YCLOAK

What’s your dream car to drive? Saudi women are asking that question after the kingdom announced that females would be granted licenses and be allowed to drive for the first time.

An Arabic Twitter hashtag asking women what car they want to drive already had more than 22,000 responses on Thursday. Some users shared images of black matte luxury SUVs. Others teased with images of metallic candy pink-colored cars. A few shared images of cars encrusted with sparkly crystals.

Car makers see an opportunity to rev up sales in Saudi Arabia when the royal decree comes into effect next June. But any gains are likely to be gradual due to a mix of societal and economic factors. Women who need to get around already have cars driven by chauffeurs. And many women haven’t driven in years, meaning the next wave of buyers could be the young.

That didn’t keep Ford and Volkswagen from trying to make the most of the moment. They quickly released ads on Twitter congratulating Saudi women on the right to drive. Saudi Arabia had been the only country in the world to still bar women from getting behind the wheel.

American automaker Ford’s ad showed only the eyes of a woman in a rearview mirror with the words: “Welcome to the driver’s seat .” German automaker Volkwagen’s ad showed two hands on a steering wheel with intricate henna designs on the fingers with the words: “My turn.”

Checking that optimism will be the reality that many women will continue to need the approval of a man to buy a car or take on new responsibilities.

“The family has always operated on the basis of dependency so that’s a big core restructuring of the family unit,” said Madeha Aljroush, who took part in Saudi Arabia’s first campaign to push for the right to drive. In that 1990 protest, 47 women were arrested. They faced stigmatization, lost their jobs and were barred from traveling abroad for a year.

“I had no idea it was going to take like 27 years, but anyway, we need to celebrate,” Aljroush said.

That won’t entail buying a new car, though. She hasn’t driven in nearly 30 years, she says, and her two daughters still need to learn how to operate a vehicle.

Allowing women the right to drive is seen as a major milestone for women’s rights in Saudi Arabia, but also for the Saudi economy. The kingdom’s young and powerful crown prince is behind a wide-reaching plan to transform the country and wean it off its reliance on government spending from oil exports.

Allowing women to drive helps to ensure stronger female participation in the workforce and boosts household incomes. It can also save women the money they now spend on drivers and transportation.

The Saudi government says there are 1.37 million drivers in the country, with the majority from South Asian countries working as drivers for Saudi women. The drivers earn an average monthly salary of around $400, but the costs of having a driver are much higher. Families must also pay for their entry permits, residence permits, accommodation, flight tickets and recruitment.

Rebecca Lindland, an analyst for Cox Automotive in the U.S. who has studied the Saudi Arabian market, said families with the means likely already have enough vehicles because women are already being transported in them, with male drivers. Those women could simply start driving the vehicles they already own.

There are also many Saudi families who do not have the money to buy new cars.

“The idea that 15 million women are going to go out and buy a car is not realistic,” Lindland said. “We may not have incremental sales because those that are already with more freedoms already probably have access to a car.”

The industry consulting firm LMC Automotive sees only a small boost in sales next year due to the royal decree, coinciding with a small recovery in sales from a slump.

The Saudi market peaked at 685,000 new vehicles sold in 2015, falling to under 600,000 in 2016, and is forecast to finish this year at 530,000. LMC had predicted a modest recovery next year based on an improved economy and sees a little added boost from women drivers.

Although Saudi Arabia has a reputation for liking luxury goods, mainstream brands dominate the car market with a 93 percent share of sales, according to LMC. Hyundai was the top passenger car brand with a 28.6 percent share of the market, followed closely by Toyota at 28.4 percent and Kia at 8.3 percent, the company said.

There are also societal factors to consider. Even if the law allows women to drive, many will still need their fathers or husbands to buy a car.

A male guardianship system in Saudi Arabia gives men final say over women’s lives, from their ability to travel abroad to marriage. Women often are asked to have the written permission of man to rent an apartment, buy a car or open a bank account.

“If you don’t have credit, if you don’t have money, your male guardian will be the one to decide whether you buy a car or not,” Lindland said.

While car sales might rise in the long-term, ride hailing apps like Uber and local rival Careem could see revenues decline. Female passengers make up the majority of the country’s ride-hailing customers.

To celebrate Tuesday’s decree, several Saudi women posted images on social media deleting their ride sharing apps.

The two companies, however, have seen strong investments from Saudi Arabia. Last year, the Saudi government’s sovereign wealth fund invested $3.5 billion in Uber. This year, an investment firm chaired by billionaire Saudi Prince Alwaleed bin Talal invested $62 million in Dubai-based Careem.

Aljroush says the right to drive will not immediately change women’s lives, but it will change family dynamics at home and will change the economy.

“Men used to leave work to pick up the kids. The whole country was paralyzed,” she said. “It’s a restructuring of how we think, how we operate, how we move.”
…

A Supreme Court with a reconstituted conservative majority is taking on a new case with the potential to financially cripple Democratic-leaning labor unions that represent government workers. The justices deadlocked 4-4 in a similar case last year.

 

The high court agreed Thursday to again consider a free-speech challenge from workers who object to paying money to unions they don’t support.

 

The court could decide to overturn a 40-year-old Supreme Court ruling that allows public sector unions to collect fees from non-members to cover the costs of negotiating contracts for all employees.

 

The latest appeal is from a state employee in Illinois. It was filed at the Supreme Court just two months after Justice Neil Gorsuch filled the high court seat that had been vacant since Justice Antonin Scalia’s death.

 

The stakes are high. Union membership in the U.S. declined to just 10.7 percent of the workforce last year, and the ranks of private-sector unions have been especially hard hit.

 

About half of all union members now work for federal, state and local governments, and many are in states like Illinois, New York, and California that are largely Democratic and seen as friendly toward unions.

 

The Illinois case involves Mark Janus, a state employee who says Illinois law violates his free speech rights by requiring him to pay fees subsidizing a union he doesn’t support, the American Federation of State, County and Municipal Employees. About half the states have similar laws covering so-called “fair share” fees that cover bargaining costs for non-members.

 

Janus is seeking to overturn a 1977 Supreme Court case, Abood v. Detroit Board of Education, that said public workers who refuse to join a union can still be required to pay for bargaining costs, as long as the fees don’t go toward political purposes. The arrangement was supposed to prevent non-members from “free riding,” since the union has a legal duty to represent all workers.

 

A federal appeals court in Chicago rejected Janus’ claim in March. Gorsuch was confirmed in April and the appeal was filed in June.

 

The justices will hear argument in the winter.
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Equifax Inc promised to make it easier for consumers to control access to their credit records in the wake of the company’s massive breach after the top U.S. consumer financial watchdog called on the industry to introduce such a system.

Equifax’s interim chief executive officer, Paulino do Rego Barros Jr., vowed to introduce a free service by Jan. 31 that will let consumers control access to their own credit records.

Barros, who was named interim CEO on Tuesday as Richard Smith stepped down from the post amid mounting criticism over the handling of the cyber attack, also apologized for providing inadequate support to consumers seeking information after the breach was disclosed on Sept. 7. He promised to add call-center representatives and bolster a breach-response website.

“I have heard the frustration and fear. I know we have to do a better job of helping you,” Barros said in a statement published in The Wall Street Journal.

Equifax announced the free credit freeze service after the Consumer Financial Protection Bureau’s (CFPB) director, Richard Cordray, told CNBC earlier in the day that the agency would beef up oversight of Equifax and its rivals.

“The old days of just doing what they want and being subject to lawsuits now and then are over,” Cordray said.

He also called for implementing a scheme of preventive credit monitoring.

“They are going to have to accept that. They are going to have to welcome it. They are going to have to be very forthcoming,” Cordray said.

The Equifax hack compromised sensitive data of up to 143 million Americans and prompted investigations by lawmakers and regulators, including the New York Department of Financial Services (DFS), which issued a subpoena to Equifax demanding more information about the breach.

