease - Wheeling Intelligencer  — City council on Tuesday unanimously approved allowing energy company American Petroleum Partners to extract natural gas from under 336 acres of city-owned property in Wheeling.The deal is worth $6,000 per acre — about $2 million total before any royalty payments.  American Petroleum, based in Canonsburg, Pa., is being given the right to tap into Marcellus and Utica shale reserves beneath 14 separate parcels of city property, with much of the acreage consisting of former city landfills, such as the one at North Park. Wheeling will then receive 18.5 percent of production royalties once natural gas starts flowing. City Manager Robert Herron and City Solicitor Rosemary Humway-Warmuth said the lease council agreed to prohibits American Petroleum from placing rigs, pipelines, fracking equipment, storage tanks, or anything else on the surface of the leased property, meaning city residents should see no signs of the drilling or extraction near their neighborhoods once the process begins.“We had two different law firms look at this to make sure we are at the upper end for the payments,” Herron said. “There are no surface rights, whatsoever.”When asked about concerns some in the community may have regarding hydraulic fracturing, Herron said the process has taken place throughout the region for nearly a decade, with relatively few problems. He also said the West Virginia Department of Environmental Protection and the U.S. Environmental Protection Agency must be responsible for regulating the technique.“There are currently several wells around (the area). The state and federal agencies are the ones responsible for regulating fracking,” Herron said.

Virginia will get $58 million from pipeline developers for environmental impacts - Developers of the Atlantic Coast Pipeline have agreed to spend nearly $58 million to help offset the massive infrastructure project's environmental impact in Virginia. An agreement outlining the payments was signed several weeks ago by then-natural resources secretary Molly Ward and Leslie Hartz, an executive with lead pipeline developer Dominion Energy. The approximately $5 billion, 600-mile natural gas pipeline, which has received many of its key permits, is designed to start in West Virginia and run through Virginia and North Carolina. Getting the project built will involve tree removal, blasting and leveling some ridgetops as the pipe, 42 inches in diameter for much of its path, crosses mountains, hundreds of water bodies and other sensitive terrain. The Federal Energy Regulatory Commission, which oversees interstate natural gas pipelines, found in an environmental analysis largely favorable for developers that more than 3,400 acres of vegetation would face long-term to permanent effects, with the greatest impact on forested areas. The funding outlined in the agreement is intended to help diminish the effects of forest fragmentation and related impacts on water quality. It's one of four major components of mitigation efforts the state has negotiated, Deputy Secretary of Natural Resources Angela Navarro said Friday. The company will also pay $10 million in mitigation funds for impacts to historic resources, purchase a new parcel of land for a wildlife management area and provide substitute land to the Virginia Outdoors Foundation in exchange for the pipeline crossing properties under protective easements, Navarro said. Of the environmental mitigation money, about $38.7 million will go toward forest conservation and about $19.2 million will go toward water quality efforts.

Three-Time Sellout: Terry McAuliffe’s Secret Mountain Valley Pipeline Deals and The Smoking Gun They Reveal -- On Friday, February 2, we published “Secret Sellout or Pay to Play?,” a Blue Virginia exclusive.  Our article exposed what until then in Virginia had been a secret Memorandum of Understanding signed in December by the administration of then Governor Terry McAuliffe with political power broker Dominion Energy regarding the Atlantic Coast Pipeline.  As we explained, in return for a payoff of $58 million (paid to various entities), “Terry McAuliffe gave Dominion a full and complete release from any and all damage to Virginia’s forests and water from the Atlantic Coast Pipeline” and he did so “before the pipeline has even been approved – it still has not been approved – much less built.” It turns out the full story is much worse. Because we now know that McAuliffe made not one, not two, but three secret pipeline agreements in late December.  A second agreement, which Blue Virginia is now publishing here exclusively for the first time (see below), gives the builders of the Mountain Valley Pipeline the same full waivers for damage to Virginia’s forests and water resources as were given to the ACP.  For only $27.5 million – that’s all Terry McAuliffe thought our natural heritage in the affected counties was worth – the MVP companies bought their way out of any further responsibility for any damage that their $3.5 billion pipeline may cause to Virginia’s forests and water resources:  Paragraph 2 – the forest damage payoff “fully satisfies any and all mitigation responsibilities related to and otherwise fully offsets the direct or indirect forest-related impacts of the Project in Virginia;” Paragraph 3(a)(i) – the water resource damage payoff “fully satisfies any and all mitigation responsibilities related to and otherwise fully offsets all water quality impacts of the Project.” A third secret agreement, which we also now publish here exclusively (also see below), concedes that the Mountain Valley Pipeline “will result in an adverse effect to historic properties” and has the MVP companies paying $2.5 million (possibly a bit more) in return for – you guessed it – a full release from any future responsibility. But that’s not even the worst part of this story…

Interior head to travel to Carolinas to discuss off shore drilling | TheHill: Interior Secretary Ryan Zinke is traveling to the Carolinas this weekend to meet with both state's governors and discuss the administration's draft plans for offshore oil and gas drilling. Zinke is scheduled to meet with South Carolina Gov. Henry McMaster (R) on Friday and North Carolina Gov. Roy Cooper (D) on Saturday, an Interior spokesperson confirmed to The Hill. The meetings follow Interior's announcement in early January that the Trump administration will seek to open up offshore leasing for much of the country. The announcement was almost immediately met with resistance from a majority of coastal states. Representatives from Florida were the most outspoken. Five days following his announcement Zinke flew down to Florida to meet with Republican Gov. Rick Scott. Following the meeting Zinke tweeted that Interior would not be considering Florida's coastlines in the decision, but left the door open to other states. “I support the governor’s position that Florida is unique and its coasts are heavily reliant on tourism as an economic driver,” Zinke said in a Jan. 9 statement. “As a result of discussion with Governor Scott's and his leadership, I am removing Florida from consideration for any new oil and gas platforms.”A number of states made statements asking to also be exempted from the rule, including South Carolina's Gov. McMaster, who told McClatchy in early January, "We cannot afford to take a chance with the beauty, the majesty and the economic value and vitality of our wonderful coastline in South Carolina." A spokesperson for McMaster confirmed that the governor's meeting with Zinke Friday at his residence stemmed from the exemption request. 

Gas pipeline opponents charged with trespassing during sit-in at Cooper's office -  — Fifteen activists demanding the state rescind a permit allowing construction of a natural gas pipeline in eastern North Carolina were charged with trespassing Friday evening during a sit-in at Gov. Roy Cooper's office. The state Department of Environmental Quality last week issued a critical water quality permit for the Atlantic Coast Pipeline. The $5 billion project, which will be owned and operated by Duke Energy and Dominion Energy, will carry natural gas more than 600 miles from West Virginia to southeastern North Carolina, passing through Northampton, Halifax, Nash, Wilson, Johnston, Sampson, Cumberland and Robeson counties. Activists complained that the permit was issued before Duke and Dominion supplied all the required information, a decision they claim was influenced by the utilities' agreement to put $57.8 million into a fund to expand renewable energy in the state and to ensure communities near the pipeline have access to the natural gas for economic development. "We campaigned for [Cooper], but little did we know that he would sell us out for $57.8 million," Northampton County resident Belinda Joyner said. "Little did we know that supporting him would get us a slap in the face for standing up for what's supposed to be rightfully ours." Eastern north Carolina has been a dumping ground, they said, for dangerous substances for years, from PCBs to coal ash to the planned gas pipeline. They also compared Cooper's opposition to offshore drilling with the approval for the pipeline. "You chose to stand against drilling off of our coast. At the same time, you allowed an unwanted, unneeded, unsafe fracked gas pipeline to tear through our farms, our dreams, our homes and, most of all, our families," said Tom Clark, a Cumberland County resident who is suing to block the pipeline. "Governor, when you say that you're fighting for our state, you can't endorse one and fight the other. You should see our state as one and the same." 

 Court sets stage for shutdown of gas pipeline through Georgia -  A federal court has moved to shut down the controversial Sabal Trail pipeline, which runs more than 500 miles through Alabama, Georgia and Florida.The ruling – a triumph for environmentalists – left standing a previous court ruling that had criticized the government for not considering the downstream effects of the natural gas pipeline.The decision came down from the U.S. Court of Appeals for the District of Columbia Circuit on Thursday. The court did not issue a statement or detailed opinion. But the decision not to revisit the August decision means – absent further legal action – that the Sabal Trail pipeline will lose permission to run and operations will be halted.The Sabal pipeline is a joint venture of Spectra Energy Partners, NextEra Energy, Inc. and Duke Energy.The case that had wended its way through the court system started life as a lawsuit by the Sierra Club, which argued that the Federal Energy Regulatory Commission did not study the emissions from the burning of natural gas that had been carried by the Sabal pipeline.The pipeline had been controversial even in the planning stages with protest for several years before the pipeline went into service on July 3. It is possible that the commission or company may have recourse that might delay a shutdown. FERC had previously said it was willing to do more studies, but wanted the pipeline to continue operation while the research was done.In response to questions from The Atlanta Journal-Constitution, Sabal spokeswoman Andrea Grover offered no details, but indicated that the legal proceedings were not quite at the end of the line.  “Given this is still pending litigation, we will not comment,”

FERC issues new Sabal Trail climate review, but pipeline's fate still hazy --  A natural gas pipeline in the Southeast could be forced to shut down tomorrow, and it's unclear if federal regulators will step in to save it.The Federal Energy Regulatory Commission yesterday did half of what's needed to keep the Sabal Trail pipeline in service: It completed a court-ordered analysis of greenhouse gas emissions. But the agency hasn't yet taken the second critical step of issuing an order to reauthorize the project.FERC spokeswoman Tamara Young-Allen said the order is still pending."I can't speculate on when the Commission's Order on Remand will issue," she said in an email yesterday.The administrative tangle relates to a Sierra Club legal challenge that has dire implications for Sabal Trail and a related $4 billion network known as the Southeast Market Pipelines Project in Alabama, Georgia and Florida.The U.S. Court of Appeals for the District of Columbia Circuit in August ordered FERC to take a closer look at certain climate impacts from the pipeline project under the National Environmental Policy Act. The judges sealed the deal on that decision last week when they rejected government and industry requests for reconsideration, setting a seven-day countdown — which ends tomorrow — for a court mandate that will vacate the project's permits until FERC completes the added climate review (Energywire, Feb. 1). Pipeline backers Spectra Energy Partners LP, NextEra Energy Inc. and Duke Energy Corp. on Friday asked FERC to quickly finish its supplemental environmental impact statement (SEIS) and reauthorize the project (Energywire, Feb. 5). FERC's action confused many agency watchers. The completion of the SEIS sets the stage for the project's reauthorization, but the commission didn't actually issue an order doing that. It's unclear if FERC will issue its decision today.

Fracking Ban Bill Moves In Florida Senate, Stalls in House --Despite early indications that a proposal to ban fracking in Florida would not advance in the current state legislative session, the bill passed its first senate committee Monday. The bill, sponsored by Republican Senator Dana Young of Tampa, unanimously passed the Senate Environmental and Preservation Committee. It calls for an outright ban on fracking or “hydraulic fracturing” and other “fracking-like” techniques that involve breaking up underground rock formations by blasting them with high-pressure water, acid and other chemicals to extract oil and gas. An identical bill stalled during last year’s state legislative session over concerns that there has been no Florida-specific study documenting the risks of fracking in the state’s unique limestone geology. Senior Environmental Policy Specialist with the Conservancy of Southwest Florida, Amber Crooks says the dangers of fracking are clear, and that they aren’t worth the risks to human health, the environment and to Florida’s economy. “We need to take a look at the studies that are available and similar to what we have done for offshore drilling,” said Crooks. “We as Floridians, need to determine what level of risk, given our economy, which is based on real estate and ecotourism that we’re willing to accept in Florida.” Crooks pointed to the 90 municipalities that have already passed an ordinance or resolution on fracking. 

BREAKING: Florida Senate Committee Unanimously Votes to Ban Fracking - Moments ago, the Florida Senate Environmental Preservation and Conservation committee chaired by Senator Bradley voted 10- 0 to pass SB 462 to prohibit ‘advanced well stimulation,’ commonly known as fracking. This staunch showing of support for a state-level fracking ban is both unprecedented and significant in the long standing fight to ban the dangerous practice in the Sunshine State. “Floridians are ready for groundbreaking environmental legislation, and we are thrilled to have such strong leadership in the Florida Senate Environmental Preservation and Conservation committee to move our state towards a safer future. It’s finally time for our elected officials to recognize the overwhelming opposition to fracking in Florida by passing a ban bill. Competing bills have been introduced to regulate the practice, ban it, or allow it, but this is the year Florida finally passes a ban and ends the longstanding controversy once and for all.” “For the second year in a row, the Senate has shown their commitment to banning fracking because of the real risks it poses to Florida’s water. Just recently, a Duke study on fracking in Pennsylvania found high levels of radium in river and stream sediment located downstream from the discharge areas of oil wastewater treatment facilities. We cannot and should not allow the fracking industry to take our water and then contaminate our waterways. Our hope is that Speaker Richard Corcoran stops listening to special interests and lobbyists and finally acts to ban fracking in the state also.”

 Exposure to chemicals used during fracking may cause pre-cancerous lesions in mice, MU study finds  – Using more than 1,000 different chemicals, unconventional oil and gas (UOG) operations combine directional drilling and hydraulic fracturing, or “fracking,” to release natural gas from underground rock. Today, researchers at the University of Missouri and the University of Massachusetts released a study that found that female mice exposed to mixtures of chemicals used in UOG operations during prenatal development had abnormal mammary glands in adulthood. Additionally, some of the mice developed pre-cancerous mammary lesions that may suggest they will be more sensitive to chemicals that cause cancer. “Our earlier research showed that both male and female mice had alterations to hormone levels and reproductive organs resulting from exposures to these UOG contaminants,” said Susan C. Nagel, an associate professor of Obstetrics, Gynecology and Women’s Health in the School of Medicine. “We felt this could indicate that exposures to UOG chemical mixtures can produce a range of defects in animals exposed during vulnerable periods, such as development in the womb. So, we examined 23 UOG contaminants and compounds commonly used or produced in the fracking process.” In the study, female mice were exposed to various amounts of the 23 UOG chemicals from gestational day 11 to birth. Although no effects were observed on the mammary glands of these females prior to puberty, in early adulthood, female mice developed mammary lesions and hyperplasia, a condition that causes enlargement of an organ or tissue. “We chose varying amounts of the UOG mixture in order to mimic a range of human exposures to these chemicals,” Nagel said, who also serves as an adjunct associate professor of biological sciences in the MU College of Arts and Science. “These results suggest that the mammary gland is sensitive to mixtures of chemicals used in unconventional oil and gas production. Determining whether these fracking mixtures affect human populations is an important goal, particularly as the number of fracking sites within human population centers increases.” Additional, long-term studies are needed to evaluate these outcomes, the researchers said.

Texas flood: U.S. oil exports pour into markets worldwide (Reuters) - In the two years since Washington lifted a 40-year ban on oil exports, tankers filled with U.S. crude have landed in more than 30 countries, ranging from massive economies like China and India to tiny Togo. The repeal has unleashed a flood of U.S. shale oil, undercutting global crude prices, eroding the clout of the Organization of Petroleum Exporting Countries (OPEC) and seizing market share from many of its member countries. In 2005, before the shale revolution, the United States had net imports of 12.5 million barrels per day (bpd) of crude and fuels - compared to just 4 million bpd today. U.S. producers are making new customers out of some of the world’s biggest oil-importing nations in Asia and Europe, posing a serious competitive threat to the only other countries that produce as much crude: Saudi Arabia and Russia. At home, the export boom has filled pipelines and sparked a surge of investment in new shipping infrastructure on the Gulf Coast. (For an interactive graphic detailing the global impacts of the U.S. shale revolution, see: tmsnrt.rs/2EtJgen) U.S. producers now export between 1.5 million and 2 million barrels of crude a day, which could rise to about 4 million by 2022. The nation’s output is expected to account for more than 80 percent of global supply growth in the next decade, according to Paris-based International Energy Agency. Much of the increased flow will go to China, the world’s top importer and, since November, the largest buyer of U.S. crude other than Canada. Chen Bo, president of Unipec - China’s largest buyer of U.S. crude - told Reuters that the firm expects to double U.S. imports this year to 300,000 bpd as it seeks to expand sales in Asia and find new customers for U.S. exports in other regions, including Europe. Unipec - the trading arm of Asia’s largest refiner, state-owned Sinopec - is also considering long-term crude supply deals with U.S. pipeline and terminal operators. The firm may also partner with such firms to expand and improve U.S. export infrastructure, Chen said in an interview. “U.S. crude flowing to Asia is a major trend in global oil trading,” Chen told Reuters. 

The U.S. Oil Boom Is Attracting Canadian Drillers - Canadian oil and gas drillers are moving their rigs to the United States in response to greater demand for their service there and an investment climate at home that is, according to industry insiders, only making their lives harder.In a recent story for The Globe and Mail, Dan Healing quotes a few executives from drilling companies who say they’re taking rigs to the Permian in Texas, and the exodus will likely intensify, even if not all drillers are too comfortable with the move so far to the south.One of these executives, Trinidad Drilling’s CEO Brent Conway, put it in simple terms: "We've raised taxes, we're increasing costs because of labour laws that are changing, we aren't building pipelines and we can't get federal or provincial governments to do anything to help us."Meanwhile in the Lower 48, drillers are getting closer to the 10-million-bpd mark by the day, despite warnings that they might “drill themselves into the ground” if they don’t rein in production growth. These words, spoken last year by Continental Resources’ Harold Hamm, rang out across the industry when benchmarks were just beginning to recover. But now, with Brent still very close to $70 a barrel and WTI enjoying a lift to $66, it’s easy to forget them, so shale boomers are drilling and hedging their future production at the higher prices. For them, life seems to be good. For Canadian drillers, not so much. A lack of pipeline capacity seems to be the most pressing problem. It is not a new problem. It has been around for years, and even in 2015, Canadian media reported warnings that the discount at which Canadian crude trades to West Texas Intermediate will only widen if no new pipelines are built, and this will hurt the performance of the local oil industry.

Oil and gas fracking triggers 900 earthquakes a year in this US state -- Oklahoma has been transformed from a seismic dead zone to a hotspot in less than a decade. Scientists attribute this unprecedented increase in seismicity to the oil and gas industry injecting its wastewater (known as "saltwater") deep underground. In a study published in the journal Science, my colleagues and I have now shown that the size of these man-made earthquakes is strongly linked to the depth at which the saltwater is injected. As a result, reducing the depth of injections could significantly reduce the likelihood of larger, damaging earthquakes. There are now more than 10,000 injection wells dotted across Oklahoma. This includes both oil recovery wells and wells used to dispose of the saltwater that is an unwanted byproduct of the oil and gas extraction process. The water is injected deep underground, typically at depths of 1km to 2km. This deliberately is well below the level of fresh ground water supplies in order to avoid contamination. Since 2011, well operators have injected on average 2.3 billion barrels of fluid a year into layers of sedimentary rock deep underground. The link between Oklahoma's earthquakes and wastewater disposal was firmly established by a 2013 study that showed a strong association between the injection zone and earthquakes, including the 2011 magnitude 5.7 Prague event. Since 2015, some new regulations have led to an overall decline in the number of earthquakes. But the total seismic energy (the "moment") has not dropped as significantly as expected.    Our new study sheds light on the complexity of Oklahoma's induced seismicity. It shows that the more saltwater is injected and the greater the depth it goes to, the larger the resulting earthquake.  The injection is even more likely to cause earthquakes at depths where layered sedimentary rocks meet the crystalline "basement" rocks below them, at depths of between 1km and 6km. This shouldn't be surprising because we know that when fluid gets into the spaces within rocks it can considerably weaken them. Pressurised fluids can effectively lubricate ancient fault zones that may have locked-in stresses built up over time, making them more prone to failure.

Fracking-related Earthquakes – Earthworks -- Hydraulic fracturing injects millions of gallons of water into oil and gas containing geologic formations deep underground. Scientific and government research indicates that fracking can cause earthquakes in two ways:

• Primarily, during the fracking process: “[Earthquakes] were caused by fluid injection during hydraulic fracturing in proximity to pre-existing faults.” 
• Secondarily, via the disposal of fracking wastewater via underground injection.

Our report Shaky Ground explores the risks of fracking triggered earthquakes in California. And increased earthquake activity in shale plays with active injection wells, like Texas, Oklahoma and Ohio show the risks are real. Although fracturing-related earthquakes are chronic, they were thought to be minor. But new research is showing that they can be quite large and damaging. The focus of the study, a 5.7 magnitude quake near Prague, Oklahoma, damaged 14 homes and other structures in the area. In Oklahoma, where the number of earthquakes magnitude 3.0 or more has jumped from an average of less than five a year to about 40, the state has been slow to act. So far, Gov. Mary Fallin created a Coordinating Council on Seismic Activity and the regulatory agency, the Oklahoma Corporate Commission, issued restrictions on wells in earthquake prone areas. Similar steps have been taken in Texas. But while the state figures out what to do, residents are taking matters into their own hands. Sandra Ladra, who lives is Prague, the site of the 5.7 magnitude quake in 2011, is sueing the oil company in Oklahoma’s highest court. A favorable finding would make wells a legal liability. In the meantime, insurance companies have already increased their rates, highlighting the risk.  Despite the increasingly apparent threat posed by fracking-related earthquakes, many states are ignoring the issue: “Nine months after a National Academy of Sciences panel said oil and gas regulators should take steps to prevent man-made earthquakes, officials in key states are ignoring quake potential as they rewrite their drilling rules.” Arkansas, however, suspended injection wells after an earthquake swarm in 2011.

Lands stripped from Utah monuments open to claims, leases — The window opened Friday for oil, gas, uranium and coal companies to make requests or stake claims to lands that were cut from two sprawling Utah national monuments by President Trump in December —but there doesn’t appear to be a rush to seize the opportunities. For anyone interested in the uranium on the lands stripped from the Bears Ears National Monument, all they need to do is stake a few corner posts in the ground, pay a $212 initial fee and send paperwork to the federal government under a law first created in 1872 that harkens back to the days of the Wild West. They can then keep rights to the hard minerals, including gold and silver, as long as they pay an annual fee of $155. It was unclear if anyone was doing that Friday. The Bureau of Land Management declined repeated requests for information about how they’re handling the lands and how many requests and claims came in. Steve Bloch, legal director of the Southern Utah Wilderness Alliance, said he was told by the BLM Friday afternoon that inquiries were made but no claims sent in. He said other conservation groups that have sued to block the downsized monument boundaries are watching closely to ensure no lands are disturbed in the short-term, hoping a judge will side with them and return the monuments to the original boundaries. Two of the largest uranium companies in the U.S. — Ur-Energy Inc. and Energy Fuels Resources Inc. — said they have no plans to mine there. The price of uranium, which has fallen to about $22 per pound — down from more than $100 in the mid-2000s — would “discourage any investment in new claims,” said Luke Popovich, a spokesman for the National Mining Association. 

