Wednesday, November 16, 2016

48 Hours In Facebook’s Unreality

Mark Zuckerberg thinks it’s a ‘crazy idea’ that fake news on Facebook helped put Trump in the White House. He should take a gander at the most shared stories of the last two days.

The Daily Beast
November 16, 2016

In the fact-free world of what trends on Facebook, everything is going swimmingly in Donald Trump’s America over the last 48 hours—even if none of it is true.

America’s biggest celebrities are flipping to Trump, manufacturing plants are shutting down in Mexico and moving back to Ohio, and Barack Obama is admitting to mountains of treasonous activities on Facebook since Monday morning.

But none of that is happening in reality, a distinctly different place from the news on the most popular social network on earth, even if millions of its daily active users—and Facebook’s CEO—are unable to recognize the disconnect.

Mark Zuckerberg has been in the crosshairs this week, even from within his own company, for saying he believes “it’s a pretty crazy idea” that “fake news on Facebook, which is a very small amount of content, influenced the election in any way.”

He should take a look at the most shared stories on his website, according to trend analysis site Trendolizer, and see if he can reconcile his PR statement with the truth.

Early Monday, exclusively on Facebook and a series of websites like, one of America’s biggest celebrities, Denzel Washington, offered up a full-throated endorsement of Trump.

“Denzel Washington Backs Trump In The Most Epic Way Possible,” the headline read. “Denzel is now Team Trump!”

The story was shared 10,000 times from a single source—American News’ Facebook page—in its first six hours on the web. The post garnered 80,000 likes in a half of a day.

Nothing about the post is true, but that didn’t seem to matter to American News, which has 5.5 million followers and an account verified by an employee at Facebook.

American News, which on Tuesday posted stories like “Michelle Obama Exposed for the Pervert She Really Is” (the website calls her “Moochelle” in its posts), “‘The View’ Is About to Get Shut Down,” and “BREAKING: Hillary Clinton to Be Indicted… Your Prayers Have Been Answered,” has 700,000 more subscribers than The Washington Post on Facebook.

None of those stories are true.

But American News is nowhere near the lone source behind the intentionally fake news that took over Facebook in the last 48 hours.

According to Trendolizer, a variation on EndTheFed’s story “Since Donald Trump Won the Presidency… Ford Shifts Truck Production from Mexico to Ohio” trended three times over the last 24 hours.

Ford shifted its truck production from Mexico to Ohio in August 2015, not this week, and the move had nothing to do with Trump. That didn’t seem to matter for EndTheFed, whose post was shared 15,000 times, or, whose nearly verbatim post trended later on Monday.

By the time’s headline “BREAKING: Since Donald Trump Won The Presidency Ford Shifts Truck Production From Mexico To Ohio” racked up 20,600 shares, there was a startling development in the real world.

Ford CEO Mark Fields announced his company was doing the opposite of the viral reports on Facebook. “Ford Motor Co. is moving ahead with plans to shift production of small cars to Mexico from Michigan,” Reuters reporter Alexandria Sage wrote at 5 p.m. on Tuesday.

Current President Barack Obama also had a busy day in the fake news world, when his “lawyers” were forced to “officially admit [his] birth certificate is fake,” according to the Facebook pages Conservative Country and The American People News, whose stories have pushed past 6,000 shares and 50,000 likes since Monday. The story is a total fabrication.

In Facebook’s universe, “3 million illegal aliens” are also “Under Investigation for Voting… After Obama Told Them It Was OK.” The group “100 Percent FED Up” netted more than 18,000 shares in the last 48 hours with that headline. Obama, for what it’s worth, did not tell undocumented immigrants to vote, and 3 million people are not under investigation.

Of course, this has no effect on the pop-up websites—often one-person operations—that can earn up to $3,000 a day by appealing to the emotions of Americans on Facebook with quasi-official-looking “news,” but without any of the facts.

As BuzzFeed News reported days before the election, more than 100 pro-Trump sites were created by Macedonian teenagers attempting to skirt labor laws and earn a paycheck on the web by appeasing an easy-to-dupe American electorate.

BuzzFeed then reported this Monday that “renegade Facebook employees” have formed a task force to challenge their CEO on his public position that fake news poses no problem to the company’s users.

“It’s not a crazy idea. What’s crazy is for him to come out and dismiss it like that, when he knows, and those of us at the company know, that fake news ran wild on our platform during the entire campaign season,” one anonymous Facebook staffer told BuzzFeed.

By the end of the day Tuesday, even fake news sites had become more self-aware than Zuckerberg.

A trending story headlined “BREAKING: Hillary Clinton Breaks Silence—Is Preparing to Fight for the White House!” on begins like this:

“One of the top reasons Democrats feel Hillary lost, is due to the vast amount of fake news sites that cram Facebook with their sensationalistic headlines, such as ‘Hillary Will Be Indicted By The FBI—Your Prayers Have Been Answered!’” the post reads. “Now, the Clinton team plans to fight back.”

The Clinton team does not plan to fight back. And neither, for now, does Mark Zuckerberg.

Article Link To The Daily Beast:

To Woo Trump, Will Kremlin Show Restraint In Syria?

Russian officials do not expect President-elect Donald Trump to roll over for President Vladimir Putin and are pondering a wide range of options the new US leader will present on the Middle East.

By Maxim A. Suchkov
November 16, 2016

The first phone conversation between President Vladimir Putin and President-elect Donald Trump took place on Nov. 14. The official press release read, “Putin and Trump agreed that the current state of US-Russia relations is unsatisfactory and agreed to actively work toward their normalization and constructive cooperation on a broad range of issues.” It also stated that both parties emphasized the need to “return to a pragmatic, mutually beneficial cooperation that meets the interests of the two states as well as stability and security in the world.”

For some, the tone of the conversation as well as its underlying message inspired hopes for a renewal of the relationship between Moscow and Washington; for others it was an embodiment of the worst fears associated with the “Trump-Putin tandem.” Until now, most assessments of Trump’s possible presidency were that as an amateur in international politics, Trump would inevitably be outfoxed by Putin, based on Trump’s positive remarks about him.

These statements, however, should be seen in a specific context, which was Trump’s criticism of what he perceived to be Obama’s inaction and weakness. To assume that this would mean that Trump would be obedient to Putin is a fallacy. Rather, Trump’s expressions of respect for Putin betray an ill-concealed desire to follow the Russian president's example as a decisive and tough leader. Given that Trump is known as a tough negotiator, Moscow doesn’t expect that dealings with the United States in Syria or elsewhere will be as easy as they have come to be portrayed.

In his own personal letter to the US president-elect, Russia’s leading foreign policy analyst, Fyodor Lukyanov, attempted to draw Trump's attention to two important things: “First, in 'big politics' a lot can be bargained — but not everything. Second, while businessmen may choose to change partners if they don’t like doing business with them, politicians cannot. There’s simply no place else to go.” Even if the first contact between Putin and Trump brings hope for a positive change, a lot will depend on how Trump is to digest and follow this philosophy through his dealings with Putin.

On specific foreign policy fronts, Syria is clearly the most daunting problem for the two states in the region at the moment. Both Moscow and Washington continue to support their respective warring parties on the ground and promote seemingly uncompromising narratives. However, problems associated with the post-war Syrian settlement — including a new constitution, the formation of a transitional government and the restoration of the country — ironically offer immense potential for cooperation. It seems that both parties believe that navigating through the military stage of the conflict into the diplomatic realm is a must but until now, there was no visible route. The fact that Putin and Trump, according to the press release, “shared the necessity to unite efforts in the fight against Enemy No. 1, which is international terrorism and extremism” and discussed “issues of settling Syria in this paradigm” seems to offer such a route or at least pave a way for it.

Should Trump indeed decide to focus on the fight against the Islamic State and Islamic extremists in general, it would create some solid ground for cooperation with Moscow. Yet his actual policy may be more nuanced, and at this point the equation has many unknowns, especially given genuine opposition to such cooperation within the Pentagon. Changing this situation is a serious challenge, and the key question people in Moscow are asking these days is: Given that Trump is hard pressed on every side already, will he be forced to compromise his position on Russia for the sake of a “deal” with the Washington establishment — including his own party, where the level of antagonism vis-a-vis Moscow is high? Or will he remain determined to fix the relationship with the Kremlin — albeit for the pragmatic reasons of safeguarding US national interests as he sees them?

For now, Moscow will try to reinforce Trump’s vision at the international level. For the last couple of months, Moscow has been bracing for the worst-case scenario of what might have been President Hillary Clinton’s policies — namely the potential introduction of a no-fly zone in Syria and increasing financial, military and political support for the Syrian opposition. Now that this scenario seems to be off the table, Russia may choose to lower its deterrent capabilities as a bargaining chip or even as a concession toolkit. So far, the pattern that has been crystallizing is that the Kremlin wants to send all kinds of positive messages to the US president-elect by dramatically decreasing its military strikes, by not responding to what until recently would have been considered NATO provocations and by tempering anti-American rhetoric. The current Russian criticism against the United States by and large targets US elites — not America as a country or even as a state.

