Trump Expected to Nominate Powell for Fed Chair

U.S. President is expected to nominate Federal Reserve Governor Jerome Powell as the next chairman of the central bank, senior administration officials said Monday.

Powell is a Republican centrist who appears inclined to continue the Fed’s strategy of gradual interest rate hikes.

But officials say Trump hasn’t made up his mind and could change it.

Powell would represent a middle-ground pick for Trump, who is also considering current Democratic Fed Chair Janet Yellen as well as Stanford University economist John Taylor and former Fed Governor Kevin Warsh.

Powell could, however, relax some of the stricter financial rules that were enacted after the 2008 financial crisis. Trump has complained that those rules have been too restrictive.

The decision over the Fed’s next leader is overshadowing this week’s meeting of the Federal Reserve’s policy meeting.

Trump said Friday he has “someone very specific in mind” for the Fed. “It will be a person who, hopefully, will do a fantastic job,” Trump said in a short video message posted on Instagram and Twitter.

Many conservative members of Congress had been pushing Trump to select Taylor, rather than Powell, for Fed chairman. Taylor, one of the country’s leading academics in the area of Fed policy, would likely embrace a more “hawkish” approach — more inclined to raise rates to fight inflation than to keep rates low to support the job market. Taylor is the author of a widely cited policy rule that provides a mathematical formula for guiding rate decisions. By one version of that rule, rates would be at least double what they are now.

 

Yellen, who was selected as Fed chair by President Barack Obama, has been an outspoken advocate for the stricter financial regulations that took effect in 2010 to prevent another crisis.

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Blockchain Technology Could Unblock Southeast Asia

Imagine you could swipe your phone over a piece of fish in the supermarket and instantly see secure records of its entire path through the supply chain, from the technique used by the fisherman who caught it in Indonesia to when it was shipped and how it was processed at a factory in your home country —  all at the tap of a smartphone.

Trial projects such as that one are testing the potential of Blockchain technology to bring transparency to all sorts of notoriously inefficient or shadowy industries in Southeast Asia.

Blockchain, the technology that powers bitcoin, is an essentially unchangeable form of bookkeeping. It creates cryptographically chained signatures between blocks of information that are authenticated by users over a peer-to-peer distributed ledger — a public record that can be applied to any type of bookkeeping, not just cryptocurrencies.

“It removes the requirement for a centralized authority, and in a lot of the products that it’s being launched in, this centralized authority tends to be the government,” said Alisa DiCaprio, head of research at R3 — an enterprise banking software firm that uses distributed ledger technology.

In a region where the most important records — identity and ownership for instance — are often subjected to little or no external oversight, blockchain offers enormous potential benefits.

Erin Murphy, Founder and Principal of Inle Advisory Group, a Myanmar and emerging business advisory firm, said major Asian business hubs are looking to blockchain to clean up and simplify transactions.

“Ideally, we would want to see adoption of blockchain at an official level all across the region,” she said in an email. “But perhaps not surprisingly, the governments that are leading blockchain adoption are those that are already low-corruption.”

One of those governments, she said, is Singapore, which is working with major banks on a blockchain-based system to streamline and qualitatively improve their customer (KYC) processes.

In other countries, it is being used for completely different purposes. In the Philippines, a remittance market worth billions of dollars per month has been invaded by firms offering cheaper services built on blockchain, which people can access without a bank account..

“Any steps that get taken at first may not be viewed through an anti-corruption lens and may inadvertently tackle that issue; it will likely be viewed through a development lens to kickstart poverty alleviation and bringing sectors up to international standards that attract foreign investment,” Murphy said.

More than money

There are many trials with clear utility in Southeast Asia underway, including systems for land titling under development in Sweden and Japan.

In June, the United Nations unveiled a blockchain-based system built in partnership with Microsoft and Accenture that gives stateless refugees a permanent identity based on biometric data.

It’s also being explored for secure voting systems.

The blockchain-based app developed to track the supply chain of fish from Indonesia — Provenance — is now the basis of many other trials, including a project to create a similar system for the garment industry.