Federal laws give the CFPB the power to supervise and examine large credit-reporting firms to ensure the quality of information they provide. In January, the CFPB fined TransUnion and Equifax $5.5 million in total for deceiving customers about the usefulness and cost of their credit scores.

Cordray called for expanded powers to cover data security to prevent breaches and suggested placing monitors inside credit reporting firms, borrowing a tactic from the regulatory regime for banks.

The CFPB is working with the Federal Trade Commission and New York’s DFS on a new regulatory framework, Cordray said. He also called for Congress to tighten oversight of the industry.

TransUnion said in a statement that it had “long been subject to regulatory oversight from state and federal regulators including the CFPB.”

Experian did not respond to requests for comment.
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Saudi Arabia’s decision to lift its ban on women driving cars may help to restore sales growth in an auto market dented by the economic fallout from weak oil prices, handing an opportunity to importers of luxury cars and sport utility vehicles.

Carmakers joined governments in welcoming the order by Saudi Arabia’s King Salman that new rules allowing women to drive be drawn up within 30 days and implemented by June 2018, removing a stain on the country’s international image.

“Congratulations to all Saudi women who will now be able to drive,” Nissan said in a Twitter post depicting a license plate bearing the registration “2018 GRL.” BMW, whose X5 SUV is the group’s Middle East top-seller, also saluted the move.

 

WATCH: Activists: Driving Augurs Further Expansion of Saudi Women’s Rights

Midrange brands dominate the Saudi market, with Toyota, Hyundai-Kia and Nissan together commanding a 71 percent share of sales.

Market had shrunk

That market has shrunk by about a quarter from a peak of 858,000 light vehicles in 2015 to an expected 644,000 this year, reflecting the broader economic slowdown. But the rule change adds almost 9 million potential drivers, including 2.7 million resident non-Saudi women, Merrill Lynch has calculated.

“We expect demand to rise again on news that women will be allowed to drive,” said a senior executive at Jeddah-based auto distributor Naghi Motors, whose brand portfolio includes BMW, Mini, Hyundai, Rolls Royce and Jaguar Land Rover models.

The arrival of women drivers could lift Saudi car sales by 15-20 percent annually, leading forecaster LMC Automotive predicts, as the kingdom’s “car density” of 220 vehicles per 1,000 adults rises to about 300 in 2025, closing the gap with the neighboring United Arab Emirates.

A middle- to upper-class Saudi family typically has two vehicles, one driven by the man of the house and a second car in which a full-time chauffeur transports his wife and children.

The rule change could spell bad news for some of the 1.3 million men employed as chauffeurs in the kingdom, including a large share of its migrant workforce, while boosting upscale car sales as households upgrade for their new drivers.

Entire market likely to benefit

“The move to allow women to drive is set to benefit the entire market,” LMC analyst David Oakley said. “But we might expect to see a disproportionately positive impact on super-premium brands.”

Luxury brands including Lamborghini and Bentley are about to launch SUVs, a vehicle category that has proved popular among women and accounts for more than 1 in 5 cars sold in Saudi Arabia.

Welcoming the announcement, British-based Aston Martin said it was well timed for the arrival of the James Bond-associated sports car maker’s DBX model, due in 2019.

“The SUV crossover boom across all segments has been powered by women,” spokesman Simon Sproule said.
…

President Donald Trump said on Wednesday a foreign leader told him at the United Nations last week that the country would soon announce plans to build or expand five automobile industry factories in the United States.

“I just left the United Nations last week and I was told by one of the most powerful leaders of the world that they are going to be announcing in the not too distant future five major factories in the United States, between increasing and new, five,” Trump said in a speech on tax reform in Indianapolis.

He added the factories were in the automotive industry.

He did not name the country. The White House did not immediately respond to a request for comment.

Automakers in Japan and Germany have both announced investments in the United States this year, with companies coming under pressure from Trump’s bid to curb imports and hire more workers to build cars and trucks in the country.

Investments to expand U.S. vehicle production capacity also reflect intensified competition for market share in the world’s most profitable vehicle market. In August, Toyota Motor Corp said it would build a $1.6 billion U.S. assembly plant with Mazda Motor Corp.

Toyota also said this week it was investing nearly $375 million in five U.S. manufacturing plants to support U.S. production of hybrid powertrains.

Last week, German automaker Daimler AG said it would spend $1 billion to expand its Mercedes Benz operations near Tuscaloosa, Alabama, to produce batteries and electric sport utility vehicles and create more than 600 jobs.

Rival German luxury automaker BMW AG said in June it would expand its U.S. factory in South Carolina, adding 1,000 jobs. And last month, Volkswagen AG’s brand president Herbert Diess said the company expected to bring electric SUV production to the United States and could add production at its Tennessee plant.
…

The South American trade bloc Mercosur could seek trade deals with Canada, Australia and New Zealand this year, an Argentine official said Wednesday, as largest members Brazil and Argentina seek to open their economies.

Mercosur, which also includes Uruguay and Paraguay, is working with the European Union to finalize the political framework for a trade deal this year, at a time when the United States under President Donald Trump has been shying away from trade.

“There is a possibility that Mercosur starts negotiations with Canada, Australia and New Zealand this year,” Argentine Commerce Secretary Miguel Braun said at the Thomson Reuters Economic and Business forum in Buenos Aires.

“Integrating ourselves with these countries takes us in the direction we want to go,” he said, pointing to developed economies with high salaries. Argentina alone is seeking a trade agreement with Mexico, and Braun said it was also working on a trade agreement with Chile that would “deepen what we already have.”

Chilean President Michelle Bachelet said in New York last week that Santiago was finishing a trade liberalization agreement with Buenos Aires to boost trade and open opportunities for investors.
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Weather extremes and air pollution from burning fossil fuels cost the United States $240 billion a year in the past decade, according to a report Wednesday that urged President Donald Trump to do more to combat climate change.

This year is likely to be the most expensive on record, with an estimated $300 billion in losses from Hurricanes Harvey, Irma and Maria and a spate of wildfires in Western states in the past two months, it said.

“The evidence is undeniable: The more fossil fuels we burn, the faster the climate continues to change,” leading scientists wrote in the study published by the nonprofit Universal Ecological Fund.

Costs to human health from air pollution caused by fossil fuels averaged $188 billion a year over the past decade, it estimated, while losses from weather extremes such as droughts, heat waves and floods averaged $52 billion.

Trump could curb the $240 billion cost, equivalent to 1.2 percent of U.S. gross domestic product, by revising his plans to promote the U.S. coal industry and to pull out of the 195-nation Paris climate agreement, it said.

“We are not saying that all [weather extremes] are due to human activity, but these are the sorts of events that seem to be increasing in intensity,” co-author Robert Watson, a former head of the U.N. panel of climate scientists, told Reuters.

Higher ocean temperatures, for instance, mean more moisture in the air that can fuel hurricanes.

Events on the rise

And, in a sign of increasing risks, there were 92 extreme weather events that caused damage exceeding $1 billion in the United States in the decade ending in 2016, compared with 38 in the 1990s and 21 in the 1980s.

The combined cost of extreme weather and pollution from fossil fuels would climb to $360 billion a year in the next decade, the study said. Trump’s pro-coal policies could mean more air pollution, reversing recent improvements in air quality.

Last month, the U.S. Environmental Protection Agency accused scientists who linked record extreme rainfall from Tropical Storm Harvey to man-made climate change as trying to “politicize an ongoing tragedy.”

Wednesday’s study has been in the works for months, said co-author James McCarthy, professor of oceanography at Harvard University. He said there was widening evidence that a shift from fossil fuels made economic sense.

“Why is Iowa, why is Oklahoma, why is Kansas, why is Texas investing in wind energy? Not because they are interested in sea level rise or ocean temperatures but because it’s economically sensible,” he told Reuters.
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Switzerland is the world’s most competitive economy for a ninth straight year, the Geneva-based World Economic Forum said on Wednesday.