If prospects for cooperation on Syria look more promising now, other fronts may be more complicated. One of the most underestimated tracks in the Middle East might be the coming tug-of-war over Iran. Russia's tactical alliance with Tehran on Syria and a relative consensus on a broad regional agenda is a work in progress for Moscow, not a given variable. Trump may be expected to restore the dented relations with Gulf monarchies, even though regional elites are skeptical about such a prospect at this point. Yet the deal with Iran that the Obama administration negotiated is unlikely to be rejected, although there will definitely be an attempt to renegotiate it so that it better favors American and Israeli interests. Moscow will be watching this track and exploring its options in all of this.

The role of strong regional power brokers will increase and so will the need for quality relations with them. Russia has been relatively successful in forging good relations with Egypt, Iran, Israel and — with a mixed record — Turkey. However, Moscow should now be ready to embrace a different reality: Regardless of how regional rulers feel about Trump, there’s a call for a fresh start in relationships with the United States across the region. In this regard, it’s quite symptomatic that Egyptian President Abdel Fattah al-Sisi was one of the first international leaders to congratulate Trump on his victory. Should Trump take advantage of the opportunity to restore US relations with its allies, Moscow may be forced to work out a different type of relationship with these states.

On a bigger scale, Moscow is pondering whether Trump will promote some strategic vision for the Middle East similar to one his Republican Party fellows promoted under President George W. Bush. Moreover, he will face a choice that Clinton also would have had to make had she been elected — does America want a greater political presence in the region, or would it rather minimize its engagement, either for the sake of continuing an Asia-Pacific pivot or to concentrate on US domestic issues? Depending on how these questions are addressed, Russia and the United States could either switch to a cooperative mode or slip back into an adversarial one.

Finally, timing is important. Given that next US election cycle starts virtually the day after the inauguration of the new president, four years in office might too short for Trump to set up the right paradigm for relations with Moscow, while long enough to plunge them further down. Therefore, there are two vital goals for Washington and Moscow. First, their leaders need to create a clear — and realistic — vision of what they would like to achieve within two years, and second, they must preserve a single-minded determination to keep their options open for any opportunities to reduce conflicts that may emerge — such as the ones sprouting up now.

Article Link To Al-Monitor:

To Woo Trump, Will Kremlin Show Restraint In Syria?

Trump’s First Chance To Silence His Foreign Policy Critics

By Benny Avni
The New York Post
November 16, 2016

President-elect Donald Trump already has a chance to prove wrong the chorus of foreign-policy critics who hounded him on the campaign trail.

On Thursday, Trump is expected to conduct his first meeting with a foreign leader since the election. It’ll be with Japanese Prime Minister Shinzo Abe.

Good idea. Japan is America’s most important ally in Asia.

Abe is on his way to a summit meeting in Peru, and he’ll need to stop to refuel. So in a phone conversation last week, he and Trump decided to meet in New York. But on Tuesday, Japanese officials reportedly had yet to finalize the “venue and menu” with the incoming presidential team. (Let’s hope Trump doesn’t invite him for sushi at Trump Tower.)

Forget the menu; what’s on the agenda?

Almost certainly, it’ll include trade. This week, the much-maligned Trans Pacific Partnership deal was declared “challenged” even by President Obama’s national-security adviser, Susan Rice. That’s an understatement. The Japanese lower house of government ratified the 12-country trade pact this week. But in America, it was already in trouble before the election — and now looks nearly dead.

Japan and the United States are the top “partners” among the TPP countries who’ve spent years negotiating the pact, which is designed to reduce tariffs and create a trading bloc to counter China’s growing economic clout.

Trump led the charge against the trade deal during the campaign. But that doesn’t mean he’ll have nothing to offer Abe.

He might broach the idea of a bilateral trade deal between the United States and Japan. Trump has repeatedly said he doesn’t oppose trade, just deals that put American workers at a disadvantage. Now he can set a new course, protecting his protectionist flank while advancing an important US alliance.

Other Pacific partners will be encouraged to strike similar deals, so the strategic goal of reducing China’s considerable economic edge in the region and beyond is maintained.

And speaking of China, Trump can offer a more rigorous response than Obama has to its expansionist aggression.

Japanese leaders are livid with China for trying to claim ever more territory in the Senkaku Islands, a fishing-rich region long administered by Japan but which Beijing claims sovereignty over. Japan needs more assurances than it’s got so far that America is and will remain in its corner.

Can Trump provide them? Maybe.

True, the compliment-prone president-elect was overly pleased after a friendly phone call with Chinese Premier Xi Jinping last week. Yet, top secretary of state prospects Rudy Giuliani and John Bolton have long expressed principled solidarity with Asia’s democracies, and wariness toward China’s increased aggression and authoritarianism.

And remember: On the campaign trail, Trump said he wanted Japan and other Asian allies to shoulder more responsibility for their own defense, even suggesting Japan and South Korea could obtain nukes to counter North Korea.

Considering Japan’s Hiroshima trauma, that’s unlikely. But Abe may be open to other ideas.

The hawkish Japanese leader has long pushed for changes in the Japanese constitution’s Article 9, which forbids using the military to settle disputes. (But allows self-defense.)

Times have changed since the post-World War II setting in which the United States set those restrictions on Japanese military activity. Abe is calling to change the “antiquated” rules.

So in Trump, Abe can get an American booster for his proposed constitutional reform. And Trump can demonstrate his ability to nudge America’s partners to contribute to their defenses by allocating more resources and raising military budgets.

But Trump, who had vowed on the trail to rebuild the US military, will be remiss if he neglects to signal that the old America is back in business, ready to resume our primacy in steering global affairs. So with Abe at his side, Trump can say that, yes, we’ll rebuild our military, but also, our partners will chip in more than they have been.

A productive meeting with Abe, in other words, could do a lot to show that Trump’s campaign slogans can actually translate into some good in the world.

And who knows, Trump, accused of isolationist tendencies, may finally also put some flesh on the “pivot to Asia” — bringing to fruition a promise mostly unfulfilled by his predecessor.

Article Link To The New York Post:

Harlem Gives President Trump A Chance

The black community isn’t despondent or angry. ‘If Trump can go in there and shake things up,’ one man says, ‘I’d like that.’

By Jason L. Riley
The Wall Street Journal
November 16, 2016

This may come as a shock to the political left, but not everyone who opposed Donald Trump is as angry or despondent as the demonstrators who grabbed headlines nationwide over the past week or the pundits who intellectualized the Democratic hissy fit.

On Monday I took a stroll around New York City’s Harlem neighborhood and asked a couple of dozen black residents to respond to the election and subsequent protests. I didn’t come across any Trump voters—or at least any who admitted it—but many told me they had expected Hillary Clinton’s defeat. No one thought it was the end of the world.

“Hillary wasn’t strong enough. She didn’t fight enough,” said a gentleman leaving a drugstore, who introduced himself as Pace. “People saw her as weak and thought she’d be weak in the White House.” He also faulted Mrs. Clinton’s message. “She was talking about what she did in other countries as secretary of state. I can understand the situation around the world, but we live here.” Mr. Trump, in contrast, “was talking about the people who live here—the poor, the veterans.”

When I asked Pace, who retired from a job in dress manufacturing several years ago, if he thought Mr. Trump would ever win him over, he responded: “He said he’d protect Medicare. I can go along with that. He said he’d get rid of the Bloods and the Crips and the gangs—get them out of here. I like that. If he does those two things, he’s my man.”

At a nearby hair salon, the proprietor, a 30-something West African woman who asked me not to use her name, said Mrs. Clinton lost because the country “didn’t want a female president, wasn’t ready for it.” Still, she’s optimistic about a Trump administration. “I think things will be different in a good way. He might surprise us. I don’t think he’s a bad person. It’s just the way he talks. He was real and people like that. I don’t think he’ll do the really crazy things like deporting everybody.”

Derrick, an off-duty police officer, told me that he considers Mr. Trump a con artist who tricked people into voting for him and won’t come through, especially on his promise to bring back manufacturing jobs. “But I’ll give him this,” he said. “She was not talking about securing this country, and that’s what he was talking about. People are watching people get blown up by these terrorists, and they’re scared, and she was talking about an open border. She didn’t emphasize scrutinizing the people who are coming in, and he did.”