Online you can view the results of a pilot released in May this year that follows a piece of clothing — an Alpaca Mirror Jumper from London-based designer Martine Jarlgaard, from a farm in Dulverton, Britain, through every step of production into London with location, content and timestamps.

It is a long way, though, from realizing that something can be done to actually making it happen, DiCaprio of R3 said.

“The technical capability to do this exists in most developing countries,” she said. “You have engineers who can code on the blockchain. But the understanding of how to actually implement this from a business point of view is very poor.”

DiCaprio estimates it will take about five years before we actually see large-scale functioning applications and believes the most impactful will occur at the macro economic level.

“So for example one area that it’s moving very quickly is trade finance,” she said. “And trade finance, you’re generally talking about fairly large companies, generally in Asia mostly exporting or importing from or to the US or EU,.”

Faster, cheaper and more transparent transactions combined with reductions in the risks of lending and borrowing would flow to down to the village level, she added.

Subversion vs centralization

Blockchain proponents are divided by some sharply divergent values. Some see blockchain — whose slogan is “be your own bank,” as technology that can fundamentally upend a global financial system they believe is intractably corrupt.

“There is a serious opportunity for us here to remove money out of government,” said a Southeast Asia based bitcoin trader who would only give his alias FlippingABitCoin, fearing he could expose himself to physical theft.

Billions of people currently excluded from the formal banking system will be able to access global cryptocurrencies with no middle man using nothing more than a phone, he said.

“It will level out the playing field of power,” he said.

Another group of enthusiasts are encouraging the absorption of this technology by states, as demonstrated by Canada, Singapore, China and Germany, all of which are either exploring or conducting trials of their own central bank digital currencies using blockchain.

“In the long run, we believe if there is any threat at all to governments, it is that other governments will lead the way in adopting blockchain technologies in producing low-corruption, high-transparency, highly-secure digitized economic infrastructures that will attract business, investment and stakeholder confidence,” wrote Michael Hsieh, a non-resident affiliate at the Center for International Security and Cooperation at Stanford University, in an email.

“The societies who lead in the great fintech [financial technology] innovation race of the 21st century will siphon all the capital and productivity from those that lag,” he wrote.

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Washington Waits for Criminal Charges in Probe of Russia Links to US Election

Washington braced Monday for the potential unsealing of the first criminal charges linked to Russian interference in the 2016 U.S. presidential election, as President Donald Trump reiterated his stance that the underlying investigations are a “witch hunt.”

A federal grand jury on Friday approved charges in the probe led by special counsel Robert Mueller, according to several major news outlets that reported the indictment could be made public as soon as Monday.

There was no public indication of who is facing charges or what crimes are being alleged. Legal experts say the first charges could be against a peripheral figure in the case, with prosecutors using a common strategy to first build their case against lower level officials before focusing on more prominent people.

In addition to Mueller’s investigation, there are separate congressional probes into Russian meddling and possible links between Trump’s campaign and Russia.

The U.S. intelligence community concluded in early 2017 that Russian President Vladimir Putin personally directed a campaign to undermine U.S. democracy and help Trump win

Trump has insisted there was no collusion, including in a series of tweets Sunday in which he said Democrats and his election opponent Hillary Clinton are the ones who are guilty.

“The Dems are using this terrible (and bad for our country) Witch Hunt for evil politics, but the R’s [Republicans] are now fighting back like never before,” Trump wrote. “There is so much GUILT by Democrats/Clinton, and now the facts are pouring out. DO SOMETHING!”

He further blamed the Russia investigations for taking attention away from Republican efforts on tax reform.

“Is this coincidental? NOT!” Trump said.

Ty Cobb, a member of Trump’s legal team, said in a statement that Trump’s comments were not related to the developments in Mueller’s investigation.

“Contrary to what many have suggested, the President’s comments today are unrelated to the activities of the Special Counsel, with whom he continues to cooperate,” Cobb said.

Mueller is believed to be examining activities of two key Trump campaign officials, former national security adviser Michael Flynn, who was fired by Trump less than a month after he took office for lying to Vice President Mike Pence and other officials about his contacts with Russia’s ambassador to Washington, and Paul Manafort, who for a short time last year was Trump’s campaign manager and also had wide lobbying interests in Ukraine and links to Russia.