Since suffering a rare blip in 2008, when it was nudged into second place by the United States, the Swiss economy has maintained an efficient but unshakeable grip on the top spot in the WEF annual ranking.

WEF economist Thierry Geiger said Switzerland had a virtuous circle of infrastructure, institutions and education, but at the heart of its success was the way it created and used talent.

“That is really the secret of Switzerland, this ability to innovate, supported by a whole range of enabling factors,” he said.

However, after almost a decade at the top, Switzerland is at risk from complacency and populism. The ageing population could undermine the innovation miracle by shutting the door to foreign talent in one of the referendums that make Swiss law, he said.

“We see a proliferation of such referendums on everything, some of them are kind of dangerous, they could really endanger and jeopardize Switzerland’s prosperity,” Geiger said.

The World Economic Forum, the same organization that runs the Davos meeting of global powerbrokers each January, bases its rankings on a dozen drivers of competitiveness and a survey of business leaders.

“Global competitiveness will be more and more defined by the innovative capacity of a country,” Klaus Schwab, WEF founder and executive chairman, said in a statement.

Besides Switzerland, the top 10 remained the same as a year ago, although there was some shuffling of the order. The United States climbed over Singapore into second place, and Hong Kong jumped three places to sixth, leapfrogging Japan in ninth spot Britain slipped one place to eighth.

Britain has not yet dropped in the rankings because of its Brexit negotiations with the European Union but it is expected to do so, the WEF said.

China inched up one place to 27th, well ahead of 38th-ranked Russia and India, which was in 40th position.

The wooden spoon went to Yemen, a poor country further devastated by civil war, economic collapse, cholera and near-famine conditions, which was in 137th place.

Full List of Top 30 countries:

1. Switzerland

2. United States

3. Singapore

4. Netherlands

5. Germany

6. Hong Kong

7. Sweden

8. United Kingdom

9. Japan

10. Finland

11. Norway

12. Denmark

13. New Zealand

14. Canada

15. Taiwan

16. Israel

17. United Arab Emirates

18. Austria

19. Luxembourg

20. Belgium

21. Australia

22. France

23. Malaysia

24. Ireland

25. Qatar

26. South Korea

27. China

28. Iceland

29. Estonia

30. Saudi Arabia
…

The Commerce Department slapped duties of nearly 220 percent on Canada’s Bombardier C Series aircraft Tuesday in a victory for Boeing that is likely to raise tensions between the United States and its allies Canada and Britain.

Commerce ruled that Montreal-based Bombardier used unfair government subsidies to sell jets at artificially low prices in the U.S.

“The U.S. values its relationships with Canada, but even our closest allies must play by the rules,” Commerce Secretary Wilbur Ross said.

Canada ‘strongly disagrees’

Canada responded by saying it “strongly disagrees” with the U.S. move.

“This is clearly aimed at eliminating Bombardier’s C Series aircraft from the U.S. market,” said Chrystia Freeland, Canada’s minister of foreign affairs.

 

Bombardier, meanwhile, called the decision “absurd … U.S. trade laws were never intended to be used in this manner, and Boeing is seeking to use a skewed process to stifle competition.”

In April, Boeing charged that Bombardier had received at least $3 billion in subsidies from the governments of Britain, Canada and the province of Quebec. The Chicago-based aircraft manufacturer asked the Commerce Department and the U.S. International Trade Commission to investigate the alleged “predatory pricing.”

Specifically, Boeing said that Bombardier last year sold Delta Air Lines 75 CS100 aircraft for less than it cost to build them.

 

“Subsidies enabled Bombardier to dump its product into the U.S. market, harming aerospace workers in the United States and throughout Boeing’s global supply chain,” Boeing said Tuesday.

Boeing upset with Delta deal

 

But Delta has said Boeing didn’t even make the 100-seat jets it needed.

“Boeing has no American-made product to offer because it canceled production of its only aircraft in this size range — the 717 — more than 10 years ago,” Delta said in a statement Tuesday.

President Donald Trump campaigned on a promise to get tough on trade. He has repeatedly criticized Canada, saying it unfairly blocks U.S. dairy products and subsidizes its softwood lumber industry. Trump also has threatened to pull out of the North American Free Trade Agreement if he can’t negotiate a better version with Canada and Mexico.

Boeing’s complaint against Bombardier drew a backlash even before Tuesday’s decision. Canadian Prime Minister Justin Trudeau threatened this month to stop doing business with Boeing, which is in talks to sell Canada 18 Super Hornet jet fighters. British Prime Minister Theresa May has discussed the case with Trump. Her concern: Bombardier employs more than 4,000 workers in Northern Ireland.

Connecticut lawmakers concerned

Connecticut Democratic Sens. Richard Blumenthal and Christopher Murphy last week wrote a letter urging U.S. government officials to “refrain from taking action that will endanger the many jobs in Connecticut that depend upon Bombardier.” Engines for the C Series aircraft are made by Pratt & Whitney, based in East Hartford, Connecticut.

Commerce’s findings Tuesday aren’t the end of the matter. The department is expected to announce its findings in another case against Bombardier early next month. Then the International Trade Commission — an independent federal agency that rules on trade cases — will decide early next year whether to uphold Commerce’s duties.

Bombardier could appeal any sanctions to a U.S. court or to a dispute-resolution panel created under NAFTA. The Canadian government could also take the case to the World Trade Organization in Geneva.

 
…

It is not quite going back to the horse, even if the bicycle was the first contraption to replace beasts as a means of personal transport.

This is a new two-wheeled animal, though, that millions of consumers in Beijing, Taipei, Singapore and cities across Asia are renting via phone apps to cover the last mile of journeys, leaving cars and motorcycles at home, and forgoing taxis.

The two-year bike-share boom has put over 16 million bikes in China alone, according to its Ministry of Transport, with more than 100 million riders registered, eating into car use and gasoline demand growth already expected to stagnate by 2025.

“I often use bike-sharing services because it’s very convenient. I can find it anywhere and will not worry about losing the bike,” said life-long Beijing native Wei Zhang, 36, who uses a shared bike several times a week on her commute, riding 5 km or more.

Analysts can’t keep up with bike numbers, let alone estimate how much gasoline consumption growth has dropped off due to the rapid rise in bike-sharing. But it is clear from industry estimates, government reports and a Reuters survey that bike services are resulting in fewer trips by motor vehicles.

“Bike-sharing has been crazy since late last year. … The general belief is that [it] boosts the utilization of public transport as shared bikes help to complete the journey,” said Harry Liu, downstream consultant with IHS Markit.

Even before the number of bike-share units began growing by multiples, analysts had already been saying greater fuel efficiency in autos and the rising use of electric cars meant gasoline’s big growth story was over.

China’s gasoline demand growth is expected to slow to nearly 4 percent this year, compared with 6.5 percent growth last year, said Sri Paravaikkarasu, head of East of Suez oil at FGE.

And Chinese demand for gasoline is expected to peak as early as 2025, according to state-owned China National Petroleum Corp.

“There used to be long queues of taxis waiting for customers outside train stations, but I don’t see them anymore,” said a Beijing analyst, who took part in a Reuters survey of bike-share users and wanted to be known only by her surname Wang.

Just in the past month, Chinese bike-sharing startup Mobike introduced its services in Kuala Lumpur, Malaysia, and Bangkok, Thailand, as well as in U.S. capital Washington, D.C. Mobike, which launched in April 2016, and China-owned rival Ofo have attracted combined funding of more than $2 billion from venture capital and private equity firms that include Temasek Holdings, Tencent Holdings, DST Global and Ant Financial.

Ofo — which has more than 10 million bikes globally to Mobike’s 7 million — says it is on track to increase its global bike units to 20 million over the next three months.

The investments “demonstrate investors’ confidence in the global bike-sharing industry,” said Lawrence Cao, head of Asia Pacific business for Ofo.

