China decries U.S. spending bill

U.S. President Barack Obama signs the ''omnibus'' spending bill in Washington January 17, 2014.

CREDIT: REUTERS/KEVIN LAMARQUE

China's Commerce Ministry has condemned a $1.1-trillion spending bill passed by the U.S. Congress last week over clauses that limit technological purchases from the Asian giant, saying they clash with the principles of fair trade.

The bill, signed by President Barack Obama on Friday, included a cyber-espionage review process for federal purchases of technology from China, a measure incorporated last year amid growing U.S. concern over Chinese cyber attacks.

In a weekend statement, China's Commerce Ministry said the move "went against the principles of fair trade" as it sought to curb purchases of Chinese technology and export of satellites and parts to China.

"China is resolutely opposed," the ministry said in comments attributed to an unnamed official in its U.S. trade division.

The bill sent a wrong message, did not aid exchanges and cooperation in the high-tech field and would have a negative effect on Chinese companies, besides harming the interests of U.S. firms, it added.

"We have noted that U.S. business groups have already made noises opposing the bill. The U.S. side should correct its mistaken ways, and create good conditions for the healthy development of Sino-U.S. trade and business cooperation."

Last year's funding legislation bars U.S. space agency NASA and the Justice and Commerce Departments from buying information technology systems without the approval of federal law enforcement officials.

That formal assessment must include "any risk associated with such system being produced, manufactured or assembled by one or more entities that are owned, directed or subsidized" by China, it says.

U.S. Representative Frank Wolf, the Republican chairman of the House Appropriations Commerce-Justice-Science subcommittee, said he directed the language to be included last year because of concerns about potential cyber threats from Chinese firms such as Huawei Technologies Co Ltd and ZTE Corp.

Wolf cited a 2012 congressional intelligence report that found such firms were closely connected to China's army, which coordinates cyber espionage against the United States.

"A slightly modified version of this language was continued again this year by bipartisan agreement with the Senate, and I believe it should be maintained and expanded to all civilian federal agencies in the year ahead," Wolf said in a statement on Friday.

U.S. curbs on foreign access to satellite technology since 1999 have effectively banned the export, re-export or transfer of this equipment or know-how to China.

The restriction followed a 1996 Chinese rocket launch accident that claimed a U.S.-manufactured satellite. In the course of the investigation, the company was accused of inadvertently transferring restricted technology to China.

But there were no new curbs on satellite exports in the latest spending bill, Kevin Wolf, a U.S. Commerce Department official, told Reuters in Washington.

"Since the late 1990s, there has been, under U.S. law, an absolute prohibition on the export and re-export to China of all satellites and related items," said Wolf, who is no relation to the congressman. "This was reconfirmed in the National Defense Authorization Act of 2013."

"The Chinese have complained about it a lot over the decades - that's not new," he said on Saturday.

China and the United States have clashed repeatedly over trade issues.

(Reporting by Ben Blanchard and Norihiko Shirouzu; Additional reporting by Doina Chiacu, Richard Cowan, David Lawder and Patricia Zengerle in WASHINGTON; Editing by Clarence Fernandez)

Source : Reuters

CORRECTED-RPT-The U.S. government's bitcoin bonanza: How, where and when to sell?

Jan 18 (Reuters) - U.S. prosecutors in Manhattan are sitting on a multimillion-dollar bitcoin gold mine. And it could get much bigger.

Federal authorities hauled in 29,655 units of the digital currency - worth $27 million at current exchange rates - through an official forfeiture by Bitcoin this week.

The bitcoins had belonged to Silk Road, an anonymous online black market that authorities say was a conduit for purchases of drugs and computer hacking services - even a place where assassins may have advertised. It was shuttered after an FBI raid in September, when agents took control of its server and arrested the man they say was its founder in San Francisco.

No one stepped forward to claim these bitcoins, which were found in electronic "wallets" used to store the digital currency. An additional 144,336 bitcoins, worth more than $128 million today, were also discovered, but the government's claim on them is being disputed by Ross William Ulbricht, 29, who U.S. authorities say was the founder and main operator of Silk Road. They had been stashed on his laptop.