Outside a storefront church on Frederick Douglass Boulevard, Bishop Gibson sat staring at his smartphone. He was eager to get some things off his chest when I approached. “First, it doesn’t bother me a bit if Trump is in there or not,” he said. “I don’t lose a minute’s sleep. My president is Jesus.” The bishop told me that some of his congregants were concerned about what the new president would do, but not enough to be demonstrating in the streets. “I don’t understand. You’re protesting, you’re rioting, but did you vote? Some did, but a lot didn’t.”

Bishop Gibson said Mr. Trump’s “law and order” message resonated with Harlemites but that ultimately “the president can’t do much about crime.” It has to start with the communities—churches, families and fathers in particular, he said.

This is a message heard often in black neighborhoods by people who aren’t professional agitators with political agendas. “These protesters,” he said, “tearing up stores and businesses and apartments, won’t solve nothing.”

Then the bishop chuckled. “Do you remember that video of the woman who saw her son protesting and went and hit him upside the head?” he asked, referring to the viral clip of Toya Graham, the Baltimore mother who caught her son participating in last year’s riots. “I really admire that woman.”

The anti-Trump demonstrations are in many cases organized and supported by people who make a living manufacturing outrage: Al Sharpton’s National Action Network,, Showing Up for Racial Justice, the Equity Coalition. And the protests are likely to continue, off and on, at least until the president-elect’s inauguration.

But Mr. Trump should understand that some of the minority voters who opposed him are open-minded, even swayable. They are more tolerant than the Democratic partisans and professional protesters would have him believe. The people I spoke with want to see their president succeed, not to deny his legitimacy because their preferred candidate didn’t win.

They’re keeping things in perspective. They haven’t written him off. As Pace put it, “If Trump can go in there and shake things up a little—he ain’t got to complete everything—but shake things up and make things a little better, I’d like that.”

Article Link To The Wall Street Journal:

President Trump’s Toughest Foe: The Bureaucracy

By Betsy McCaughey
The New York Post
November 16, 2016

Donald Trump’s triumph over Hillary Clinton presages an even bigger battle ahead against the heart of the Democratic establishment: the federal workforce. This army of bureaucrats — almost 3 million strong — gave Clinton a large majority of their votes and over 90 percent of their campaign contributions.

Expect federal workers and their union bosses to use every trick in the book to block Trump’s reform agenda.

Trump’s ability to fix the Department of Veterans Affairs, clean up IRS abuses, rollback job-killing regulations and get taxpayers their money’s worth all hinge on uprooting the entrenched civil service. Newt Gingrich, a top Trump advisor, warns: “If you don’t fix this problem, nothing in government is going to work.”

That’s a tall order. The bureaucracy generally has a vise-like grip on the executive branch — presidents come and go, but the bureaucrats remain.

Public unions are already digging in for a fight. After the election, J. David Cox, president of the American Federation of Government Employees, dismissed Trump’s plans as more or less irrelevant. AFGE members have their own big-government agenda, and “that never changes no matter who sits in the White House.” Protection of the status quo at any cost.

Even deaths. Thousands of sick vets died at VA hospitals because of employee self-dealing. Bureaucrats doctored the medical waitlists to earn bonuses while vets languished without care.

Despite Congress enacting “reforms” and President Obama appointing a new VA secretary in 2014, the bureaucracy continues to block giving vets access to civilian care. How hard is it to fire anyone at Veterans Affairs? One surgeon found guilty of abandoning a patient on the operating table and leaving the medical center still got an $11,000 bonus.

As a candidate, Trump promised to make swift changes. Exit polls show military families voted for him 2-1 over Clinton. Dan Caldwell of Concerned Veterans for America says he’s encouraged to see civil-service reform at the top of Trump’s agenda.

The same changes needed to turn around the VA have to be made across all federal departments. Right now, workers found guilty of serious misdeeds like tax evasion, watching porn on the job or fraudulent collection of unemployment benefits typically keep their jobs and get bonuses.

Firing requires so many months of documentation, hearings and appeals that bosses decide it’s not worth the trouble. No-show jobs are rampant, costing $1 billion a year. Supervisors ignore the waste, and just hire someone else to get the work done.

Breaking up the federal-employee protection racket will require muscle from Congress and the Department of Justice. Obama’s DOJ obstructed efforts to fire wrongdoers and incompetents. Now, with the White House and Congress under Republican control, taxpayers have a fighting chance.

A bipartisan VA reform bill with real teeth has already passed the House and is ready for Senate action. It will shorten the process for firing and demoting senior VA personnel, even eliminating appeals to the misnamed Merit Systems Protection Board, which protects criminals and deadwood, not merit.

Count on fierce opposition from union-funded pols like Sens. Bernie Sanders (D. Vt.) and Richard Blumenthal (D. Conn.), who gutted previous efforts to hold VA employees accountable.

Will Trump, a newcomer to Washington, succeed where other presidents have failed? Possibly. He’s shown he gets his money’s worth. After all, he defeated spendthrift Clinton with less than a quarter of the campaign staff and half the spending.

But federal employees will scramble to stay on the gravy train. They earn a whopping $123,160 a year on average — about a third more than private-sector employees — get over a month’s paid vacation and don’t lose sleep over getting fired. Hard to call them civil “servants.”

Obama hiked their pay, and Clinton promised to give them even more, after which she happily received their votes. One hand washes the other. Trump understands who should be calling the shots in Washington, DC: not federal bureaucrats but the taxpayers who cover their salaries.

Article Link To The New York Post:

Wednesday, November 16, Morning Global Market Roundup: Asia Shares Win Reprieve As Dollar Rally, Bond Rout Pause

By Hideyuki Sano 
November 16, 2016

A pause in both the sell-off in global bonds and sharp rise in the dollar following Donald Trump's election victory, together with Wall Street's record high overnight helped Asian shares steady on Wednesday.

U.S. President-elect Trump's plans to cut taxes and boost infrastructure spending would boost demand while his proposals to deport illegal immigrants and impose tariffs on cheap imports, if implemented, are seen likely to drive inflation higher.

That prospect has given rise to expectations that U.S. interest rates will rise faster than earlier anticipated, making the dollar stronger, but investors are still trying to assess what opportunities a Trump presidency will bring.

"The markets are having a bit of a pause at the moment. But people still want to do more of this trade," said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management in Tokyo.

"If you look at the U.S. markets, investors are looking at coming infrastructure spending and so on and they are rotating to stocks from bonds."

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent, bouncing back from a four-month low touched earlier this week.

European shares are expected to rise as well, with spread-betters expecting Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI opening up about one percent.

The dollar's strength has fanned fears investors could shift funds to the United States from emerging markets.

Emerging market stocks .MSCIEF, which had fallen 7 percent over the four sessions until Monday, also extended gains for a second day on Wednesday.

Japan's Nikkei .N225 rose 1.1 percent to nine-month high on Wednesday, thanks to the dollar's strength against the yen.

The dollar was trading at 109.08 yen JPY= in late Asian trade, having slipped slightly off high of 109.34 yen struck on Tuesday.

On Wall Street, the Dow Jones industrial average .DJI rose 0.29 percent to a record high while the S&P 500 .SPX gained 0.75 percent.

Since Trump's unexpected victory last week, U.S. shares have rallied while U.S. bond prices tumbled, pushing up their yields sharply.

The yield on 10-year U.S. Treasuries US10YT=RR slipped to 2.207 percent from Monday's 11-month high of 2.302 percent, although that is sharply above its levels around 1.86 percent before the election.

U.S. retail sales rose more than expected in October, pointing to sustained economic strength that could allow the Federal Reserve to raise interest rates next month.

U.S. interest rate futures <0> are pricing in an 85 percent chance of a rate hike, compared to 75 percent before the election.

The two-year U.S. notes yield fell to 0.989 percent US2YT=RR on Wednesday, having hit a 10-month high of 1.029 percent on Tuesday.

Nikko SMBC Securities estimates U.S. two-year notes are currently pricing in five Fed rate hikes in the next two years, said senior strategist Makoto Noji.

"If we base our assumption on (Fed Chair Janet) Yellen's gradualist approach, which can be roughly translated as two rate hikes per year, we could say that the market has already priced in tightening they could reasonably imagine at this point," Noji said.

"But of course if Trump's policies stoke inflation that cannot be contained by two rate hikes per year, the U.S. bond market could see big moves again," he added.

Sharp gains in U.S. bond yields have drawn investors to the dollar, and its index against a basket of six major currencies .DXY =USD hit its highest level in almost a year on Tuesday.

It slipped slightly in Asia on Wednesday to 99.973, but was still just 0.5 percent away from reaching its highest level in more than 13-1/2 years.

The euro EUR= traded at $1.0748, a tad above Monday's $1.0709, its lowest level in almost a year.

The Chinese yuan CNY=CFXS also weakened to 6.8703 to the yuan, its weakest level since December 2008.

Gold XAU= traded at $1,231.5 per ounce, not far from a 5 1/2-month low of $1,211.8 seen on Monday.