Consultancy Roland Berger said the “unforeseeable” amounts of venture capital put into bike schemes made it almost impossible to estimate the growth potential of bike operators, particularly in China, over the last two years.

Taiwan, where the government backs a bike-sharing scheme, is aiming to have bikes account for a 12 percent share in trips to work by 2020, up from about 5 percent now.

The Taipei city government is expanding bike-sharing program Youbike — which uses docking stations — to have a bike station within a 10-minute walk of every citizen by 2018.

Singapore-owned Obike and U.S.-based VBikes — both free-range systems — are also operating in Taiwan.

Four wheels bad

A survey done by Mobike of 100,000 customers across 36 cities in China found that car trips among the respondents had more than halved since its service was introduced.

A report from the Transport Commission of Shenzhen, one of China’s richest cities, said more than 500,000 bike-share units there had replaced nearly 10 percent of travel by private car or 13 percent of gasoline consumption.

Bike-sharing could pose a risk to gasoline consumption “if a stronger state push to reduce carbon intensity and improve air quality translates to more drivers replacing shorter-distance driving with bike rides,” said Peter Lee, an oil and gas analyst at BMI research.

Chinese growth of passenger car sales, which grew an average annual rate of 10.1 percent over 2011 to 2016, is expected to slow to 2.5 percent over the next five years, said BMI’s Lee.

Still, mismanagement of bike numbers and misuse of some bicycles may attract legislation that could curb their use. New shared bikes were recently banned in some areas in the Chinese cities of Wuhan, Shanghai and Guangzhou, because of bicycles being discarded in public spaces.
…

Despite concerns about low inflation in the United States, the head of the U.S. central bank says raising interest rates gradually would be the most appropriate policy stance for the Federal Reserve.

“It would be imprudent to keep monetary policy on hold until inflation is back to two percent,” Fed Chair Janet Yellen said Tuesday, while speaking to the National Association for Business Economists (NABE) in Cleveland, Ohio.

Inflation, a sustained increase in the price of goods and services, has remained consistently below the Fed’s target rate of 2 percent. But even with uncertainty about the possible reasons for the low rate of inflation — from misjudging the strength of the labor market to the impact of foreign competition on the global supply chain — Yellen said the Fed “should be wary of moving too gradually.”

The Federal Reserve has kept its benchmark lending rate near record lows since the 2008 financial crisis to stimulate the U.S. economy. It has raised its interest rate three times since last December. The federal funds rate, the interest rate the central bank charges banks on overnight loans, currently sits in a range between one and one-and-one-quarter percent.

Ellen Zentner, chief economist at Morgan Stanley, says her biggest takeaway from the Cleveland speech was Yellen’s confidence that “a strong U.S. labor market would ultimately drive inflation closer to the Fed’s two percent goal over the next few years.”

Equity markets, which have benefited from low borrowing costs, anticipate a fourth rate hike in December, and possibly three more next year. Starting next month, the Fed says it will begin the process of “unwinding,” or selling off, the massive holdings of bonds and securities it has acquired since 2008.

But Yellen’s longer-term goals may be subject to change. Her four-year term as the nation’s top banker ends in February. President Donald Trump has not said whether he plans to re-appoint Yellen or overhaul the central bank’s seven-member board of governors.

Zentner believes there is a 60 percent chance Yellen will be named to serve a second term. “The longer the president waits, the greater the probability that Yellen will be re-appointed,” the bank economist said.  

Yellen spoke in Cleveland as the Conference Board released a survey that showed consumer confidence declined in September. The global business research group reported consumers’ views about the strength of the U.S. labor market have weakened and home sales have dropped to an eight-month low due to Hurricanes Harvey and Irma in the states of Texas and Florida. 
…

Mexican officials are tallying up the economic losses of the magnitude 7.1 earthquake that caused widespread damage in the capital, as the number of buildings that may need to be pulled down or need major repairs rose to 500.

 

The death toll in the quake rose to 333, with 194 of those deaths in Mexico City. Authorities pledged a return to normality, but many streets in the capital were still blocked by construction equipment and recovery teams looking to extract the last remaining bodies from the rubble. Mayor Miguel Angel Mancera said 40 to 50 people are still considered missing.

 

The city government announced a plan of reconstruction loans and aid for apartment dwellers who lost their homes or who may lose them as teetering buildings are pulled down.

 

But for city businesses like the downtown restaurant Guapa Papa, the result is already all too clear.

 

Sitting in the entrance of his restaurant Monday, surrounded by caution tape, Antonio Luna said: “This is a bust. It’s already closed due to structural damage to the building.”

 

He had to let go the three dozen employees at the 1950s-themed restaurant and is just trying to salvage whatever furniture and equipment wasn’t damaged.

 

“In the end the company let everyone go because it couldn’t continue having expenses,” Luna said.

 

Mancera said that the city, in alliance with private developers, would handle repairs on buildings that needed touch-ups or minor structural work to be habitable. He offered low-interest loans to apartment owners whose buildings would have to be demolished and rebuilt.

However, it is unclear to what extent the city can force owners to demolish buildings. Some that were damaged in the 1985 are still standing, in part because court challenges can stretch on for years.

 

Moody’s Investors Service said in a report Monday that the Sept. 19 earthquake that caused damage and deaths in the capital and nearby states “has the potential to be one of Mexico’s costliest natural catastrophes.”

 

Alfredo Coutino, Latin America director for Moody’s Analytics, said they were still collecting data on losses, but a preliminary estimate was that the earthquake could knock 0.1 to 0.3 percentage point off growth in Mexico’s gross domestic product in the third and fourth quarters.

 

For the full year, the impact on gross domestic product should be about 0.1 percentage point. “The impact on the year’s growth will be small, particularly considering that the reconstruction work will compensate for some of the total loss in activity during the fourth quarter,” Coutino said.

 

Money is expected to pour into the economy as Mexico City and the federal government tap their disaster funds. As of June, the city’s disaster fund stood at 9.4 billion pesos (more than $500 million), making it slightly larger than the national fund, according to a Moody’s Investors Services report.

 

Of course, the national fund also has to deal with recovery from the even stronger Sept. 7 quake that has been blamed for nearly 100 deaths, mostly in the southern states of Oaxaca and Chiapas.

 

There will be months of work ahead from demolition to repairs and reconstruction.

 

Mexico City Mayor Miguel Angel Mancera said that 500 “red level” buildings would either have to be demolished or receive major structural reinforcement. An additional 1,300 are reparable, and about 10,000 buildings inspected so far were found to be habitable.

At least 38 buildings, including apartments and office buildings, collapsed during the earthquake.

 

Mexico’s education ministry also has 1.8 million pesos (about $100,000) to spend on school repairs. In Mexico City alone, only 676 of the city’s 9,000 schools had been inspected and cleared to resume classes, Education Secretary Aurelio Nuno said Monday.

 

AIR Worldwide, a Boston-based catastrophe modeling consultant, provided a wide range for industry-insured losses, but noted they would be only a small part of the total economic losses. It put the insured losses at between 13 billion pesos ($725 million) and 36.7 billion pesos ($2 billion).

 

A graceful traffic roundabout encircled by restaurants, cafes and shops is now a sprawling expanse of medical tents, piles of food and other relief supplies, and stacks of building materials. While relief work went on outside Monday, men were busily wrapping furniture in foam and plastic inside the Antiguo Arte Europeo store.

 

Stone panels on the building’s facade appeared cracked or were altogether missing. Saleswoman Luisa Zuniga said the owners were waiting for civil defense inspectors to certify there was no structural damage to the building before reopening to the public.

 

Meanwhile, they were moving furniture that could still be sold to their other branches.

 

“Then we’ll see how long it takes to fix everything,” she said. “It is important to get back to work.”