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Trump Tax Overhaul Under Intensifying Fire as Congress Readies Bill

President Donald Trump’s plan for overhauling the U.S. tax system faced growing opposition from interest groups on Sunday, as Republicans prepare to unveil sweeping legislation that could eliminate some of the most popular tax breaks to help pay for lower taxes.

Republicans who control the U.S. House of Representatives will not reveal their bill until Wednesday. But the National Association of Home Builders, a powerful housing industry trade group, is already vowing to defeat it over a change for home mortgage deductions, while Republican leaders try to head off opposition to possible changes to individual retirement savings and state and local tax payments.

Trump and Republicans have vowed to enact tax reform this year for the first time since 1986. But the plan to deliver up to $6 trillion in tax cuts for businesses and individuals faces challenges even from rank-and-file House Republicans.

House and Senate Republicans are on a fast-track to pass separate tax bills before the Nov. 23 U.S. Thanksgiving holiday, iron out differences in December, send a final version to Trump’s desk before January and ultimately hand the president his first major legislative victory. Analysts say there is a good chance the tax overhaul will be delayed until next year.

The NAHB, which boasts 130,000 member firms employing 9 million workers, says the bill would harm U.S. home prices by marginalizing the value of mortgage interest deductions as an incentive for buying homes. The trade group wants legislation to offer a $5,500 tax credit but says it was rebuffed by House Republican leaders.

“We’re opposed to the tax bill without the tax credit in there, and we’ll be working very aggressively to see it defeated,” NAHB chief executive Jerry Howard told Reuters.

Republicans warned that the Trump tax plan is entering a new and difficult phase as lobbyists ramp up pressure on lawmakers to spare their pet tax breaks.

“When groups start rallying against things and they succeed, everything starts unraveling,” Senator Bob Corker, a leading Republican fiscal hawk, told CBS’ Face the Nation.

Anxiety in high-tax states

One of the biggest challenges involves a proposal to eliminate the federal deduction for state and local taxes (SALT), which analysts say would hit upper middle-class families in high income tax states such as New York, New Jersey and California. The states are home to enough House Republicans to stymie legislation.

The top House Republican on tax policy gave ground over the weekend, saying he would allow a deduction for some local taxes to remain.

“We are restoring an itemized property tax deduction to help taxpayers with local tax burdens,” House Ways and Means Committee Chairman Kevin Brady said in a statement.

But the gesture appeared to do little to turn the tide of opposition to SALT’s elimination.

“I’m not going to sign onto anything until the full package is fully analyzed by economists,” Representative Peter King of New York told the Fox News program Sunday Morning Futures. “The fact that we’re getting it at the eleventh hour raises real issues with me,” he added.

A lobby coalition representing state and local governments, realtors and public unions rejected Brady’s statement outright, saying the move would “unfairly penalize taxpayers in states that rely significantly on income taxes.”

House Republicans have also faced opposition from Trump and others after proposing to sharply curtail tax-free contributions to 401(k) programs and move retirement savings to a style of account that allows tax-free withdrawals, rather than the tax-exempt contributions that are popular with 401(k) investors.

House Republicans now say they could permit higher 401(k) contribution limits but continue to talk about tax-free withdrawals. “We will expand the amount that you can invest. But we’ll also give you an option to actually not be taxed later in life,” House Republican leader Kevin McCarthy told Fox News.

The current cap on annual 401(k) tax-free contributions is $18,000.

Corker said congressional tax committees seem to be falling short of their goal to eliminate $4 trillion in tax breaks to prevent the Trump plan from adding to the federal deficit.

“They’re having great difficulty just getting to $3.6 trillion,” said the Tennessee Republican, who has vowed to vote against tax reform if it increases a federal debt load that stands at more than $20 trillion.

Ohio’s Republican governor, John Kasich, told Fox News Sunday that spending on entitlement programs such as Medicare, Medicaid and Social Security should also be reviewed as part of the effort to pay for tax cuts.

“It may be separate from the tax bill, but it needs to happen,” Kasich said.