Methane Reporting Gap Widens in Oil and Gas Industry - A new report from Environmental Defense Fund (EDF) shows some oil and gas companies are exposing themselves to scrutiny by failing to adequately disclose meaningful information on emissions of methane , the heat-trapping pollutant that is drawing increased attention from the public.The analysis demonstrates company reporting on methane has improved slightly, though unevenly, over the past two years since EDF first examined methane disclosure within the U.S. oil and gas industry in their report, Rising Risk. The quality of methane reporting has improved among the top companies, though 42 percent of the companies surveyed disclose nothing on their methane management practices.Methane—the key component of natural gas and a greenhouse gas 84 times more potent than carbon dioxide—is responsible for more than a quarter of the warming we are experiencing today and represents a fast-emerging, highly-potent form of carbon risk for investors."As a long-term global investor, we recognize that methane emissions are one of the most financially significant environmental risks we face," said Brian Rice, Portfolio Manager at CalSTRS, California's second largest public pension fund. "While the oil and gas industry has taken some steps to address this issue, CalSTRS sees opportunities for the industry to enhance its methane risk management and reporting efforts that simultaneously reduce atmospheric emissions and capture more natural gas by phasing out methane-emitting equipment, increasing training and designing new emissions-free systems." The report, The Disclosure Divide: Revisiting Rising Risk and Methane Reporting in the U.S. Oil & Gas Industry , examines the current state of voluntary reporting on methane in the U.S. oil and gas sector. The authors surveyed publicly disclosed data and found of the 64 top upstream and midstream companies surveyed, only four companies report quantitative methane targets. Only nine companies report comprehensively on their leak detection and repair (LDAR) programs.

Climate 'Hero' Gets Three-Year Prison Sentence for Shutting Down Tar Sands Pipeline -- Michael Foster, the valve turner who temporarily halted the flow of tar sands oil in TransCanada's Keystone pipeline in October 2016 , called for future actions to address the global climate crisis before he headed to prison, where he is expected to serve at least a year of his three-year sentence."It doesn't matter if I'm sitting in jail. What matters is stopping the pollution," Foster, a 53-year-old mental health counselor from Seattle, declared after his sentencing in North Dakota on Tuesday.  "If other people don't take action, mine makes no difference," he continued. "And if they don't, the planet comes apart at the seams. The only way what I did matters is if people are stopping the poison."  Although others who participated in the multi-state #ShutItDown action two years ago have been allowed to present a " necessity defense "—or argue they believed their act was " necessary to avoid or minimize a harm" that was "greater than the harm resulting from the violation of the law"—Judge Laurie A. Fontainerejected such a defense for Foster and Sam Jessup, who filmed Foster's action and received a two-year deferred prison sentence with supervised probation.Outside the court, Dr. James Hansen—who has been called " the father of modern climate change awareness" and was barred from testifying during the trial last year—said the public is generally unaware of the need to urgently address the climate crisis, emphasizing that we are entering "the age of consequences" for burning fossil fuels. "Michael Foster isn't a criminal," Hansen added, "he's a hero." The decision to sentence Foster to prison time was decried by other climate activists, including fellow valve turner Emily Johnston, who pointed out the lack of legal consequences for environmental degradation caused by the fossil fuel industry:

Court Asked to Sanction DAPL Lawyers Who Sued Environmental Movement - The Center for Constitutional Rights asked a federal court to sanction Energy Transfer Partners and Energy Transfer Equity for “misusing” the legal system when it sued “Earth First!” for “federal racketeering” to suppress activism against the Dakota Access Pipeline.Kasowitz Benson Torres, the law firm which represents President Donald Trump, attempted to sue the movement, Earth First!, in August. However, “Earth First!” is an idea that cannot be sued.Nevertheless, the law firm sent a complaint to Earth First! Journal, even though the publication was not named in the lawsuit.Sanctions, according to CCR, require lawyers accused of offenses receive “advance notice” of a motion so they have an opportunity to withdraw “improperly filed papers.” CCR served Kasowitz Benson Torres, as well as Vogel Law Firm (a co-counsel), with a sanctions motion.The lawsuit was not withdrawn, but without explanation, Vogel Law Firm no longer represents Energy Transfer Partners or Energy Transfer Equity.“Massive corporations have the financial resources to file frivolous lawsuits and crush advocacy through the sheer weight of litigation, even if they do not ultimately win in court,” CCR senior staff attorney Rachel Meeropol suggested. Earth First! Journal editor Ryan Hartman stated, “Trump’s lawyers were given an opportunity to withdraw papers they knew were improper and avoid sanctions. Their refusal leaves no doubt that the aim of this lawsuit is not to address racketeering, but to scare activists opposing pipelines into silence. It’s not working.”

How Standing Rock is forcing oil investors to consider human rights   - Some shareholders want to see oil companies take human rights into greater consideration when choosing what projects to finance. And the stark police brutality against the Standing Rock Sioux Tribe during its protest of the Dakota Access Pipeline in 2016 is why.  A group of shareholders with the Marathon Petroleum Corporation, a major U.S. oil company that has a $500 million stake in the controversial interstate crude oil project, is asking the company to consider a resolution on human rights—especially those of indigenous peoples. Trillium Asset Management filed this resolution earlier this year with the nonprofit Ceres, which aims to make investments more sustainable and just. In the filing, the stakeholders request Marathon prepare a report that would break down how the company currently analyzes a project’s social and environmental risks and whether Marathon is down to change these processes in the future. The concern, according to the resolution, is the way ignoring these impacts could affect a project’s image and, ultimately, result in economic loss. It offers Marathon the suggestion of using the United Nations Declaration on the Rights of Indigenous Peoples as a template, which makes clear that free, prior, and informed consent should be acquired before the approval of any project.The issue isn’t just with particular projects, though. It’s also about the companies with which Marathon does business—like, say, Energy Transfer Partners, the developer of the Dakota Access Pipeline. The resolution notes the company’s “poor environmental record” and its growing stack of lawsuits across the country.

'Not a Single Drop': California to Block Trump's Offshore Drilling Plan -  The Trump administration's plan to vastly expand offshore oil drilling along the U.S. coastline has drawn bipartisan opposition from nearly all coastal governors . Now, in one of the strongest declarations of opposition yet, California's Lt. Governor Gavin Newsom, chair of the state's powerful land commission has vowed "not a single drop from your new oil plan will ever make landfall in California." So what's the plan? The Golden State will deny pipeline permits for transporting oil over land from new leases off the Pacific Coast. California's State Lands Commission sent a letter on Wednesday to the U.S. Interior Department's Bureau of Ocean Energy Management that stated, "It is certain that the state would not approve new pipelines or allow use of existing pipelines to transport oil from new leases onshore." Additionally, as NPR reported, even if oil companies drill off California's shores, they cannot construct new onshore infrastructure—i.e. terminals, pipelines and other equipment—without voter approval from more than a dozen coastal cities and counties first. While companies can get offshore oil without using onshore equipment—they can instead use floating oil rigs and transfer the oil onto ships—that method is much more difficult and expensive. And after consecutive years of low oil prices, companies would likely look elsewhere. "Absolutely," Bob Fryklund with IHS Markit, which does research and consulting for the oil industry, told NPR. "The companies look at that. They look at the ease of operation." Furthermore, CNBC noted that California could also invoke the federal Coastal Zonal Management Act of 1972, which gives states the authority to review offshore federal and industrial activity that may affect a state's coastal uses or resources.  "This strategy," as CNBC pointed out, "could provide a blueprint for other states" opposed to offshore drilling.

Report: Fracked Gas Project Could Undermine Washington’s Clean Energy Goals -- A new report from the Stockholm Environment Institute (SEI) on a controversial fracked gas-to-methanol refinery proposed in Washington state confirms McKibben's assertion: the Kalama methanol refinery will not help us achieve a low-carbon future or meet the goals in the Paris agreement . According to the report, approving the Kalama methanol refinery "would not appear to be consistent with globally agreed climate goals of keeping warming at less than 2 degrees Celsius."The Kalama methanol refinery—the largest fracked-gas-to-methanol refinery in the world—would cause the equivalent of 3.7 to 7 million tons per year of CO 2 pollution, based on 20-year global warming potential. That's over half the carbon footprint of the massive coal -fired power plant in Centralia, Washington. When the Centralia coal plant closes in 2025, the Kalama methanol project would become Washington's top contributor to climate change.Backed by the Chinese government, a company called Northwest Innovation Works proposes to refine fracked gas to liquid methanol on the banks of the Columbia River in the Twilight-famous town of Kalama , then ship the methanol to China to produce olefins, a chemical building block for plastic .The new report casts doubt on claims that the Kalama methanol refinery would replace coal-based methanol production in China and thus benefit the climate. Researchers found that the Kalama facility is just as likely to displace more common—and less emissions-intensive—methods of making plastic. This means that "that the facility would be just as likely to increase global GHG emissions [from other sources] as to decrease them." Researchers also found that the Kalama methanol refinery could result in emissions that are two to six times higher than estimates in the final Environmental Impact Statement ("EIS"). That's largely because the EIS left out emissions involved in supplying fracked gas to the methanol refinery. "The new analysis provides an opportunity to fix that, and consider all emission impacts in the supplemental review," said SEI senior scientist Peter Erickson, a co-author of the report.

Budget deal envisions largest oil stockpile sale in history | TheHill: The two-year budget deal reached by congressional leaders would set up the biggest sale in history from the nation’s emergency oil stockpile. In an effort to partially pay for new spending, the budget agreement would sell 100 million barrels of the Strategic Petroleum Reserve (SPR) in the next decade. Taken with sales Congress authorized last year to pay for other spending, the deal would leave the Department of Energy-managed reserve with just over 300 million barrels, or about half its previous size.The deal takes a big chip out of a landmark safety net established in the 1970s to guard the United States from the effects of international turmoil or other big supply disruptions. “It’s the biggest non-emergency sale proposed in history,” Kevin Book, managing director of ClearView Energy Partners, said of the 100 million-barrel sale. “The age of energy scarcity, the entire structure — regulatory and otherwise — that was built to address concerns about ‘not enough,’ has apparently ended.” Oil is currently going for around $60 a barrel, which would net the United States $6 billion if sold today. Prices are likely to increase over the next decade, when the sales would happen, but it’s difficult to predict by how much. Until recently, Congress had strong bipartisan agreement to avoid using the SPR as a piggy bank. But with little other sources of income and perennial opposition to tax increases, it has increasingly been used as such, for costs like infrastructure and a medical research bill. The Trump administration proposed last year to cut the SPR’s size in half, which Congress is now on track to do. The deal still needs to be approved by both the House and Senate.

Revealed: Trudeau government welcomed oil lobby help for US pipeline push - The Trudeau government treated Donald Trump’s election as “positive news” for Canada’s energy industry and welcomed the help of Canada’s main corporate oil group in lobbying the US administration, documents show. Meetings conducted by senior government officials with TransCanada and the Canadian Association of Petroleum Producers (CAPP) reveal an one-sided approach more reminiscent of former Prime Minister Stephen Harper’s secret oil advocacy than Justin Trudeau’s green electoral promises. The Liberal government has strongly backed the export of Alberta tar sands via the Keystone XL pipeline, which was initially rejected by the Obama administration on climate grounds but approved by Trump in March 2017. The documents, obtained through access-to-information, show the Parliamentary Secretary to Canada’s Foreign Affairs Minister met around the same time with TransCanada’s CEO Russ Girling and CAPP to discuss the continued promotion of the pipeline and oil exports. The briefing note states that the oil lobby group “specifically will be interested to hear the outcomes of the recent visits by Prime Minister Trudeau and Minister Freeland to the United States, as well as volunteering their services (or those of members) in the Government’s U.S. engagement efforts.” The Parliamentary Secretary was advised to respond by saying “we welcome your engagement offer and would like to stay in touch.” The Guardian asked CAPP what kind of services they had volunteered but the lobby group declined to answer. CAPP shares many members with its US-counterpart, the American Petroleum Institute, whose lobbying of the Trump administration has resulted in cuts to environmental regulations and the speed-up of permits for oil and gas drilling. The briefing documents appear to present Trump’s approach to energy policy as an improvement over that of Obama’s. 

Canada, facing protests, seeks to overhaul pipeline assessments (Reuters) - The Canadian government, seeking to address unhappiness over the potential environmental impact of major projects, on Thursday unveiled draft legislation to change how pipelines and mines are assessed. The bill, which officials say could become law by mid-2019, will create a new Impact Assessment Agency of Canada to investigate proposed major natural resource projects. Reaction to the new rules was mixed. Industry expressed concerns over the wider scope of the new process, and environmental and Aboriginal groups saw promise in the enhanced consultation but worried over climate commitments. Major project reviews are currently divided between three entities, a system the ruling Liberals say Canadians no longer trust. The revamp is an attempt to address the concerns of aboriginal and environmental activists, who have opposed recent oil pipeline projects on the grounds that the existing assessment process is flawed and not stringent enough. “I believe this will get us to a better place, that we will be able to ensure that you have the public trust,” Environment Minister Catherine McKenna told reporters. “We need good projects to go ahead. We need good jobs.” Officials say the new law will cut review times, and factor in health, indigenous and gender issues as well as the environment. Industry players have complained it can take years for a review to be completed. Involving indigenous groups early in the process will likely help companies smooth some opposition other projects have run into, said Patrick Kelly, chair of the Coastal First Nations. “It helps avoid some of the stickier issues that end up in litigation,” he said, but noted First Nation governments would have liked more authority in the process.

A new analysis of US midstreamers' assets and outlooks - The recent rise in crude oil prices to levels not seen since late 2014 certainly has captured everyone’s attention, and generally boosted the financial prospects for U.S. producers and midstreamers alike. But while it’s often said that a rising tide lifts all boats, the fact is that accurately assessing the relative value of — and prospects for — specific midstream energy companies requires a deep, detailed analysis. Where are their assets located? How do they complement each other? Do their contractual obligations help or hinder? Sure, things may be looking up in the midstream sector in a big-picture sense, but that hardly makes every midstream company a winner. Today, we review highlights from a new East Daley Capital report that shines a bright light on 28 U.S. midstream companies. A year ago, our friends at East Daley published their first “Dirty Little Secrets” report — a deep-dive look at a somewhat smaller group of midstream companies (23), and we ran a series of blogs highlighting what we saw as key themes from the analysis. In Part 1, we focused on the report’s argument that a surprising number of supply-push contracts for crude oil and natural gas pipeline capacity will be expiring in the next few years, and in many instances the likely terms for contract extensions or renewals may be much less favorable to the pipeline owners. The theme we discussed in Part 2 was that vertically integrated midstream companies that can gather natural gas, process it to remove natural gas liquids (NGLs), then pipe gas to market and mixed NGLs (or “y-grade”) to storage and/or fractionators — and maybe even fractionate the y-grade into ethane, propane and other “purity products” — have a real leg up on midstreamers whose assets are more disjointed. The third theme, which we talked about inPart 3, was that location really, really matters ­­— that is, the near- and mid-term success of a midstream company depends to a significant degree on how many of its pipelines, processing plants and other assets serve production areas that are on the rise and not on the edge.

EIA's Short Term Energy Outlook -- February 6,2018 - Key points:

• $62/bbl is not going to help Saudi Arabia; projected price for Brent crude oil through 2019
• US coal production remains stable, slightly greater than 2016
• natural gas is poised to set a record annual increase and record production level in 2018

Oil and Natural gas:

• EIA’s forecast expects Brent crude oil prices to be in the $62 per barrel range in 2018 and 2019.
• that’s down a bit from current levels, as strong U.S. production growth is expected to help moderate global prices
• after exceeding 10 million barrels per day last November, a first since 1970, EIA estimates U.S. crude oil climbed to 10.1 million barrels per day in January, which would be the highest for any month on record.
• February’s short-term outlook revises the forecast for increased oil production over the next two years
• we now expect U.S. crude oil production to average 10.6 million barrels per day in 2018 and 11.2 million barrels per day in 2019
• cold weather east of the Rocky Mountains last month pushed natural gas inventory withdrawals to a record high and contributed to sharp increases in natural gas spot prices, which rose more than one dollar from December’s price to $3.88 per million British thermal units in January.
• natural gas is poised to set a record annual increase and record production level in 2018
• EIA expects a production increase of 6.7 billion cubic feet per day in 2018, climbing from 73.6 billion cubic feet per day in 2017 to more than 80 billion cubic feet per day
• growth from 2018 to 2019 is forecast to be lower but will remain close to 3% year-over-year.
• record natural gas production in the coming months should allow prices to pull back from January’s highs
• February’s short-term outlook expects production increases to continue through 2019 and, accordingly, we should see natural gas spot prices continue declining to an average of about $3.20 per million British thermal units this year and even further to $3.08 per million Btu in 2019.

EIA’s latest Annual Energy Outlook projects rising production, relatively flat consumption - EIA’s Annual Energy Outlook 2018 (AEO2018), released this morning, includes projections of U.S. energy markets through 2050 based on a Reference case and a number of sensitivity cases. The AEO2018 Reference case shows continued development of U.S. shale and tight oil and natural gas resources paired with modest energy consumption growth, leading to the transition of the United States from a net energy importer to a net energy exporter. The United States has been a net energy importer since 1953, but the AEO2018 Reference case projects the United States will become a net energy exporter by 2022. This transition occurs even earlier in some AEO2018 sensitivity cases that incorporate assumptions supporting larger growth in oil and natural gas production or that have higher oil prices. In the High Oil and Gas Resource and Technology case, favorable geology and technological developments increase oil and natural gas supply, leading to higher energy exports. In the High Oil Price case, before 2040, economic conditions are more favorable for oil producers, supporting higher levels of exports and lower domestic consumption than in the Reference case. Exports decline after 2040 in this sensitivity case as a result of the lack of substantial improvements in technology.   The AEO2018 presents updated projections for U.S. energy markets through 2050 based on the Reference case and six additional sensitivity cases: Low and High Economic Growth, Low and High Oil Price, and Low and High Oil and Gas Resource and Technology. The AEO2018 Reference case incorporates only existing laws and policies and is not intended to be a prediction of the future. The sensitivity cases incorporate different key assumptions that reflect market, technology, resource, and policy uncertainties that affect energy markets.

US will be a net energy exporter by 2022, four years sooner than expected, Energy Department says - The United States is on pace to export more energy products than it imports by 2022 as oil and natural gas production from the nation's shale fields keep booming and domestic energy demand remains fairly tepid, according the Department of Energy's statistics arm. The country will achieve the feat as it expands natural gas exports beyond its traditional North American markets, shipments of crude oil increase and outward flows of refined products such as gasoline remain robust, the Energy Information Administration said in its Annual Energy Outlook. The nation's anemic appetite for energy will also play a role in the United States becoming a net exporter. U.S. energy consumption is forecast to grow by only 0.4 percent through 2050, compared with expectations for economic growth of 2 percent. If the forecast bears out, 2022 will mark the first year the U.S. energy exports surpassed imports since 1953. "The United States energy system continues to undergo an incredible transformation," EIA Administrator Linda Capuano said in a statement. "This is most obvious when one considers that the [Annual Energy Outlook] shows the United States becoming a net exporter of energy during the projection period in the Reference case and in most of the sensitivity cases as well — a very different set of expectations than we imagined even five or ten years ago." In fact, just last year, the EIA forecast the United States would not achieve net exporter status until 2026. As a net exporter, the United States would still import oil, natural gas and other energy products. Many U.S. refineries are configured to process heavier grades of crude oil, and international flows fluctuate based on the relative cost of energy products from different parts of the world.

Why the New EIA Forecast Is Unrealistic - The Energy Information Administration (EIA) of the U.S. Department of Energy has just released its Annual Energy Outlook (AEO) 2018, with forecasts for American oil, gas and other forms of energy production through mid-century. As usual, energy journalists and policy makers will probably take the document as gospel. That's despite the fact that past AEO reports have regularly delivered forecasts that were seriously flawed, as the EIA itself has acknowledged . Further, there are analysts inside and outside the oil and gas industry who crunch the same data the EIA does, but arrive at very different conclusions. The most comprehensive critiques of past AEO forecasts have come from earth scientist David Hughes, a Fellow of Post Carbon Institute (note: I, too, am a Post Carbon Institute Fellow). Since 2013, Hughes and PCI have produced annual studies questioning EIA forecasts, based on an analysis of comprehensive play-level well production data. Their latest report, a critical look at AEO2017, is just out. "Shale Reality Check: Drilling Into the U.S. Government's Rosy Projections for Shale Gas & Tight Oil Production Through 2050" explores four big questions crucial to the realization of the EIA's forecasts:

• 1. How much of the industry's recent per-well drilling productivity improvement is a result of better technology, and how much is due to high-grading the best-quality parts of individual plays? Over the past few years, industry has shown the ability to extract increased amounts of oil and/or gas from each well. This has been achieved in part by drilling longer horizontal laterals, tripling the amount of water and proppant (usually sand) used per unit of well length, and increasing the number of fracking stages. It is also in part a result of "high-grading," or focusing drilling on the best-quality parts of each play (termed "sweet spots" or "core areas").
• 2. Can technological advancement in the industry continue to raise productivity indefinitely? If, as the EIA suggests, improved technology will continue to increase well production, then perhaps per-well productivity can continue to grow for some time. However, based on the analysis of recent data, Hughes questions this (as does a team of MIT researchers ).
• 3. What will be the ultimate cumulative production from all U.S. tight oil and shale gas wells? Taking the above points into account, Hughes concludes from a detailed analysis of production data that the EIA is making extremely optimistic assumptions about ultimate production and long-term production rates in most shale plays.

U.S. Looks To Sell 15% Of Strategic Petroleum Reserve - The budget deal that the U.S. Congress reached on Wednesday includes the sale of 100 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) between 2022 and 2027—a total volume equal to some 15 percent of the current reserve.According to the text of the budget deal, carried by Reuters, the agreement—expected to be voted later on Thursday—involves the Department of Energy selling 30 million barrels of the SPR between 2022 and 2025, another 35 million barrels in 2026, and additional 35 million barrels in 2027 to help fund the government.The budget deal also involves the sale of $350 million worth of crude oil, or some 5.7 million barrels, this year, with proceeds to be used to repair storage units at the reserve.Currently, the SPR has around 665.1 million barrels of crude oil stored in underground caverns on the coasts of Texas and Louisiana.  Last year, in the draft budget for fiscal 2018, the Trump Administration proposed selling half of the Strategic Petroleum Reserve, hoping to raise some US$500 million during the fiscal year and US$16.6 billion over the next ten years. The proposal, however, did not become law because of opposition from Republicans in Congress. Some Republican Senators have argued that selling half the SPR would have hurt U.S. oil producers as it would have reduced oil prices. Opponents also said that the SPR was necessary in case of major storms or major unplanned outages in other oil-producing countries. Another argument of lawmakers who opposed the plan to halve the SPR was that some of the crude oil in the emergency reserve was bought at higher oil prices, so oil from the SPR should be sold when prices increase more. In the wake of Hurricane Harvey last August, the U.S. tapped the SPR after the storm disrupted the petroleum industry in Texas and Louisiana, and led to motor fuel price spikes and shortages. A total of 5 million barrels of oil from the SPR was delivered to Gulf Coast refineries, helping to continue their processing operations and prevent further supply disruptions.

Fracking is linked to breast cancer -- Fracking is linked to breast cancer, new research suggests.The chemicals used in the high-pressure extraction of oil and gas cause uncontrolled cell division in adult mice's mammary cells, a US study found.Past research shows cancer is caused by uncontrolled cell growth, which results in tumours. This cell division occurs when mice are exposed to the equivalent level of chemicals found in the drinking water of areas affected by fracking, the research adds.Fracking is a contentious issue in the UK with campaigners recently announcing they will continue to protest about the proposed operation in Kirby Misperton, North Yorkshire until the energy firm behind it goes bust. The controversial process involves drilling down into the earth before inserting a high-pressure mixture to release gas and oil trapped in rocks.Campaigners argue the use of potentially cancer-causing chemicals in fracking may escape and contaminate local water supplies. Researchers from the University of Massachusetts exposed pregnant mice to one of four doses of 23 chemicals commonly used in fracking. These chemicals were added to the rodents' drinking water. The researchers then analysed the breast tissue of the pups at 21 days old,as well as just before puberty and at 85 days old, which is considered early adulthood in mice. According to the researchers, the two lowest chemical doses investigated are equivalent to levels found in drinking water from drilled areas. The highest dose used matches that of chemicals present in industry wastewater. 