 

Edgar Novoa, a fitness trainer, went back to his job Monday after working as a volunteer following the earthquake. Around midday, he stopped his bicycle at a cleared foundation where a building of several stories had stood near his home.

 

He knelt and prayed while others left flowers and candles at the site.

 

The government has said that nine foreigners, including five from Taiwan, died in the quake. One of the buildings that collapsed in the quake housed a business listed as Asia Jenny Importaciones, SA de CV. A South Korean man was also confirmed dead.

 

A Panamanian woman died, as did one man from Spain and one from Argentina.
…

The United States has imposed sanctions on eight North Korean banks and 26 bank executives amid escalating tensions with Pyongyang over its nuclear program.

“This further advances our strategy to fully isolate North Korea in order to achieve our broader objectives of a peaceful and denuclearized Korean Peninsula,” U.S. Treasury Secretary Steven Mnuchin said Tuesday in a statement.

Last week, President Donald Trump signed an executive order calling for new economic sanctions against individuals and businesses that finance trade with Pyongyang’s reclusive communist regime and fund its weapons development.

U.S. Defense Secretary Jim Mattis emphasized Tuesday that the U.S. sought a peaceful resolution to escalating tensions with North Korea, despite the regime’s claim that a tweet Monday by Trump was tantamount to a declaration of war.

In New Delhi for talks with Indian officials about strengthening U.S.-India ties, Mattis said that while the U.S. military presence on the Korean Peninsula was necessary to deter North Korea’s threats, it also supported diplomatic efforts to resolve the conflict peacefully.

“And that is our goal, to solve this diplomatically, and I believe President Trump has been pretty clear on this issue,” Mattis said, following a meeting with India’s defense minister.

Hope for diplomacy

Secretary of State Rex Tillerson on Tuesday also stressed that the U.S. would “continue to pursue our diplomatic efforts and hope that’s the way we’ll solve this”

On Monday, Trump commented on Twitter that if North Korea carried out its threats, Kim Jong Un’s regime “won’t be around much longer.”

Speaking to reporters near U.N. headquarters in New York, North Korean Foreign Minister Ri Yong Ho said, “Given the fact that this comes from someone who is currently holding the seat of the United States presidency, this is clearly a declaration of war.”

The world should clearly remember, he added, that “it was the U.S. who first declared war on our country.”

White House press secretary Sarah Huckabee Sanders called Ri’s characterization of the tweet “absurd.”

“We’ve not declared war on North Korea,” she said.

Although North Korea has declared “war” many times in the past, now “we’ve entered a bona fide crisis,” Van Jackson, senior lecturer in international relations at Victoria University in Wellington, New Zealand, told VOA.

“Even if we’re not in a war right now, we seem to be doing everything in our power to make one happen by actions and statements that make deterrence more likely to fail,” said Jackson, a former director for Korea policy and a defense strategy adviser at the U.S. Defense Department.

Threat to bombers

Ri warned that his country might shoot down U.S. strategic bombers, even if they were not in North Korean airspace. According to South Korea’s Yonhap news agency Tuesday, Lee Cheol-woo, the chief of the National Assembly’s intelligence committee, said Pyongyang was spotted readjusting the position of its warplanes and boosting its defensive capabilities along its east coast.

A fighter jet from North Korea in 1969 shot down an unarmed U.S. Navy reconnaissance plane, outside North Korean territorial airspace in the Sea of Japan, killing 30 sailors and one marine on board.

Speaking at a security conference on Monday, Trump’s national security adviser, H.R. McMaster, said the United States hoped to avoid war with North Korea, “but what we can’t do is discount that possibility.”

The Army lieutenant general added that the U.S. had thought through several different ways the problem with North Korea could be resolved, and “some are uglier than others.”

However, McMaster, told the conference, hosted by the Institute for the Study of War, that “there’s not a precision strike that solves the problem.”

One peaceful solution, according to McMaster, would be for Pyongyang to give access to inspectors from the International Atomic Energy Agency. But any diplomatic negotiations, McMaster said, would “have to happen under conditions that are different from previous talks.” He said, however, he was not going to come up with a list of preconditions.

Beijing’s role

Some analysts see the path to talks still running through Beijing, which recently moved to cut banking ties between China and North Korea, shut off the supply of liquefied natural gas to the North Koreans and stop imports of their textiles.

“I think that the Chinese are sending a signal to the North that they are skating on thin ice,” said T.J. Pempel, a political science professor at the University of California at Berkeley.

The North Korean foreign minister threatened on Saturday that his country could conduct an atmospheric hydrogen bomb test over the Pacific Ocean.

Mattis responded Monday that if North Korea carried out its threat, “this would be a shocking display of irresponsibility toward global health, toward stability, toward nonproliferation.”

U.S. Air Force B-1B Lancer bombers from Guam escorted by F-16 fighter jets from a U.S. base in Japan on Saturday flew in international airspace over waters east of North Korea.

The Pentagon said the show of force, meant to display some of the military options available to Trump, was “the farthest north of the demilitarized zone any U.S. fighter or bomber aircraft have flown off North Korea’s coast in the 21st century.”

VOA’s William Gallo contributed to this report from New Delhi.
…

Federal Reserve Chair Janet Yellen acknowledged Tuesday that the Fed is puzzled by the persistence of unusually low inflation and that it might have to adjust the timing of its interest rate policies accordingly.

Speaking to a conference of economists, Yellen touched upon key questions the Fed is confronting as it tries to determine why inflation has remained chronically below its inflation target of 2 percent annually. The Fed chair said officials still expect the forces keeping inflation low to fade eventually. But she conceded that the Fed may need to adjust its assumptions.

In noting the persistence of low inflation, Yellen suggested that the Fed will take care not to raise rates too quickly. But she also said the central bank should avoid raising rates too slowly. Moving too gradually, she suggested, might eventually force the Fed to have to accelerate rate hikes and thereby elevate the risk of a recession.

Most analysts expect the central bank to raise rates in December, for a third time this year, in a reflection of economic improvement. But the Fed has said its rate hikes will depend on incoming data.

In her speech in Cleveland to the annual conference of the National Association for Business Economics, Yellen went further than she has before in suggesting that the Fed could be mistaken in the assumptions it is making about inflation.

“My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective or even the fundamental forces driving inflation,” Yellen said.

The Fed seeks to control interest rates to promote maximum employment and stable prices, which it defines as annual price increases of 2 percent. While the Fed has met its goal on employment, with the jobless rate at 4.4 percent, near a 16-year low, it has continued to miss its inflation target.

Chronically low inflation can depress economic growth because consumers typically delay purchases when they think prices will stay the same or even decline.

Inflation, which was nearing the 2 percent goal at the start of the year, has since then fallen further behind and is now rising at an annual rate of just 1.4 percent.

Yellen has previously attributed the miss on inflation this year to temporary factors, including a price war among mobile phone companies. She and other Fed officials have predicted that inflation would soon begin rising toward the Fed’s 2 percent inflation target, helped by tight labor markets that will drive up wage gains.

In her remarks Tuesday, Yellen said this outcome of a rebound in inflation is still likely. But she said the central bank needed to remain alert to the possibility that other forces not clearly understood might continue to keep inflation lower than the Fed’s 2 percent goal.

The Fed chair cautioned that if the central bank moved too slowly in raising rates, it could inadvertently allow the economy to become overheated and thus have to raise rates so quickly in the future that it could push the country into a recession.

“It would be imprudent to keep monetary policy on hold until inflation is back to 2 percent,” Yellen said.

During a question-and-answer session, Yellen said the Fed would be “looking at inflation very carefully” to determine the timing of upcoming rate hikes. But she said the data is likely to be difficult to assess, in part because of the effects of the recent devastating hurricanes, which have forced up gasoline prices.

Yellen’s remarks came a week after Fed officials left their benchmark rate unchanged but announced that they would start gradually shrinking their huge portfolio of Treasury and mortgage bonds. Those holdings had grown from purchases the Fed made over the past nine years to try to lower long-term borrowing rates and help the U.S. economy recover from the worst downturn since the 1930s.