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Radio Pollution Creates Space Shield for Satellites

People are big polluters, on the land, in the sea and even in outer space, that can include anything from a hammer that floats away from the space station, to radiation from a nuclear weapons test in the atmosphere.

“This can range from little chips of paint all the way up to spent rocket bodies and things like that,” said Dan Baker, director of the Laboratory of Atmosphere and Space Physics at the University of Colorado, Boulder. “We’ve been trying to figure out how can we most effectively eliminate this debris without causing more of a problem.”

Space debris travels so fast, even an orbiting chip of paint can poke a hole in a satellite. But Baker says something tinier, and natural, is a bigger hazard: It’s the highly charged “killer electrons” of the magnetized zone above the earth called The Van Allen Belts.

“We’ve observed them to cause very significant problems for spacecraft,” Baker said.

Electro-magnetic planetary blanket

The doughnut-shaped Van Allen Belts around our planet protect life on earth from solar winds and cosmic rays. But their highly energetic charged particles can damage the circuitry in space stations, weather satellites and other machines that travel through that region of space.

Baker notes that “killer electrons” can also come from some human activities, like the atmospheric testing of nuclear weapons.

“Back in the 1950s and especially in the 1960s, there were nuclear explosions that put huge amounts of radiation into space that caused many satellites to ‘die’ because of radiation damage,” he said. “And if that were to happen today, we know that there are over 1,400 satellites operating in space around the earth and all of those could be subject to very severe consequences.”

Most nations adhere to treaties that prohibit atmospheric weapon testing. But Baker says that’s no guarantee.

“What is worrisome to us from a political standpoint today is that there are nations, for example, North Korea and others, that may be thinking once again, and who may not be adherent to such treaties, that this might be an interesting way to mess with modern technology,” Baker said.

Mysterious space shield

Radiation particles in the Van Allen Belts already “mess” with modern technology. So when satellites must spend time in that region, they are built with thicker materials. That armor makes them heavier, and more expensive. Fortunately, spacecraft and satellites that orbit just under the Van Allen Belts don’t need this heavy shielding. Baker says that’s because, at the lower edge of the Van Allen Belts, the killer electrons abruptly stop.

He compares it to the shields that protected Captain Kirk’s ship, the Enterprise, from phasers and asteroids on Star Trek.

Scientists have known for years that something here on the earth creates an invisible bubble that clears killer electrons from the lower edge of the Van Allen Belts. Just what makes that shield has been a mystery.

But recently, Baker’s teams figured out its source. The “bubble maker” is very low frequency radio transmissions, also known as VLF. Militaries use VLF to communicate with submarines underwater. It turns out those radio waves also travel up, through the atmosphere, to the Van Allen Belts.

“So the VLF bubble is made up of these intense waves. These waves act to sort of scatter and scrub the inner part of the Van Allen Belts,” Baker said, admitting, “I would prefer that we not be messing with nature. However, in this particular case I would say that there is some evidence that this is beneficial.”

John Bonnell, a researcher at the University of California Berkeley’s Space Sciences Lab, agrees that VLF “pollution” is probably benign, and he points to the high-energy radiation emitted by lightning bolts as evidence.

“We’ve had natural clearing of the radiation Belts with lightning, for as long as we’ve had lightning. So in essence, you’ve had a long-running experiment that you can look at and say, ‘Well, if we’re going to do things on sort of a sporadic basis, whereas lightning’s been doing it daily for hundreds of millions of years, the likelihood of there being a bad side effect is pretty minimal,'” he said.

Bonnell says that discovering a man-made way to clear killer electrons from the Van Allen Belt does not mean we will soon create “shields up” devices that use magnetics or radio transmissions. At least, he says, we’re not making them yet.

“It’s a fascinating possibility and it’s a fascinating technology that could enable us in the future, to explore more of the solar system with people, with robots. And so it’s definitely something that people pick away at slowly over time,” he said.

Bonnell says scientists, engineers and astronomers have teamed up to make amazing discoveries about how to study, and travel through, outer space. And while the future shape of space exploration is a mystery, our new understanding about the man-made “pollution” that shields satellites may be an important part of it.