In contrast, oil prices extended gains, shrugging off an industry report that showed an unexpected build in U.S. crude stocks, and adding to gains of nearly 6 percent from the previous session.

Oil prices had surged on Tuesday as members of he Organization of the Petroleum Exporting Countries (OPEC) were set to renew efforts on concrete steps to implement a deal on cutting output in the face of a persistent global glut.

Brent LCOc1 futures, the global benchmark, rose 0.8 percent to $47.32, hitting their highest levels in about two weeks.

Elsewhere, iron ore futures in China DCIOcv1 slumped 7 percent as investors pared bullish bets in a commodity still hit by excess supply after its massive rally in the past several weeks.

Article Link To Reuters:

Oil Prices Extend Rally, Shrug Off U.S. Stock Build

By Aaron Sheldrick 
November 16, 2016

Oil futures rose on Wednesday, shrugging off an industry report that showed an unexpected build in U.S. crude stocks, and adding to gains of nearly 6 percent from the previous session.

Oil prices had surged on Tuesday as members of he Organization of the Petroleum Exporting Countries (OPEC) were set to renew efforts on concrete steps to implement a deal on cutting output in the face of a persistent global glut.

U.S. benchmark crude CLc1 was up 14 cents at $45.94 a barrel. On Tuesday, the contract surged 5.8 percent to $45.81 per barrel in its biggest intraday percentage rise since early April.

Brent LCOc1 futures, the global benchmark, rose 20 cents to $47.15, after spending most of the Asian session in negative territory. They settled up 5.7 percent at $46.95 a barrel in their largest percentage gain since Sept. 28.

Both contracts had opened lower after Asian trading started following an after-hours report on Tuesday from the U.S. industry group, the American Petroleum Institute (API), that showed crude stocks rose last week.

"Given the size of the move and that the market finished pretty to its highs it is a situation that likely favors the move continuing a little longer," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

OPEC agreed to an outline of a supply cutting deal in September but with two weeks to go before a Nov. 30 meeting, disagreements persist among members and non-OPEC Russia on crucial details.

OPEC secretary-general Mohammed Barkindo will travel to member nations, including Iran and Venezuela, over the next few days to discuss the deal.

"Should an agreement to limit production come through, it will be the first in eight years," Jingyi Pan, market strategist at IG in Singapore, wrote in a note.

"There remains event risks from U.S. inventory reports in addition to non-OPEC members' stance that could jeopardize the current recovery pace of oil prices," Pan said.

Crude inventories climbed by 3.6 million barrels to 488.8 million barrels in the week ended Nov. 11, the API report showed, compared with analyst expectations for an increase of 1.5 million barrels.

Official figures on stockpiles from the U.S. Energy Information Administration are due later in the day.

Article Link To Reuters:

Straight Talk On Trade

By Dani Rodrik
Project Syndicate
November 16, 2016

Are economists partly responsible for Donald Trump’s shocking victory in the US presidential election? Even if they may not have stopped Trump, economists would have had a greater impact on the public debate had they stuck closer to their discipline’s teaching, instead of siding with globalization’s cheerleaders.

As my book Has Globalization Gone Too Far? went to press nearly two decades ago, I approached a well-known economist to ask him if he would provide an endorsement for the back cover. I claimed in the book that, in the absence of a more concerted government response, too much globalization would deepen societal cleavages, exacerbate distributional problems, and undermine domestic social bargains – arguments that have become conventional wisdom since.

The economist demurred. He said he didn’t really disagree with any of the analysis, but worried that my book would provide “ammunition for the barbarians.” Protectionists would latch on to the book’s arguments about the downsides of globalization to provide cover for their narrow, selfish agenda.

It’s a reaction I still get from my fellow economists. One of them will hesitantly raise his hand following a talk and ask: Don’t you worry that your arguments will be abused and serve the demagogues and populists you are decrying?

There is always a risk that our arguments will be hijacked in the public debate by those with whom we disagree. But I have never understood why many economists believe this implies we should skew our argument about trade in one particular direction. The implicit premise seems to be that there are barbarians on only one side of the trade debate. Apparently, those who complain about World Trade Organization rules or trade agreements are awful protectionists, while those who support them are always on the side of the angels.

In truth, many trade enthusiasts are no less motivated by their own narrow, selfish agendas. The pharmaceutical firms pursuing tougher patent rules, the banks pushing for unfettered access to foreign markets, or the multinationals seeking special arbitration tribunals have no greater regard for the public interest than the protectionists do. So when economists shade their arguments, they effectively favor one set of barbarians over another.

It has long been an unspoken rule of public engagement for economists that they should champion trade and not dwell too much on the fine print. This has produced a curious situation. The standard models of trade with which economists work typically yield sharp distributional effects: income losses by certain groups of producers or worker categories are the flip side of the “gains from trade.” And economists have long known that market failures – including poorly functioning labor markets, credit market imperfections, knowledge or environmental externalities, and monopolies – can interfere with reaping those gains.

They have also known that the economic benefits of trade agreements that reach beyond borders to shape domestic regulations – as with the tightening of patent rules or the harmonization of health and safety requirements – are fundamentally ambiguous.

Nonetheless, economists can be counted on to parrot the wonders of comparative advantage and free trade whenever trade agreements come up. They have consistently minimized distributional concerns, even though it is now clear that the distributional impact of, say, the North American Free Trade Agreement or China’s entry into the World Trade Organization were significant for the most directly affected communities in the United States. They have overstated the magnitude of aggregate gains from trade deals, though such gains have been relatively small since at least the 1990s. They have endorsed the propaganda portraying today’s trade deals as “free trade agreements,” even though Adam Smith and David Ricardo would turn over in their graves if they read the Trans-Pacific Partnership.

This reluctance to be honest about trade has cost economists their credibility with the public. Worse still, it has fed their opponents’ narrative. Economists’ failure to provide the full picture on trade, with all of the necessary distinctions and caveats, has made it easier to tar trade, often wrongly, with all sorts of ill effects.

For example, as much as trade may have contributed to rising inequality, it is only one factor contributing to that broad trend – and in all likelihood a relatively minor one, compared to technology. Had economists been more upfront about the downside of trade, they may have had greater credibility as honest brokers in this debate.

Similarly, we might have had a more informed public discussion about social dumping if economists had been willing to recognize that imports from countries where labor rights are not protected do raise serious questions about distributive justice. It may have been possible then to distinguish cases where low wages in poor countries reflect low productivity from cases of genuine rights violations. And the bulk of trade that does not raise such concerns may have been better insulated from charges of “unfair trade.”

Likewise, if economists had listened to their critics who warned about currency manipulation, trade imbalances, and job losses, instead of sticking to models that assumed away such problems, they might have been in a better position to counter excessive claims about the adverse impact of trade deals on employment.

In short, had economists gone public with the caveats, uncertainties, and skepticism of the seminar room, they might have become better defenders of the world economy. Unfortunately, their zeal to defend trade from its enemies has backfired. If the demagogues making nonsensical claims about trade are now getting a hearing – and, in the US and elsewhere, actually winning power – it is trade’s academic boosters who deserve at least part of the blame.

Article Link To Project Syndicate:

Oil Wars - How The Kremlin's $13 billion Indian Deal Almost Fell Apart

By Dmitry Zhdannikov, Nidhi Verma and Katya Golubkova 
November 16, 2016

A multi-billion-dollar Russian deal to buy Indian refiner Essar was nearly sunk at the eleventh hour by a rival bid from Saudi Arabia as the two oil superpowers vie for supremacy across the world.

The deal between Essar and a consortium led by Kremlin oil giant Rosneft (ROSN.MM) appeared dead in the water two months ago after Saudi state energy firm Aramco weighed in, according to seven Russia, India and Saudi-based industry sources familiar with or involved in the negotiations.

It was salvaged due to the involvement of Russian President Vladimir Putin and Indian Prime Minister Narendra Modi, who were keen for it go through, and after the consortium agreed to pay $13 billion - more than double what Rosneft had initially valued Essar at, sources told Reuters.

This made the refiner the biggest-ever foreign acquisition in India and Russia's largest outbound deal.

The tussle for Essar - a state-of-the-art plant in the world's fastest-growing fuel market - illustrates the growing battle for oil markets between Russia and Saudi Arabia, the world's two largest crude exporters.

It also sheds light on the challenges OPEC member Saudi Arabia and non-OPEC Russia - which are also fighting a proxy conflict in Syria's civil war - will face in trying to clinch a global agreement to limit output growth to prop up oil prices.

The full details of how the Essar deal was struck remain unclear. Two industry sources said it was rescued thanks to the involvement of Putin and Modi while three other sources said Rosneft had simply outbid Saudi Aramco.