The Fed did retain a forecast showing that officials expect to boost rates three times this year. So far, they have increased their benchmark lending rate twice, in March and June, leaving it at a still-low range of 1 percent to 1.25 percent.

Last week, the Fed said the reductions in its bond holdings would begin in October by initially allowing a modest $10 billion in maturing bonds to roll off the $4.5 trillion balance sheet each month.

Asked about how long-term loan rates might respond to reductions in the Fed’s bond portfolio, Yellen cited a study that estimated that the increase in its bond holdings had lowered such rates by about 1 percentage point.

But she said the reduction in the holdings wouldn’t likely raise rates by as much as a percentage point given that the Fed intended to keep the size of its balance sheet significantly higher than it was before the financial crisis. She said any upward pressure on rates would likely be gradual and take place over several years.

Crutsinger reported from Washington, Kang from Cleveland.
…

Hackers breached the U.S. Securities and Exchange Commission’s computer system last year by taking advantage of companies that used authentic financial data when they were testing the agency’s corporate filing system, according to sources familiar with the matter.

The Federal Bureau of Investigation and the U.S. Secret Service have since launched an investigation into a 2016 hack into the SEC’S EDGAR system, several of those people said.

The sources spoke anonymously because it is not a public investigation.

The SEC’s EDGAR system is a crucial network used by companies to file earnings reports and other material information.

Spokesmen for the FBI, the Secret Service and the SEC all declined to comment, saying they could neither confirm nor deny the existence of an investigation.

The breach occurred in October 2016 and was detected that same month. The attack appeared to have been routed through a server in Eastern Europe, according to an internal government memo describing the incident, which was seen by Reuters.

There was no evidence at the time that data had been improperly retrieved, according to one source familiar with the matter, and the issue was handled internally by the SEC’s Office of Information Technology.

Only after the SEC’s Enforcement Division detected a pattern of suspicious trading ahead of company public disclosures did officials go back to the agency’s technology staff and ask if some companies were using authentic data when they were testing the EDGAR system, one of the people said.

The person said that “not many companies” had submitted real
data that is believed to have been hacked.

The test process is for people to submit test filings to ensure that they format correctly and don’t have submission errors,” the person said.

“They normally use that right before they file their normal reports. They are supposed to use dummy data,” the person said. “However, it is still supposed to be protected the same way in case they do something stupid. A couple companies did, and it wasn’t protected properly.”

SEC chair to confirm probe

SEC Chairman Jay Clayton will confirm the enforcement division’s ongoing investigation when he testifies Tuesday before the Senate Banking Committee, according to prepared testimony reviewed by Reuters.

He has also asked the SEC’s Office of Inspector General to investigate the intrusion itself, the scope of non-public information that was stolen and how the SEC responded to the incident, which he said was properly reported to the Department of Homeland Security’s Computer Emergency Readiness Team.

The FBI’s investigation, which is being led out of New Jersey, is focusing specifically on the trading activity in connection with the breach, according to several sources.

One possibility the FBI is considering is that the SEC breach was connected to a group of hackers that intercepted electronic corporate press releases in a previous case which the FBI in New Jersey helped investigate, several of the sources said.

In that case, federal prosecutors in the New York borough of Brooklyn and New Jersey, as well as the SEC, charged an alliance of stock traders and suspected computer hackers based in the United States and Ukraine.

Clayton, who was installed as chairman in May, only learned of the 2016 breach in August through the enforcement investigation. SEC Commissioners Kara Stein and Mike Piwowar, who are the only other two sitting members of the agency at the moment, also only learned of it recently.

Some SEC enforcement attorneys not involved in the matter learned about it when they read it in the newspaper, sources said.

The delay in disclosing the hack and the months-long gap between uncovering it and discovering the potential insider trading are particularly embarrassing for an agency that has pushed companies to bolster their cyber capabilities and which investigates companies for failing to disclose breaches to investors faster.

While no company has ever been charged for flawed disclosures, the SEC has previously brought charges against brokerage firms over poor cyber security practices.

The SEC has experienced other cyber incidents in recent months.

Between October 2016 and April 2017, the SEC documented a variety of various cyber security incidents, according to one source familiar with the matter.

Reuters was not immediately able to ascertain the nature of all of the incidents, though the source said several involved EDGAR.

In one other case that was not related to EDGAR, a server being set up for SEC use had not been updated to fix known vulnerabilities, one person familiar with the matter said.

The SEC detected unauthorized communications from it. The FBI watched the traffic, which was early signaling or “beaconing” rather than the export of important information, and the hole was closed. In that case, the signal from the beacon was sent to a server in Ukraine, the person added.

The SEC has been criticized for its cyber defenses. The U.S. Department of Homeland Security detected 5 “critical” vulnerabilities that needed to be fixed when it scanned a sample of the agency’s computers and devices the week of January 23.

Reporting by Sarah N. Lynch in Washington and Joseph Menn in San Francisco; Editing by Leslie Adler
…

Equifax CEO Richard Smith announced his sudden retirement Tuesday following a massive data breach at the credit reporting company earlier this year.

Smith and Equifax says they learned of the hack in late July but waited until September 7 to inform its customers about the incident, which may have further compromised the personal information of about 143 million Americans.

The federal government is investigating the company’s response to the hack and Congress will hold a hearing on the matter next week.

Paulino do Rego Barros, Jr., an executive from the Asia Pacific division at Equifax, will serve as CEO while the company searches for a permanent replacement.

Equifax, one the largest credit reporting companies in the United States, said hackers were able to obtain names, Social Security numbers, birth dates and addresses of more than 40 percent of the U.S. population.

The company said credit card numbers were also compromised for 209,000 U.S. consumers, as were credit dispute accounts for 182,000 people.

Smith served as CEO from 2005 until this week. His departure follows the abrupt retirement of Equifax’s chief security officer Susan Mauldin and chief information officer Dave Webb.
…

The United States has asked China not to implement its new cybersecurity law and is concerned it could damage global trade in services, a U.S. document published by the World Trade Organization showed on Tuesday.

China ushered in a tough new cybersecurity law in June, following years of fierce debate around the move that many foreign business groups fear will hit their ability to operate in the country.

The law requires local and overseas firms to submit to security checks and store user data within the country.

If China’s new rules enter into full force in their current form, as expected by the end of 2018, they could impact cross-border services supplied through a commercial presence abroad, said the U.S. document, submitted for debate at the WTO Services Council.

“China’s measures would disrupt, deter, and in many cases, prohibit cross-border transfers of information that are routine in the ordinary course of business,” it said. “The United States has been communicating these concerns directly to high level officials and relevant authorities in China,” the U.S. document said, adding it wanted to raise awareness among WTO members about the potential impact on trade.

“We request that China refrain from issuing or implementing final measures until such concerns are addressed.”

The two-page U.S. document said the measures causing concern included the Cybersecurity Law adopted in November 2016 and taking effect June 2017 and various implementing measures connected with that law and the July 2015 National Security Law.

The law obliges companies to store all data within China and pass security reviews, fitting China’s ethos of “cyber sovereignty” – the idea that states should be permitted to govern and monitor their own cyberspace, controlling incoming and outgoing data flows. “The impact of the measures would fall disproportionately on foreign service suppliers operating in China, as these suppliers must routinely transfer data back to headquarters and other affiliates,” the U.S. document said. “Companies located outside of China supplying services on a cross-border basis would be severely affected, as they must depend on access to data from their customers in China.”

China maintains a strict censorship regime, banning access to foreign news outlets, search engines and social media, including Google and Facebook.
…

Global accountancy firm Deloitte has been hit by a sophisticated hack that resulted in breach of confidential information and plans from some of its biggest clients, Britain’s Guardian newspaper said on Monday.