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For Spanish, Catalan Economies, No Winners in Standoff

Xavier Gabriel can take some credit if the tiny Catalan mountain town of Sort is one of the most famous in Spain.

He runs a lottery shop called La Bruja de Oro, or The Golden Witch, in a town whose name, aptly, means “Luck” in Catalan. Its fortune in having sold many prize-winning tickets has made it a household name and a successful online business.

But the crisis surrounding Catalonia’s push for independence has changed life for 60-year-old Gabriel. He joined more than 1,500 companies in moving their official headquarters out of the wealthy region in recent weeks. Their main fear: that they would no longer be covered by Spanish and European Union laws if Catalonia manages to break away, dragging their businesses into unknown territory.

“The time had come to make a decision,” said Gabriel, who employs 16 people and describes himself as a proud Catalan.

​Hedging their bets

Like Gabriel’s, the vast majority of companies that moved their headquarters didn’t transfer workers or assets, such as bank holdings or production equipment. So far, it’s mainly a form of legal insurance. But as the political crisis escalates, the risk is that companies are deferring investments and hiring. There is evidence that tourists are holding off booking, perhaps frightened by images in the media of police crackdowns, street demonstrations and strikes.

And the situation risks getting worse before it improves: the central government’s decision Friday to take control of the region could spiral out of control if there is popular resistance, whether by citizens or local authorities like the Catalan police force.

“There is absolutely no doubt that the crisis is having a very damaging effect on the economy,” said Javier Diaz Gimenez, an economics professor at Spain’s prestigious IESE Business School.

Financial markets in Spain have so far fallen only modestly, reflecting investors’ apparent belief that the tensions will eventually be resolved. The Spanish government has called a regional election in Catalonia for Dec. 21 and could later consider revisions to the constitution that might placate some of the independence supporters.

But that could take some time, Diaz Gimenez says, given how confrontational both sides have been.

Banks leave

The list of businesses moving headquarters includes Catalonia’s top two banks, Caixabank and Sabadell, which are among Spain’s top five lenders. Then there is the Codorniu cava sparkling wine maker for which Catalonia is famous. Another well-known cava maker, Freixenet, is also planning to follow if the independence drive continues. Publishing giant Planeta, the world’s leading Spanish-language publisher and second biggest publisher in France, has also moved its official address out of Catalonia.

Caixabank says it suffered a moderate but temporary run on deposits because of the crisis, but said it has since recovered and was adamant the move was permanent.

Shares for Caixabank, Sabadell and some other companies have been volatile, falling after the Oct. 1 vote for independence and jumping sharply when they announced their decision to move headquarters.

Tip of the iceberg

Lottery shop owner Gabriel says ticket sales this month are up nearly 300 percent over last year, a rise he attributed to popular support for his decision to move his business.

Diaz Gimenez said the decisions to move headquarters, while not immediately affecting jobs, were “just the tip of the iceberg.”

“Plans to relocate firms or invest elsewhere are going to accelerate and some of it is going to go to, say, Poland, and it’s never going to come back,” he said.

“People that were thinking about investing in Spain and Barcelona are starting to think again,” he said. “It’s not just Catalonia. It’s the mismanagement by Spain, which is proving that it’s not a serious country because it cannot solve this thing.”

Spanish economy humming

The turmoil, ironically, comes just as Spain has been enjoying some of the fastest economic growth in Europe.

Its economy, the fourth-largest in the 19-country eurozone, grew by a hefty quarterly rate of 0.9 percent in the second quarter. The government has maintained its forecast for growth in 2017 at 3.1 percent, but revised its estimate for 2018 from 2.6 percent to 2.3 percent because of the political crisis. Moody’s credit rating agency has warned that a continued political impasse and, ultimately, independence for Catalonia would severely hurt the country’s credit rating.

Billions at stake

Tourism seems to be taking the biggest hit so far.

Experts say spending in the sector in Catalonia in the first two weeks of October — that is, following the independence referendum — was down 15 percent from a year earlier.

Tourism represents about 11 percent of Spain’s 1.1-trillion euro ($1.3 trillion) gross domestic product, with Catalonia and its capital, Barcelona, providing a fifth of that, being the most popular destinations for visitors.