It all puts authorities in an unusual position, given their concerns about the way in which bitcoins and other digital currencies are used by criminals to circumvent regulations intended to prevent money laundering. By trading in bitcoins, the government could give the currency some legitimacy.

Bitcoin is essentially software code that defines units of value, which users can move back and forth among themselves. Unlike other virtual money transmitters, its value isn't pegged to a hard currency like the dollar or the euro; it is determined by the demand for bitcoins.

The U.S. Marshals Service, which is in charge of liquidating such seized assets, will have to decide whether to sell the units on a Bitcoin exchange or find a private buyer, perhaps through an auction.

A spokeswoman for Preet Bharara, the U.S. Attorney for New York's Southern District, said Friday that the government is still trying to decide what to do with the forfeited bitcoins.

The timing of any sale could make a big difference in the amount the government could realize.

Bitcoin's value has fluctuated wildly over the past six months. When Silk Road was seized, the bitcoins found on the server were worth $3.6 million, far below their current $27 million value. Friday's exchange rate was about $900 per bitcoin, according to the Tokyo-based Bitcoin exchange MtGox.

It is unclear whether a large sale of bitcoins by the government could drive down the price. Friday's volume on MtGox, which is the largest Bitcoin exchange, was 8,656 units.

"If it's worth $27 million now, is that a high part of the market? A low part of the market? That's one of the decisions they're going to have to make," said Louis Rulli, a professor at the University of Pennsylvania Law School.

"It would seem to me that they would probably convert those bitcoins into cash relatively quickly."

Barry Silbert, the founder of one of the first investment funds that lets retail investors gain exposure to Bitcoin, declined to offer an opinion on what the government should do with its stash or how a sale would affect the market.

Marco Santori, chairman of the regulatory affairs committee for the Bitcoin Foundation, which is Bitcoin's official trade group, said the group did not have an official position on the matter.

'THIS WON'T BE DIFFICULT'

Most goods seized by U.S. authorities end up in the hands of the U.S. Marshals, where they are auctioned or, at times, repurposed for government use. But the Marshals aren't just practiced at unloading forfeited SUVs or houses; they also deal with complex financial instruments, foreign companies and other kinds of obscure assets forfeited by criminals.

"While Bitcoin is a somewhat new form of asset, it's not unusual for them to have to find out how to liquidate a new asset," said Jeffrey Alberts, a partner at Pryor Cashman and a former federal prosecutor in Manhattan. "This won't be difficult for them, whether they do it through an exchange or find a buyer who wants to buy it directly from them."

Ulbricht was arrested Oct. 1 in a San Francisco public library and charged by prosecutors in New York with one count each of money laundering, computer hacking and drug trafficking. He is being held at a federal detention center in New York without bail. He has not entered a formal plea but has maintained his innocence through statements by his lawyer.

Prosecutors last week asked a judge to grant them a default judgment in the civil forfeiture case they filed after the raid on Silk Road and Ulbricht's arrest claiming Silk Road's assets. U.S. District Judge J. Paul Oetken signed an order to that effect on Wednesday, giving the government control of the 29,655 Bitcoins from Silk Road's server but not of the bitcoins - the larger sum - discovered on Ulbricht's computer. Those are still in dispute.

The proceeds from any sale would be turned over to an asset forfeiture fund from which the U.S. Justice Department can draw for law enforcement activities. If any money were to come back to prosecutors' budgets, it would be distributed evenly among U.S. attorneys' offices, a policy meant to prevent individual offices from unduly seizing assets to pad their budgets. (Reporting By Emily Flitter; Editing by Martin Howell and Douglas Royalty)

Source : Reuters

U.N. Says Lag in Confronting Climate Woes Will Be Costly

Nations have so dragged their feet in battling climate change that the situation has grown critical and the risk of severe economic disruption is rising, according to a draft United Nations report. Another 15 years of failure to limit carbon emissions could make the problem virtually impossible to solve with current technologies, the experts found.