Officials in Modi's office declined to comment while Putin's spokesman Dmitry Peskov denied there was any Kremlin intervention in the deal.

"Naturally, we defend the interests of our companies. Of course we lobby for them, especially on such large deals," said Peskov, but added that in the case of Essar "there were no orders from the Kremlin".

"It was a corporate decision by Rosneft to gain synergies via cooperation with India," he said.

Rosneft and Saudi Aramco declined to comment.

Essar said it had held discussions with several potential buyers but had gone with the Rosneft consortium because their offer was considered the most attractive. It denied there was any intervention from Putin or Modi.


Rosneft boss Igor Sechin is keen to buy refining assets around the world to guarantee outlets for Russian oil. He had been negotiating since 2014 to buy 49 percent of Essar from its owners, Indian brothers Ravi and Shashi Ruia, and the two parties had been in exclusive talks since July 2015 when a preliminary deal was signed.

While the exact amount Rosneft was prepared to offer for the stake at that stage is unclear, Russian and Indian industry sources said it valued the whole of Essar at about $5.7 billion.

However it became apparent that there were problems with the deal in early September, when Sechin traveled to India to meet the Ruia brothers, flying from Hangzhou, China, where he had been part of Putin's G20 summit delegation.

Sechin walked into the meeting with the Ruia brothers soon after landing in India at 1 a.m., determined to close the deal, according to sources briefed on the discussions.

As the meeting started, one of the brothers told Sechin the deal process had been going on for too long, the exclusivity period had expired in July and Essar was now talking to other parties.

Those other parties included Saudi Aramco, he said.

According to the sources familiar with how the meeting unfolded, Sechin responded by saying that if Essar walked away from the deal it risked losing Russian financial and oil-supply support.

The Ruia brothers then said the talks with Rosneft were over and called an abrupt end to the meeting.

"People started leaving the room, embarrassed," one of the sources said. Another source said the Essar management had drafted a statement to say the deal with Rosneft was off.

Rosneft and Essar declined to comment on what transpired at the meeting, or on whether such a statement had existed. Sechin and the Ruia brothers could not be reached for comment.

Three Saudi-based sources familiar with details of talks between Essar and Saudi Aramco said the firm was seriously considering buying Essar. One of the sources said Aramco was prepared to pay up to $9 billion for all or most of the refiner.

Aramco declined to comment on whether it had made a bid.

Too Big To Fail

In the end, however, the Rosneft-Essar deal proved to be too big to fail.

For India, a deal collapse or a delay because of talks with another party would set back Modi's drive to clean up India's $140 billion mountain of bad debt given Essar's multi-billion-dollar debts to local and foreign banks after years of rapid expansion.

For Russia, the deal in the huge Indian market represented an important milestone in building a global oil empire despite Western sanctions imposed on Russia over its actions in Ukraine.

Facing the Saudi competition, Rosneft formed a consortium that bought 98 per cent of the refiner plus a fuel terminal for $13 billion. The Kremlin oil firm bought 49 percent - below the 50 percent level that would have fallen foul of Western sanctions - with Swiss trading house Trafigura and Russian private investment group UCP buying the other 49 percent.

According to the Indian and Russian industry sources, Rosneft and Essar returned to the negotiating table within days of the spat in early September, and the deal was finally struck.

One of the sources said there was a fierce battle between Essar and Rosneft over the terms. They said the Russian-led consortium was forced to outbid the Saudi offer, which they said comprised a combination of cash, long-term low interest credit and oil supplies.

Trafigura declined to comment on how the deal came together, while UCP did not reply to a written request asking for comment. Washington said the deal did not violate sanctions.

The deal was signed in Mauritius on Oct. 14, a day before a formal announcement on the sidelines of a BRICS summit in Goa where Putin and Modi met. The leaders also oversaw the signing of a raft of other transactions including India agreeing to pay $5 billion for Russian long-range air defense missile systems.

Two industry sources said the Essar deal had first been discussed by Putin and Modi as far back as May 2014 on the sidelines of the St. Petersburg Economic Forum, Russia's main investor show.

It was unclear what form - if any - high-level government intervention might have taken after the September dispute.

But the two sources said that without political will in Moscow and New Delhi, an agreement could not have been struck.

"Putin and Modi saved that deal," said one.

Article Link To Reuters:

Ride-Sharing For Pilots Is No Flight Of Fancy

A Supreme Court decision to review Flytenow v. FAA could make airplane flight-sharing an option for Americans.

By Jonathan Riches and Thomas P. Gross
The Wall Street Journal
November 16, 2016

From Uber to Airbnb, the “sharing economy” is revolutionizing industries by letting companies connect directly with consumers. If the Supreme Court decides to review Flytenow v. FAA, Americans could benefit from cost-sharing in the airline industry.

In late 2014 the Federal Aviation Administration banned private pilots from communicating travel plans and sharing flight expenses over the internet. That order shut down Flytenow, a startup that connected pilots and cost-sharing passengers online.

Around the same time, the European Aviation Safety Agency found compelling reasons to allow the very same cost-sharing operations in Europe. On Aug. 26, the agency authorized cost-sharing for general aviation flights in 32 countries. At least two companies similar to Flytenow, called Wingly and Off We Fly, now operate in the European Union.

In American aviation, cost-sharing isn’t a new thing. For over 50 years the FAA has allowed pilots and passengers to communicate about cost-sharing via email and phone as well as by posting notices on airport bulletin boards.

With seed money from Silicon Valley, Flytenow brought that practice into the digital age. And it was working until the FAA shut down the startup. The agency claimed that if a private pilot flying a four-passenger airplane used Flytenow to communicate travel plans and find people to share his expenses, that pilot should be regulated as a commercial flight operation.

Yet the FAA ignored a key difference between commercial and general aviation: Commercial pilots provide services to the public for profit; Flytenow pilots merely share expenses. By regulation, flight-sharing pilots must pay at least a pro rata share of flight expenses, so they can never earn a profit. The FAA’s conclusion also missed that pilots have a First Amendment right to communicate their noncommercial travel plans with others, even over the internet.

The FAA’s job is to ensure safety. Yet its rationale for deeming Flytenow dangerous is based on pre-internet policies. Web-based flight-sharing arrangements, where pilots are screened, and their experience and credentials are displayed for potential passengers, are actually safer than simply posting flight times on an airport bulletin board.

The Goldwater Institute challenged the FAA’s legal interpretation on behalf of Flytenow and the Supreme Court is expected to decide within the next few weeks whether to review the case. Meanwhile, the House Transportation and Infrastructure Committee has passed an amendment to its FAA reauthorization bill that would authorize web-facilitated flight sharing.

The Flytenow case presents an opportunity for the Supreme Court and Congress to say consumers and service providers should be free to choose which innovations work for them. If Europe can ensure the safety of these tech innovations, then so can the U.S.

Article Link To The Wall Street Journal:

Overcapacity, Competition To Weigh On U.S. Airfares In 2017

By Arunima Banerjee and Jefferey Dastin
November 16, 2016

U.S. airfares are expected to fall in 2017 amid overcapacity and stiff competition between budget carriers and legacy airlines, according to an American Express report on the travel industry.

Short-haul economy fares are expected to drop 3 percent, while long-haul business class fares may see a 1.5 percent decline in the United States, the American Express Global Business Travel report said.

However, higher ancillary fees will help offset lower fares in North America as airlines continue to look for new revenue sources, the report added.

For months, lower fuel costs have allowed airlines to add flights that would have been unprofitable when oil prices were high. With seats for sale growing faster than the pool of passengers to buy them, fares for U.S. flights have fallen.

In particular, budget carriers such as Spirit Airlines Co have added cheap service at the hubs of larger rivals and are now adding routes from medium-sized airports.

Top carriers American Airlines Group Inc and United Continental Holdings Inc plan to fight back by marketing cheap but higher-restriction fares, which partially explains why 2017 may see more price drops.

Airfares in Europe and much of Asia Pacific are expected to stay flat, with slight increases depending on route and fare class in the APAC region. In Europe, fares would continue to be impacted by weak economy and security concerns.

U.S. hotel rates are estimated to increase 3.6 percent next year.

Hotel rates in Europe are expected to rise marginally, while they could vary in the APAC region as strong demand in China and India could be hurt by a rise in inventory, according to the report.

Article Link To Reuters:

Another Financial Warning Sign Is Flashing In China

Broad loan-to-deposit ratio at 80% for top 50 China banks: S&P; China’s credit reliance could worsen NPL problem, Fitch says

By Bloomberg News
November 16, 2016

Add another credit indicator to the financial warning signs flashing in China.

The adjusted loan-to-deposit ratio, which includes a range of off-balance sheet items and is an indicator of the banking system’s ability to weather stress, climbed to 80 percent as of June 30, according to S&P Global Ratings. For some smaller lenders, the ratio has already topped 100 percent, S&P estimates.