Oil Production Vital Statistics January 2018 - The oil price has begun 2018 strongly with Brent breaking through $70 / bbl for the first time since December 2014. OPEC+Russia+others’ discipline on production constraint remains high with ~ 1.7 Mbd production withheld from the market. The IEA reports an ~1 Mbpd stock draw in the OECD + China in 4Q 2017. IEA revisions transform the picture in the USA from one of static production to one of strong growth over the last 3 months (this undoes one of the assumptions used in my 2018 oil price forecast). The inset image (live chart below the fold) shows a slow motion train wreck in Venezuela where production has fallen 810,000 bpd since December 2014. The dramatic slide in oil production in Venezuela began ~ December 2014. We have to presume that the collapse in the oil price has something to do with this. There is however no sign that rising price, now offset by falling production, is averting that country’s collapse. The oil price was held back in 2017 by rising production in Nigeria and Libya. Production in Libya is now holding steady at ~ 1 Mbpd  and production in Nigeria is holding steady at ~ 1.65 Mbpd. According to the IEA, OPEC compliance with the agreed cuts is now running at 129% in part due to the unscheduled collapse in Venezuelan supply. I have been following bio-fuel production, pointing out that it had been on a cyclical high last autumn and was scheduled to fall by ~ 1 Mbpd over the winter. This fall is duly underway (below). This, combined with the collapse of Venezuela and continued OPEC++ discipline has underpinned the strong oil price rally.

US Secretary of State Tillerson threatens oil sanctions against Venezuela -- Reflecting mounting concern over challenges to US dominance over Latin America, the Trump administration sent Secretary of State Rex Tillerson on a diplomatic tour aimed at countering “new imperial powers” in the region, particularly China and Russia.In a preamble to his trip at the University of Texas in Austin, Tillerson declared Thursday: “Today, China is gaining a foothold in Latin America. It is using economic statecraft to pull the region into its orbit.” He later condemned Russian military aid to certain countries and warned Mexican officials to be wary of Russian influence in their July general elections.The message he sought to deliver was summed up by his comment that the 1823 Monroe Doctrine claiming US hegemony over the hemisphere “is as relevant today as it was the day it was written.”This represented an about-face from the declaration by then-US Secretary of State John Kerry in 2013 that “The era of the Monroe doctrine is over.” Washington is dispensing with such rhetorical accommodations to national sentiments in order to pursue its recently announced strategic orientation to the preparation for “great power” conflicts Overall, Tillerson’s trip followed the same guidelines as that of US Vice President Mike Pence’s Latin American tour last August, when he pushed governments to join the US in condemning the government of President Nicolas Maduro in Venezuela as part of a broader campaign to undermine Russian and Chinese interests in the region. “As we see widening asymmetrical threats developing around the world, we would do well to see to Central and South America,” Pence said, advancing the reasoning behind Washington’s escalation and expansion into Latin America of the anti-China “pivot to Asia.”

Tillerson raises specter of US sanctions on Venezuelan oil  (Reuters) - The United States is considering restricting imports of Venezuelan crude oil and exports of U.S. refined products to Venezuela, U.S. Secretary of State Rex Tillerson said on Sunday, to put pressure on socialist President Nicolas Maduro to “return to the constitution.” “One of the aspects of considering sanctioning oil is what effect would it have on the Venezuelan people? Is it a step that might bring this to an end more rapidly?” Tillerson said at a news conference in Buenos Aires, referring to Venezuela’s economic and political crisis. Tillerson, on a Latin America trip that also includes visits to Mexico, Peru, Colombia and Jamaica, raised eyebrows on Friday after he suggested that Maduro could be toppled by his own military. Restrictions on Venezuela’s all-important oil industry would represent an escalation of financial pressure on the OPEC member, which is gripped by severe shortages of food and medicine. Sanctions have so far focused on individual members of Maduro’s government and a ban on buying new Venezuelan debt. “We are looking at options and we are looking at how to mitigate the impacts on U.S. business interests” and on other countries in the region, Tillerson said.   Standing next to Tillerson at the news conference, Argentine Foreign Minister Jorge Faurie said his country would “closely follow” the possibility of oil and fuel sale restrictions, but said sanctions “must never harm the Venezuelan people.” Other Latin American governments have said they were unwilling to take steps that would worsen the humanitarian crisis in Venezuela, 

Senator Rubio calls for military coup in Venezuela - Republican Senator Marco Rubio called for the Venezuelan Armed Forces to rebel against the government, in a series of inflammatory tweets posted on Friday. The Secretary of State has hinted at support for a coup d’etat. “The world would support the Armed Forces in #Venezuela if they decide to protect the people & restore democracy by removing a dictator,” Florida Senator Rubio wrote. Rubio’s tweets come after Secretary of State Rex Tillerson on Thursday hinted at his support for a coup d’etat in Venezuela, as well as more sanctions including an embargo on Venezuela’s valuable oil exports. The Trump administration is seeking to ramp-up pressure on President Nicolas Maduro’s socialist regime in the wake of alleged human rights abuses against political dissidents in the country. “In the history of Venezuela and South American countries, it is often times that the military is the agent of change when things are so bad and the leadership can no longer serve the people,” Tillerson said at the University of Texas in Austin on Thursday. 

Ireland on a path to being the 4th country in the world to ban fossil fuel exploration - The government has lost a vote on proposed legislation which would place a ban on fossil fuel exploration off the Irish coast.The Bill secured the support of 78 TDs, with 48 voting against it. It will now proceed to Committee Stage in the Oireachtas, despite the government’s opposition.Solidarity-People Before Profit’s Petroleum and Other Minerals Development (Amendment) Climate Emergency Measures Bill aims to stop the issuing of any new licences for the exploration of fossil fuels.Costa Rica, Belize and France have already implemented similar measures. The Bill sets out that the government must:  Ensure regard is had to national and global environmental considerations when issuing licences, undertakings and leases under the Petroleum and Other Minerals Development Act 1960  These considerations include: The annual average global temperature, the monthly mean level of carbon dioxide in the atmosphere With the support of the Green Party, Fianna Fáil, Sinn Féin, Labour, and Independents 4 Change (and pop superstar Cher who tweeted her support) it passed, meaning Ireland is now on the path to become the fourth country in the world to implement a ban on the exploration of fossil fuels.Reacting to the vote result today, Green Party Leader Eamon Ryan TD said “this is truly is a historic day for environmentalism in Ireland. The tide has turned on fossil fuels, and there is widespread political support now for a just transition to renewable power”. Smith said passing this Bill to the next stage sends “a signal globally” that Ireland takes climate change seriously. During the week she called on the Taoiseach to support the move.

Poland Waves Goodbye to Russian Gas After 74 Years - Russia’s oldest natural gas buyer is ready to break up after more than 74 years.  Poland, which relies on Kremlin-controlled Gazprom PJSC for about two-thirds of its gas, says diversification trumps potential price cuts it could leverage from building an import link to access Norwegian fuel. That comes after the eastern European nation in 2016 completed a liquefied natural gas terminal to diversify away from the Russian gas it’s been buying since 1944. “We’re not diversifying our supplies in order to continue with Russia,” Piotr Naimski, the government official in charge of strategic energy infrastructure, said in an interview in Warsaw. “It’s a question of security and the Baltic Pipe is not a part of negotiations with Gazprom.” The ruling Law & Justice party has said since it came to power in 2015 that it won’t renew a long-term contract with Gazprom that ends in 2022. In order to do that, state-controlled gas distributor PGNiG SA had to revive a project for a link to Norway first mooted about 20 years ago. The Baltic Pipe is on schedule, which is tight with a completion date of October 2022.“If we want to prolong the Gazprom contract we would need to start talks in December 2019, but by that time we’re going to be certain that the Baltic Pipe will be built, so we’re in a comfortable situation,” said Naimski. “At the same time, Poland is ready for any kind of supply risk in the transition period.”Poland is also vying with Gazprom over the Russian company’s plan to expand its Baltic Sea gas pipeline to Germany, called Nord Stream 2. Poland argues that the project would make countries like Ukraine more vulnerable if Russia decided to shut down gas links running across its territory to western Europe. During last month’s visit to Warsaw, U.S. Secretary of State Rex Tillerson said the plan was “not a helpful piece of infrastructure to support stability in Europe.”

India To Boost Oil Refining Capacity By 77% - India plans to increase its crude oil refining capacity by 77 percent to 438.65 million tons, or more than 8 million bpd, a government report has revealed. The increase would happen gradually over the next 12 years as Asia’s new powerhouse seeks to satisfy its growing demand for fuel.The report said that the bulk of the capacity boost will come from facilities owned and operated by Reliance Industries, the local heavyweight, and Essar Oil, which Russia’s Rosneft acquired last year.Reliance will start by increasing the capacity of one of its refineries from the current 33 million tons to 63 million tons annually, while Essar Oil will focus on its 20-million-ton Vadinar facility, upgrading its capacity to 45 million tons.Indian Oil Corp will also take part in the undertaking, planning to boost the processing capacity of four refineries from 80.7 million tons annually to 116.55 million tons.  The report comes on the heels of a statement from a government official that the country also has plans to triple its LNG imports over the next seven years to 70 million tons annually. Currently, India has a capacity to import 20 million tons, received at four LNG terminals. Until 2024, the government will aim to build another 11 facilities as it seeks to increase the share of natural gas in its energy mix twofold to 15 percent. These will further rise to 15 terminals, Narendra Taneja, spokesman for the ruling BJP party said at an industry event in Indonesia, as the country’s demand for energy continues to rise steadily. This demand will not only be driven by the government’s plans to expand electricity supply to millions of households that are currently dependent on wood for their heating, cooking, and lighting needs, but also by ambitious plans for EV adoption announced last year.

China surpassed the United States as the world’s largest crude oil importer in 2017 - China surpassed the United States in annual gross crude oil imports in 2017, importing 8.4 million barrels per day (b/d) compared with 7.9 million b/d for the United States. China had become the world’s largest net importer (imports minus exports) of total petroleum and other liquid fuels in 2013. New refinery capacity and strategic inventory stockpiling combined with declining domestic oil production were the major factors contributing to the recent increase in China’s crude oil imports.  In 2017, 56% of China’s crude oil imports came from countries within the Organization of the Petroleum Exporting Countries (OPEC), a decline from the peak of 67% in 2012. More so than other countries, Russia and Brazil increased their market shares of Chinese imports between those years from 9% to 14% and from 2% to 5%, respectively.  Russia surpassed Saudi Arabia as China’s largest source of foreign crude oil in 2016, exporting 1.2 million b/d to China in 2017 compared with Saudi Arabia’s 1.0 million b/d. OPEC countries and some non-OPEC countries, including Russia, agreed to reduce crude oil production through the end of 2018, which may have allowed other countries to increase their market shares in China in 2017. Several factors are driving the increase in China’s crude oil imports. China had the largest decline in domestic petroleum and other liquids production among non-OPEC countries in 2016, and EIA estimates it will have had the second-largest decline in 2017. Total liquids production in China averaged 4.8 million b/d in 2017, a year-over-year decline of 0.1 million b/d (2%) from 2016, and further declines in both 2018 and 2019 are forecasted in EIA’s January 2018 Short-Term Energy Outlook (STEO). In contrast to declining domestic production, EIA estimates that growth in China's consumption of petroleum and other liquid fuels in 2017 was the world’s largest for the ninth consecutive year, growing 0.4 million b/d (3%) to 13.2 million b/d. As China has built up inventories of strategic petroleum reserves, China’s crude oil imports have increased faster than their domestic consumption.

Surging Chinese energy demand draws record crude imports in January; near-record for gas (Reuters) - China imported a record volume of crude oil and the second-highest amount of natural gas in January, data showed on Thursday, on a surge in refinery buying and spiking heating demand from consumers in the world’s largest energy user. Independent refiners raced to shore up supplies of crude after receiving higher import quotas for 2018 and as a Russian pipeline expansion started up. China pulled in gas last month to avoid a supply squeeze ahead of another cold snap and as the world’s most populous nation prepares for the Spring Festival celebrations that start next week. Crude imports rose 20 percent from the same time a year ago to a record 40.64 million tonnes, or 9.57 million barrels per day (bpd), according to data from the General Administration of Customs on Thursday. That compares with 33.7 million tonnes, or about 7.94 million bpd, in December and beats the previous record set in March 2017 of 9.17 million bpd. The buying spree came after China raised its 2018 crude oil import quota for the country’s independent refiners by 55 percent over 2017. Russia, the nation’s top oil supplier last year, also ramped up exports through its expanded Siberian pipeline last month. “The independents should be a major factor. They tend to increase imports in the first two months of the year, and some new players got quotas,” said Sengyick Tee, senior director SIA Energy. January gas imports, including pipeline imports and tanker shipments of liquefied natural gas (LNG), came in at 7.7 million tonnes, one-third higher than a year earlier and just shy of the previous record of 7.9 million tonnes set in December. A massive government push to heat millions of homes and power thousands of factories with natural gas in northern China has led to demand for the fuel outpacing supply, while delivery infrastructure has struggled to manage the higher consumption. 

China's soaring natural gas output unable to meet demand set loose in pollution fight (Reuters) - China’s natural gas production is rising at the fastest pace in four years but that will not be enough to meet the demand for the fuel that has been unleashed through a government program to raise gas usage in order to clean the country’s polluted air. Gas output in China rose to a record 147.4 billion cubic meters (bcm) last year, up 8.5 percent from 2016, data from the National Bureau of Statistics showed. Gas production is forecast to climb by between 6 percent to 8 percent per year through 2020, according to researchers at China National Petroleum Corp. But China’s war against smog has spawned voracious demand for the fuel that will keep it reliant on growing imports of liquefied natural gas or piped gas. The consumption surge is a result of a government drive that started last year to switch factories and millions of homes from coal to gas in order to cut harmful emissions. “The momentum of this round of gas boom that started in late 2016 will extend well through this year,” said Li Yao, chief executive at SIA Energy. China, the world’s largest energy consumer, was the world’s sixth-largest gas producer in 2016 after rising investments over the past 20 years. However, consumption is surging even faster, climbing 15 percent in 2017 to 237 bcm, according to the National Development and Reform Commission. SIA expects China’s 2018 gas output to rise by around 8 percent, or roughly 12 bcm, at the same time that gas demand will rise by 30 bcm, or 12.5 percent, to 270 bcm. That means that China in 2018 will need to import as much as 114 bcm of gas through pipelines and LNG combined. China’s gas imports last year surged by 28 percent. The trend of rising imports will continue, with SIA forecasting imports of 132 bcm will be required to meet 317 bcm of demand by 2020. 

Japan's average LNG spot contract price in Jan rises 8% on month: METI -- The average price for spot cargoes in Japan contracted in January rose to $11/MMBtu, up 7.8% from December, the sixth month of rise since August, data released by the Ministry of Economy, Trade and Industry on Friday showed. The price was the highest since December 2014 when Japanese buyers paid an average of $11.60/MMBtu for spot cargoes. The ministry does not disclose when these contracted cargoes will be delivered. S&P Global Platts JKM averaged $10.851/MMBtu in January, reflecting deals for February and March delivery. The spot market remained firm on expectation of additional demand on the back of colder weather in the region, and supply concerns due to some production issues. The average price of cargoes delivered to Japan in January was $10.10/MMBtu, up 24.7% from December, METI said. 

Iran's Jan LPG exports jump to 520,000 mt, the most since sanctions ended: sources -- LPG shipments from Iran made a strong start to the year, rebounding to 520,000 mt in January, the highest since Western sanctions for its nuclear program were lifted in January 2016, updated fixtures from shipping sources showed this week. The latest volume is 146,000 mt more than initial figures published in mid-January, according to shipping sources. It is also up 39.4% from 373,000 mt in December 2017, when shipments posted the first month-on-month increase in three months, after exports started declining in September due to lower output at the South Pars gas field amid a two-month maintenance. In 2017, Iran's LPG shipments totaled around 3.5 million mt, with the highest monthly volume seen in August at 423,000 mt before the maintenance, which ended around mid-November, sources had said. Iranian exports are helping to fill shortfalls of spot supply from the Middle East, as major producers Saudi Arabia, the UAE, Qatar and Kuwait are exporting less spot cargoes as they focus on fulfilling term contracts and meeting domestic petrochemical demand. Preliminary figures so far showed 132,000 mt fixed for lifting in February in three cargoes, shipping sources said. 

NYMEX March natural gas down 1 cent but slows declines on technicals - After a 1.0 cent drop to close at $2.846/MMBtu Friday, NYMEX March natural gas futures edged briefly higher overnight ahead of Monday's open as technical buying view with fundamental pressure. But the market then turned lower again. At 7:00 am ET (1200 GMT) the contract was 1.0 cent lower at $2.836/MMBtu. After the March contract logged a net 32.1 cent drop since becoming front month on Jan. 30, a burst of opportunist buying buoyed the futures market overnight. But the upside remains limited by fundamental weakness implied by recent and projected low weather-related demand. Natural gas demand ended January on a weak note in generally warmer weather, with the EIA's latest "Natural Gas Weekly Update" for the week ended Jan. 31 showing a 2% week-on-week drop in total US gas consumption. Dry production was up 1% over the same period. Elevated production alongside diminished demand during the week in review should limit the amount of natural gas drawn from underground storage facilities when the next weekly inventory report is released that will cover the week to Feb. 2, allowing for a continuation of the recent slow pace of stock erosion.

March NYMEX natural gas catches its breath at $2.754/MMBtu after further sharp decline - NYMEX March natural gas futures ticked marginally higher overnight in the US ahead of Tuesday's open, with little in the way of fundamental support. Having shed 9.9 cents Monday, the contract was 0.7 cent higher at $2.754/MMBtu at 7:01 am ET (1201 GMT). March gas has notched a cumulative loss of 44.8 cents after steadily declining for four consecutive sessions from January 31 to February 5, with fundamental pressures coming from weather and natural gas inventories. Warmer weather in the week to January 31 drove a 2% decline in total US gas consumption compared with a week earlier, according to the EIA's latest Natural Gas Weekly Update, feeding expectations for a continuation of the slow pace of storage erosion. Farther out, abating cold in midrange temperature outlooks should heap additional downside pressure on demand levels, likely to allow for more natural gas to remain in underground storage facilities heading toward spring.

Feature: LPG's 'flipped' year of summer strength and winter weakness - Through the late summer and into the winter, global markets for LPG have repeatedly defied expectations about seasonal patterns in supply and demand, reversing the usual script by strengthening in summer and weakening in winter, just when prices are typically at their annual peak. Across the US, Europe and Asia, those patterns have been fueled by low stocks and high prices in the US during the summer months, followed by weak winter heating demand in key consumer markets, and a closed arbitrage from Europe to the US for gasoline, which has undercut demand for butane as a blending component as temperatures dropped. But underlying these factors are signs of a longer-running shift in LPG markets, as the explosion of US shale energy has redrawn the supply map for propane and butane, while petrochemical buyers, who use the products as alternative feedstocks to naphtha for their steam crackers, have increasingly set the floor for demand even during the winter months. Both propane and butane prices are typically seasonal. For propane, winter heating demand around the world normally pushes up price levels during the colder months, while temperatures dip during the spring and into the summer to levels where the product becomes attractive as an alternative feedstock to naphtha for petrochemicals. Butane has typically followed a similar cycle. In the autumn, gasoline blends in Northwest Europe shift to winter blends, which allow butane to be used as a blending component. Butane is too light to be used in blending during the summer months, and in markets like West Africa, summer specification is used all year round. In the summer, like propane, butane sinks to levels where it becomes competitive as an alternative feedstock. Over the past several years, those seasonal troughs and peaks have often been flattened or slightly shifted, with butane's seasonal shifts coming slightly later over the last two years. But the change has been particularly notable recently: rather than merely flattening or coming later in the year, the seasonal trends have often been totally reversed, with strength in the summer and weakness in the winter, driven by sparse product during the warmer months and sparse demand into the winter.

Mar NYMEX natural gas near flat at $2.765/MMBtu weighed down by fundamentals - NYMEX March natural gas futures were near unchanged overnight in the US ahead of Wednesday's open on fundamental pressure. At 6:44 am ET (1144 GMT) the contract was 0.6 cent higher at $2.765/MMBtu.While Tuesday saw a modest 1.2 cent uptick it followed a cumulative loss for the March contract of 44.8 cents after steadily declining for four consecutive sessions from January 31 to February 5.Market participants anticipate a continuation of the slow pace of storage erosion when the US Energy Information Administration releases its weekly inventory report Thursday.Estimates for the storage data call for a withdrawal in the upper 110s Bcf to the low 120s Bcf, which would be below both the 142 Bcf year-ago pull and the 151 Bcf five-year-average.The week's data will follow a modest 99 Bcf drawdown reported for the week to January 26Generally warmer weather in the week ended January 31 drove a 2% decline in total US gas consumption compared to the week ago, according to the EIA's latest Natural Gas Weekly Update. Additional warming in the weeks ahead suggest ongoing demand weakness, which should allow for more gas to remain in underground storage facilities as it keeps a lid on the rate of weekly stock draws.

EIA reports slightly larger-than-expected decline in U.S. natural-gas supply - The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas fell by 119 billion cubic feet for the week ended Feb. 2. Analysts surveyed by S&P Global Platts had forecast a decrease of 109 billion, while the five-year average withdrawal is 151 billion. Total stocks now stand at 2.078 trillion cubic feet, down 503 billion cubic feet from a year ago, and 393 billion below the five-year average, the government said. March natural gas was up 2.3 cents, or 0.9%, at $2.726 per million British thermal units, little changed from before the data.

Iran plans to increase oil production capacity by 700000 BPD within 4  (Reuters) - Iran aims to raise its crude output capacity to 4.7 million barrels per day within the next four years, deputy Oil Minister Amir Zamaninia told a conference in Paris. “We are striving - to be very cautious and not ambitious - for the next 3, 4 years we are planning to increase our production by about 700,000 taking our production to 4.7 million bpd,” Zamaninia said. He added that it could rise to as much as 1 million if Iran was able to reach deals on the development of four of its oil fields with international companies.

Two OPEC Nations Set to Open Giant Fields - Two OPEC countries will bring giant oil fields online this year, testing their commitment to cap output amid a global push to curb supply.Total SA plans to start production at two so-called mega-projects, Kaombo in Angola and Egina in Nigeria, Chief Executive Officer Patrick Pouyanne said Thursday. Once both are onstream -- Kaombo by mid-year and Egina in the fourth quarter -- they’ll have a combined capacity of 430,000 barrels a day. That exceeds the total output of OPEC members Gabon and Equatorial Guinea. The Organization of Petroleum Exporting Countries has been curtailing production for more than a year, achieving unprecedented compliance with caps and driving oil prices up 18 percent in 2017 as global stockpiles finally shrank. Yet the latest supply data from Angola and Nigeria show that the additional barrels planned for this year would cause both to flout their OPEC commitments should their output remain otherwise unchanged.

OPEC-Russia Deal Could Extend Until 2019 - Gazprom Neft—the Russian oil company that has publicly expressed frustration with the OPEC-Russian deal to curtail oil supply—does not rule out that the joint cooperation pact could last until the first half of 2019. Gazprom Neft is basing its planning on that assumption, Sergey Vakulenko, head of strategic planning at the oil producing arm of Russia’s gas giant Gazprom, told Reuters on Thursday. Before the extension of the production cut pact in November last year, Gazprom Neft had been hinting that it was not happy with the deal as it had to sacrifice production growth plans as Russia and OPEC restrict oil supply to draw down the global overhang. In October 2017, a month before OPEC and allies decided to extend the deal to the end of 2018, Gazprom Neft’s first deputy CEO Vadim Yakovlev said in an interview with Reuters—also published on the corporate website—that the company sees the OPEC deal as short term. Gazprom Neft is holding its nose at the deal as it is forcing the firm to scale back production growth plans, Yakovlev said. Months before that, in June 2017, Gazprom Neft CEO Alexander Dyukov had said in another interview published on Gazprom Neft’s website: “Gazprom Neft, as you know, has, in recent years, aggressively expanded production — by seven to nine percent per year — and, of course, we had planned to continue growing at that same rapid pace. Following the OPEC agreement, instead of growing at eight to nine percent, we have increased production by just 4.5 to five percent. Which is, without a doubt, a negative factor for us.” 

Art Berman: When Oil Longs Outnumber Shorts, It "Always Leads To A Correction" - The legalization of US oil exports may have "changed the game" for global oil prices - especially WTI - but that doesn't mean old pricing models like the inverse correlation between inventories and prices still apply. At least that's what Art Berman, a petroleum geologist and the featured guest on this week's episode of MacroVoices, told host Erik Townsend back in October during a previous appearance on the program. Berman argued this to justify his bet that oil prices would continue to head higher while causing the spread between WTI and Brent to compress. And as it turns out, Berman had it right: WTI climbed above $70 for the first time in three years last month, the strongest signal yet that the bear market in oil that's contributed to a string of bankruptcies in the oil patch and a devastating economic crisis in Venezuela is finally over, and that the long-anticipated "rebalancing" of inventories and prices has begun.  For Berman believes that, even though the price of oil has nearly doubled since June, the commodity has a long way to climb as accelerating economic growth and coordinated production cuts more than offset the impact of US exports and the booming shale industry in the US and Canada. Berman explains, using slides from his latest chart deck, how OPEC's response to the growing threat from the North American shale industry has been the dominating factor in energy markets since 2014. By reducing production, OPEC has shifted the WTI futures curve from Contango to Backwardation - a strong signal that prices will continue higher. Still, Berman admits that speculation ultimately is the guiding force for oil markets, and that the record net long positioning in WTI futures could trigger a sharp correction if something triggers a vicious short squeeze. Right now, WTI longs outnumber shorts 12:1.

Hedge funds pause oil buying as rally runs out of steam: Kemp (Reuters) - Hedge fund managers have cut their bullish exposure to petroleum for the first time in six weeks as oil prices stalled and sentiment turned more cautious amid concerns about an increasingly crowded trade. Fund managers cut their net long position in the six most important futures and options contracts linked to crude and fuels by 21 million barrels in the week to Jan. 30 (http://tmsnrt.rs/2E1RCJ6). The reduction was small and comes after the net long position was increased by 258 million barrels over the previous five weeks and by 1,174 million barrels since the end of June. Nonetheless it came after portfolio managers had built a record net long position in Brent, NYMEX and ICE WTI, U.S. gasoline, U.S. heating oil and European gasoil a week earlier. Long positions had come to outnumber short ones by a record ratio of more than 11:1, fuelling concerns about lopsided positioning and the risk of a correction. In the most recent week, fund managers cut their net long position in Brent (-7 million barrels) and West Texas Intermediate (-18 million barrels), according to records published by regulators and exchanges. Changes in U.S. gasoline (+3 million barrels), U.S. heating oil (-2 million barrels) and European gasoil (+4 million barrels) were smaller and more mixed. There is not enough data to determine whether the position reduction was merely a pause after an extraordinary bull market or the start of a more sustained pull back. 

Oil Prices Ravaged By Financial Turmoil -  Oil prices fell back suddenly over the last few trading sessions, dragged down by some forces beyond the oil market. The steady decline of the U.S. dollar has helped drive up crude prices for weeks, but that came to an abrupt halt last week. A rebound for the greenback led to a steep decline in oil prices on Friday. At the same time, sudden turmoil in the broader financial system also bled over into the oil market. Volatility in the stock market flared up on Friday, sparking the sharpest single-day upheaval in years. The Dow Jones Industrial Average fell more than 600 points, only the ninth time in history that a fall of that magnitude has occurred. “The stock market and interest rates can really affect oil a lot,” Mark Waggoner, president of Excel Futures, told The Wall Street Journal. “It’s spilling over into the energy markets and causing these ripple effects.” The stronger-than-expected job growth and wage increases fueled speculation that the Fed would tighten interest rates more than previously thought. Bond yields continue to rise, undercutting equities. Signs of higher inflation also led to speculation of interest rate hikes from the central bank. The dollar gained 0.7 percent on Friday. That led to a selloff for Brent and WTI. And if the turmoil continues, the trouble for oil benchmarks will also linger. “The potential is present for a big move lower should fear return to the stock market and spark liquidations across the board,” analysts at TAC Energy said Friday, according to The Wall Street Journal. “The cross-asset class correlations have returned over the past several weeks.”

Oil takes a hit from global market jitters, sending WTI to a 2-week low - Oil prices dropped on Monday, tracking a sharp drop in global stock markets, with a stronger dollar and rising U.S. crude production sending U.S. benchmark crude to its lowest finish in two weeks. March West Texas Intermediate crude fell $1.30, or 2%, to settle at $64.15 a barrel on the New York Mercantile Exchange, adding to a 0.5% loss from Friday. It marked its lowest finish since Jan. 22, according to FactSet data. Brent for April gave up 96 cents, or 1.4%, to $67.62, ending at a roughly four-week low on the ICE Futures Europe exchange. Some of the tailwinds for the oil markets in recent weeks “have become headwinds, including the U.S. dollar bottoming out, and storage drawdowns turning into inventory builds,”  “While stock prices have started to drop back in an overdue correction, oil prices…could be vulnerable if traders pull out of risk markets and go defensive,” he said.Both WTI and Brent ended last week with losses, as a key dollar index DXY, -0.02% put on 0.6% for its biggest gain of the year. That came as better-than-expected U.S. wage growth data stoked fears of resurgent inflation that could force the Federal Reserve to raise interest rates faster than anticipated. A strong buck tends to weigh on dollar-denominated commodities such as oil, as they become more expensive to buy for holders of other currencies. On Monday, the dollar strengthened, with the ICE U.S. Dollar Index up 0.5%. Investors have also been lukewarm about dipping further into the oil market after data out last week showed U.S. production crossed the 10-million-barrels-a-day mark in November for the first time in nearly 50 years. In the same vein, Baker Hugheson Friday said the number of active U.S. rigs drilling for oil rose by six last week, indicating American production will remain high for the foreseeable future.

US crude falls 2%, settling at $64.15, as oil prices sell off with broader market - Oil fell for a second day on Monday as rising U.S. output, a weaker physical market and recent dollar strength added to the pressure from a widespread decline across equities and commodities markets.U.S. West Texas Intermediate (WTI) crude finished Monday's session down $1.30, or 2 percent, to $64.15, slipping further from a roughly three-year intraday high of $66.66 set on Jan. 25.Brent crude futures fell to session lows, dropping $1, or 1.5 percent, to $67.58 a barrel by 2:29 p.m. ET. The contract was trading near its lowest level since early January."We're definitely starting to raise some serious red flags, especially in the $67 area for Brent. If we can get a bounce off that area, that would suggest to us we have the possibility to work higher, but it would suggest the sideways consolidation period could continue," said Brian LaRose, technical analyst at United-ICAP.Friday's U.S. jobs report that showed the fastest wage growth in nearly nine years exacerbated a broader market sell-off that was already under way as Wall Street stocks backed off record highs, and a rising dollar dented commodities.Wall Street's three major indexes logged their biggest weekly losses in two years on Friday after the strong payrolls report. The S&P 500 and Dow Jones Industrials posted their worst weeks since January 2016 while the Nasdaq recorded its worst week since February 2016.On Monday, the Dow Jones Industrial Average shed more then 600 points, dropping another 2.4 percent in mid-afternoon trading, fueling concerns that oil prices could fall further."If you don't see some signs in the equity markets finding their footing then that will be headwinds for the energy complex as a whole," LaRose added.Although volatility in oil is rising, it is still close to its lowest in three years. The physical crude market has deteriorated in the last few weeks, as the price of North Sea oil hit its lowest in eight months, while Russian Urals crude changed hands last week at its lowest level in a year.

Oil prices drop sharply as U.S. production rises | Calgary Herald: Oil’s rally is unraveling on fears over an increase in U.S. production and as a deepening slump in equities undermines market support. Benchmark Brent fell to its lowest level since Jan. 8 after Baker Hughes data showed American explorers last week raised the number of rigs drilling for crude to the highest in almost six months. A global slump in equities deepened on Monday, removing another pillar of support for the oil market. Brent has broken $70 a barrel this year, extending a rally driven by the extension of an output deal until the end of 2018 by the Organization of Petroleum Exporting Countries and its allies. While crude’s strong start to the year was also helped by falling U.S. inventories, strong gains in equities and a weaker dollar, analysts have been cautioning about the potential for a surge in U.S. shale production. “A global sell-off in risk assets is gathering pace and sending the energy complex lower amid a sea of red,” PVM Oil Associates Ltd. analysts Tamas Varga and Stephen Brennock wrote in a report. “The risk-off environment throughout the energy complex comes as U.S. drillers added oil rigs for a second consecutive week.” Brent for April settlement lost as much as 98 cents to $67.60 a barrel on the London-based ICE Futures Europe exchange. It traded 90 cents lower at $67.68 a barrel at 12:44 p.m. in London. The global benchmark crude traded at a premium of $3.29 to April West Texas Intermediate, touching the least since August. WTI for March delivery dropped 61 cents to $64.84 a barrel on the New York Mercantile Exchange. Total volume traded was about 73 percent above the 100-day average. 

Analysis: OPEC's success may be its own undoing, as oil market may overtighten  (Platts)-- OPEC oil ministers have taken pains to head off any rumors that they will abandon their production cuts prematurely, saying that despite higher oil prices in recent weeks, global inventory levels were still much too bloated -- by some 100 million barrels -- to even consider the idea. But do the ministers protest too much? Some analysts say they believe stocks are far less than OPEC has declared. S&P Global Platts Analytics estimates that excess stocks of oil in storage have largely already drained and that the rebalancing is more or less complete, taking into account the growth in demand over the last three years and line-fill volumes required for new infrastructure builds. The danger is that OPEC overshoots on tightening the market, which could exacerbate the backwardation in prices, prolong the rally in near-term prices, and ultimately erode demand. That is what happened in 2014 after years of stable, high oil prices at or above $100/b, which helped prompt the boom in US shale growth and trigger a severe market slump that persisted until the current OPEC/non-OPEC output agreement was reached and the cuts started to bite, head of S&P Global Platts Analytics Chris Midgley said. Midgley added that he was "less concerned this time about shale production growth," saying that these barrels will be needed to meet strong demand growth this year, and that producers are showing far greater fiscal discipline and focusing primarily on cash flow over output. A price surge may not happen until the second half of the year, given seasonal demand patterns, but it's a situation that "we need to watch carefully," Midgley said. Goldman Sachs drew an even more bullish conclusion, saying in a note to clients Thursday that "the rebalancing of the oil market has likely been achieved, six months sooner than we expected." The investment bank revised up its forecast for demand growth in 2018 and forecast that oil prices could rise to $82.50/b by mid-year. ICE Brent futures were trading at $69.48/b at 1130 GMT Friday.

Crude oil futures: Crude continues to edge lower amid stocks selloff -- Crude oil futures continued to trend lower during European morning trading on Tuesday as expectations of further increases in US oil stocks this week -- as well as dramatic global stock market falls -- exerted pressure on the oil market. At 1113 GMT, April ICE Brent crude futures were down 42 cents from Monday's settle at $67.20/b, while the NYMEX December light sweet crude contract was down 54 cents cents at $63.61/b.  An S&P Global Platts survey of analysts' expectations for US weekly oil stocks data indicates an increase of 2.8 million barrels for the week ended February 2.  For the week ended January 26, total US crude stocks increased 6.78 million barrels to 418.36 million barrels, ending 10 consecutive weeks of declines. The American Petroleum Institute will release its data later Tuesday with more definitive numbers from the US Energy Information Administration due to be published on Wednesday. Meanwhile, global stock markets experienced further volatility on Tuesday, after the Dow Jones Industrial Average saw its largest daily loss of all time yesterday.  According to analysts at ING, "given the amount of speculative money in the oil market at the moment, it shouldn't come as too much of a surprise that the more recent risk-averse move from global investors has put pressure on the oil market." Carsten Fritsch at Commerzbank said that "given the magnitude of the stock market selloff the oil drop is still rather moderate and not far away from any kind of panic -- we can likely expect it to fall further." The US Dollar Index was down 0.14 from Monday's close at 89.50.

WTI/RBOB Rise After Surprise Crude Inventory Draw -- Both WTI/RBOB slid notably lower on the day amid equity market chaos, OPEC comments, and chatter about US production reaching 11m b/d sooner than expected. API printed an unexpected 1.05mm crude draw and WTI managed a small pop.“The mood of the market will get a lot more positive as the stock market mood gets more positive,” Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, said by telephone. Meanwhile, there’s concern about being “too long ahead of tonight’s API report.”  API :

• Crude -1.05mm (+3.15mm exp)
• Cushing -633k
• Gasoline-227k
• Distillates +4.552m

Last week's surprise crude build - breaking the streak of draws - has prompted expectations of a build again this week from analysts, but API shows a draw. The big build in distillates was also very notable... The move in oil prices is “linked to what’s going on in the broader markets,”Tamar Essner, an analyst at Nasdaq Inc. in New York, said by telephone. “Markets tend to move in lockstep. In panic situations, markets tend to move together in a coordinated way.” But we do note that as stocks ramped into the close, WTI/RBOB did not but very modestly popped higher on the API data.

Oil Crushed By Market Meltdown - The major news over the last few days is the global market meltdown, which has inflicted disproportionate pain on the energy sector. Equities sold off around the world, but energy stocks dropped especially severely. Falling oil prices and a rebound in the U.S. dollar magnified the losses in the energy space. As of early trading on Tuesday, the losses continued.   The Energy Select Sector SPDR ETF, an exchange-traded fund that tracks the energy sector, lost 4.31 percent on Monday, the largest one-day decline since January 2016. The fund has lost more than 10 percent in two days. The losses mirror those at individual companies. ExxonMobil saw its share price plunge by more than 10 percent between Friday and Monday. The oil major was hit on two fronts as poor earnings came on the same day that markets started melting down. Barclays gave Exxon a double downgrade. "This is contagious from the financial markets and the equity market, especially,” Michael Lynch, president of Strategic Energy & Economic Research, told Bloomberg. "People worry that the demand may be not as robust over the next couple of quarters as people have been anticipating.”  Ahead of the market meltdown, hedge funds and other money managers trimmed their bullish bets on oil futures, the first cut in net-long bets in six weeks. The reduction was small, but it was an indication that investors were growing wary last week of the oil price rally. Meanwhile, since that data release, global equities have sold off. That risks a deeper liquidation of bullish bets on crude oil, which could send prices careening down. U.S. Secretary of State Rex Tillerson floated the idea of a ban on Venezuelan oil imports into the U.S., a drastic move that would send shockwaves through a country already dealing with falling oil production and an economic crisis. American refiners would also be hit. Valero Energy and Chevron would be impacted the most, the first and second largest U.S. buyers of Venezuelan oil. They have refineries on the Gulf Coast that would be negatively affected, a fact not lost on the U.S. government.

Crude oil prices fall as global financial markets tumble - Oil prices dropped by more than 1 per cent on Tuesday, extending falls from the previous session as global financial markets tumbled lower in the wake of one of the biggest intra-day falls ever registered on Wall Street. Brent crude futures were at $66.91 (£47.84) per barrel on Tuesday morning, down 71 cents, or 1.1 per cent, from the previous close. That was more than $4 below their high-point for 2018, hit last month. US West Texas Intermediate (WTI) crude futures were at $63.46 a barrel, down 69 cents, or 1.1 per cent, from their last settlement and more than $3 off their 2018 high. “The fall [in crude futures] is mainly attributable to a global sell off in equities,” said Sukrit Vijayakar, director at consultancy Trifecta Energy. “People ran to the US dollar as a safe-haven currency. Therefore the dollar strengthens. This makes commodities more expensive to buy, hence oil futures get sold off,” he added. Financial markets went into a tailspin on Monday after a sharp rise in US bond yields that raised alarms over rising inflation and potentially higher interest rates. The Dow Jones Industrial Average’s 4.6 per cent loss on Monday was its largest in percentage terms since August 2011, and the day’s 1,175 point loss was its biggest ever in absolute terms. The index was briefly down more than 6 per cent. US S&P 500 futures tumbled 3 per cent in Asian trade on Tuesday, extending Monday’s sell-off. “Suddenly, inflation has become one of the most-talked about issues in markets,” US bank JP Morgan said in a note to clients. The correction in oil is also being driven by fundamentals, traders said. Despite Opec and Russia cutting production in order to tighten the market, crude remains in ample supply. That is largely due to soaring US shale oil production, which has jumped by almost 18 per cent since mid-2016 to 10 million barrels per day (bpd), surpassing top exporter Saudi Arabia. Only Russia produces more, averaging 10.98 million bpd in 2017.

WTI/RBOB Sink After US Oil Production Hits Record High, Surpassing Saudis - WTI/RBOB held on to gains after last night's surprise crude draw from API, but quickly tumbled after DOE reported a 1.9mm crude build (2nd week in a row) and significant gasoline and distillate builds. However, US crude production's massive spike to 10.25m b/d was the big headline. DOE:

• Crude +1.895mm (+3.15mm exp)
• Cushing -711k (-263k exp)
• Gasoline +3.414mm (+500k exp)
• Distillates +3.926mm (-1.25mm exp)

Last week's surprise (huge) crude build from DOE was dismissed by API overnight but DOE ruined that party and showed the second weekly crude build in a row. Gasoline and Distillates stocks resumed their rise...As Bloomberg's David Marino notes, Total U.S. inventories grew the most since early September. It's actually even a bigger deal than the headline number suggests: if not for a 6.4 million draw from propane/propylene and "other" oils, we'd be looking at a 10 million barrel build. But all eyes were once again on US crude production as it smashed above 10m b/d. As Bloomberg's Julian Lee notes, that huge jump in crude production is not the result of a sudden burst of drilling. More likely it is the correction we expected after the earlier release of monthly data for November that showed production was already above 10 million barrels a day three months ago.U.S. crude output hits a record high of 10.25 million bpd, surpassing both the monthly high set in Nov 1970, and Saudi Arabia's latest production.

Oil prices tank 2.5%, settling at one-month low of $61.79, after US crude and fuel stockpiles jump - Oil prices fell for a fourth straight session on Wednesday after government data showed U.S. crude and fuel stockpiles rose last week, while American drillers continue to increase production. "The report was unilaterally negative — not only did it show builds in both crude and refined products, but what spooked the bears is that U.S. production hit a fresh record high of 10.25 million" barrels per day, said Tamar Essner, director of energy and utilities at Nasdaq Corporate Solutions. U.S. West Texas Intermediate (WTI) crude futures ended Wednesday's session down $1.60, or 2.5 percent, to $61.79 a barrel. The contract hit one-month closing and intraday lows and was trading down 5.6 percent this week. Brent crude futures fell $1.35, or 2 percent, to $65.51 a barrel, closing below its 50-day moving average for the first time in about seven months. The contract has not fallen below $66 a barrel since Dec. 26 and is down 4.5 percent for the week. Crude futures were caught up in a broad market sell-off earlier in the week. But while U.S. share prices continued to rally after a late afternoon rebound on Tuesday, oil prices extended losses after the weekly inventory report. U.S. commercial crude inventories rose by 1.9 million barrels to 420.3 million in the week through Feb. 2, the U.S. Energy Information Administration reported. That was lower than the increase of roughly 3 million barrels analysts anticipated in a pair of surveys. But data on Tuesday from the American Petroleum Institute had shown a decline of 1.1 million barrels, setting market expectations for a drop after the previous week's big rise. The increase was largely due to a buildup of stockpiles in the Gulf Coast refining hub, where refiners are winding down operations for seasonal maintenance. Despite this, refinery activity remained strong, but last week's data likely did not reflect some big shutdowns, said Tom Kloza, global head of energy analysis at Oil Price Information Service. "We're going to see those refinery runs drop next week and they'll continue to drop into March," he said.

Oil hits one-month low on U.S. crude stocks build, record output - (Reuters) - Oil prices fell to a one-month low on Wednesday after U.S. data showed a build in inventories and record high crude production, raising worries of more selling that could expose speculators with big bets on upward momentum in crude prices. U.S. West Texas Intermediate (WTI) crude fell $1.60, or 2.5 percent, to settle at $61.79 a barrel. WTI hit a low of $61.33, the lowest since Jan. 5. Volumes were heavy, with more than 957,000 front-month futures trading, far more than the average of 634,000 contracts over the last 200 days. Brent crude futures fell $1.35, or 2 percent, to $65.51 a barrel. U.S. WTI prices have slid for four straight sessions, down 6 percent in that time. U.S. crude inventories rose 1.9 million barrels last week, according to the U.S. Energy Information Administration. [EIA/S] This was less than expected, but that was in part because of a surprising increase in refining activity that boosted fuel inventories headed into the seasonally slow spring. However, U.S. crude production also rose, hitting 10.25 million barrels per day (bpd), a record if confirmed by more reliable monthly data, which lags by a couple of months. “U.S. weekly oil production registering 10.25 million bpd in today’s report has unsettled the market – the impact of which is manifested as weakening oil prices,” A recent rebound in drilling rig activity boosted production after futures prices extended a rally to three-year highs earlier this month. Higher output could undercut prices, analysts said, noting that official estimates for U.S. production gains were recently increased. Hedge funds and other speculators had a record long position in crude futures as recently as late January. These positions have been trimmed, but are still largely arrayed in favor of rising oil prices.

US shale surge sends warning to OPEC: Kemp (Reuters) - U.S. crude oil production is set to increase by more than 1.2 million barrels per day in 2018 compared with 2017, according to the latest short-term forecasts from the U.S. Energy Information Administration. U.S. crude production will average almost 10.6 million barrels per day (bpd) this year compared with 9.3 million bpd in 2017 ("Short-Term Energy Outlook", EIA, Feb. 6).The forecast has been revised sharply higher from less than 10.3 million bpd at the time of the last prediction in January 2018 and 9.9 million bpd in July 2017 (http://tmsnrt.rs/2EpmSoV).Unexpectedly rapid growth in U.S. onshore production from the Lower 48 states in recent months has caused the agency to re-benchmark its output numbers going forward.Crude production from the Lower 48 excluding federal waters in the Gulf of Mexico, mostly from shale, is expected to rise by nearly 1.25 million bpd this year.Total U.S. liquids production, which includes natural gas liquids, is predicted to rise by 1.7 million bpd in 2018, which is exactly the same as the forecast increase in global liquids consumption.If the forecasts prove correct, U.S. shale producers will capture all or most of the predicted growth in global oil consumption this year. Surging output from shale underscores the growing competitive threat to members of the Organization of the Petroleum Exporting Countries and its allies led by Russia.Efforts to restrain production under the cooperation framework between OPEC and non-OPEC allies risk back-firing.The cooperating countries are already conceding market share to the shale producers, in a re-run of the situation before oil prices slumped in 2014.If production restraint succeeds in drawing down global inventories even further, and pushes Brent significantly above $70 per barrel, the resulting shale surge and slowdown in consumption growth will intensify the danger.  The dilemma between defending prices or protecting market share has been a familiar one for OPEC for the last 40 years, and the organisation has regularly alternated between pursuing these competing priorities. The price defence strategy has worked but is now starting to threaten the organisation's market share and could become counterproductive if carried too far.