Deloitte — one of the big four professional services providers — confirmed to the newspaper it had been hit by a hack, but it said only a small number of its clients had been impacted.

The firm discovered the hack in March, according to the Guardian, but the cyber attackers could have had breached its systems as long ago as October or November 2016.

The attack was believed to have been focused on the U.S. operations of the company, which provides auditing, tax advice and consultancy to multinationals and governments worldwide.

“In response to a cyber incident, Deloitte implemented its comprehensive security protocol and began an intensive and thorough review including mobilizing a team of cybersecurity and confidentiality experts inside and outside of Deloitte,” a spokesman told the newspaper.

“As part of the review, Deloitte has been in contact with the very few clients impacted and notified governmental authorities and regulators.”

A Deloitte spokeswoman declined immediate comment, saying that the firm would issue a statement shortly.
…

Airbnb is launching local tours and other experiences in New York City this week with a special host.

Her listing promises an “unforgettable shoe-shopping experience'” and her bio describes her as an “actor, producer, businesswoman” and “proud New Yorker.”

 

She’s Sarah Jessica Parker of ‘Sex and the City’ fame and she’ll be taking four guests shoe-shopping at Bloomingdale’s, then sending them to the ballet.

 

Parker’s listing goes live Tuesday, with four spots at $400 each, first come, first served. The money will benefit the New York City Ballet, where Parker is a board member.

 

Airbnb is primarily known for vacation rentals around the world. Officials in many cities have criticized the company, saying its short-term rentals are reducing long-term housing options for residents and forcing prices up.

 
…

Poised to reveal a tax plan that is a pillar of  his economic policy and delivering on a campaign pledge, President Donald Trump is promising “The largest tax cut in the history of our country.”

Trump’s declarations came as the health care legislation brought forward by Republicans teetered near failure. He said his “primary focus” is the tax overhaul plan, which would be the first major revamp of the tax system in three decades.

 

Trump has promised economic growth of 3 percent, and insists that slashing taxes for individuals and corporations is the way to achieve it. He said the tax plan that the White House and Capitol Hill Republicans have been working on for months is “totally finalized.” He was speaking on the tarmac at the Morristown Municipal Airport.

 

Trump’s details weren’t firm. He said “I hope” the top corporate tax rate will be cut to 15 percent from the current 35 percent. House Speaker Paul Ryan has said a 15 percent rate is impractically low, with a rate somewhere in the low- to mid-20 percent range more viable to avoid blowing out the deficit. The rate is “going to be substantially lower so we bring jobs back into our country,” Trump said.

 

Trump also said “We think we’re going to bring the individual rate to 10 percent or 12 percent, much lower than it is right now.” He did not say whether the tax rate for the wealthiest Americans, now at 39.6 percent would be cut, as some Republicans have advocated.

 

“This is a plan for the middle class and for companies, so they can bring back jobs,” he said.

 

The plan also is expected to reduce the number of tax brackets from seven to three.

 

Trump spoke as House Republicans on the tax-writing Ways and Means Committee huddled behind closed doors to discuss the plan. They have promised to reveal an outline and possible details of the plan later this week, after all Republican lawmakers in the House get a chance to discuss it and put questions to the chief architects, including Rep. Kevin Brady, R-Texas, who heads the Ways and Means panel.

 

“We’ll let the White House determine the timetable” of releasing the plan, Brady said following the meeting. He added it will “definitely” occur this week.

 

Republicans have been split on some core issues. They are divided over whether to add to the nation’s soaring $20 trillion debt with tax cuts. The GOP also is at odds over eliminating the federal deduction for state and local taxes.

 

Republican senators on opposing sides of the deficit debate have tentatively agreed on a plan for $1.5 trillion in tax cuts. That would add substantially to the debt and would enable deeper cuts to tax rates than would be allowed if Republicans followed through on earlier promises that their tax overhaul wouldn’t add to the budget deficit. That would mark an about-face for top congressional Republicans like Senate Majority Leader Mitch McConnell and Ryan, who had for months promised it wouldn’t add to the deficit.

 

Earlier Sunday, Treasury Secretary Steven Mnuchin said in a television interview the plan “creates a middle-income tax cut, it makes businesses competitive and it creates jobs.” He added that there are changes, too, for the “high end,” including “getting rid of lots of deductions.” He did not offer specifics.
…

Iraq on Sunday urged foreign countries to stop importing crude directly from its autonomous Kurdistan region and to restrict oil trading to the central government.

The call, published in statement from Prime Minister Haider al-Abadi’s office, came in retaliation for the Kurdistan Regional Government’s plan to hold a referendum on independence on Monday.

The central government’s statement seems to be directed primarily at Turkey, the transit country for all the crude produced in Kurdistan. The crude is taken by pipeline to the Turkish Mediterranean coast for export.

Baghdad “asks the neighboring countries and the countries of the world to deal exclusively with the federal government of Iraq in regards to entry posts and oil,” the statement said.

The Iraqi government has always opposed independent sales of crude by the KRG, and tried on many occasions to block Kurdish oil shipments.

Long-standing disputes over land and oil resources are among the main reasons cited by the KRG to ask for independence.

Iraqi Kurdistan produces around 650,000 barrels per day of crude from its fields, including around 150,000 from the disputed areas of Kirkuk.

The region’s production volumes represent 15 percent of total Iraqi output and around 0.7 percent of global oil production. The KRG aspires to raise production to over 1 million barrels per day by the end of this decade.

Kurdish oil production has been dominated by mid-sized oil companies such as Genel, DNO, Gulf Keystone and Dana Gas. Major oil companies such as Chevron, Exxon Mobil and Rosneft also have projects in Kurdistan but they are mostly at an exploration stage.

However, Rosneft, Russia’s state oil major, has lent over $1 billion to the KRG guaranteed by oil sales and committed a total of $4 billion to various projects in Kurdistan.
…

Swiss voters rejected raising women’s retirement age to 65 in a referendum on Sunday on shoring up the wealthy nation’s pension system as a wave of Baby Boomers stops working.

Authorities pushing the first serious reform of the pension system in two decades had warned that old-age benefits were increasingly at risk as life expectancy rises and interest rates remain exceptionally low, cutting investment yields.

But it fell by a margin of 53-47 percent, sending the government back to the drawing board on the thorny social issue.

The package turned down under the Swiss system of direct democracy included making retirement between the ages of 62 and 70 more flexible and raising the standard value-added tax (VAT) rate from 2021 to help finance the stretched pension system.

It sought to secure the level of pensions through 2030 by cutting costs and raising additional revenue.

Minimum pay-out rates would have gradually fallen and workers’ contributions would rise, while public pensions for all new recipients would go up by 70 Swiss francs ($72.25) a month.

The retirement age for women would have gradually risen by a year to 65, the same as for men.

“That is no life,” complained one 49-year-old kiosk cashier, who identified herself only as Angie. “You go straight from work to the graveyard.”

Some critics had complained that the higher retirement age for women and higher VAT rates were unfair, while others opposed expanding public benefits and said the reforms only postponed for a decade rather than solved the system’s financial woes.

Opinion polls had shown the reforms just squeaking by, but support had been waning.

The standard VAT rate would have gone up by 0.3 point from 2021 to 8.3 percent — helping generate 2.1 billion francs a year for pensions by 2030 — but the rejection means the standard VAT rate will now fall to 7.7 percent next year as a levy earmarked for disability insurance ends.

A 2014 OECD survey found Switzerland, where a worker earns over $91,000 on average, spends a relatively low 6.6 percent of economic output on public pensions. Life expectancy at birth was 82.5 years. More than 18 percent of the population was older than 65.

($1 = 0.9690 Swiss francs)
…

Sunday’s national election in Germany will sound the starting gun for a renewed debate on fixing flaws in Europe’s shared currency to prevent future crises.

 

France’s new president Emmanuel Macron has made it clear he is willing to push for change to strengthen the euro and is expected to make proposals in a major speech Tuesday. He is pushing for, among other things, a finance minister for the eurozone to oversee a central fiscal pot of money that could even out recessions in individual members.

 

Even pro-euro policymakers concede their 19-nation currency union contains weaknesses that fed its debt crisis — and leave it exposed to new trouble. But action on fixes has slowed.

 

Macron’s ideas are not new but several of them have faced resistance from Germany, always allergic to the idea of being handed the bill for other members’ troubles. For example, German Chancellor Angela Merkel and her finance minister, Wolfgang Schaeuble, have pushed back against the idea of EU-wide insurance on bank deposits meant to keep bank troubles from hitting government finances.

 

Now there are signs that after its own elections are out of the way, Germany might be more open to change or at a minimum speeding up steps — like the deposit insurance idea — that have stalled. Polls suggest Merkel will win a fourth term. What’s not clear is which party her center right Christian Democratic Union will form a coalition.

 

“In several ways, the coming 12-18 months represent an exceptional opportunity for European reform,” says Nicolas Veron, senior fellow at the Bruegel think tank in Brussels and at the Peterson Institute for International Economics in Washington. Reasons for that, he said, include:

The two biggest EU countries, France and Germany, will now have new governments with fresh mandates from voters.
Europe’s banks are in better shape and the economy is growing, meaning leaders are not preoccupied with fighting a crisis.
 Anti-euro populists have been turned back at the polls this year in France and the Netherlands, giving pro-EU forces a fresh shot of confidence.
 Memories of the debt crisis that threatened to break up the eurozone at its peak in 2011-2012 may still be vivid enough to overcome complacency. 

Merkel has expressed cautious openness to tweaking the setup of the euro.

“I have made clear that I don’t have anything against the title of a European finance minister per se — we would just have to clear up, and we are not yet that far along in talks with France — what this finance minister could do,” she said in August.

 

“I could imagine an economy and finance minister … so that we achieve a higher degree of harmonization of competitiveness.”

 

The euro, currently worth about $1.20, was created in 1999, and 19 of the 28 EU members use it.

 

European officials concede that the debt crisis, which exploded when Greece revealed in October 2009 that it was bankrupt, exposed serious flaws. Once financial trouble hit, member countries such as Greece, Ireland and Portugal lacked typical crisis safety valves such as letting their national currency devalue, which can help a country’s exports and attract investment. Without their own currencies, this was no longer possible. The countries wound up needing bailouts from the other member countries led by Germany and from the International Monetary Fund.

 

Additionally, the cost of rescuing failing banks threatened to bankrupt entire eurozone governments. And the euro lacks a central fiscal budget that could even out recessions in member countries by investing more in economies in need.

 

German resistance will likely remain strong to the bolder ideas, such as a well-stocked central fiscal pot worth several percentage points of EU gross domestic product. Currently, the EU’s budget is 1 percent of GDP, spent on things like support for farmers and infrastructure to help development in the poorest members.

 

More modest, politically realistic steps could include:

Pushing ahead with EU-wide deposit insurance, to be implemented over a period of years.
Regulations limiting the widespread practice of European banks buying their own governments’ bonds. That would increase pressure on governments to shape up their economies and finances.
 A modest additional pot of money that could be used as targeted stimulus for eurozone countries that fall into serious recessions, with the condition that they implement economic reforms.

EU governments led by Germany, the bloc’s most influential member, have already taken some significant steps since the crisis days. They created a fund that can give bailout loans to states in need. They tightened banking oversight by moving it to the EU level at the European Central Bank, and they took steps to stick bank creditors — not taxpayers — with any losses in case of a rescue.

 

The new system proved its mettle in June, when the ECB pulled the plug on Spain’s troubled Banco Popular, the country’s sixth-largest bank, and then orchestrated a sale to Banco Santander for one euro. Shareholders and junior bondholders took the losses, while taxpayers and depositors were spared. It’s a step away from crisis times when the financial burden of rescuing banks drove Ireland and Spain to seek bailout help.

 

Carsten Brzeski, chief economist at ING Germany, says that reforms like a small central fund and deposit insurance are feasible.

 

“The opportunity in 2018 would be more a natural evolution of the process that has been ongoing now for the past couple of years, rather than being a revolution,” he said.
…

Cheap solar panels imported from China and other countries have led to a boom in the U.S. solar industry, where rooftop and other installations have surged 10-fold since 2011.

But two U.S. solar manufacturers say the flood of imports has led one to bankruptcy and forced the other to lay off three-quarters of its workforce.

The International Trade Commission is set to decide Friday whether the imports, primarily from Asia, are causing “serious injury” to the companies. If so, the commission will recommend this fall whether the Trump administration should impose tariffs that could double the price of solar panels from abroad.

President Donald Trump has not cozied up to the solar industry, as he has for coal and other fossil fuels, but he is considered sympathetic to imposing tariffs on solar imports as part of his “America first” philosophy. A White House spokeswoman declined to comment Thursday.

Both sides of the dispute were making their case ahead of Friday’s meeting.

“Simply put, the U.S. industry cannot survive under current market conditions,” a lawyer for Georgia-based Suniva Inc. wrote in a petition filed with the commission. Suniva brought the case with Oregon-based SolarWorld Americas.

Opposition to tariffs

Governors of four solar-friendly states — Nevada, Colorado, Massachusetts and North Carolina — oppose the tariff, warning it could jeopardize the industry. They cited a study showing that a global tariff could cause solar installations to drop by more than 50 percent in two years, a crushing blow as states push for renewable energy that does not contribute to climate change.

“The requested tariff could inflict a devastating blow on our states’ solar industries and lead to unprecedented job loss, at steep cost to our states’ economies,” the two Republicans and two Democrats wrote in a letter Thursday to the trade commission.

A group of former U.S. military officials also urged the Trump administration to reject solar tariffs, noting that the Defense Department is the nation’s largest energy consumer and follows a federal law calling for the Pentagon to procure 25 percent of its energy from renewable sources by 2025.

Suniva called the case a matter of fairness. Even with better manufacturing methods, lower costs and “dramatically improved efficiency,” the company has “suffered substantial losses due to global imports,” Suniva said in its petition. The company declared bankruptcy this spring after laying off 190 employees and closing production sites in Georgia and Michigan.

SolarWorld Americas, meanwhile, has trimmed its workforce from 1,300 to 300, with more cuts likely.

“After nearly 30 factories have shut down in the wake of surging imports, the legacy of this pioneering American industry hangs in the balance,” said Juergen Stein, CEO and president of SolarWorld Americas.

“We believe that the promise of solar — energy sustainability and independence — can be realized only with healthy American manufacturing to supply growing U.S. demand,” Stein said in a statement to The Associated Press.

Trade group speaks out

In a twist, the main trade group for the solar industry opposes tariffs and calls the trade case “an existential threat” to the industry.

“The stakes are exceedingly high. We are talking about 88,000 people in this country who could lose their jobs if these tariffs are put in place,” said Abigail Ross Hopper, president of the Solar Energy Industries Association, which represents an array of solar companies.

A global tariff could cause a sharp price hike that could force the U.S. to lose out on solar installations capable of powering more than 9 million homes over the next five years — more than has been installed to date, Hopper said. States could lose out on billions of dollars of infrastructure investment, she added.

Suniva and SolarWorld have themselves to blame for their struggles — not pressure from overseas, Hopper said.

“Here is the real story of this case: We have two foreign-owned, poorly managed companies using U.S. trade laws to put U.S. manufacturers out of business and causing U.S. employees to lose their jobs,” she said.

Indeed, while Suniva’s U.S. operations are based in Georgia, the company’s majority owner is in China. SolarWorld Americas is a subsidiary of German solar giant SolarWorld, which declared insolvency last month.

If an injury finding is made, the trade commission would have until mid-November to recommend a remedy to the president, with a final decision on tariffs expected in January.
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