S&P’s adjusted measure is rising much faster than the official loan-to-deposit ratio as banks pile into off-balance sheet lending, sidestepping government efforts to rein in credit. At the current pace, overall credit could surpass deposits on an adjusted basis within a few years -- a level that would give China little leeway to stave off financial turmoil, S&P says.

"The next two to three years is a crucial window for China to rein in the ratio, or we will be in serious trouble," said S&P’s Beijing-based director Liao Qiang. "Reaching 100 percent doesn’t mean a crisis will ensue immediately, but it shows China’s entire deposit base is used up and any loss of confidence from savers will severely destabilize the banking system."

Even after S&P’s adjustments, the ratio in China remains lower than in many other countries. Yet the country’s rapid loan growth, diminishing return on credit and rising bad debts combine to make deposits a particularly important buffer against future financial distress, according to Liao.

Cap Abolished

Deposit-taking has formed a cornerstone of China’s banking system as it expanded in tandem with the economy, providing lenders with a stable, low-cost funding base to fuel credit growth. Chinese households and companies hold $22 trillion of bank deposits, more than anywhere else in the world. That cushion has made lenders less dependent on short-term wholesale funding than banks elsewhere.

For two decades, China imposed a cap that limited loans to a maximum 75 percent of deposits as part of measures to contain risks. That ceiling was abolished in October 2015, in part because it was seen as a blunt tool that encouraged illicit deposit-hoarding and moving loans off balance sheets. The official loan-to-deposit ratio among Chinese lenders stood at 67 percent at the end of September, up only slightly from 66 percent when the cap was lifted.

But that measure has become less relevant as Chinese banks -- especially small and mid-sized ones -- have stepped up shadow lending and sales of savings-like offerings called wealth management products, which don’t get carried on their balance sheets. The shift is captured in S&P’s adjusted ratio, based on the country’s 50 largest banks, which stood at 70 percent in 2013 and rose by 10 percentage points over the following two years.

Adjusting Ratio

S&P came up with its adjusted ratio by treating all loan-like assets and corporate bond investments on banks’ balance sheets, as well as corporate credit made off-balance sheet, as loans. On the other side of the equation, it added wealth management products to deposits.

Jonathan Cornish, Hong Kong-based head of bank ratings for North Asia at Fitch Ratings, said adjusting the loan-to-deposit ratio to capture items like interbank borrowing, wealth management products and other assets can contribute to “a more comprehensive assessment of liquidity across the system and for individual banks.” Fitch doesn’t calculate its own adjusted ratio, he said.

A nine-year credit expansion meant to protect economic growth has prompted numerous warnings of impending financial trouble. China’s debt-to-gross domestic ratio reached 247 percent after expanding at the fastest pace among Group of 20 nations, according to economists Tom Orlik and Fielding Chen at Bloomberg Intelligence; such sharp increases have been known to trigger crises in other countries, they say.

The Bank for International Settlements in September used data comparing credit and GDP to warn of looming risks in China.

“Targeting economic growth and continued heavy reliance on credit to support growth means that economic leverage is unlikely to abate soon,” said Cornish. “This will increase the risks for the financial sector.”

Wholesale Funding

When loans exceed deposits, banks are forced to rely on wholesale funding that can quickly vanish during market dislocations, Cornish said. In such an event, the central bank -- which sets benchmark rates for deposits as well as loans -- would be forced to raise interest rates to draw in deposits, according to Liao. That, in turn, would make it harder for companies coping with slower economic growth to repay loans, putting further stress on banks, he said.

The fragile nature of interbank funding was revealed in June 2013, when a credit crunch drove the one-day repurchase rate to a record and the central bank was forced to inject cash amid rumors of lenders missing payments. The episode exposed “deficiencies” in commercial banks’ liquidity management, the chairman of the banking regulator said at the time.

Some banks are already pushing into danger territory. Bank of Jinzhou Co.’s adjusted loan-to-deposit ratio stood at 153 percent at the end of 2015 and the lender got 43 percent of its funding from interbank borrowings last year, S&P estimates. At mid-sized Industrial Bank Co., the broadly adjusted ratio was 115 percent while 39 percent of its funding came from the interbank market, according to S&P.

Industrial Bank declined to comment. A press officer at Bank of Jinzhou didn’t respond to phone calls.

Wang Tao, head of China economics at UBS Group AG, in April compiled her own adjusted loan-to-deposit ratio for China and came up with an estimate closer to 90 percent. “Once the LDR visibly exceeds 100 percent, banks may become more vulnerable to credit market sentiment,” she wrote in a report at the time.

Article Link To Bloomberg News:

India's Great Rupee Fail

By Mihir Sharma
The Bloomberg View
November 16, 2016

One week after India’s sudden declaration that 500- and 1,000-rupee notes were no longer legal tender, the economy is in chaos. And that’s perhaps because the policy was designed as much to shock and awe observers with the government’s command of the Indian economy as to control India’s “black money” problem. What seemed at first to be a masterstroke by Prime Minister Narendra Modi now looks like a grave miscalculation.

Modi is beginning to sound like he may agree. His recent speeches on the subject have been frankly bizarre. In one, he seemed to laugh at those inconvenienced by the ban; in another, he broke down while speaking of the “sacrifices” he'd made for India, and warned that he might be assassinated by “forces” desperate to protect their “loot."

What’s changed in a week? Well, for one, it’s become clear that the government was simply too cavalier in its planning. Now that 86 percent of India’s currency is no longer valid, the central bank has struggled to print replacement denominations -- and the new notes are the wrong size for existing ATMs. Modi’s asked people to be patient for 50 days, but the process could take as long as four months.

You have to wonder if Modi truly sought expert advice, or relied once again on a small and trusted set of politicians to determine policy. India’s simply too big and complex for shock and awe. Large parts of the rural economy use cash for 80 percent of transactions and have been hard-hit. In seafood-mad West Bengal, for example, the fishing industry is in a state of near-collapse; in the wheat-growing states of the northwest, farmers halfway through the sowing season have run out of cash to buy seeds.

Few villagers have access to an ATM. Most have to trek to a bank branch to change their cash, which means losing out on crucial days of labor. Many Indians, particularly women, still don’t have an active bank account. Finance Minister Arun Jaitley wondered aloud how many poor people would even have 1,000-rupee notes -- probably a rhetorical question, but surely it shouldn’t have been. Someone should've sought the answer before shutting down India’s financial system.

Among India’s middle class, Modi’s “surgical strike on black money” still appears to be popular. It’s the old “vegan fallacy” -- if something tastes terrible, it must be good for you. Enough Indians are suffering that they believe it must be in a greater cause. It’s a moral project, not an economic one. Stand in line, we’re told, and you honor our brave soldiers at the border.

But will that support last? The government’s plan is likely to be ineffective in the long term. Economists agree it will have no effect on the generation of black money through corruption.

Meanwhile, estimates of the amount of black money that will eventually be recovered vary widely. The optimists (wrongly) think enough cash will be destroyed by hoarders that the central bank will be able to pay a hefty dividend to the government. Others point out that a very small fraction of black money tends to be held as cash and that there are a dozen ways still available to launder that fraction. The government has largely failed to close these loopholes. Worse, rumors of the demonetization were reportedly circulating before Modi’s announcement, leading to suspicions that the well-connected may have had time to dump their cash piles.

Even in the best case scenario -- that a significant proportion of the outstanding currency is destroyed -- there’s no reason to suppose it was all black money and not the savings of regular citizens scared of harassment by tax authorities. Modi has dropped dark hints that this is just the beginning, raising fears that business should now worry about of constant tax raids and the reopening of decades-old cases. In fact, that dark new age may already be here.

Even setting aside the painful adjustment, the long-term effects of this monetary shock on India’s informal economy could well be severe; a large proportion of marginal firms may not survive the loss of a fortnight of income. The informal financial sector -- unregistered moneylenders who provide loans to businesses worth 40 percent of total bank lending -- will be decimated.

The costs to the government could be equally high. Modi's administration has put political considerations over economic detail once too often -- and this time, it's severely dented its image for efficiency and practicality. Even if the long queues vanish in the next few weeks, that damage to the government’s reputation is permanent.

Article Link To The Bloomberg View:

Singapore Sees Brexit As Chance To Recruit London's FinTech Talent

By Marius Zaharia and Saeed Azhar
November 16, 2016

Britain leaving the European Union is opening up an opportunity for Singapore to recruit talent for its ambitious plans to become a leading financial technology hub, said the chief FinTech officer of the city-state's central bank.

"First thing after Brexit happened, we talked about talent - talent coming out of the UK," said Sopnendu Mohanty of the Monetary Authority of Singapore at a panel discussion at Singapore's first FinTech festival.