Delay would likely force future generations to develop the capability to suck greenhouse gases out of the atmosphere and store them underground to preserve the livability of the planet, the report found. But it is not clear whether such technologies will ever exist at the necessary scale, and even if they do, the approach would likely be wildly expensive compared with taking steps now to slow emissions.

The report said that governments of the world were still spending far more money to subsidize fossil fuels than to accelerate the shift to cleaner energy, thus encouraging continued investment in projects like coal-burning power plants that posed a long-term climate risk.

While the spread of technologies like solar power and wind farms might give the impression of progress, the report said, such developments are being overtaken by rising emissions from fossil fuels over the past decade, especially in fast-growing countries like China. And one of the most important sources of low-carbon energy, nuclear power, is actually declining over time as a percentage of the global energy mix, the report said.

Unless far greater efforts are made to reduce emissions, “the fundamental drivers of emissions growth are expected to persist despite major improvements in energy supply” and in the efficiency with which energy is used, the report declared.

The new warnings come in a draft report from the Intergovernmental Panel on Climate Change, a United Nations panel of climate experts that won the Nobel Peace Prize in 2007 for its efforts to analyze and communicate the risks of climate change. The report is not final, but a draft dated Dec. 17 leaked this week and was first reported by Reuters. The New York Times obtained a copy independently.

In the dry language of a technical committee, the draft outlines an increasingly dire situation.

Even as the early effects of climate change are starting to be felt around the world, the panel concluded that efforts are lagging not only in reducing emissions, but in adapting to the climatic changes that have become inevitable.

It is true, the report found, that the political willingness to tackle climate change is growing in many countries and new policies are spreading, but the report said these were essentially being outrun by the rapid growth of fossil fuels.

While emissions appear to have fallen in recent years in some of the wealthiest countries, that is somewhat of an illusion, the report found. The growth of international trade means many of the goods consumed in wealthy countries are now made abroad — so that those countries have, in effect, outsourced their greenhouse gas emissions to countries like China. (Emissions in the United States rose slightly in 2013, but are still about 10 percent below their 2005 levels, largely because of the country’s newfound abundance of natural gas, which produces less greenhouse gases than burning coal.)

The Kyoto Protocol, an international treaty meant to limit emissions, has “not been as successful as intended,” the report found. That is partly because some important countries like the United States refused to ratify it or later withdrew, but also because of flaws within the treaty itself, the report found. The treaty exempted developing countries from taking strong action, for instance, a decision that many experts have said was a mistake in retrospect.

Efforts are underway to negotiate a new international treaty to replace the Kyoto Protocol, but it is not even supposed to take effect until 2020, and it is unclear whether countries will agree on ambitious goals to limit emissions. It is equally unclear how much political support a new treaty will gain in China and the United States, the world’s largest emitters.

The Obama administration is pushing for a deal, but any treaty would have to be ratified by the Senate; many Republicans and some coal-state Democrats are wary, fearing economic damage to the country.

The new report suggests, however, that the real question is whether to take some economic pain now, or more later.

Nations have agreed to try to limit the warming of the planet to 3.6 degrees Fahrenheit above preindustrial levels. Even though it will be exceedingly difficult to meet, this target would still mean vast ecological and economic damage, experts have found. But the hope is that these would come on slowly enough to be somewhat manageable; having no target would be to risk catastrophic disruption, the thinking goes.

As scientists can best figure, the target requires that atmospheric concentrations of carbon dioxide, the main greenhouse gas, stay below 500 parts per million. The level recently surpassed 400, and at present growth rates will surpass 500 within a few decades.

If countries permit continued high emissions growth until 2030, the draft report found, the target will likely be impossible to meet, at least without a hugely expensive crash program to rebuild the energy system, and even that might not work.