Oil World Turned Upside Down as America Sells Oil in Middle East - The United Arab Emirates, a model Persian Gulf petro-state where endless billions from crude exports feed a giant sovereign wealth fund, isn’t the most obvious customer for Texan oil. Yet, in a trade that illustrates how the rise of the American shale industry is upending energy markets across the globe, the U.A.E. bought oil directly from the U.S. in December, according to data from the federal government. A tanker sailed from Houston and arrived in the Persian Gulf last month. The cargo of American condensate, a type of very light crude oil, was preferred to regional grades because its superior quality made more suitable for the U.A.E’s processing plants, a person with knowledge of the matter said, asking not to be identified discussing a commercially sensitive matter. “As a member of OPEC and a large crude producer, I would imagine they would be very self-sufficient in their own crude supply,” said Andy Lipow, president of Lipow Oil Associates LLC. The purchases of U.S. oil aren’t likely to continue, given the U.A.E.’s own supply, Lipow said. The end of a ban on U.S. exports in 2015 coupled with the explosive growth of shale production, has changed the flow of petroleum around the world. Shipments from U.S. ports have increased from a little more than 100,000 barrels a day in 2013 to 1.53 million in November, traveling as far as China and the U.K. 

 Oil hits seven-week low on expectations of higher US, Iran output (Reuters) - Oil prices fell to their lowest in seven weeks on Thursday amid fears of rising global supplies after Iran announced plans to increase production and U.S. crude output hit record highs. Brent futures LCOc1 fell 70 cents, or 1.1 percent, to settle at $64.81 a barrel, their lowest close since Dec. 20. U.S. West Texas Intermediate (WTI) crude CLc1, meanwhile, was down 64 cents, or 1 percent, to settle at $61.15, its lowest close since Jan. 2. Both benchmarks fell for the fifth straight day, the longest losing streak for Brent since November 2017 and for WTI since April 2017. Brent futures have lost as much as 15 percent since hitting a four-year high above $71 in late January. “Oil prices remain under pressure in today’s trading session as market participants continue to digest yesterday’s bearish oil inventories report,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London. The U.S. Energy Information Administration (EIA) on Wednesday said crude production last week rose to a record high of 10.25 million barrels per day (bpd). At that level, U.S. production would overtake the current output in Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries. [EIA/S] OPEC and other producers, including Russia, have cut production since January 2017 to force down global inventories, but these cuts have been somewhat offset by rising U.S. oil production. Oil prices were also pressured by an announcement from Iran that it is looking to boost production over the next four years. “The Iranians are looking to increase production...despite their alleged adherence to the OPEC-Russia deal. Everybody is itching to produce more oil,” said John Kilduff, partner at energy hedge fund Again Capital LLC in New York. Traders also noted the restart of the Forties pipeline in the North Sea, added to losses in crude prices. The pipeline, which carries around a quarter of all North Sea crude output and roughly a third of Britain’s offshore natural gas production, shut on Wednesday for the second time in two months after a valve closure at a Scottish facility.

Oil Prices Fall Below $60 On Renewed Shale Threat -- After a bit of a hiatus mid-week, instability in the global financial markets returned on Thursday. Benchmark oil prices appeared to be headed for steep losses to close out the week. WTI and Brent lost another 1 percent on Thursday, as global equities sold off yet again. The Dow Jones Industrial Average fell by another 4 percent. That dragged down the entire energy sector. Oil prices crashed on Friday as a result of a major increase in U.S. drilling activity. As this newsletter has noted in the past, the preponderance of bullish bets on oil futures from hedge funds and other money managers puts benchmark prices at risk of a correction. That could be underway – WTI and Brent are off more than 10 percent in a week. Forthcoming data will reveal if financial moves from investors are accelerating the oil price slide.   The EIA published its latest Short-Term Energy Outlook, in which it drastically revised its forecast for U.S. oil production, predicting the country will hit 11 mb/d by the end of 2018, a year earlier than it previously thought. In fact, the latest weekly survey estimates that U.S. oil production already jumped to 10.25 mb/d in the first week of February. Surging output threatens to push down oil prices further. The EIA sees Brent averaging $62 per barrel in 2018, and WTI to average $58.

US oil rig count climbs by 26: Baker Hughes - The number of US oil rigs in use jumped by 26 this week to 791, a level not seen in nearly three years, with the Permian Basin posting the largest single-area gain, according to Baker Hughes data released Friday. The Permian, located in West Texas and New Mexico, gained 10 oil rigs for a total of 437, the weekly Baker Hughes North American rig count showed. That is the highest number of oil rigs in the Permian since late January 2015. The last time the total domestic oil rig count was that high was the week of April 2, 2015, a time when the rig count (802 that week) was falling due to plummeting oil prices. Friday's rig count was released on a day oil prices dropped further, with NYMEX March WTI settling down $1.95 at $59.20/b. Analysts pointed out that current rig count numbers represent drilling decisions made weeks to a few months ago. "The higher rig count is from oil prices a little above $55/b in November," said energy economist James Williams, president of WTRG Economics. "The recent drop in prices will just slow the growth in drilling in the second quarter if prices do not recover." "Some companies were talking about increasing their capex for drilling but this will probably cause some to delay that decision," Williams added. Even so, companies are now launching their activity programs for 2018, Evercore ISI Group's James West said. "E&Ps are moving forward with their growth programs and now have fresh 2018 budgets," he said. In addition, the "others" category, which includes less prominent areas outside of the 14 named basins that Baker Hughes tracks each week, was up 11 oil rigs to 132.

 U.S. drillers boost oil rig count to highest nearly three years: Baker Hughes -   (Reuters) - U.S. energy companies added 26 oil rigs this week, boosting the count to 791, its highest since April 2015, even as crude pulled back from three-year highs with drillers expecting higher prices for their output in 2018 than last year. The increase in the week to Feb. 9 was the biggest weekly rise since January 2017, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. More than half of those oil rigs were located in the Permian basin in west Texas and eastern New Mexico where the number of active units increased by 10 this week to 437, the most since January 2015. Those rigs were expected to help boost oil output in the Permian to a record high near 2.9 million barrels per day in February, according to federal projections, representing about 30 percent of total U.S. oil production. The U.S. rig count, an early indicator of future output, is much higher than a year ago when 591 rigs were active as energy companies have continued to boost spending since mid-2016 when crude prices began recovering from a two-year crash. U.S. crude prices on Friday fell through $60 a barrel for the first time since December and have tumbled more than 11 percent from this year’s high point in late January, due to growing worries that U.S. production will overwhelm efforts by OPEC nations to cut supply. That compares with averages of $50.85 in 2017 and $43.47 in 2016. Looking ahead, futures were trading above $57 for the balance of 2018 and below $54 for calendar 2019. In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co said 36 of the roughly 65 E&Ps they track have already provided capital expenditure guidance indicating an 8 percent increase in planned spending over 2017.  Cowen said the E&Ps it tracks planned to spend about $66.1 billion on drilling and completions in the lower 48 U.S. states in 2017, about 53 percent over what they planned to spend in 2016. Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week slightly reduced their forecast the total oil and natural gas rig count to an average of 1,002 in 2018 and 1,128 in 2019. Last week, they forecast 1,006 in 2018 and 1,131 in 2019.  There were 975 oil and natural gas rigs active on Feb 9, also the highest since April 2015. On average, there were 876 rigs available for service in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.

'Short-Term Folly': U.S. Adds 38 Percent More Oil and Gas Rigs  - The number of oil and gas rigs in the U.S. has increased an astonishing 38 percent over the past year. That's according to S&P Global Platts Analytics, which reported this week that the country had 1,070 rigs at the end of January , up from just 773 a year earlier. Experts expressed fear that all of this new development does not bode well for the planet. "This will have a very significant climate impact," said Romany Webb , climate law fellow with the Sabin Center for Climate Change Law. "The oil and gas industry is a huge source of methane , which is a really potent greenhouse gas. And then on top of that you also have the carbon dioxide emissions from the combustion of this oil and gas. So this is very concerning from a climate perspective." Webb links the increase in drilling, in part, to the recent rise in prices for crude oil and natural gas. "Oil is now above $60 a barrel , which is what the industry always said that they needed to ramp up production," she said. Experts also connect the boom to the policies of the Trump administration, which has prioritized the extraction of oil, natural gas and coal over the development of renewable energies even as the planet continues to warm. "That the hottest years in human history coincide with a dramatic increase in U.S. drilling for oil and gas is a reminder of what a rogue nation we now live in," said noted environmentalist Bill McKibben .  The extraction boom took place nationwide, with all but one of S&P's reporting regions (see below) gaining new rigs. The fastest growth occurred in two states in the natural gas-rich Permian Basin: Texas gained 141 rigs, while New Mexico added 43. S&P also noted that extraction companies are moving outside the Permian Basin, which, according to senior analyst Trey Cowan, indicates "future growth being led from other regions in the months ahead."  The analysis includes rigs located on U.S. land, as well as in inland waters and the Gulf of Mexico.

Oil falls below $59 after big jump in US rig count - A crushing oil price rout extended into a sixth day, with U.S. crude nearly falling below $58 a barrel, as rising production, a strong dollar and a broad financial asset sell-off combined to weigh down the market.The drubbing started last Friday and gathered steam this week, putting U.S. West Texas Intermediate crude on pace for its worst weekly performance in two years.U.S. crude plunged to a seven-week low at $58.07 a barrel, before paring losses to end Friday's session down $1.95, or 3.2 percent, at $59.20.Brent crude dropped $1.66, or 2.6 percent, to $63.15, after hitting a nine-week low at $61.77 by 2:28 p.m. ET.For the week, U.S. crude was down nearly 9.6 percent, while Brent has fallen about 8 percent. WTI broke below $59 a barrel after Baker Hughes reported the U.S. oil rig count rose by 26 rigs to 791, the highest total since April 2015. The week's losses accelerated on Wednesday after government data showed weekly U.S. production jumping to a record 10.25 million barrels a day. Meanwhile, the nation's stockpiles of crude rose for a second straight week. With American output on the rise, concerns are creeping into the market that OPEC's deal with Russia and other major producers to limit supply could come under pressure, "It goes to the sense that folks are getting antsy about the production scheme holding together," he said.

U.S. oil benchmark ends below $60 a barrel for first time in 2018 - Oil futures fell for a sixth straight session on Friday, with the U.S. benchmark settling below $60 a barrel for the first time in 2018 to notch its biggest weekly loss in more than a year. Data released Friday revealed the biggest weekly jump in the number of U.S. oil-drilling rigs since January 2017, contributing to concerns about a surge in U.S. production. March West Texas Intermediate crude dropped $1.95, or 3.2%, to settle at $59.20 a barrel on the New York Mercantile Exchange. Prices saw their lowest finish since Dec. 22. For the week, it was down roughly 9.6%, which was the biggest such decline since January 2016. April Brent crude the global oil benchmark, fell $2.02, or 3.1% to end at $62.79 a barrel on London’s ICE Futures exchange. Brent, which settled at its lowest since Dec. 13, retreated roughly 8.4% this week. Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil jumped by 26 to 791 this week. That marked a third straight week of increases and the largest weekly rise in more than a year. This offers a “path for much more than a million barrels a day U.S. production increase this year, but prices will need to remain above $50,” . “Not a good Friday for OPEC.” Until recently, oil prices have been buoyed by production cuts from the Organization of the Petroleum Exporting Countries and other large producers among other threats to supply.However, OPEC member Iran also plans to raise its oil production in the next four years, according to a report from Reuters. That has “added to market fears of an increase in global supplies,”  Oil-market fundamentals are also changing as recent increases in prices provided incentive for the U.S. to crank up output.

Emboldened by the oil market's recovery, OPEC readies the taps -- just in case -- Having patiently waited a year for the oil market to turn, many OPEC members are now feeling confident enough in its recovery to begin touting their output expansion plans, even as they insist they will comply with their quotas under their production cut agreement. In recent weeks, Kuwaiti oil minister Bakheet al-Rashidi has declared that his country will boost its production capacity to 3.225 million b/d by the end of March, up from its current 3 million b/d, while normally hawkish Iranian oil minister Bijan Zanganeh has said his country could raise its output by 100,000 b/d within days if the deal were to be terminated. Iraqi oil minister Jabbar al-Luaibi at a conference in London trumpeted the record 4.6 million b/d in export capacity now built in the southern port of Basra and proclaimed that it would reach 5 million b/d by year's end. The UAE also has ambitions of hiking its production capabilities to 3.5 million b/d from around 3 million b/d later this year. While all of them have insisted that these capacity gains will not be unleashed while the production cut deal is in force, their declarations provide perhaps a warning that, for all the talk of an orderly exit from the agreement, countries may be champing at the bit to pump more and earn more. Or, they may be serving as an intra-OPEC warning shot to unstable Venezuela, Libya and Nigeria that their cohorts may not be so magnanimous as to stay on the sidelines if their respective domestic crises cause output to fall. "Current price levels are likely to encourage additional drilling .. as producers seek to take advantage of attractive economics," analysts with Barclays said in a recent note. 

The War in Yemen and the Making of a Chaos State - The thousand-day war in Yemen has embroiled nearly a dozen nations, most of them allied closely with Saudi Arabia. That means most of them are, by extension, allied against Iran, which stands accused of arming the Houthis. Of particular concern, the commander of U.S. Central Command told reporters Monday, is that Iran is arming the Yemeni rebels with ballistic missiles. General Joseph Votel, the head of U.S. Central Command, has said that this created a “growing missile threat that is being orchestrated by Iran through the Houthis, and which I think poses a significant danger, not just to Saudis and Emiratis, but in cases where we have our forces and citizens co-located it poses a risk to us.” A few of those Saudi allies are wondering how to proceed, now that the Saudi-led war on the Houthis has largely stalemated in a horseshoe around Yemen’s western highlands. And even though the Saudis have succeeded in some respects along the southern coast, the broader fighting has accelerated the country’s descent from failed state into a “chaos state.”  “Yemen more closely resembles a region of mini-states at varying degrees of war with one another, and beset by a complex range of internal politics and conflicts, than a single state engaged in a binary conflict,” wrote Peter Salisbury, a researcher with the London-based Chatham House policy institute, in a December report on the country. Yemen has been a hotbed for extremism since the Afghan civil war ended in the 1990s. For more than 15 years, the U.S. military has used drones primarily to kill Yemen-based descendants of those foreign fighters, now known as al-Qaeda in the Arabian Peninsula. This sustained war-within-a-war may be one of the few relative bright spots inside Yemen today, with some experts saying the U.S. military may be enjoying its most successful period against AQAP to date. For a brief time, even Yemenis changed their minds about American drone strikes in their country, thanks to improved targeting methods that have reduced civilian deaths and collateral damage. But Yemeni attitudes began to swing back in 2017, beginning with the bloody January 29 U.S. special forces raid in central Yemen.  The persistence of the Houthi rebellion—and the fact that more than 8,000 civilians are believed to have been killed since March 2015—has turned up the pressure on Washington.  December was a particularly bloody month for Yemeni civilians, with more than 100 killed in Saudi airstrikes in a single 10-day period.

War that Won't End: No Signs Fighting Will Cease in Syria – SPIEGEL  - By invading Afrin, one of the last unscathed regions in Syria, Turkey is trying to prevent the creation of a Kurdish state. The U.S. is looking on powerlessly while Russia is rubbing its hands in glee. Ultimately, the true winner might be Bashar Assad.The first victims on both sides of the front hadn't done anything. All they wanted was to survive. When the Turkish air force began bombing Kurdish positions in and around the Syrian town of Afrin on Jan. 20, one of their rockets struck a chicken farm near the village of Jalbara and wiped out almost the entire Hussein family. The mother and six children were killed, with only the father surviving. They were refugees from Maarat al-Numan, a city located further south in the province of Idlib, which has once again become the the target of massive bombings by the Syrian air force and has been under fire since December. The next morning, another rocket, this time fired from the Kurdish enclave of Afrin, struck near the Turkish border town of Reyhanli, slamming into the ground only two meters away from Nadir al-Fares' car. The taxi driver was killed instantly when the razor-sharp metal shrapnel ripped his car to shreds. Fares had fled to the border region from Bashar Assad's army back in 2012. He had managed to make it into Turkey, while Hussein family's flight ended in Afrin, where they endured the stench of the chickens to at least have a roof over their heads during the cold winter. The deaths of these civilians shows on a small scale what the larger situation in the region looks like. They show how new battle lines are constantly being drawn and new hotspots are constantly emerging in the war in Syria. A conflict that those involved aren't even trying to stop anymore. For the last two weeks, a brand new front has encircled Afrin. The increasingly autocratic Turkish President Recep Tayyip Erdogan had repeatedly announced his intention to extend his fight against the Kurdistan Workers' Party across the border into Syria. There, the PKK offshoot YPG, or People's Protection Units, controls around a quarter of the country and has established what is effectively its own Kurdish state. The region includes areas traditionally settled by Kurds, but also places where a majority of residents are Arab. 

Turkey Warns US Troops In Northern Syria May Be Targeted By Its Army - Last week we reported  that days Turkey valiantly demanded that US forces vacate military bases in the Syrian district of Manbij, the US predictably refused, and on Monday a top American general said that US troops will not pull out from the northern Syrian city of Manbij, rebuffing Ankara demands to withdraw from the city and risking a potential confrontation between the two NATO allies.  One week later, in the latest dramatic escalation between the two NATO members, Turkey's Deputy PM has warned that US troops fighting alongside Syrian Kurdish militias in the same uniform may be targeted by the Turkish army due to the difficulty of distinguishing them in the heat of battle, effectively stating that US troops in northern Syria are now "fair game" in the ongoing deadly conflict. Speaking to CNN Turk on Sunday, Turkish Deputy Prime Minister Bekir Bozdag said if US troops wear “terrorists’ clothes” and find themselves among “terrorists” of the Kurdish YPG forces attacking the Turkish troops, “there is no chance that we will make a distinction at this point.” The unambiguous warning comes at a time when Turkish troops are making further advances into the Kurdish-held Syrian province of Afrin as part of the recently launched "Operation Olive Branch." As RT reports, Ankara had previously complained that the American troops’ embedding with Kurdish militias – regarded as terrorists in Turkey – is unacceptable for the US-Turkish alliance. “We are clearly saying that we do not want to confront our ally, the United States. I am sure that they do not want to face Turkey and Turkish armed forces,” Bozdag stated, although he also made it clear that a confrontation appears inevitable if the two sides continue on their present course.

Turkey's Offensive In Syria: The US Falls Into A Trap Of Its Own Making - In the heat of the battle for Afrin, Turkey has warned it will go farther to establish control over vast swathes of land in northern Syria. The offensive  is supposed to take Turkish forces as far as Syria’s border with Iraq. On Jan. 28, Ankara called on Washington to withdraw its military from Manbij (100 km from Afrin) before it launches an operation to clear that area of Kurdish militias. It’s important to note that the US had provoked Turkey’s action by announcing its decision to set up a new border security force in the areas under Kurdish control. So Washington has created this situation all by itself – a trap of its own making. Having sown the wind, it reaps the whirlwind.  A push to the east will potentially force a confrontation between Turkish troops and the US-led Syrian Democratic Forces (SDF). The Kurdish combat units in Afrin missed their opportunity to avoid a worst-case scenario. Some Pro-Kurdish sources say Russia had betrayed the Afrin Kurds by pulling its peacekeepers out before the Turkish attack began. This is a very misleading statement. Let’s look at the facts. Moscow believes all regions west of the Euphrates should be under the control of the regular Syrian army, because these areas belong to Syria – a territorially cohesive country with a legitimate government. Russia had asked the Kurds in Afrin to interact with Damascus and allow its regular army into the area. They refused. Moscow is still ready to act as a mediator to broker talks on autonomy within Syria. So far that initiative has been rejected. The Kurds have preferred the US as their protector. Now they are on their own. They've made their bed, now they must lie in it.".  The US military has not defended the Kurds in Afrin, claiming it does not regard them as allies on par with the Kurds who are part of the SDF farther east. The US maintains that the Kurds in Afrin did not fight the Islamic State (IS). But even so, those Kurds did protect Afrin and kept their land from being invaded by jihadi militants. Perhaps the US never committed itself to defending the Kurds in Afrin, but it did accept the responsibility of protecting the SDF in Manbij. What will happen now? It is next to impossible to make predictions with any degree of accuracy, but we can contemplate some potential scenarios.

US-led coalition in Syria attacks pro-Assad fighters, 100 dead --The US-led coalition that has been fighting the "Islamic State" (IS) in Syria said it had carried out retaliatory airstrikes late on Wednesday and early Thursday, killing about 100 people it described as pro-Assad forces.According to the coalition, the strikes were a response to a "large, coordinated and unprovoked attack" on one of the headquarters of the  Syrian Democratic Forces' (SDF)in Deir al-Zor province. The US supports the SDF, an alliance of Arab and Kurdish militias in northern and eastern Syria, one of many armed groups opposing President Assad.  A US official told the news agency Reuters the attack had been by 500 opposing forces, backed by artillery, tanks and multiple-launch rockets 8 kilometers (5 miles) east of the Euphrates River. Russia and the US informally treat the river as a dividing line for their air forces' bombing missions over Syria.However, a Russian MP criticized the attack, using language reminiscent of the frequent US condemnations of Russia airstrikes in support of Assad. "The actions of the US coalition do not comply with legal norms, beyond all doubt it is aggression," Franz Klintsevich, a member of Vladimir Putin's United Russia party, was quoted as saying by Interfax news agency.The US-led coalition alerted Russian officials about the presence of SDF forces in the area far in advance of the attack, a US official told Reuters. "Coalition officials were in regular communication with Russian counterparts before, during and after the thwarted [enemy] attack," he said.  The Russian Defense Ministry said later on Thursday that the US's goal in Syria was not to fight IS, but to capture what it called "economic assets."

Syria – U.S. May Have Arranged “Self Defense” Attack On Syrian Government Forces - Last night the illegal U.S. occupation force in north-east Syria attacked a group of Syrian government aligned troops and their Russian support. The incident happened north-east of Deir Ezzor city on the east side of the Euphrates. The U.S. claims that it killed some 100 Syrian soldiers that were allegedly attacking its proxy forces in an attempt to recover oil fields.  There is a factual separation of areas south-west of the Euphrates under Syrian government control and north-east of the Euphrates under U.S. occupation. But several locations around Manbij, Raqqa and Deir Ezzor contradict that and are under control of the respective other side. The U.S. claims that a "de-confliction line" along the Euphrates is agreed upon. The Syrian government says that no such agreement exists. An small area across the Euphrates north-east of Deir Ezzor had been taken by Syrian government forces months ago. It is near some oilfields which the U.S. wants to keep away from the Syrian government. "The U.S. wants to keep Syria weak and poor," says Prof. Joshua Landis. According to Landis the U.S. is keeping the north-east of Syria under occupation to deny Syria access to its oil and its best agricultural land. It wants to turn Syria into a swamp for Russia and Iran to the benefit of mostly Israel.  The valuable oil and gas fields are currently in the hands of local Arab tribes who earlier worked with the Islamic State and are now, the U.S. claims, allied with the YPG/PKK Kurds under the name Syrian Democratic Forces. The SDF is the U.S. local proxy force for its occupation.

Moscow Slams "Illegal US Presence In Syria" Following Pentagon's "Defensive" Airstrikes - Moscow lashed out at the US this morning, after the US-led coalition in Syria carried out several "defensive" airstrikes against Syrian forces allied with President Bashar al-Assad on Wednesday in Syria's Deir al-Zor province - purportedly in retaliation for what the coalition said was an "unprovoked" attack on the US-backed left-wing rebel group. In response, during a closed door meeting of the UN Security Council in New York, Russian UN ambassador Vasily Nebenzya reminded his colleagues that the US presence in Syria is "actually illegal." "Nobody invited them there," Nebenzya stated, emphasizing that the coalition's actions were jeopardizing the region's hard-fought stability. According to the Russian Defense Ministry, the Syrian militia was advancing against a “sleeper cell” of Islamic State terrorists near the former oil processing plant of al-Isba, when the unit was suddenly fired upon by air strikes. At least 25 militiamen were injured in the attack, the Russian Ministry of Defense said, adding that pro-government troops targeted by the coalition did not coordinate their operation with the Russian command. 'What right does the US have to defend illegal formations in Syria?' - former US diplomat @JimJatras https://t.co/1gIXvGODUR pic.twitter.com/a8hTiKYfHq — RT (@RT_com) February 8, 2018   The US, however, maintains that the militia attacked the SDF. The Pentagon said Syrian forces moved "in a battalion-sized unit formation, supported by artillery, tanks, multiple-launch rocket systems and mortars." The battle, which lasted over three hours, according to the US, began after 30 artillery tank rounds landed within 500 meters of the SDF unit’s location, according to RT "At the start of the unprovoked attack on Syrian Democratic Forces and coalition advisers, coalition aircraft, including F-22A Raptors and MQ-9B Reapers, were overhead providing protective overwatch, defensive counter air and [intelligence, surveillance and reconnaissance] support as they have 24/7 throughout the fight to defeat ISIS," Air Forces Central Command spokesman Lt. Col. Damien Pickart told Military.com. 

US massacre of Syrian troops threatens to unleash wider war - US warplanes and artillery batteries carried out an unprovoked massacre of up to 100 pro-government troops in the northeastern province of Deir Ezzor Wednesday, signaling the initiation of a new and far more dangerous stage in the more than three-year-old direct US military intervention in Syria.The Syrian government denounced the attack as a “war crime” and “direct support to terrorism,” insisting that its forces came under US attack as they were carrying out an operation against Islamic State of Iraq and Syria (ISIS) elements between the villages of Khasham and al-Tabiya on the eastern side of the Euphrates River.While the Pentagon proudly claimed to have killed 100 pro-government fighters, Damascus allowed that the US strikes claimed “the lives of dozens, injuring many others and causing massive damage in the area.”  The Syrian Observatory for Human Rights, meanwhile, said it had confirmed only 20 dead among the pro-government forces.Whatever the precise number of casualties—the Pentagon’s figures are suspect given that the bombings and artillery barrages were not followed up by any ground attack—the incident marks a major escalation of US aggression against Syria, eclipsing the firing of 59 US cruise missiles last April in response to an unsubstantiated allegation of a chemical weapons attack in Idlib province. The only previous US attack resulting in comparable bloodshed was the September 17, 2016 US airstrike against a Syrian army position near the Deir Ezzor airport, which killed 62 soldiers and wounded some 100 more. The Pentagon claimed that attack was the result of an “unintentional, regrettable error.” This time around, the US military said that it was exercising its “inherent right of self-defense” in attacking the forces of a government whose territory American troops are occupying without either its consent or any mandate from the United Nations.

Russians reported killed in US strikes in Syria - Multiple reports indicate that Russian military contractors were among the dead in air and artillery strikes launched Wednesday by the US military in the northeastern Syrian province of Deir Ezzor against forces loyal to the government of President Bashar al-Assad.The Pentagon unleashed devastating firepower against the pro-government fighters on the pretext that they were mounting an attack against a headquarters of the Syrian Democratic Forces (SDF), the US proxy ground force that is dominated by the Syrian Kurdish YPG militia. US special forces troops directing the activities of the Kurdish proxies were stationed at the headquarters in the zone of influence carved out by the US intervention in Deir Ezzor, northeast of the Euphrates River.Bombs and missiles were rained down upon the force, which reportedly included between 300 and 500 infantry, backed by tanks and artillery. US F15 fighter jets, Apache helicopters, AC-130 gunships and unmanned drones were all called in to attack the force, along with US artillery units.According to Pentagon sources, 100 of the Syrian fighters were killed in the barrage. The Syrian government reported “dozens” killed in what it described as an unprovoked “massacre” and a “war crime.” Iran’s Tasnim news agency quoted Syrian sources as reporting that several Russian military advisors were killed in the attack, which took place in the Khasham gas field in Eastern Deir Ezzor.

Iraqi Kurds maneuver to get closer to Iran - Iraqi Kurds have given reassurances to Tehran that they will not allow Kurdish opposition groups to launch cross-border attacks from Iraqi Kurdistan, a major development in the warming up of relations between Erbil and Tehran. This comes as ties reached a breaking point following the controversial Sept. 25 independence referendum in Iraqi Kurdistan. “We cannot tolerate the fact that some counter-revolutionary groups use the Kurdish lands to kill our soldiers and citizens, [then] return to the areas under the [Kurdistan Regional Government's (KRG)] control and claim responsibility with audacity in interviews with the official Kurdish media,” Ali Shamkhani, the secretary of Iran’s Supreme National Security Council, reportedly told a Kurdish delegation headed by KRG Prime Minister Nechirvan Barzani on Jan. 21.The KRG came under a crippling economic blockade and political pressure following the September referendum, with KRG officials now trying to repair relations with Baghdad and neighboring countries — including Iran, a key player with a long land border with the Kurdistan Region and enormous clout in Baghdad. Both the Iraqi Kurds and Iranians have described the meetings in Tehran as positive and a step in the right direction of accepting the KRG once again as a responsible partner in the region. Al-Monitor has learned that the delegation headed by Barzani explained to the Iranians in clear terms that their overreliance on Turkey and the West — including the Americans — in recent years was misplaced and that they will from now on readjust their policies to reflect the position of Iran in Iraq and in the region.

How Al-Qaeda Ended Up With Anti-Aircraft Missiles: Here Is The Congressional Authorization - After the terrorist group Hayat Tahrir al-Sham (HTS), a rebrand of Jabhat al-Nusra, which is the Syrian al-Qaeda affiliate, claimed responsibility for the dramatic downing of a Russian Su-25 fighter jet over Idlib in northwest Syria on Saturday - the first Russian plane downed in Syria since 2015 - a number of analysts have published articles asking the obvious million dollar question: where did al-Qaeda get the portable anti-aircraft missile system used in the attack? Once such article in Al Monitor speculates on the following: "The three immediate questions that arose from the attack were how the downing was made possible, how the militants acquired the arms and whether there was a bigger-level player behind the attack." MANPADS are heat seeking shoulder fired missiles capable of hitting targets flying at anywhere between 10,000 and 15,000 feet. Image source: Activist Post And Al Monitor seems to answer its own question in the following when listing the array of allied groups now operating under the leadership of al-Qaeda (HTS) - among them groups previously "vetted" and approved to receive advanced weaponry by the CIA (specifically the TOW anti-tank missile): Dozens of miles of Idlib province are contested among an array of groups, including the terrorist Hayat Tahrir al-Sham (HTS), a rebrand of Jabhat al-Nusra, which was affiliated with al-Qaeda; the Free Syrian Army; and its affiliate Jaish al-Nasr, which is considered a “moderate opposition group" that received weapons from the United States.   But does anyone remember this? ...from The Wall Street Journal all the way back in February of 2014, headlined Saudis Agree to Provide Syrian Rebels With Mobile Antiaircraft Missiles - U.S. Also Giving Fighters Millions of Dollars for SalariesWashington’s Arab allies, disappointed with Syria peace talks, have agreed to provide rebels there with more sophisticated weaponry, including shoulder-fired missiles that can take down jets, according to Western and Arab diplomats and opposition figures.Saudi Arabia has offered to give the opposition for the first time Chinese man-portable air defense systems, or Manpads, and antitank guided missiles from Russia, according to an Arab diplomat and several opposition figures with knowledge of the efforts. Saudi officials couldn’t be reached to comment.

Israel Launches Attack On Syrian Military Facility After Unverified Gas Attack Claims - Overnight Tuesday Israel again launched a major attack on Syrian government locations near Damascus in what seems a monthly exercise that many analysts now openly recognize as an Israeli attempt to provoke war with Syria. For at least the third time since the start of the 7-year long war in Syria, Israeli jets attacked a site just outside of Syria's capital city called Jamraya - believed to be a military research facility related to chemical weapons. Jamraya is an area well-known for its multiple government facilities, including a branch of Syria's Scientific Studies and Research Center, which was the site of two prior attacks by Israel - one in 2013 and another in early December 2017 - but also has sprawling civilian residential areas. It lies on the opposite side of Mt. Qasioun, against which the Damascus city center is nestled.Like with other recent attacks, Israeli jets are reported to have fired from over Lebanon, with a Syrian military media statement saying that its air defenses intercepted most of the inbound missiles, though no further details were given. Unconfirmed international media reports, however, indicate one or more of the Israeli missiles may have impacted parts of the Syrian government facility during the strikes which occurred at 03:42 am local time Wednesday morning.

Secret Alliance: Israel Carries Out Airstrikes in Egypt, With Cairo’s O.K. NYT The jihadists in Egypt’s Northern Sinai had killed hundreds of soldiers and police officers, pledged allegiance to the Islamic State, briefly seized a major town and begun setting up armed checkpoints to claim territory. In late 2015, they brought down a Russian passenger jet. Egypt appeared unable to stop them, so Israel, alarmed at the threat just over the border, took action.For more than two years, unmarked Israeli drones, helicopters and jets have carried out a covert air campaign, conducting more than 100 airstrikes inside Egypt, frequently more than once a week — and all with the approval of President Abdel Fattah el-Sisi.The remarkable cooperation marks a new stage in the evolution of their singularly fraught relationship. Once enemies in three wars, then antagonists in an uneasy peace, Egypt and Israel are now secret allies in a covert war against a common foe. For Cairo, the Israeli intervention has helped the Egyptian military regain its footing in its nearly five-year battle against the militants. For Israel, the strikes have bolstered the security of its borders and the stability of its neighbor. Their collaboration in the North Sinai is the most dramatic evidence yet of a quiet reconfiguration of the politics of the region. Shared enemies like ISIS, Iran and political Islam have quietly brought the leaders of several Arab states into growing alignment with Israel — even as their officials and news media continue to vilify the Jewish state in public.

Gaza hospitals shut down as deadly siege tightens -- Doctors at Gaza’s al-Nasr children’s hospital say patients’ lives are at risk as hospitals in Gaza shut down due to a shortage of fuel for generators. (via Facebook)  Emergency generators have run out of fuel in at least 19 health facilities in the Gaza Strip as Israel’s deadly decade-old siege on the territory tightens.The health ministry in Gaza announced Tuesday that the generators have shut down in 16 primary care clinics and three major hospitals, but that medical staff have been ordered to stay at their posts and do what they can to assist patients.On Tuesday, the UN humanitarian coordination agency OCHA warned that “emergency fuel for critical facilities in Gaza will become exhausted within the next 10 days,” unless donors step in to prevent a “humanitarian catastrophe.”But for patients and medical personnel on the frontlines, the catastrophe is already happening, and it is only the latest chapter in the forced collapse of Gaza’s healthcare system.At the al-Nasr children’s hospital, head of intensive care Dr. Raed Mahdi said that the lives of dozens of children in his unit are at risk.According to the health ministry, Mahdi said overcrowding and pressure on medical staff and supplies had reached a crisis point at his hospital as children were being transferred there from other facilities that had lost all power.

Another Unnecessary War - The writing is already on the wall: Israel will soon launch a military operation in Lebanon. Not a targeted attack on a weapons convoy or factory, but a simultaneous attack on Hezbollah’s missile production and launch sites. The operation will take place at the same time as, or immediately after, a series of assassinations of known Hezbollah operatives. That organization will, of course, react by launching a massive missile barrage at population centers in Israel, and Hamas may contribute its share in the south. Last week we were informed that missile interceptor systems have already been deployed throughout the country as part of a joint “drill” between the IDF and the U.S. military. Washington has already given a green light, or so we learn from Thomas Friedman’s most recent column — a faithful mouthpiece of American foreign policy. In this well-orchestrated event, Israel’s mouthpieces play a single tune: Iran and Hezbollah have crossed a red line, and if their Russian patron does not restrain them (the crux of Israel-Russia security coordination), Israel will strike hard (and it will do so because the Russians cannot restrain them). Defense Minister Liberman promises that “all of Beirut will be hiding in bomb shelters,” while Minister Naftali Bennett has pledged that  (Hebrew) “the Lebanese will pay the price” (an explicit threat to commit war crimes). Of course this is also the finest hour of the retired generals who can now speak freely. “The IDF is going to use a lot of force. These places will be destroyed almost completely,” promises Maj.-Gen. (res.) Noam Tibon. Maj.-Gen. (res.) Amiram Levin tossed another log into the fire: “Lebanon will be destroyed.”  This is nothing short of Orwellian. There is no “balance” between the precision of Israeli missiles and those in the hands of Hezbollah. Weapons “removing the balance of power” in the organization’s hands actually restore balance. But a true balance between Hezbollah’s deterrence capability and that of the IDF is an intolerable thought for the top echelons of the Israeli defense establishment. Therefore, it is necessary to bomb any sign of weapons that “remove the balance of power” — an attack designed to destroy the balance between the two sides. This loop is self-defeating for Israel.

 Russian fleets control ports of Lebanon - Russian media sources revealed that on Tuesday Russian Prime Minister, Dmitry Medvedev, instructed the Russian Defence Ministry to begin talks with its Lebanese counterpart to sign a military cooperation agreement between Russia and Lebanon. The draft agreement to be signed between the parties included the opening of Lebanese ports in front of Russian military vessels and fleets, in addition to making Lebanese airports a transit station for Russian aircrafts and fighters, and the dispatch of Russian military experts to train and strengthen the capabilities of members of the Lebanese army, according to the Russian agency Sputnik.

Kim Jong Un's Sister to Become First Dynasty Member to Enter South Korea -  Kim Jong Un named his sister to represent North Korea at the Winter Olympics in South Korea, a historic visit that raises the drama as world leaders including U.S. Vice President Mike Pence gather for the event.   Kim Yo Jong -- promoted by her brother last year to the ruling party’s political wing -- would be the Kim’s dynasty’s first official representative to set foot in the south. She plans to attend the Friday opening ceremony for the Winter Games in South Korea’s alpine town of Pyeongchang, South Korea’s Unification Ministry said Wednesday.The visit by a potential future leader of North Korea could be seen as a symbolic gesture by Kim to show he’s keen to maintain the current lull in tensions over his nuclear weapons program. But her presence also serves a propaganda purpose, stealing the spotlight from South Korea and putting more pressure on the alliance between Washington and Seoul. Speculation about the visit was already high after Pence signaled he might be open to talks with North Korean officials while attending Olympics events. Complicating the issue is the fact that Kim Yo Jong is subject to U.S. sanctions for heading the nation’s propaganda department. Any contact Pence has with her could constitute a violation. After a meeting with Japanese Prime Minister Shinzo Abe in Tokyo, Pence took a tough line against North Korea, telling reporters that the administration would “soon unveil the toughest and most aggressive” economic sanctions. Pence will be joined at the Olympics by the father of Otto Warmbier, the American student who died last year after being jailed in North Korea. “We will not allow North Korean propaganda to hijack the message and imagery of the Olympic Games,” Pence said. “We will not allow North Korea to hide behind the Olympic banner the reality that they enslave their people and threaten the wider region.”

North Korea's Kim invites South Korean president for summit - North Korean leader Kim Jong Un invited South Korean President Moon Jae-in to Pyongyang "at an early date", South Korean officials said on Saturday, potentially setting up the first meeting of Korean leaders in more than 10 years. Any meeting would represent a diplomatic coup for Moon, who swept to power last year on a policy of engaging more with the reclusive North. The recent detente, anchored by South Korea's hosting of the Winter Olympic Games, came despite an acceleration in the North's weapons programme last year and pressure from Seoul's allies in Washington. The invitation came during talks and a lunch Moon hosted with Kim Yo Jong, the younger sister of the North Korean leader, at the presidential Blue House in Seoul. Kim Jong Un wanted to meet Moon "at an early date", a spokesman for the Blue House said. Moon had said "let's create conditions to make it happen", the official said, an indication that Moon was likely to accept the invitation. Kim Yo Jong arrived in South Korea on Friday with Kim Yong Nam, the North's nominal head of state, for the opening ceremony of the Winter Olympics in the alpine resort town of Pyeongchang. They shook hands with Moon and cheered for athletes from the two countries who marched under a unified peninsula flag for the first time in a decade. Some North Korean experts believe tough U.N. sanctions that are cutting off most of the isolated North's sources of revenue have added pressure on Pyongyang to engage further with Seoul. "I think this overture towards South Korea is partly sanctions-related, and also related to the fact that it's clear a divergence has developed between Washington and Seoul's most keenly desired goals in the near term,"  "The North Koreans should understand that for a summit or any kind of serious talks to occur, Moon needs to be able to take something to Washington — something that addresses denuclearization," he said before the North's invitation to Moon was announced. 

 China Deploys 300,000 Soldiers To N.Korean Border In "Preparation For Potential War" -  While the specter of a nuclear war with North Korea has faded in recent weeks, China is not taking chances, and ahead of the Winter Olympics in South Korea, the Chinese government has deployed 300,000 troops and multiple mobile strike groups to its highly-guarded border with North Korea, a move which signals that Beijing is quietly gearing for a potential crisis between Kim Jong Un and the United States in the coming months. According to South Korea’s Chosun Ilbo news, "China is preparing for a potential war on the Korean Peninsula by reinforcing missile defenses near the border with North Korea" citing a report from Radio Free Asia. "Military units in Yanbian were relocated from Heilongjiang Province, thus adding 300,000 troops along the border."RFA quoted a North Korean source in China that the Chinese military late last year deployed another missile defense battery at an armored division in Helong, west of Longjing in the Yanbian Korean Autonomous Prefecture. Now it is deploying missile defense batteries near North Korean reservoirs by the Apnok and Duman rivers.The reason for the increased missile presence is that Chinese troops in the border area could be swept away if the North tore down the banks of the reservoirs or they were destroyed by missiles or air strikes, the source added.On Jan. 24, Taiwan's Central News Agency reported that the 78th Group Army, the first Chinese military unit that would cross the border into the North in the event of a war on the Korean Peninsula, has been armed with newest surface-to-air missiles against South Korean and U.S. aircraft and missiles.The reported deployment comes just days before the start of the 2018 Winter Olympic Games in South Korea. What is peculiar about this escalation is that it comes as Kim Jong Un’s regime has - at least optically - attempted to “thaw” relations with Seoul, wishing the South Korean government a “successful” competition and hoping to “ease military tensions” before the games begin. In a rare case of Korean unity, both North and South Korea plan to march into the Opening Ceremonies under a “united Korean flag” and will combine their female hockey teams.

 Chinese police are using facial-recognition glasses to scan travelers - Chinese railway police are using facial-recognition sunglasses to catch suspects at train stations in Zhengzhou, the capital of central Henan province. The eyewear, which looks similar to the original Google Glass, was unveiled earlier this year and has already helped identify seven alleged criminals, according to the Communist Party's official newspaper People's Daily. The glasses are linked to a database that can match travelers with criminal suspects. It is unclear how long it takes for a match to be made in the real world, butWu Fei, the CEO of LLVision Technology which developed the glasses, told The Wall Street Journal that, during testing, the system could identify faces from a database of 10,000 in 100 milliseconds.So far the glasses have identified people suspected of misdeeds ranging from traffic infringements to crimes like human trafficking. A further 26 people using fake identity documents were also prevented from traveling. In China, people must use identity documents for train travel. This rule works to prevent people with excessive debt from using high-speed trains, and limit the movement of religious minorities who have had identity documents confiscatedandcan wait years to get a valid passport. While this is the first time Chinese officials have used glasses to implement facial-recognition, the technology is widely used by police. China is also currently building a system that will recognize any of its 1.3 billion citizens in three seconds.  These programs have been condemned by human-rights groups that say this implementation of the technology infringes on people's right to privacy.

China to stamp out cryptocurrency trading completely with ban on foreign platforms - China is to block all websites related to cryptocurrency trading and initial coin offerings (ICOs) – including foreign platforms – in a bid to finally quash the market completely. “To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs,” said an article published on Sunday night by Financial News, a publication affiliated to the People’s Bank of China (PBOC). The article acknowledged that recent attempts to stamp out digital currencies by shutting down domestic exchanges had failed to completely eradicate trading.“ICOs and virtual currency trading did not completely withdraw from China following the official ban … after the closure of the domestic virtual currency exchanges, many people turned to overseas platforms to continue participating in virtual currency transactions. “Overseas transactions and regulatory evasion have resumed … risks are still there, fuelled by illegal issuance, and even fraud and pyramid selling,” the article said. China’s official Xinhua news agency quoted the PBOC on Monday afternoon as saying it would tighten regulations on domestic investors’ participation in overseas transactions of ICOs and virtual currencies, as risks are still high in the sector. Beijing’s tougher stance – which effectively bans all forms of activity related to digital currencies – aims to put the breaks on the ICO and virtual-currency trading mania that has been sweeping China. The frenzy among retail investors led to huge price volatility and several reported incidents of fraud, causing a headache for regulators increasingly worried about social unrest. 

China’s ageing population is creating a new debt crisis for Beijing as pension shortfall widens | South China Morning Post: China’s pension shortfall is emerging as the next big challenge for policymakers as they intensify their years-long campaign to keep rising debt from derailing the economy. Ageing in the world’s most populous country means pension contributions by workers no longer cover retiree benefits, forcing the government to fill that gap since at least 2014. Pension expenses rose 11.6 per cent to 2.58 trillion yuan (US$409.4 billion) in 2016, leaving the government a 429.1 billion yuan tab to cover the shortfall, according to the latest available data from the finance ministry. That shortfall will reach 600 billion yuan this year and 890 billion yuan in 2020 if the system is not reformed, according to Wang Dehua, a researcher at the National Academy of Economic Strategy in Beijing. Enodo Economics in London, which has advised policymakers on the matter, forecast last year that it could soar to 1.2 trillion yuan by next year. The finance ministry does not release estimates. “China’s biggest fiscal risk is pension risk,” said Wang, whose institute is under the Chinese Academy of Social Sciences, the government’s top think tank. “There are big problems in the pension system if it can only keep operating with large fiscal subsidies.”

India strengthens ties with ASEAN countries - Late last month Indian Prime Minister Narendra Modi hosted leaders from all 10 members of the Association of Southeast Asian Nations (ASEAN), in a clear move to strengthen Delhi’s geo-strategic and economic ties and counter China’s growing influence in the region.ASEAN leaders were the chief guests at the Indian Republican Day celebrations on January 26, having attended an India-ASEAN Commemorative Summit a day earlier. Modi also held bilateral talks in New Delhi with each ASEAN country leader—from Vietnam, Malaysia, Indonesia, Singapore, Myanmar, the Philippines, Thailand, Brunei, Laos and Cambodia.Modi’s attempt to boost relations with ASEAN is being encouraged by the US, as part of India’s transformation into a frontline state in Washington’s military-strategic offensive against China.In an op-ed article published by 27 newspapers in the ASEAN countries, Modi declared: “South-east Asia and ASEAN, our neighbours by land and sea, have been the springboard of our Look East and, since the last three years, the Act East policy.”Addressing the India-ASEAN summit, which was held under the theme of “Shared Values, Common Destiny,” Modi declared that India shared “ASEAN’s vision of peace and prosperity through the rules-based order for the oceans and seas.… Respect for international law, notably UNCLOS [the United Nations Convention on the Law of the Sea] is critical for this.” The references to “a rules-based order” meshes with Washington’s stance on the territorial disputes in South China Sea and the US-instigated case in the Permanent Court of Arbitration in The Hague in 2016 that ruled against China’s maritime claims (see: “The Hague ruling: A dangerous step toward war”).

Why Australia’s Skilled Migration System Is Failing – Will the UK and US Take Note? -Yves Smith - Yves here. The idea of preferring skilled immigrants over other ways to allow them to enter has become popular in the UK, as the Tories have been talking up using an Australian-style points system to screen immigrants. At a high level, it screens for people who are young, educated, and have good language skills. The Trump Administration has also started advocating the idea of restricting family-based migration policies and preferring “skilled” immigrants.  I’m not surprised to see the Australian system hasn’t worked out as well as expected. The trend in the US, and I wonder if it has been taking hold in Australia, is for jobs where employers are recruiting, to overspecify the requirements, as in to look for someone who has done precisely the same job at a very similar employer. Companies are not willing to train. For instance, as we’ve mentioned often, for at least the last 15 years, Slashdot has regularly had articles by new computer science grads lamenting that they can’t land a job because there are no entry-level positions and the oldsters confirm that this is the case. More generally, in the US, the idea that there is a shortage of graduates with STEM degrees is also a myth.Now consider some additional inconvenient facts. The first is that the general patten is that immigrants who do not have a corporate sponsor or a strong personal network where they land to help them get placed are more likely to take a step down socioeconomically even if their income in cash terms is higher than it would have been in their home country. For instance, many Jewish professionals who fled the Nazis wound up becoming doormen or equivalent.More specifically, the factors that operate against even skilled migrants landing good jobs are:

• 1. Most job openings aren’t made public. When I was in Australia, I was told that 80% of the hiring took place without the position ever having been given to a headhunter or hiring agency or otherwise advertised. That sounds about right.
• 2. Employers don’t tend to hire people they can’t assess.

Families’ spokesman on New Zealand earthquake building collapse: “Are there people who are above the law?” - New Zealand police announced last November they would not prosecute anyone over the flattening of the Canterbury Television (CTV) building in Christchurch. The building collapsed in a 6.3 magnitude earthquake that struck the city in February 2011, killing 115 people—over half of the total 185 deaths from the quake. Like last year’s Grenfell Tower fire in Britain and the 2010 Pike River mine disaster in New Zealand, the CTV collapse was not only a tragedy. It was a crime for which no one has been held accountable. A royal commission in 2012 found that the office tower crumpled due to hundreds of design and construction deficiencies, which had been overlooked by Christchurch City Council officials and regulators under successive National and Labour governments since the building’s construction in 1986.A series of companies, city council administrations and governments were complicit in its construction and in allowing the building to stand without remediation for more than a quarter of a century. Its construction took place during a period of sweeping deregulation in every industry, beginning with the 1984-1990 Labour Party government.After a three-year investigation that began four years after the earthquake, police considered charges of negligent manslaughter against two individuals: engineers Alan Reay and David Harding, who designed the building. Following advice from deputy solicitor-general Brendan Horsely, however, a decision was made not to prosecute. The WSWS recently spoke to Maan Alkaisi, a spokesman for the Christchurch Earthquake Families Group. His wife, Maysoon Abbas, died in the CTV building, where she worked as a doctor. Alkaisi is a professor in electrical and computer engineering at the University of Canterbury.

What's 'the Price' of China's Influence in Latin America - Rex Tillerson has made 18 foreign trips since he was confirmed as secretary of state on February 1, 2017: Only one them, a two-day visit to Mexico City early in his tenure, was south of the U.S. border.Tillerson was back in Mexico City on Friday, the first stop in his first multi-country tour of Latin America and the Caribbean. But while U.S. officials were planning his trip, Chinese Foreign Minister Wang Yi met late last month in Chile with 33 members of the Community of Latin American and Caribbean States and invited them to become part of China’s Belt and Road Initiative, a massive infrastructure plan that aims to connect China to its Asian neighbors and farther afield. Chinese investment in these countries has gone beyond raw-material extraction to car manufacturing, tech, and telecoms. China’s trade with and investment in the region deepened at around the time of the great recession of 2008. Between 2015 and 2019, it plans to invest $250 billion in direct investment in the region and about $500 billion in trade. It’s well on its way: China is already the largest trading partner of Argentina, Brazil, Chile, and Peru. As I’ve previously written, countries in Africa, Asia, and Latin America have a hard time securing international financing because of poor governance, corruption, and their economic policies. But China goes to them, builds desperately needed roads, railways, and ports, and uses these new facilities to transport raw material to feed its growing economy and population. China is an attractive investor not only because it has a policy of non-interference in the domestic affairs of its partner countries but because its projects are completed at a speed that developing nations are unused to. More importantly, perhaps, it offers to finance these projects on easy terms. But there’s always a catch, Tillerson said Thursday at the University of Texas, his alma mater. “China, as it does in emerging markets throughout the world, offers the appearance of an attractive path to development,” he said. “But in reality, this often involves trading short-term gains for long-term dependency.”

 Scientists discover ancient Mayan city hidden under Guatemalan jungle -- Researchers using a high-tech aerial mapping technique have found tens of thousands of previously undetected Mayan houses, buildings, defence works and pyramids in the dense jungle of Guatemala’s Peten region, suggesting that millions more people lived there than previously thought. The discoveries, which included industrial-sized agricultural fields and irrigation canals, were announced on Thursday by an alliance of US, European and Guatemalan archaeologists working with Guatemala’s Mayan Heritage and Nature Foundation. The study estimates that roughly 10 million people may have lived within the Maya Lowlands, meaning that kind of massive food production might have been needed.

French president Macron to end lifetime job guarantee for public sector workers --On Thursday, French Prime Minister Edouard Philippe and Public Finances Minister Gerald Darmanin announced a sweeping attack on public sector workers aimed at scrapping the legal statute of public sector workers’ rights established after the liberation from Nazi occupation.“This plan aims to shatter to pieces the last taboos surrounding public sector workers and also marks the end of the dogma of life-time employment guarantees, upon hiring, for all public sector workers,” wrote the right-wing daily Le Figaro. The two ministers stated that the attacks would not apply to the police and intelligence forces, the military or the top ranks of the state bureaucracy, but to the mass of public sector workers.They are directly targeting the roughly 4 million workers who have public sector status in France. Though eroded by attacks under Socialist Party and right-wing governments alike, the “statute” governing their working conditions has still formally guaranteed fundamental rights including lifetime employment, guaranteed base pay, regular promotion and regular wage increases.It also grants vacations and easier conditions for retirement or early retirement without penalties. Only 10 years ago, public sector workers still retired three years earlier than private sector workers. They also had a guaranteed right to strike and to join political and trade union organizations. The measures announced by Philippe and Darmanin include a massive resort to “contract workers,” who will replace public sector workers but be denied the rights of the public service. At the same time, a plan for an essentially unlimited number of “voluntary departures” aims to sack tens of thousands of workers who will have to find jobs in the private sector. This will allow the state to cut public-sector wages by €4.5 billion ($5.6 billion) by 2020.

Macron’s Attack on Workers - Labor reform has been a key achievement of Macron’s first year, succeeding where a string of predecessors failed. The new president had the advantage of a super majority in the National Assembly but nevertheless chose to pursue the reforms by executive order, thereby curtailing parliamentary debate and the possibility of unwelcome amendments. These circumstances all but required any successful opposition to come from the streets. Only massive disruption would have forced the government to relent. France’s labor movement, however, is in disarray. Two of the three largest unions declined to back mass mobilizations, including the nation’s largest private sector union, the Democratic French Confederation of Labor (CFDT). Both decided their relationships with the Elysée weren’t worth jeopardizing so early in Macron’s term. That left the combative General Confederation of Labor (CGT) and the smaller left-wing union Solidaires with the task of jump-starting and leading a movement themselves. Participation in strikes and nationwide protest marches alike were limited, never truly exceeding a devoted left-wing base. In the one sector that saw mildly disruptive strikes — trucking, which has proven critical to past social movements — unions brokered a side agreement with the government exempting workers from the brunt of the reforms. For organized labor, the events were a cruel reminder of its disconnect from French society. While unions wield hefty institutional might and negotiate contracts on behalf of nearly the entire workforce, they count just 11 percent of workers as members. That rate is about the same as in the United States. If twenty years ago French unions might have been able to mobilize significant numbers of non-members, they simply don’t have the same reach today.

France: Migrant Crisis Spirals Out Of Control -- Hundreds of Africans and Asians armed with knives and iron rods fought running street battles in the northern port city of Calais on February 1, less than two weeks after French President Emmanuel Macron visited the area and pledged to crack down on illegal immigration.The clashes plunged Calais — emblematic of Europe's failure to control mass migration — into a war zone and reinforced the perception that French authorities have lost control of the country's security situation.The mass brawls, fought in at least three different parts of Calais, erupted after a 37-year-old Afghan migrant running a human trafficking operation fired gunshots at a group of Africans who did not have money to pay for his services. Five Africans suffered life-threatening injuries.Within an hour, hundreds of Eritreans, Ethiopians and Sudanese took to the streets of Calais and attacked any Afghans they could find. More than a thousand police officers using batons and tear gas were deployed to restore order. Two dozen migrants were hospitalized.French Interior Minister Gérard Collomb described the level of violence in Calais as "unprecedented." He attributed the fighting to an escalating turf war between Afghan and Kurdish gangs seeking to gain control over human trafficking between Calais and Britain, which many migrants view as "El Dorado" because of its massive underground economy. Each day around 40 ferries depart Calais for Britain. Vincent de Coninck, director of the charity Secours Catholique du Pas-de-Calais, said that rival gangs were trying to secure control over access to the port of Calais in order to induce payments of €2,500 ($3,100) from migrants seeking to stow away on trucks crossing the English Channel.

Polish president signs bill censoring free speech about the Holocaust - Polish President Andrzej Duda signed into law Tuesday a bill censoring free speech about the Holocaust, after it has been passed by the lower and upper houses of the Polish parliament. The bill criminalizes the use of the term “Polish death camp” for death camps such as Auschwitz or Sobibor that were built by the Nazis in occupied Poland during the Second World War. Both Polish and foreign citizens can be punished with up to three years in prison for using this term. The bill also penalizes people who are deemed to be ascribing crimes against the Jews to “the Polish nation” or the “Polish state.”The law is a far-reaching assault on free speech. Even while it formally states that “scientific and artistic” creations are exempted, it will not only stifle public discourse on major issues such as Polish anti-Semitism and pogroms by Poles against Jews, but also impede scientific research.For instance, a Holocaust survivor whose relatives were murdered by Poles or handed over by Poles to the Nazis could now be put on trial if his or her testimony could be interpreted as ascribing blame “to the Polish nation.” The law will have massive implications for public education and public discussion. Moreover, there is little doubt that it is but a first step toward much further restrictions of free speech and scientific research into this and other parts of Polish history.

Merkel Faces `Decisive Day' in Government Talks After Long Wait -   German Chancellor Angela Merkel’s talks on renewing her government alliance with the Social Democrats are coming to a head, with negotiators saying they’ll seek a yes-or-no decision on Tuesday. Negotiations were extended for a second day as SPD leaders seek to wring concessions on labor and health-insurance rules from Merkel’s Christian Democratic-led bloc. The goal is to conclude a draft coalition pact that the Social Democrats can put to a membership vote. “We agree that tomorrow is the decisive day,” SPD general secretary Lars Klingbeil told reporters on Monday. “It will be decided tomorrow whether we successfully close the talks or not. All of us are willing to get a solution, but the talks are contentious.” The Social Democrats are holding out for selling points to present to the party’s base in the ballot. That increases pressure on Merkel to offer policy concessions to her prospective junior partner so she can start her fourth term. More than four months after her CDU-led bloc won an inconclusive national election, Merkel remains at the helm as acting chancellor. After serving as her junior partner for eight of her 12 years in office, many SPD members blame the last four years with Merkel for the party’s electoral decline to a post-World War II low. Any coalition pact will be put to a vote by the SPD’s more than 440,000 members. A rejection would force Merkel to consider governing without a stable parliamentary majority or put Germany on track for another election, which polls suggest would turn out largely like the last one in September. Two key SPD demands remain on the table: curbing the use of temporary work contracts, and overhauling the national health-care system to prevent doctors from billing higher fees for privately insured patients. The CDU and its Bavaria-based CSU sister party have balked at both.

German coalition deal reached between Merkel and SPD -- Political leaders in Germany have reached a breakthrough in talks to form a new coalition government, following months of uncertainty after elections in September failed to produce an overall majority for any party.German Chancellor Angela Merkel's Christian alliance (the CDU-CSU) and the Social Democrats (SPD), led by Martin Schulz, have agreed on a deal to form a coalition government. Speaking at a press conference on Wednesday afternoon, Merkel said the talks had been difficult, but worth it."I am convinced the coalition treaty can be the basis of a good and stable government," she said, adding that solid finances, infrastructure investment and digitalization would be key focuses for the government.German newspaper Bild reported that Merkel's Christian Democratic Party (and its sister party, the Christian Social Union, or CSU) will be given the economy and defense ministries in the agreement, while the SPD was reported to have been given the finance ministry.German news agency DPA also reported that the SPD's Olaf Scholz, currently mayor of Hamburg, is to become the finance minister. The Exterior Ministry is also said to have been given to the SPD with speculation that party leader Schulz could be put in charge.Merkel said compromises had been made, especially in the division of ministries. She also noted that many conservatives will not be happy with the SPD taking over the finance ministry.Talks between the parties have been going on for days, having missed a self-imposed deadline of Sunday, and went into the night on Tuesday. In particular, health care and labor market policy proving sticking points in the talks.

German parties reach agreement on grand coalition for war and austerity - Germany’s Christian Democratic Union, Christian Social Union (CDU/CSU) and Social Democrats (SPD) announced Wednesday that they have reached a deal to form a new grand coalition government. A third installment of the grand coalition will be the most right-wing German government since the downfall of the Nazi regime. It will seek to launch a massive military build-up, initiate a new round of social attacks, adopt the refugee policy of the far-right Alternative for Germany (AfD), and establish a police state to carry out domestic repression. A careful review of the 177-page coalition agreement makes this clear. The empty promises from leading Social Democrats, such as the incessant claims by current SPD leader Martin Schulz and his designated successor Andrea Nahles that more money will be available for education, housing and social spending, merely serve to conceal the reactionary plans they have put down on paper and will now proceed to implement in practice.The central focus of the coalition agreement is Germany’s return to a “great-power” foreign policy, which was announced by the previous grand coalition at the 2014 Munich Security Conference. The 20-page chapter on “Germany’s responsibility for peace, freedom and security around the world” is the longest in the entire agreement and must be read as a blueprint for a massive expansion of German militarism.The chapter identifies countries, regions and entire continents once again viewed by German imperialism as its spheres of influence: the Western Balkans, Russia, Ukraine, Turkey, the Middle East, Africa, Latin America, Asia and Afghanistan. In the section entitled “A modern army,” the SPD and conservative parties pledge to “make available the best possible equipment” and “training” so that the army can “expertly fulfill the tasks assigned to it in all of their dimensions.”

Deutsche Bank Tumbles To 2016 Lows Amid Reports Of HNA Technical Default -- One week ago we reported that China's largest conglomerate, HNA Group, is on the verge of bankruptcy with the company facing a 15 billion yuan liquidity shortfall in the coming weeks, with the amount ballooning exponential over the next few months. And, as we noted then, "the scale of the funding gap will likely deepen concerns about the viability of the group, which owns stakes in everything from Deutsche Bank AG to Hilton Worldwide Holdings, as it faces scrutiny worldwide from regulators and investors."But more importantly, we said that any fears about HNA's viability "could unleash another liquidation panic in Deutsche Bank shares if other shareholders become convinced that HNA is looking to sell its $4 billion worth of DB shares (roughly a 10% stake) and try to frontrun it."Today, this worst case scenario for China's biggest and most indebted conglomerate, appears to be now in play because according to a report  in Chinese industry website Wangdaizhijia, HNA Group missed some payment on a peer-to-peer product sold on Phoenix Finance, an investment and wealth management platform of Phoenix TV. Here is the google translated summary of the Chinese news report:Since January this year, the overdue events related to Hainan Airlines have been aroused and heated discussions. Many mutual platforms have been "lying guns." HNA cash flow is tight, related items can not be cashed on time, directly "tired" to Phoenix Financial. Some investors broke the net credit house broke the news that Phoenix Financial Products Fung Ying Ying - HHSY overdue..

Dalio's $13 Billion Short: Bridgewater Unveils Its Biggest Ever Short Position - Last October, Italy's government was angry when the world's largest hedge fund, Ray Dalio's Bridgewater unveiled it had amassed a sizable $713 million short against Italian financial stocks, its biggest disclosed bearish bet in Europe. Then last week, and just one month before Italy's March 4 elections - which the broader market stubbornly refuses to acknowledge are a risk factor - Bridgewater tripled down on its bearish bets against Italian banks and insurers, making the position the largest thematic short carried by the world's biggest hedge fund. As we reported last Thursday, Bridgewater boosted its bearish bets against Italian companies to $3 billion and 18 firms, up four-fold from just over $713 million in early October, further infuriating Italian authorities. As Bloomberg added, Bridgewater's bearish bets against European companies as a whole totaled $3.3 billion, spread among 20 names. In addition to his previous negative exposure, Dalio disclosed a short position in transport-infrastructure provider Atlantia and added to its largest short bet, against lender Intesa Sanpaolo SpA. The growing short comes just days after Dalio told a Davos audience that "holding cash is now stupid"... and literally days before the biggest market crash since Lehman. Fast forward to today, when Dalio's bearish fascination is starting to get a little concerning, because according to the latest Bloomberg summary, Bridgewater now has at least $13.1 billion in European Union shorts, quadrupling the $3.2 billion short from last week, and over 18 times more than the fund's original position last October. In the past week, Bridgewater put more than $1 billion to work betting against oil giant Total SA - making it the firm’s largest disclosed short holding in Europe. As Bloomberg notes, Europe's energy titan has been riding out the biggest industry downturn in a generation by selling assets and cutting spending. The hedge fund also started a bearish Airbus SE position, investing about $381 million against the aircraft maker. Among other short positions, it disclosed wagers against BNP Paribas SA, ING Groep NV and Banco Santander SA. Amusingly, since the Feb. 8 regulatory filings were made public, Total fell 1% as markets slumped, while Dalio's other shorts, Airbus, BNP Paribas, ING Groep and Banco Santander sank roughly 2%. A list of Bridgewater's top 10 shorts is shown below: 

The Nuclear Safeguards Bill may not protect the UK’s nuclear industry after Brexit -- The European Atomic Energy Community (Euratom) is the body - governed by the European Commission - that regulates the nuclear industry across Europe, shaping how nuclear materials are used, transported, sold and disposed of. Membership of Euratom crosses two of the UK Government’s stated red lines in its negotiations over the UK’s future relationship with the EU: Euratom comes under the jurisdiction of the European Court of Justice and requires freedom of movement for nuclear specialists. The Prime Minister gave notification on 29 March 2017 that the UK would be withdrawing from Euratom. But the Government has also stated it wants to remain as closely aligned as possible with Euratom to ‘maximise shared interests’ and expertise after we leave the EU. The Nuclear Safeguards Bill, which gets its reading in the House of Lords next week, outlines the new powers the UK will take on when we leave Euratom and is a first step in this process of alignment. The bill expands the remit of the Office for Nuclear Regulation (ONR) to regulate in the UK, taking on new responsibilities for domestic nuclear safeguarding and meeting international obligations. But the bill alone is insufficient if the UK is to avoid a regulatory gap when it leaves Euratom.

The EU as Britain’s Constitutional Stabiliser? -- More than it thinks, Britain may need its membership in the EU for the preservation of its national integrity and of its ancient constitutional settlement.After a preliminary agreement in December 2017 phase two of the Brexit negotiations has begun. Still, there seems little awareness that Britain might experience considerable internal constitutional and political changes as a result of its departure from the EU, including the risk of the disintegration of the country altogether. Unlike its European counterparts, Britain has an unwritten and essentially still feudal constitution with a constitutional continuity since 1689 (in the case of England) or 1707 (when England and Scotland together formed Britain). Feudalism is still the ultimate framework of the British state. Therefore in England and Wales every ‘landowner’ is still a feudal tenant of the Crown, and the legislative and executive institutions, in particular the Crown and Parliament, have a feudal root. The legislative powers derive from (theoretically unfettered) parliamentary sovereignty, not from the people. That parliamentary sovereignty limits the prerogative of the Crown and its executive – but to what extent depends on the constitutional decisions of the courts. Neither parliamentary sovereignty nor the prerogative of the Crown are in any way regulated by a written constitution.  Feudal systems are by nature centralist: if the regions had too much autonomy, the state would fall apart (such as historically in Germany); if the central power was strong (such as in France), the state could continue to exist as a unitary entity. In a feudal state structure, genuine federal systems are not possible, and indeed, they do not exist in the UK: what we have is an ‘asymmetrical’ devolution, that is, in Scotland, but not in England.

Taking their knives to Mrs May’s toga won’t solve all of the Tories’ troubles - Nicholas Hytner’s terrific reimagining of Julius Caesar at London’s Bridge theatre is a topical reminder that political assassinations are often messy and frequently don’t have the outcome that the plotters intended. There is a possible moral here for Tory MPs as their clammy fingers hover over semi-unsheathed daggers and they contemplate whether to put Theresa May out of her misery. The Tory tradition, rather like the Roman way, has been dictatorship tempered by regicide. Tories are slavishly loyal to the leader right up to the moment before they slash the toga. That, at any rate, was how they used to operate. In the joyless era of Mrs May, the Tory party has adopted a new and much less satisfactory method of dealing with a floundering chief. This is to be openly disloyal to the leader and engage in endless discussion about dispatching her without actually going through with the deed. The ides of March come round every day. The enemies within her party who accuse Mrs May of being indecisive and incoherent share those traits with the object of their dismay.   Voices in Brussels and around Whitehall are beginning to murmur that if there is going to be an attempt to remove her, it would be better it happened sooner rather than later. It takes 48. That many Tory MPs have to ask for it to trigger a vote of no confidence. No one but Sir Graham Brady, the chairman of the backbench 1922 committee, knows how many of his colleagues have written to him demanding such a vote. The speculation among Tories is that we have got closer to the magic number since the new year. If Mrs May then won a confidence vote, she might carry on, more or less damaged, depending on the size of her victory. Only if she lost – or won by a fatally narrow margin – would there be a contest for the succession. It is this next step that shivers the spines of a lot of Tory MPs. There are some who have concluded that things have become so bad that it is worth taking the risk of unleashing a chaotic and vicious contest to succeed her. But it is worth noting that there are also Tories who have travelled in the opposition direction, MPs who once thought she had to go, but who now calculate that the consequences would be too awful. One former cabinet minister remarks: “Where I was in favour of her departing immediately after the election because she had lost all authority, now I think it would be a disaster and a bloodbath.”

Secret plan to use Brexiteers Gove and Johnson in compromise to end Tory turmoil on trade talks - Ministers are preparing a Brexit compromise aimed at ending the increasingly acrimonious row in the Conservative Party over whether Britain stays in the EU’s customs union. The 11-strong Brexit “war cabinet” will meet on Wednesday and Thursday to try to break the 19-month deadlock over the country’s relationship with the European Union after it leaves the bloc.  Ms Rudd suggested that the UK would have some customs relationship with the EU, but Mr Raab insisted that there would be no form of customs union. Members of the war cabinet believe that a compromise could be struck by asking Brexiteers such as Boris Johnson, the foreign secretary, and Michael Gove, the environment secretary, to sign up to a time-limited extension to elements of the existing customs union.This may prove more attractive to Mr Gove than Mr Johnson and drive a wedge between them, some in Downing Street believe. A senior member of the government said that No 10 was prepared to play the pair off against each other and do “what any good leader does: divide and rule”.  A cabinet source expressed optimism that Mr Gove would be constructive during talks: “Michael is being given latitude to do what he wants in Defra in the expectation of absolute loyalty on other things.” Mr Gove is also sensitive to the challenges in the Commons, where there is not a clear majority to leave the customs union. Mr Johnson said in September that the Brexit transition must last “not a second more” than two years. As part of a potential deal, Remain-leaning ministers such as Ms Rudd and Philip Hammond, the chancellor, would clear the way for trade deals with non-EU countries if short-term economic harm could be avoided. Ms Rudd insisted that there was greater unity in the cabinet than many realised.

Warring Conservatives Force May Into New Red Line on Brexit  -- The hard choices of Brexit have tipped Theresa May’s Conservative Party into open warfare. It’s not clear the prime minister will survive the crossfire. May has held onto her job by avoiding too much clarity on what Britain’s divorce from the European Union might look like, even as the process has been going on for nearly a year. She still hasn’t stamped her vision of Brexit on her divided Cabinet, and that’s led to “huge uncertainty for business,” said Hilary Benn, chairman of Parliament’s Leaving the European Union Committee. Hilary Benn Photographer: Chris J Ratcliffe/AFP via Getty Images As May is forced to reveal her hand, both extremes of her party’s Brexit spectrum are emboldened, with those seeking the most radical break from Brussels making threats, demanding firings, and questioning the integrity of the country’s revered civil service. They’ve even hatched a plot to oust her, according to the Sunday Times. “The prime minister is clearly finding it impossible to reconcile the two factions within her cabinet,” Benn said in a BBC radio interview on Monday. “All of this argument about the forecasts, attacks on civil servants, is a sign of the dysfunction there is at the heart of the government.” While the parliamentary arithmetic probably supports a divorce that maintains more ties to the European Union, and the anti-Brexit camp is getting more organized, May knows she has to listen to the pro-Brexit hardliners. Her eagerness to keep them onside was underlined late Sunday when her office said the U.K. would leave the bloc’s customs union after the divorce, acceding to a key demand of the Brexit hardliners.

Brexit uncertainty to stay Bank of England’s hand - There can rarely have been a more complicated time to set interest rates for the U.K. economy. While high inflation, low unemployment and stable growth would usually prompt the Bank of England to raise interest rates again soon, concerns over Brexit are likely to stay the hand of its Monetary Policy Committee, whose decision is due Thursday. "Uncertainty over how Brexit talks will pan out means that the MPC won't want to make a strong commitment regarding the timing of the next rate hike," said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics. With the next stage in the Brexit discussions with the European Union due to start soon, there's a sense of confusion over what Britain's exit from the bloc in a little over a year's time will entail. Chief among the concerns is the terms of a transition period that Britain wants in place after it is due to leave in March 2019 in order to smooth out its exit and give it time to adjust to a new economic relationship with the EU. Bank of England Governor Mark Carney has said that the outlines of the transition deal should be agreed upon by the end of this quarter so that firms across sectors — particularly in the crucial financial services industry — can start planning. Doing so, he has said, will limit the risks of a shock on Brexit day: "The sooner the better." Despite a lack of clarity over Britain's economic outlook after March 2019 and whether firms will continue to have access to the European tariff-less single market, the British economy proved last year to be more resilient than many had forecast. That has emboldened many Brexit backers to discredit warnings about the future. The Bank of England itself was one of the more high-profile forecasters to get it badly wrong in the run-up to the Brexit referendum in June 2016, warning that a vote in favor of Brexit could lead to recession. There's been no recession — not even close — partly because the fall in the pound helped boost exports, particularly to the 19-country eurozone, which is currently in the midst of its strongest upturn in a decade. 

Pound Soars After Hawkish BOE Warns Rate Hikes May Be "Somewhat Earlier And By Greater Extent" - In light of the previously noted speculation that the BOE may come out on the hawkish side in its commentary today, that's precisely what the Bank of England did today when it kept rates unchanged at 0.5%, and QE flat as expected in a unanimous 9-0 vote...MPC vote unanimously to keep #BankRate at 0.5% pic.twitter.com/mn0i3r6ceW — Bank of England (@bankofengland) February 8, 2018... but what traders have immediately honed in on is the following language from the statement, in which the BOE raised its growth forecast and said that the "Committee judges that, were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target."The reason for the surprisingly hawkish language is that in thequarterly inflation report, the BoE’s Monetary Policy Committee agreed a statement saying that the central bank was no longer willing to tolerate inflation above its 2 per cent target for the next three years.As the FT reminds us, today's language was similar to that in September’s MPC minutes, which immediately preceeded the first interest rate rise in a decade in November, raising official rates to their current level of 0.5 per cent. But the main change in the forecasts from three months ago was an upward revision to the BoE’s expectation of the strength of the global economy, which helps Britain’s exporters, nudging up the forecast UK growth rate in 2018 from 1.7 per cent to 1.8 per cent. As a result of the clearly hawkish bias, the report is sparking expectations the BoE may proceed with its next hike as soon as its May meeting.

UK crops left to rot after drop in EU farm workers in Britain after Brexit referendum -- British farmers have been forced to leave thousands of pounds worth of vegetables to rot in their fields, because of a drop in the number of farm workers from the European Union (EU). James Orr, whose farm outside St Andrews produces potatoes, carrots, parsnips, broccoli, cauliflower, said his farm suffered a 15 per cent drop in the number of workers between August and November. “We simply could not harvest everything, and as a result we left produce in the field to rot,” he told Scotland’s Sunday Herald newspaper. Read more Downing Street says UK is ‘categorically leaving customs union’ Enough broccoli to feed 15,000 people for a year was wasted, he added. Mr Orr’s farm supplies more than 1,000 tones of the vegetable and he estimated he lost between £30,000 and £50,000. The UK farming industry is heavily dependent on pickers from the EU, particularly those from eastern Europe. Britain’s low unemployment rate and the the seasonal nature of the work makes it difficult to attract domestic workers. But the fall in the value of sterling against the Euro since the Brexit vote, means the UK has become less attractive to seasonal workers from Romania and Bulgaria. Farmers also fear that a Brexit deal restricting freedom of movement could leave them with even fewer people to help harvest their crops. The National Farmers Union (NFU) has surveyed its members in England, Wales and Scotland to discover the effect leaving the EU could have on the industry. 

EU toughens Brexit transition demands - The EU is demanding the U.K. not take “any action or initiative … likely to be prejudicial” to the bloc’s interests in any international body or forum during a Brexit transition period, according to draft legal text prepared by the European Commission. The provision is part of a document, seen by POLITICO, in which the EU set out its updated terms for a 19-month transition period after the U.K. formally leaves the bloc in March 2019. These terms, which the U.K. is yet to agree to but has little leverage to negotiate, include a tighter definition of Britain’s minimal influence over EU decision-making and a new provision that will restrict the U.K.’s ability to prevail in disputes over aspects of the single market. As expected, the draft transition agreement includes the EU’s main condition: a requirement that the U.K. abide by all EU laws and obligations, even as it loses all voting rights and representation in Brussels. According to the text, the EU would be required to consult London — but not necessarily act on the U.K.’s input — only in regard to setting new fishing quotas. On other issues, such as sanctions policy, and issues directly affecting the U.K., the EU may consult Britain but would be under no obligation to do so — a flat dismissal of U.K. negotiator David Davis’ demand for some recourse mechanism over new EU policies that Britain might oppose. “We will have to agree a way of resolving concerns if laws are deemed to run contrary to our interests and we have not had our say,” said Davis in a speech on the U.K.’s view of a transition period last month. The five-page document, which was discussed by the EU’s College of Commissioners in Strasbourg Tuesday and then circulated among EU27 diplomats, includes updated language and new provisions that were not in previous draft negotiating directives agreed by EU ministers last month. 

Brexit: EU to have power to punish UK at will during transition -  Brussels will have the power to punish the UK at will during the Brexit transition period by closing off parts of the single market to British companies, according to a leaked legal document drawn up by the EU. The 27 remaining member states want to be able to act against the UK without having to go through the potentially lengthy process of bringing cases to the European court of Justice, should Brussels come to the judgment that Britain has infringed EU law. The use of focused sanctions to “suspend certain benefits ... of the internal market”, would give the EU the freedom to punish the UK without prematurely terminating the transition period and risking damage to its economic interests. Sanctions the EU could feasibly impose include tariffs on goods, the enforcement of customs checks or the suspension of the single air aviation agreement, which gives UK carriers the right to fly between Britain and the continent. The document does not stipulate what acts by the UK would lead to sanctions, but the EU has made it clear it is concerned that the British government could infringe the rights of its nationals living in the UK after Brexit. The development will inevitably fuel the concerns held by some over the terms of the 21-month transition period following Brexit day on 29 March 2019, during which the UK will effectively stay in the single market and customs union without any say on new regulations. Theresa May’s apparent acceptance of most of the EU’s demands has already prompted accusations from the Tory MP Jacob Rees-Mogg that the UK will be a “vassal state”. The EU’s leaked position paper, entitled Transitional Arrangements in the Withdrawal Agreement, lays out in legal language the EU’s terms for the transition period, including its insistence that British officials and politicians will play no role in decision-making institutions after 29 March 2019. The document says that only in exceptional cases will the UK be allowed to sit in on parts of meetings. 

Will Upcoming Brexit Negotiation Round Finally Cause Hard Core Brexiter Heads To Explode? - Yves Smith –  Brexit enthusiasts have managed to come up with such creative forms of denialism that the word “insanity” does not being to do it justice. Their main tactic so far has been a political version of Schrodinger’s cat. As long as they can keep the lid shut on the Brexit box, they can pretend it amounts to whatever version of Brexit they’d most like to have, even though the particulars, as we and others have pointed out, are internally contradictory.However, the problem with the Scrodinger’s cat approach, of refusing to open the box and deal with actual conditions (like feed the feline or bury it), is it is putting the UK in the worst imaginable position on every level. The UK is failing to do any contingency planning. The UK is refusing to advance proposals and policy positions, and does so only under duress, and even then typically as napkin doodles, or as petulant reactions to EU efforts to move the talks forward by putting its own proposals on the table. This is making the odds of worst case scenario outcomes higher with every passing day. Another Tory denialism strategy is more conventional: scapegoating. One avenue is to criticize Theresa May for her supposed lack of decisiveness and her failure to beat up on those meanie Eurocrats. The reality is that May’s stasis is a reflection of the incoherence of the Tory position and the deep divisions in the party. She can’t forge a consensus in her own party because there are too many MPs on each flank. She could perhaps have attempted the bold gambit of a softer Brexit grouping of the non-Ultra Tories plus the at least 100 or so Labour party members who also want a softer Brexit. But UK politics are over my pay grade, and I have to assume this sort of cross party alignment is not workable (as in both parties have enough party discipline to block it). And of course, the other regular scapegoat is the EU. The UK and EU are supposed to resolve what the transition phase looks like in their upcoming round of negotiations. The EU also told the UK in the December talks that it needed to codify its solution for the Irish border. Since that solution is in fact not viable, requiring the UK to reduce it to sufficient written detail as to be a basis for rules and procedures will reveal it to be a fraud.

Theresa May kicks Brexit can down the road - BBC News: Another gathering in Downing Street has come and gone, imagined at one point to be a "crunch meeting" at which Cabinet colleagues might thrash out their differences on the destination of Brexit. In fact, it was nothing of the kind. The only crunching to be seen or heard was the gentle crump of the metaphorical tin can labelled "Britain's future after Brexit" being kicked, unopened, further down the road. Did we seriously expect anything else? Boris Johnson, and Brexiteers like him, believe that Brexit opens up a world of new opportunities. Former Remainers including Phillip Hammond, the chancellor, are believed to quietly fear it could usher in an era of national decline. There is no reconciling these views. So ministers on both sides, and colleagues in between, have chosen with lesser or greater enthusiasm to embrace the government's stated ambition to pursue the goal of "frictionless trade" with the EU, with few if any tariff or non-tariff barriers, while simultaneously shuffling off the obligations that go with membership of the EU customs union and single market. No matter that the chancellor is suspected by many in Whitehall and at Westminster to fear this is unachievable, and to secretly nurse the dream of an eventual rethink, or perhaps the hope that a Brexit transition might somehow go on and on. Never mind that some senior Brexiteers are known to be quietly enthusiastic about the possibility of Brexit negotiations ending with no-deal with the EU, and with Britain trading in future on World Trade Organisation rules, until agreements can be struck with nations around the world. For now, the goal of a future in which the UK both has its cake and eats it serves as the fulcrum upon which two opposing views can balance. 

David Davis accuses EU of acting in bad faith over Brexit transition plans — The EU was “unwise” to publish a document that said Brussels could suspend the U.K.’s single market benefits during the Brexit transition period, David Davis said Thursday, accusing the EU of failing to act in “good faith.” In a sign of a cooling of relations between the U.K. and EU negotiating teams, Davis said Wednesday’s legal document setting out the EU’s terms for the transition period contained “discourteous language,” and branded it a “political document” not a legal one. The U.K. also said on Thursday that it wanted to be “treated in the same way as EU member states” during the transition period. Officials in London were blindsided by Wednesday’s demand from the EU, contained in a footnote to a new draft section of the transition agreement, that during the transition the EU should have “a mechanism” to “suspend certain benefits deriving for the U.K. from the participation in the internal market,” if a dispute were to arise and Brussels decided there was no time to refer the matter to the European Court of Justice. U.K. negotiators were also disappointed, one official said, by segments of the paper that stated that “during the transition period, the parliament of the U.K. shall not be considered a national parliament” and the Bank of England “shall not be considered to be a national central bank.” While legally this is merely restating the position that the U.K. will not be an EU member, it risks goading Brexiteer Conservative MPs on whose support Theresa May’s political authority depends, and is viewed as unhelpful, the official said. In a TV clip sent to U.K. national broadcasters, Davis said: “I thought that document was hardly a legal document, it was a political document … I do not think it was in good faith to publish a document with frankly discourteous language, and actually implying that they could arbitrarily terminate in effect the implementation period. That’s not what the aim of this exercise is, it’s not in good faith, and we think it’s unwise to publish that.”

 Japanese ambassador warns of Brexit ‘high stakes’ - Japan’s ambassador to the UK has warned Theresa May that her Brexit negotiators are playing for increasingly “high stakes” in the run-up to a final deal with the EU later this year.Koji Tsuruoka, speaking outside Downing Street, said international companies could close their UK operations if there was “no profitability” in staying in the country.“If there is no profitability of continuing operations in the UK — not Japanese only — no private company can continue operation,” he said. “So, it’s as simple as that. This is all high stakes that I think all of us need to keep in mind.”The ambassador said Japanese companies had come to the UK on the basis that they would have access to European markets: “Therefore it is expected that they will have free access” The warning came after talks between Japanese business leaders — including executives from Hitachi, Mitsubishi, Mitsui, Nomura, Panasonic, Eisai, Nissan and SoftBank — and senior government figures, including Mrs May, Philip Hammond, chancellor, Greg Clark, business secretary, and Liam Fox, trade secretary.

UK Asks the Rest of the World to Be Super Duper Nice and Act as Its Old Deals Are Still Valid Post Brexit - Yves Smith - You cannot make this stuff up.  At the end of this post is embedded a technical note from the UK government, addressed to no one in particular, in which the UK asks the rest of the world to let the UK keep the same terms of any bi-lateral deals with the EU in place with respect to them too during the transition period. The note acknowledges that multi-lateral deals are a different kettle of fish. The legal fudge in numbered paragraph 7 looks pretty desperate:This approach is underpinned by international law and practice, including Article 31 of the Vienna Convention on the Law of Treaties (VCLT), which provides that a treaty is to be interpreted in its context, which can include a subsequent agreement between the parties regarding its interpretation or application.Help me. The UK wasn’t a party to any of these agreements. It was the EU. So the Uk can’t be one of the parties per the language above because it did not enter into the original agreement.1 So what does this mean in practice? It is another demonstration of utter UK incompetence. How long has Theresa May been talking about her pet implementation period, and only now does anyone in her Government realize that it (along with Brexit generally) entail other moving parts besides getting an eventual pact on trade and services with the EU? The Financial Times was onto this last May, in After Brexit: the UK will need to renegotiate at least 759 treaties, yet the Government has apparently been trying to stick its head in the sand since then. Key sections from its account:While Brexit is often cast as an affair between Brussels and London, in practice Britain’s exit will open more than 750 separate time-pressured mini-negotiations worldwide, according to Financial Times research. And there are no obvious shortcuts: even a basic transition after 2019 requires not just EU-UK approval, but the deal-by-deal authorisation of every third country involved.  Each agreement must be reviewed, the country approached, the decision makers found, meetings arranged, trips made, negotiations started and completed — all against a ticking clock and the backdrop of Brexit, with the legal and practical constraints that brings. Most inconvenient of all, many countries want to know the outcome of EU-UK talks before making their own commitments….  Through analysis of the EU treaty database, the FT found 759 separate EU bilateral agreements with potential relevance to Britain, covering trade in nuclear goods, customs, fisheries, trade, transport and regulatory co-operation in areas such as antitrust or financial services.

Northern Ireland will stay in single market after Brexit, EU says - UK negotiators have been warned that the EU draft withdrawal agreement will stipulate that Northern Ireland will, in effect, remain in the customs union and single market after Brexit to avoid a hard border.In response the UK agreed this week to engage in technical discussions on how such an arrangement could work.The uncompromising legal language of the draft agreement and the UK’s engagement on those terms is likely to provoke a major row, something all parties to the negotiations have been trying to avoid.British officials negotiating in Brussels were told by their counterparts on Tuesday that there could be a “sunset clause” included in the legally binding text, which is due to be published in about two weeks. Such a legal device would make the text null and void at a future date should an unexpectedly generous free trade deal or a hitherto unimagined technological solution emerge that could be as effective as the status quo in avoiding the need for border infrastructure.As it stands, however, the UK is expected by Brussels to sign off on the text, which will see Northern Ireland remain under EU law at the end of the 21-month transition period wherever it is relevant to the north-south economy and the requirements of the Good Friday agreement.The move is widely expected to cause ructions within both the Conservative party and between the government and the Democratic Unionist party, whose 10 MPs give Theresa May her working majority in the House of Commons.The UK will be put under even greater pressure to offer up a vision of the future relationship that will deliver for the entire UK economy, but the inability of that model to ensure frictionless trade is likely to be exposed. A meeting of the cabinet to discuss the Irish border on Wednesday failed to come to any significant conclusions. The EU’s chief negotiator, Michel Barnier, told reporters at the end of the latest round of talks in Brussels on Friday that of the three options left open at talks before Christmas to solve the problem of avoiding a hard border, it was only full regulatory alignment that was currently viable.

Bailed-Out RBS Systemically Forged Customer Signatures: Whistle-Blowers -  The Royal Bank of Scotland, the UK mega-lender that has already cost British taxpayers over £90 billion in bailouts, losses, fines and legal fees, could be about to face its biggest scandal yet following allegations staff were routinely “trained” to forge customer signatures.First, managers were taught how to fake the names on key customer documents, according to whistle-blowers at the bank, cited by the Scottish Mail on Sunday. Staff were then allegedly shown how to download authentic signatures from the bank’s online system, trace them on to new documents by holding them against a window and to photocopy the paperwork a number of times, to “obscure the image somewhat” and thus avoid detection — a blatantly criminal practice that allegedly became commonplace throughout the bank to speed up processing.The latest allegations are further confirmation of just how poisoned a legacy the pre-crisis management team left behind at the bank. Obsessed with achieving rapid growth at just about any cost, executives “bred a culture of impunity that affected most aspects of [RBS’] business,” says British financial journalist Ian Fraser. It was small business customers that suffered most at RBS’ hands. The bank’s Global Restructuring Group, which was supposed to help turn compromised business customers around, did everything it could to push them over the edge in order to raise quick funds during the financial crisis. Two weeks ago, a government inquiry into the scandal published a tip sheet written by a GRG manager that included points such as “Rope: sometimes you just have to let customers hang themselves.” The GRC deliberately “knee-capped” business customers they didn’t particularly like, through various techniques such as phony valuations or misselling them deadly interest rate swaps, so that the bank could pretend they were in breach of conduct, says Fraser. Then, as a favor to a larger company it valued much more, the group would sell it the smaller company or its remaining assets at a discount and pocket the change. In this manner the group is alleged to have wiped out thousands of smaller companies at the height of the financial crisis.

Crash of Outsourcing Giant Capita with 70,000 Employees Globally Sparks New Panic - Since the sudden downfall of the British infrastructure giant Carillion two weeks ago, investors’ nerves in London are frayed. And short-sellers, scanning the horizon for their next prey, seem to have found it. Its name is Capita. It is one of the UK government’s biggest outsourcing firms with contracts to provide services to government entities, such as NHS cleaning, school dinners, and prison maintenance. It has 70,000 employees in the UK, Europe, South Africa, and India.On Wednesday, its shares tumbled 47.5% to a 15-year low after its new CEO, Jon Lewis, slashed profit forecasts, announced plans to tap the capital market for £700 million, and suspended a dividend that was worth more than £200 million to shareholders last year.On Thursday, the rout continued , with shares dropping a further 13%. In a desperate bid to calm market nerves at the height of Wednesday’s rout, the UK government released a statement insisting that Capita was “not another Carillion.” But W hatever the Government Might Say, There Is a Striking Resemblance Between the Two Companies:Like Carillion, Capita is massively dependent on government contracts. In the last two years alone it was awarded 226 public sector contracts — 10 times more than Carillion — making it the biggest supplier of local government services in the country, according to public sector data provider Tussel.Like Carillion, Capita is massively in debt, with an estimated £1.1 billion of funds outstanding. And like Carillion, it’s been exceptionally generous with its dividend policy in recent years. So did it, as Carillion is accused of doing, borrow money and sell-off assets in order to pay its dividends, in direct contravention of UK law?Like Carillion, Capita has a pension shortfall, estimated to be around £380 millioin, but, as happened with Carillion, it could grow in the coming days as the full extent of its long-term liabilities becomes clear.Capita also shares the same auditor as Carillion, KPMG, whose alleged role in cloaking Carillion’s financial reality is already under investigation by two parliamentary inquiries.

The Amazon worker: paid £18,000 a year to shift 250 items an hour - If I’ve learned anything from doing this job, it’s that money can’t replace time. I work four nights a week in an Amazon warehouse near my home in Southend-on-Sea. It’s quite a cold place to work and, apart from two half-hour meal breaks, I’m on my feet for 10 and a half hours. I scan the items the trucks bring in from distributors and place them into the right cart for the robots to take to the correct place in the warehouse.I have to put away each item in 15 seconds or less, and get through 250 in an hour, or I’ll be given a warning by a manager. Stepping away from my station to, say, get a drink of water can have a big impact on my performance.During my half-hour breaks I rush downstairs to have something to eat. It’s stressful – and it definitely affects my health, standing up for hours on end. I worry I may pass out if I don’t rest during my meal breaks. I’ve lost a lot of weight since I started.  I live with my parents, and pay them £50 a week for rent and food. I also spend £50 a week travelling to work. Apart from that, I don’t spend much on anything. That means two-thirds of the money I take home every month – about £1,000 – just sits in my bank account.It’s weird, but it’s like money’s become almost meaningless. Before I took this job, I used to spend money doing things with friends, but now I work such anti-social hours, it’s difficult to meet up. I feel like I’ve lost who I was.I end up spending most of my time off trying to sleep. The shifts I have to work never change, so I don’t like to reset my sleeping pattern when I’m not working. During the week I get so focused on work, it’s hard to switch off. I’ll lie in bed for hours, trying to drift off. Sometimes, I only get four hours’ sleep between shifts.  I haven’t wanted, recently, to do things. Plus, seeing all the different items people buy from Amazon actually puts me off buying stuff. After you’ve handled something 200 times, somehow you no longer want it. When Jamie Oliver brings a new bestseller out, I curse him.