"I agree they have a huge pool of talent and it's good to have something like that so we can take some talent out.

Britain's economic secretary to the treasury Simon Kirby, one of the officials in attendance, told the audience that London will remain a leading financial center, though he acknowledged that Singapore might be able to lure some of the talent.

"Brexit is an opportunity not a risk," Kirby said.

Mohanty said Singapore was making its own efforts to develop talent, building a research center dedicated to FinTech and retraining people from the financial industry.

People needed to "wake up" to the need to learn new skills, Mohanty said, as "financial services in 5-10 years time will be called FinTech."

Some 11,000 participants - including software giant Microsoft and global banks such as Citibank and Standard Chartered - from over 50 countries gathered for the FinTech event.

Article Link To Reuters:

A Post-Trump SEC Could Shake Up Current Policy

By Sarah N. Lynch 
November 16, 2016

It will be a new day at the U.S. Securities and Exchange Commission after President-elect Donald Trump installs his choice to run the agency.

With Trump's transition team already in regulatory-relief mode and promising to revamp the Dodd-Frank financial reform legislation, some rules already are marked for death or dialback.

Expected on the chopping block soon after Trump takes the oath of office is a proposal that would require companies to disclose pay ratios between their CEOs and employees. Another would require companies to disclose whether their products contain conflict minerals -- minerals that were mined in a war-torn region of Africa.

Dead for now is any prospect of the SEC approving a tough fiduciary rule for financial advisers, say policy experts.

Trump's decision to tap former Republican SEC Commissioner Paul Atkins to help manage the Trump team's transition efforts at the SEC and other financial agencies offers a window into some other changes that could be in store. Atkins, the founder of the regulatory consulting firm Patomak Global Partners, is viewed by some to be a top contender for the position of SEC chairman itself, though as the transition head he could also recommend someone else for that job.

Atkins' well-known conservative views on everything from enforcement penalties to corporate governance are likely to be reflected in the SEC's agenda.

Here are five policy areas likely to change.

Corporate Auditing Rules Could Get Looser

Paul Atkins was a staunch critic of the Public Company Accounting Oversight Board (PCAOB), a body created after the Enron accounting scandal to police and write new rules for corporate auditors.

Atkins raised concerns about the board's budget and high salaries, and advocated against prescriptive accounting rules that he felt constrained auditors from making professional judgments.

Recently, Republicans have criticized the PCAOB for taking on more progressive causes, such as proposing companies rotate auditors to reduce conflicts or requiring accounting firms to disclose the name of individual partners working on company audits.

The PCAOB's chairman Jim Doty, who advocated for the controversial reform measures, will almost certainly not be re-appointed by the incoming SEC chair.

"I expect that a new Chair will refocus the Board’s standard-setting agenda on the core audit function," said Hunton & Williams Partner Scott Kimpel. "I would expect a return to the basics."

Penalties Could Shrink; People Could Pay

The topic of whether to impose corporate penalties against a company would come under scrutiny.

During his time at the SEC, Atkins advocated for an enforcement approach that he said did not unduly punish corporate shareholders that had already suffered from the misconduct. He called for the SEC to carefully weigh who had profited from the bad behavior, and urged the SEC to hold individuals accountable for their actions.

Stock Market Trading Would Get Second Look

Atkins has long opined that the SEC's rules requiring "best price" execution of stock trades actually skews the market by causing fragmentation and harming price discovery by directing orders away from traditional stock exchanges into "dark pool" trading platforms.

As a commissioner, Paul Atkins was critical of the rule called Regulation National Market System (NMS), saying it could impede true price discovery and encourage gaming of the system.

In January 2016 he wrote an opinion piece in the Wall Street Journal calling for the SEC to do major surgery on the rule, allowing considerations beyond 'best price' and speed to determine order flow.

Whistleblower Could Face More Hurdles

The Dodd-Frank law gave the SEC newfound powers to reward whistleblowers who come forward with tips of corporate malfeasance.

From August 2011 through fiscal year 2015, the SEC has received more than 14,000 tips, and by August of 2016, the program had given out more than $100 million in rewards.

But corporate America has long disliked the part of the rule that protects whistleblowers from having to report wrongdoing to their own companies before they tip off the government.

In 2011, Atkins urged the SEC to require whistleblowers to report internally first, saying a failure to do so could undermine compliance programs.

Whether this will change remains to be seen, especially in the wake of the Wells Fargo & Co (WFC.N) scandal, where employees who reported internally about the opening of unauthorized accounts were fired.

Atkins "cares deeply about the commission and its enforcement program," said Jordan Thomas, a whistleblower attorney at Labaton Sucharow who previously worked in the SEC's enforcement division during Atkins' tenure.

"I find it very hard to believe that he would support undermining such a successful program."

Capital Formation Could Get A Boost

Atkins was a strong proponent of the 2012 Jump Start Our Business Startups Act, which scaled back some SEC rules to help smaller companies raise capital.

In testimony on Capitol Hill, Atkins advocated for additional steps to be taken to help smaller companies, including rules to help create venture exchanges for mid-cap stocks and broadening efforts to exempt private capital-raising rules from regulation by states.

Article Link To Reuters:

Green Elites, Trumped

The planet will benefit if the climate movement is purged of its rottenness.

By Holman W. Jenkins, Jr.
The Wall Street Journal
November 16, 2016

Hysterical, in both senses of the word, is the reaction of greens likePaul Krugman and the Sierra Club to last week’s election. “The planet is in danger,” fretted Tom Steyer, the California hedge funder who spends his billions trying to be popular with green voters.

Uh huh. In fact, the climate will be the last indicator to notice any transition from Barack Obama to Donald Trump. That’s because—as climate warriors were only too happy to point out until a week ago—Mr. Obama’s own commitments weren’t going to make any noticeable dent in a putative CO2 problem.

At most, Mr. Trump’s election will mean solar and wind have to compete more on their merits. So what?

He wants to lift the Obama war on coal—but he won’t stop the epochal replacement of coal by cheap natural gas, with half the greenhouse emissions per BTU.

He probably won’t even try to repeal an egregious taxpayer-funded rebate for wind and solar projects, because red states like this gimme too. But Republican state governments will continue to wind back subsidies that ordinary ratepayers pay through their electric bills so upscale homeowners can indulge themselves with solar.

Even so, the price of solar technology will continue to drop; the lithium-ion revolution will continue to drive efficiency gains in batteries.

Mr. Trump wants to spend on infrastructure, and the federal research establishment, a hotbed of battery enthusiasts, likely will benefit.

In a deregulatory mood, he might well pick up an uncharacteristically useful initiative from the Obama administration. The Nuclear Regulatory Commission quietly is revisiting a scientifically dubious radiation risk standard that drives up the cost of nuclear power.

What a Trump election will do is mostly dismantle a green gravy train powered by moral vanity that contributes nothing to the public welfare.

A phenomenon like Trump, whatever its antecedents, is an opportunity—in this case to purge a rottenness that begins at the commanding heights. The New York Times last year published a feature entitled “short answers to the hard questions about climate change” that was notable solely for ignoring the hardest question of all: How much are human activities actually affecting the climate?

This is the hardest question. It’s why we spend tens of billions collecting climate data and building computerized climate models. It’s why “climate sensitivity” remains the central problem of climate science, as lively and unresolved as it was 35 years ago.

Happily, it only takes a crude, blunderbussy kind of instrument to shatter such a fragile smugness—and if Mr. Trump and the phenomenon he represents are anything, it’s crude and blunderbussy.

As with any such shattering, the dividends will not be appropriated only by one party or political tendency.

Democrats must know by now they are in a failing marriage. Wealthy investors like George Soros,Nat Simons and Mr. Steyer, who finance the party’s green agenda, have ridden the Dems into the ground, with nothing to show for their millions, and vice versa.

On the contrary, the WikiLeaks release of Clinton campaign chairman John Podesta’s emails only dramatizes what a liability they’ve become, demanding attacks on scientists and even loyal Democrats who don’t endorse their climate-disaster scenarios. Their anti-coal, anti-pipeline, anti-fracking stance especially hurts Dems with union households, which turned out in record numbers for Mr. Trump.

It was always crazy to believe in an unprecedented act of global central planning to wean nations away from fossil fuels, but equally idiotic not to notice that our energy economy is ripe slowly to be transformed by technology anyway.

One greenie who is beyond the need for handouts is Bill Gates, who has made himself non grata by saying the current vogue for subsidizing power sources that will always need subsidies is a joke—an admission of defeat.

Honest warriors like Mr. Gates and retired NASA alarmist James Hansen insist real progress can’t be made without nuclear. Why haven’t others? Because the Tom Steyers and Bill McKibbens would sacrifice the planet 10 times over rather than no longer be fawned over at green confabs. That’s rottenness at work.