Exceltur, a nonprofit group formed by the 25 leading Spanish tourist groups, expects growth in tourism this year to ease from an estimated 4.1 percent to 3.1 percent.

Reservations in Barcelona alone are down 20 percent compared with last year, it said. If the trend continues in the final three months of the year, it could lead to losses of up to 1.2 billion euros ($1.41 billion) in the sector, which in turn could affect jobs.

Analysts fear that the independence movement’s stated aim of continuing to create as much social and economic chaos for Spain as possible could exacerbate the situation. The Catalan National Assembly group has been openly talking about a boycott against Spain’s top companies and major strike activity.

“Spain, its tourism, everything is very dependent on image,” Diaz Gimenez said. “And this is just killing it.”

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Report: DeVos Considers Only Partial Debt Relief for Defrauded Students

The Education Department is considering only partially forgiving federal loans for students defrauded by for-profit colleges, The Associated Press has learned, abandoning the Obama administration’s policy of fully erasing that debt.

Under President Barack Obama, tens of thousands of students deceived by now-defunct for-profit schools had more than $550 million in such loans canceled completely.

But President Donald Trump’s education secretary, Betsy DeVos, is working on a plan that could grant such students only partial relief, according to department officials who were not authorized to publicly comment on the issue and spoke on condition of anonymity. The department may look at the average earnings of students in similar programs and schools to determine how much debt to wipe away.

Hints of new approach

If DeVos goes ahead, the change could leave many students scrambling after expecting full loan forgiveness, based on the previous administration’s track record. It was not immediately clear how many students might be affected.

A department spokeswoman did not immediately respond to a request for comment Saturday.

But the Trump team has given hints of a new approach.

In August, the department extended its contract with a staffing agency to speed up the processing of a backlog of loan forgiveness claims. In the procurement notice, the department said that “policy changes may necessitate certain claims already processed be revisited to assess other attributes.” The department would not further clarify the meaning of that notice.

Advocates: unjustified, unfair

DeVos’ review prompted an outcry from student loan advocates, who said the idea of giving defrauded students only partial loan relief was unjustified and unfair because many of their classmates had already gotten full loan cancellation. Critics say the Trump administration, which has ties to the for-profit sector, is looking out for industry interests.

Earlier this year, Trump paid $25 million to settle charges his Trump University misled students.

“Anything other than full cancellation is not a valid outcome,” said Eileen Connor, a litigator at Harvard University’s Project on Predatory Student Lending, which has represented hundreds of defrauded students of the now-shuttered Corinthian Colleges. “The nature of the wrong that was done to them, the harm is even bigger than the loans that they have.”

“Even more importantly, it is completely unfair that a happenstance of timing is going to mean that one student who’s been defrauded is going to have full cancellation and the next is not,” Connor said.

1990s regulation

A federal regulation known as borrower defense allows students at for-profit colleges and other vocational programs to have their loans forgiven if it is determined that the students were defrauded by the schools. That rule dates to the early 1990s. But it was little used until the demise of Corinthian and ITT for-profit chains in recent years caused tens of thousands of students to request that the government cancel their loans.

In the last few months of the Obama administration, the Education Department updated the rule to add protections for students, shift more financial responsibility onto the schools and prevent schools from having students sign away their right to sue a school.

That change was set to take effect in July, but DeVos has frozen it and is working on a new version. She argued that the Obama regulation was too broad and could cancel the loans of some students without a sound basis.

65,000 claims waiting

DeVos has come under criticism for delaying consideration of more than 65,000 applications for loan forgiveness under the borrower defense rule. The agency hasn’t approved a single claim since DeVos took office in February.

Jennifer Wang, an expert with the Institute of College Access and Success, said the Obama administration was providing full loan cancellations to students.

“It would be totally different from what was happening under the last administration,” Wang said. “It’s not equitable; it’s not fair for students. If she provides partial relief, it’s that she only cares what’s fair for schools and not students.”

Abby Shafroth, an attorney at the National Consumer Law Center, said the agency could be faced with lawsuits, especially from Corinthian students, whose classmates had received full forgiveness.

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