If emissions do overshoot the target, the report found, future generations would likely have to develop ways to pull greenhouse gases out of the air. It is fairly clear this will be technically possible. It could be achieved, for instance, by growing bioenergy crops that take up carbon dioxide, burning the resulting fuel, and then injecting the emissions into underground formations. But the large-scale use of land to grow energy crops would compete with food production, already under strain as a consequence of the planetary warming.

Machinery might be developed that could directly extract greenhouse gases from the air; in fact, early work on such systems has begun. But experts have said the costs, safety and practicality of such techniques cannot be foreseen today. They believe it would be much cheaper to find ways to avoid putting the gases into the air in the first place.

The leaked draft is the third and final segment of a major report that the climate change panel is completing in stages in 2013 and 2014. The first segment, published in Stockholm in September, reviewed the fundamental physical science of climate change, finding a 95 percent or greater likelihood that human activity is the main cause of the ongoing planetary warming.

The second segment, focusing on the probable impacts of climate change, leaked in October and is due for publication in Yokohama, Japan, in March; a major finding is expected to be that the food supply is at serious risk as warming continues.

The third segment, prepared by a committee made up largely of economists and policy analysts, many of them with some scientific training, focuses on policies that could limit the overall damages from climate change, and is to be published after an editing session in Berlin in April.

January 2014 Business Outlook Survey

Manufacturing growth in the region continued in January, according to firms responding to this month’s Business Outlook Survey. The survey’s broadest indicators for general activity, new orders, shipments, and employment were positive, signifying continued moderate growth. The survey's indicators of future activity moderated but continue to suggest general optimism about growth over the next six months.

Indicators Suggest Continued Moderate Growth

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a revised reading of 6.4 in December to 9.4 this month (see Chart).* The index has now been positive for eight consecutive months.

The current shipments and new orders indexes remained positive but moved in opposite directions compared with December. The demand for manufactured goods, as measured by the current new orders index, decreased from a revised reading of 12.9 to 5.1 this month. Shipments continued to expand, and its index edged slightly higher to a reading of 12.1.

Labor market indicators showed some improvement this month. The current employment index increased 6 points from its revised reading in December. Twenty-three percent of the firms reported increases in employment in January, which is slightly higher than the 18 percent that reported increased employment last month. Firms reported reduced work hours, with the average workweek index falling from 4.8 to -5.3.

Cost pressures were slightly more widespread this month among reporting firms: The prices paid index increased 2 points, to 18.7. But with respect to firms’ own manufactured goods, price increases were less widespread this month: The prices received index decreased 6 points, to 5.1.

Six-Month Indicators Moderate

The survey’s future indicators have recently shown moderating optimism about growth in manufacturing. This month, the future general activity index fell 10 points, from a revised reading of 44.8 in December to 34.4 this month (see Chart). Still, nearly 48 percent of the firms expect increases in activity over the next six months; 13 percent of the firms indicated that they expect decreases. The indexes for future new orders and shipments also remained at relatively high levels but fell 7 points and 9 points, respectively. The future employment index was virtually unchanged at 17.5, with nearly 25 percent of the firms expecting to increase employment over the next six months.

In this month’s special questions, firms were asked about the factors that are influencing their hiring plans over a longer horizon of 12 months (see Special Questions). The percentage of firms that indicated they expect employment growth over the next year (41 percent) exceeded the percentage expecting decreased employment growth (10 percent) by a significant margin. Nearly all firms responded to a question about the factors that were restraining hiring. The most frequently cited factors restraining hiring were the need to keep operating costs low and low expectations for sales growth. Expected slow sales growth was the most frequently cited “most important” factor restraining hiring. Difficulty finding workers with appropriate skills and uncertainty about the cost of health-care insurance also ranked high.

Summary

The January Business Outlook Survey suggests that activity in the region’s manufacturing sector increased moderately this month. Firms reported increases in overall activity, new orders, and employment in January. Price increases for firms’ own manufactured goods were less widespread this month. The survey’s future activity indexes suggest that firms expect growth over the first half of 2014.

Special Questions (January 2014)

1. Do you expect your firm to increase employment, leave unchanged, or decrease employment over the next 12 months?

Increase	41.1%
Unchanged	45.2%
Decrease	9.6%
NR	4.1%
Total	100.0%

2. What are the most important factors, if any, restraining your hiring plans?

 ( Source : www.phil.frb.org )

For only $3 trillion, you can have a policy that’s “at least somewhat effective”

Bernanke says that studies show QE is at least somewhat effective. He also implicitly acknowledged that some members of the FOMC don’t feel QE is effective when he said that a he doesn’t feel that a ‘large amount’ of people on the FOMC feel QE is not effective.

( Source : www.forexlive.com )

The Fed has no idea what’s happening with inflation

Fed officials didn’t forecast low inflation and when Chicago Fed President Charles Evans said disinflation has been “puzzling” he wasn’t alone.

In October, CPI fell to just +1.0% y/y, the lowest since 2009. It ticked up to 1.2% the following month and is expected at 1.5% for the December data at the bottom of the hour. If anything can completely derail Fed expectations in 2014, it’s falling prices.

( Source : www.forexlive.com )

Credit Suisse says the BOJ will have to ease further to keep upward momentum on CPI

• CS say in a recent report there is a strong correlation between rising import prices – the driver of CPI gains – and the weakening yen.
• They allude to the fact that if the yen weakening stalls, so will the gain in the CPI.
• Say unless there is a major upshift in wages or the unit labor cost, headline CPI inflation is likely to start dropping  by the middle of 2014
• Says the BOJ will not wit until there is a drop in demand to ease further
• Says further easing could come as early as the February 17-18 or March 10-11 meetings

( Source : www.forexlive.com )

Homebuilders Remained Confident in January on Rising U.S. Sales

Confidence among U.S. homebuilders held in January near its highest level in eight years, indicating the residential real-estate market will continue to contribute to economic growth in 2014.

While the National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 56 from 57 in December, readings greater than 50 mean more respondents report good market conditions, figures from the Washington-based group showed today. The median forecast in a Bloomberg survey called for 58.

Home construction has been a source of strength for the economic expansion, propelled by job gains and rising property values. The market has weathered an increase in interest rates and prices are forecast to continue rising this year.

(Source : www.bloomberg.com )

U.S. Said to Expand Limits on Racial Profiling in Probes

Justice Department will soon extend its ban on the use of racial profiling during federal investigations, according to a law enforcement official briefed on the matter.

The Justice Department under Attorney General Eric Holder has been reviewing the guidelines for federal investigations for several years, according to the official, and is planning to expand the definition to prohibit profiling based on religion, national origin, sexual orientation and gender.

Holder, who during his tenure has spoken against racial profiling, has been under pressure from civil rights and civil liberties groups, including the American Civil Liberties Union, to expand a ban put in place by President George W. Bush in 2003.

“Every year, thousands of people are stopped while driving, flying, or even walking simply because of their actual or perceived race, ethnicity, national origin, immigration or citizenship status, or religion,” Anthony Romero, the executive director of the ACLU, said in testimony for a 2012 Senate hearing on racial profiling.

The Bush administration issued guidelines barring federal agents from using race or ethnicity in their investigations across federal law enforcement agencies. Those guidelines provided leeway to agents involved in national security operations, allowing them to use the race or ethnicity in investigations designed to identify potential terrorist threats.

Profiling Permitted

Illinois Senator Richard Durbin, the chamber’s second-ranked Democrat, held a hearing on the issue in 2012 and has pressed Holder to expand the ban on profiling. While he called the Bush administration guidelines an “important step forward,” he said the ban “does not apply to profiling based on religion and national origin.”

“In essence, these exceptions are a license to profile American Muslims and Hispanic Americans,” Durbin said at the hearing.

While the scope of the changes that will be proposed by Holder wasn’t immediately available and the timing of any announcement unclear, the possible changes were discussed in a meeting yesterday between Holder and New York City Mayor Bill De Blasio at City Hall, the official said.

The New York Times first reported the planned changes to ban.

 (Source : www.bloomberg.com )