There’s a reason today’s climate movement increasingly devotes its time and energy to persecuting heretics—because it’s the most efficient way to suppress reasoned examination of policies that cost taxpayers billions without producing any public benefit whatsoever.

The theory and practice of climate advocacy, on one hand, has been thoroughly, irretrievably corrupted by self righteousness—blame Al Gore, that was his modus. Yet, on the other, it has allowed itself to become the agent of economic interests that can’t survive without pillaging middle-class taxpayers and energy users—exactly the kind of elitist cronyism that voters are sick of.

Without attributing any special virtue to Mr. Trump, he represents a chance for a new start. He might even turn out to be good for the planet.

Article Link To The Wall Street Journal:

Billionaire Green Activist Steyer Vows To Battle Trump, Says Money Not An Issue

By Richard Valdmanis
November 16, 2016

Billionaire environmental activist Tom Steyer, who has spent more than $140 million on fighting climate change, said on Tuesday he will spend whatever it takes to fight President-elect Donald Trump's pro-drilling and anti-regulation agenda.

The former hedge fund manager from California is putting together a strategy that will "engage voters and citizens to fight back" once Trump takes the White House in January, he told Reuters in an interview. However, he stressed he was not planning to fight Trump through the courts.

Instead, he would focus on "trying to present an opposite point of view and trying to get that point of view expressed, and communicated to citizens."

Steyer’s pledge to fight Trump suggests an intensifying battle for U.S. public opinion on global climate change, an issue that has already divided many Americans, lawmakers, and companies between those who consider it a major global threat and those who doubt its existence.

Other U.S. environmental groups are also preparing to resist Trump’s agenda, with some vowing street protests and more established organizations that helped draft some of President Barack Obama’s environmental regulations preparing to defend them in court.

“We have always been willing to do whatever is necessary," Steyer said, when asked how much money he was willing to spend to oppose Trump's agenda.

Trump campaigned on a promise to drastically reduce environmental regulation and ease permitting for infrastructure, moves he said would breathe life into an oil and gas industry ailing from low prices, without harming U.S. air and water quality.

He has also called climate change a hoax and has promised to “cancel” the Paris Climate Accord between nearly 200 nations to slow global warming, a deal he said would cost the U.S. economy trillions of dollars and put it at a disadvantage.

While the approach has cheered the industry, it has sent shockwaves through the environmental movement, which is confronting the prospect of losing all progress it made during the Obama administration.

Steyer, who had endorsed Democratic presidential candidate Hillary Clinton, called Trump's policies dangerous.

“Every single one of these things, whether it was getting rid of Paris or cutting back the EPA, we think are extremely dangerous to the security of every American," Steyer said. "We think it is based on willful ignorance of the facts and flies in the face of the realities facing the world.”

Arctic Drilling 

Steyer's main political vehicle, NextGen Climate, on Tuesday called on the Obama administration to defy Trump's pro-drilling agenda by issuing an order permanently blocking all new drilling in the Atlantic and Arctic Oceans.

The White House did not immediately respond to a request for comment.

Trump has also promised to ask Canadian oil pipeline company, TransCanada Corp, to resubmit its application to build a pipeline into the United States that would link Alberta's vast oil sands to American refineries and ports on the Gulf Coast. The project, Keystone XL, had been rejected by the Obama administration after years of mass protests and lobbying by environmental organizations.

Steyer said the project may no longer make sense since a slump in oil prices has reduced the profitability of oil sands production.

Steyer, who four years ago left the hedge fund firm he co-founded to devote himself full-time to environmental activism, said young voter turnout in areas where NextGen focused its mobilization efforts during the 2016 campaign was up more than 20 percent from the last presidential election in 2012.

"Did we get the president we want, absolutely not. Did we get a majority of clean energy supporters in the senate, no," Steyer said. "But in terms of what we did, and the strategy we took, we wouldn’t do anything differently."

NextGen poured nearly $69 million into its elections related programs during the presidential campaign, according to federal records compiled by, slightly lower than the $74 million it spent during the mid-term congressional elections in 2014, when only two of the six candidates it supported won.

Article Link To Reuters:

Why Shouldn’t Liberal California Or London Break Away?

Prosperous enclaves find themselves increasingly out of step with rest of nation.

By Matthew Lynn
November 16, 2016

What should you do when you don’t like the politics of the country you find yourself part of? Fight back? Emigrate? Opt for a quiet life? Perhaps. But increasing numbers of people seem to think that the answer is something quite different. To break away.

In the wake of Donald Trump’s victory, one of the top trends on Twitter was ‘”Calexit” — for a breakaway California. Likewise, as the U.K. voted to leave the European Union, plenty of people started to argue for an independent London — let’s call that a Loxit.

Crazy? Embittered bad losers? Maybe so. And yet, there is also an element of sense in both demands. As populism comes to dominate the politics of many major economies, there may well be a growing case for super-rich, liberal enclaves to break away. They have developed very different economies from the countries they are locked into, and they certainly have the wealth to go it alone.

A Calexit or Loxit is not totally impossible — and no one should be that surprised if similar movements spring up in Paris, Milan or Berlin eventually as well.

It is no real surprise that voters in California feel bewildered to find themselves part of a country that just elected Trump as its president. The state is overwhelmingly Democratic. Hillary Clinton took 62% of the votes, compared with just 33% for her Republican opponent. Electoral majorities don’t get much more overwhelming than that. In reality, California is so far out of step with the rest of the U.S., it is practically another country.

Something similar happened in the U.K. during the equally divisive and bitter EU referendum. While large parts of Britain’s rust belt racked up big majorities for leaving, wealthy, cosmopolitan London was overwhelming to remain.

Londoners voted 60% to stay in the EU, with some areas of the capital close to 80%. Again, the verdict was overwhelming — and completely different to the rest of the country

Just like Californians, many Londoners are wondering if they really want to be part of a country that, the final form of Brexit has yet to be decided, may well turn out to be increasingly inward-looking and protectionist.

In fact, we may well have seen the first step toward some form of city state of London — a kind of Singapore, except with a bit more drizzle. The London Chambers of Commerce, which represents the capital’s businesses, is now arguing for London-only work visas that allow migrants the right to work only there. That sounds very like a first step towards independence — after all, control of its borders is one of the things that defines a nation.

Right now, an independent California or London might sound crazy. But fast-forward a few years, and it might start to seem a lot more compelling. In fairness, a few super-wealthy liberal enclaves might well have a case for breaking away.

First, they certainly have the clout for independence. California by itself would be the sixth-largest economy in the world, making it bigger than both France and India. There are a lot of less-fortunate countries. London would be smaller than that, but hardly a micro-state if it struck out on its own. With a gross domestic product of about $600 billion, it would be the 21st-largest economy in the world, making it bigger than Sweden or Taiwan. No one thinks those countries don’t work as independent nations.

Next, both places have developed very different economies from the rest of the countries of which they are part. California’s economy is based on technology and entertainment. London’s economy is based on finance, law, consultancy and technology.

In both cases, they are dominated by high-end, white-collar workers. And, more significantly, they require very high levels of immigration to make them work — both of highly skilled professionals, and low-skilled people to keep the place ticking over. Across the rest of the U.S., just like the U.K., a majority is increasingly in favor of restricting immigration to protect blue-collar jobs — but that is precisely what places like California and London don’t need.

Finally, they can afford it. California has a GDP per capita of $56,000. London has a GDP per capita of £46,000 ($58,000). Inner London is off-the-scale wealthy, with a GDP per capita of £83,000. Both places are increasingly pulling ahead of the countries of which they are part — and see the politics of the rest of their nations dragging them back.

It is not necessarily going to stop there.

If Marine Le Pen does win power in France on a platform of taking France out of the euro EURUSD, +0.2238% — and you can hardly rule that out anymore — then Paris is very unlikely to want to go along with that. Why throw in its lot with declining rust-belt France? Likewise, what does Milan have left in common with a stagnant Italy?

If Germany turns its back on Angela Merkel’s liberal, immigrant-friendly brand of politics, will vibrant Berlin want to go along with that? Probably not. Some people might feel a bit nervous to see Prussia re-emerge as a political entirety, but you can hardly rule it out.

The solution? Some kind of breakaway. It doesn’t have to be complete. Plenty of European countries have increasing levels of autonomy for different regions. Catalonia has a huge level of autonomy within Spain. In the U.K., Scotland has a far higher level of control of its own affairs than it ever used to. That might be the answer.

It won’t happen right away. But places such London and California want high immigration, free movement of goods and capital, combined with ultra-liberal social policies. Yet the countries that they are part of want to restrict immigration, and are increasingly reactionary. In truth, the economics of breakaways make a lot of sense — so we can hardly rule out the politics moving in that direction as well.

Article Link To MarketWatch: