United States puts Japan on notice in currency report

U.S. President Barack Obama delivers remarks on measures to reduce gun violence, at the University of Hartford in Connecticut April 8, 2013.

Credit: Reuters/Jason Reed

By Anna Yukhananov

WASHINGTON | Sat Apr 13, 2013 2:54am EDT

WASHINGTON (Reuters) – The Obama administration on Friday put Japan on notice that it was watching its economic policies to ensure they were not aimed at devaluing the yen to gain a competitive advantage.

In a semi-annual report on currency practices of major trade partners, the United States also said China’s currency remained “significantly undervalued,” but again stopped short of labeling the world’s second-biggest economy a currency manipulator.

It has been more than 18 years since the U.S. Treasury has designated any country a manipulator. China was labeled a manipulator between 1992 and 1994.

The U.S. Treasury said it would press Japan to adhere to the commitment it made in February as a member of the Group of Seven and Group of 20 nations to let the market determine exchange rates. The U.S. move followed comments by Japanese officials that suggested they were targeting a weaker yen.

Treasury’s report highlighted statements made by Japanese officials last year who said they wanted to “correct the excessively strong yen,” and also some proposals to ease monetary policy by purchasing foreign bonds.

But since then, Japan has mostly avoided commenting on the yen and has not intervened in currency markets, according to the congressionally-mandated report.

“We will continue to press Japan to adhere to the commitments agreed to in the G7 and G20 … and to refrain from competitive devaluation and targeting its exchange rate for competitive purposes,” the report said.

The Treasury also said it was closely monitoring policies in Japan meant to support the growth of domestic demand. The Bank of Japan launched a massive bond-buying program earlier this month to try to shock the economy out of two decades of stagnation.

The policy has sharply undercut the value of the yen – ending the dollar to another four-year high against the Japanese currency on Thursday – and refueled a debate about competitive devaluations.

YUAN UNDERVALUED, NOT MANIPULATED

The U.S. Treasury also said China did not meet the legal requirements to be deemed a currency manipulator, although Beijing controls the pace at which the yuan can rise by intervening in foreign exchange markets.

The label is largely symbolic, but would require Washington to open discussions with Beijing on adjusting the yuan’s value. Many U.S. lawmakers have accused China of deliberately keeping the yuan undervalued to gain a trade advantage.

As in other reports over the last several years, the analysis on China reflected both the administration’s desire to maintain good relations with its top creditor and an attempt to keep up pressure for changes in China that could benefit the U.S. economy and mollify domestic critics.

Efforts to take a stronger stance on China’s currency moves have also faded due to an increase in the value of the yuan, a big drop in China’s global trade surplus and a rise in labor costs that has made Chinese products less competitive.

The report said China had allowed the yuan to rise 16.2 percent against the dollar in inflation-adjusted terms since June 2010, when China moved off its exchange rate peg.

The yuan, also known as the renminbi, hit a record high against the dollar on Friday as China’s central bank fixed its official midpoint for the currency at the strongest level yet ahead of a Beijing visit by U.S. Secretary of State John Kerry.

“Nonetheless, the available evidence suggests the renminbi remains significantly undervalued, intervention appears to have resumed, and further appreciation of the renminbi against the dollar is warranted,” Treasury said in a statement.

The top Democrat on the U.S. House of Representatives Ways and Means Committee, Sander Levin of Michigan, said “action is long overdue” on what he called serious problem.

“Currency manipulation needs to be addressed in ongoing trade negotiations, especially the Trans-Pacific Partnership talks,” he said in a statement, referring to an 11-nation Asia-Pacific free trade agreement that Japan is moving toward joining.

The United States also said it remains concerned that China’s progress may not last. For example, China’s trade surplus has narrowed not only due to a higher yuan, but also because of weak demand for Chinese exports in advanced economies, suggesting the trend may reverse once the global economy recovers more.

The U.S. Business and Industry Council condemned the currency report, and called on the Obama administration to use tariffs to punish China for manipulating the yuan.

“The Treasury Department’s latest refusal to label China a currency manipulator once again demonstrates President Obama’s deep-seated-indifference to a major, ongoing threat to American manufacturing’s competitiveness, and to the U.S. economy’s return to genuine health,” the Council said in a statement.

As in the previous report, Treasury also kept the pressure on South Korea, urging it to limit foreign exchange intervention except in exceptional circumstances.

South Korea says it intervenes to smooth the volatility of its won currency. But Treasury said it had gone into the market throughout 2012.

(Reporting by Anna Yukhananov; Editing by Tim Ahmann, Leslie Adler and Xavier Briand)

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Reuters: Business News

United States puts Japan on notice in currency report

Merkel"s Vision: "United States of Germany"

Following brutal negotiations with EU finance ministers, the IMF and various European government officials, Cyprus finally agreed to measures that her highness, Angela Merkel would accept.

This time she held her ground. Previously, Merkel compromised every key position she has ever held in the sake of political expediency.

For example, Merkel went twice went to the well on Greece to appease her opponents. She repeatedly caved in on demands from French president Nicolas Sarkozy. She reversed her stand on nuclear energy following German polls.

So why did Merkel drew the line at Cyprus?

To Merkel everything is a play to win the next election and ultimately to preserve her legacy. She is willing to play hardball now for one reason only. Public opinion is decisively against further bailouts, and anything but exceptionally harsh terms on Cyprus would hurt her election chances in September.

She fears the rise of the eurosceptic Alternative for Germany (AfD) Party and the best way to take some wind out of the AfD sails is to show she cares about austerity.

Merkel’s Vision

Merkel’s vision is not a United States of Europe. Rather, Merkel’s vision is for a “United States of Germany”. She would sell her soul to obtain that legacy. In this light, every move she has made makes perfect “political” sense, solidarity be damned.

That Cyprus and Greece were ruined in the process is acceptable “collateral damage”. If Spain is not careful, it will become the next “collateral damage”.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Merkel"s Vision: "United States of Germany"

Citizens United Part II? Supreme Court takes up direct campaign donations

The U.S. Supreme Court will return to the controversial question of campaign finance once again. On Tuesday, the court announced it will take up a case challenging limits on how much individuals can contribute directly to candidates or political parties within an two-year election cycle. Congress put the limits in place in the 1970s in response to the Watergate scandal, as an effort to curb corruption through large political donations. 

A conservative Alabama businessman named Shaun McCutcheon brought the case that the Supreme Court has decided to take up. McCutcheon recently wanted to make contributions to more candidates and more Republican Party committees than is allowed under current limits. He and the Republican National Committee are asking the Supreme Court to consider lifting those limits, on the grounds that they are unconstitutional.

The plaintiffs also argue that in the wake of the court’s ruling in Citizens United three years ago, which removed independent political spending limits on corporations and individuals, more money is now being siphoned away from candidates and political parties and into outside super PACS which are less transparent and harder to hold accountable. They say removing limits on direct contributions to candidates and parties could level the playing field.

That approach amounts to “fighting fire with fire,” says Tara Malloy of the Campaign Legal Center, a proponent of campaign finance restrictions. Malloy has calculated that without limits on direct contributions, a single person could give almost $ 3.5 million to a party and its candidates, in total.

“I don’t think a single person can give an eye-popping sum like $ 3.5 million without raising very serious concerns about what type of influence that person will have over the party and the office holders of that party,” she says.

Bert Johnson, a political science Professor at Middlebury College, says one person giving such vast sums of money is a pretty rare hypothetical. What’s really at stake in this case, Johnson says, is the principal of limiting direct campaign contributions in the first place.

When Congress passed limits after Watergate, Johnson says the country was “worried about corruption and the appearance of corruption, and the Supreme Court said our worries are a good enough reason to limit the contributions to candidates and parties.”

But in recent years, the court has been increasing their scrutiny of campaign contribution limits, and Johnson says the McCutcheon case could signal a further change in the high court’s views. 

With the Citizens United case three years ago, the court threw out limits on outside, independent spending for political causes. With this case, the court will consider lifting limits on giving directly to candidates and their parties. And that’s something the court has, until now, been reluctant to do.   

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Citizens United Part II? Supreme Court takes up direct campaign donations

Who Is The Most Active User Of Drones Over The United States?

At this point everyone in the world knows what a drone is: some have been bombarded by one, others, thousands of miles away, have done the bombardment, and everyone else is split whether or not this remote-controlled form of international retribution and global Pax Americna should be allowed over the territory of the US – either for purely peaceful, or outright military, as was the case with the Chris Dorner manhunt, purposes.  And as with most issues that polarize US society, the approach is one of form opinion first, and investigate the underlying facts later.

To that end on Friday, the Government Accountability Office, or GAO, issued testimony on Unmanned Aircraft Systems (UAS, or also Drones), titled “Continued Coordination, Operational Data, and Performance Standards Needed to Guide Research and Development” which while full of largely useless information, does have an informative section detailing which entities received Certificates of Waiver or Authorization (COA) or said otherwise “permissions to drone” for a period , from the FAA, which is the ultimate authority granting UAS flyovers in the US. Among the agencies seeking and being granted such permissions are all domestic military; public (academic institutions, federal, state, and local governments including law enforcement organizations); and civil (private sector entities).

So which entity engaged most actively in US-based droning in 2012? It will come as no surprise that of the 391 COAs issued in the past year, the Department of Defense accounted for 201 or, well over half of all authorized droning operations. One can rest assured that America is truly well defended, if mostly from enemies domestic.

The GAO’s take on this:

Currently, FAA authorizes all domestic military; public (academic institutions, federal, state, and local governments including law enforcement organizations); and civil (private sector entities) UAS operations on a limited basis after conducting a case-by-case safety review. Federal, state, and local government agencies must apply for Certificates of Waiver or Authorization (COA), while civil operators must apply for special airworthiness certificates in the experimental category. Because special airworthiness certificates do not allow commercial operations, there is currently no means for FAA to authorize commercial UAS operations.

 

Since FAA started issuing COAs in January 2007, 1,428 COAs have been issued. At present, under COA or special airworthiness certification, UAS operations are permitted for specific time frames (generally 12 to 24 months); locations; and operations. So, one agency can be issued multiple COAs to operate one UAS for the same purpose. In 2012, FAA issued 391 COAs to 121 federal, state, and local government entities across the United States, including law enforcement entities as well as academic institutions (see fig. 2).

 

According to an industry forecast, the market for government and commercial use of UAS is expected to grow, with small UAS having the greatest growth potential. This forecast estimates that the worldwide UAS market could be potentially worth $ 89 billion over the next decade. The majority of this estimate is for military-type products (primarily the U.S. military) with the associated research and development for production estimated to be $ 28.5 billion over the next 10 years. As smaller UAS are expected to continue to improve in technology and decrease in price, their prevalence in the national airspace is expected to increase. The forecast also indicates that the United States could account for 62 percent of the world’s research and development investment for UAS technology over the coming decade.

For those not quite up to speed on the whole droning thing, here is a simplified chart explaining it all:

Finally, the risk factors read like a point by point challenge to either every black hat hacker out there, or Iran, whichever responds first.

Command, Control and Communication Systems

Ensuring uninterrupted command and control for both small and large UAS remains a key obstacle for safe and routine integration into the national airspace. Since UAS fly based on pre-programmed flight paths and by commands from a pilot-operated ground control station, the ability to maintain the integrity of command and control signals are critically important to ensure that the UAS operates as expected and as intended.

Lost Link

In a “lost link” scenario, the command and control link between the UAS and the ground control station is broken because of either environmental or technological issues, which could lead to loss of control of the UAS. To address this type of situation, UAS generally have pre-programmed maneuvers that may direct the UAS to hover or circle in the airspace for a certain period of time to reestablish its radio link. If the link is not reestablished, then the UAS will return to “home” or the location from which it was launched, or execute an intentional flight termination at its current location. It is important that air traffic controllers know where and how all aircraft are operating so they can ensure the safe separation of aircraft in their airspace.18 FAA and MITRE have been measuring the impacts of lost link on national airspace safety and efficiency, but the standardization of lost link procedures, for both small and large UAS, has not been finalized. Currently, according to FAA, each COA has a specific lost link procedure unique to that particular operation and air traffic controllers should have a copy for reference at all times. Until procedures for a lost link scenario have been standardized across all types of UAS, air traffic controllers must rely on the lost link procedures established in each COA to know what a particular UAS will do in such a scenario.

Dedicated Radio-Frequency Spectrum

Progress has been made in obtaining additional dedicated radio-frequency spectrum for UAS operations, but additional dedicated spectrum, including satellite spectrum, is still needed to ensure secure and continuous communications for both small and large UAS operations. The lack of protected radio-frequency spectrum for UAS operations heightens the possibility that a pilot could lose command and control of a UAS. Unlike manned aircraft—which use dedicated, protected radio frequencies—UAS currently use unprotected radio spectrum and, like any other wireless technology, remain vulnerable to unintentional or intentional interference. This remains a key security and safety vulnerability because, in contrast to a manned aircraft in which the pilot has direct physical control of the aircraft, interruption of radio transmissions can sever the UAS’s only means of control. UAS stakeholders are working to develop and validate hardware and standards for communications operating in allocated spectrum. For example, FAA’s UAS Research Management Plan identified 13 activities designed to mitigate command, control, and communication obstacles. One effort focused on characterizing the capacity and performance impact of UAS operations on air-traffic-control communications systems. In addition, according to NASA, it is developing, in conjunction with Rockwell Collins, a prototype radio for control and a non-payload communications data link that would provide secure communications.

GPS Jamming and Spoofing

The jamming of the GPS signal being transmitted to the UAS could also interrupt the command and control of UAS operations. In a GPS jamming scenario, the UAS could potentially lose its ability to determine its location, altitude, and the direction in which it is traveling.19 Low cost devices that jam GPS signals are prevalent. According to one industry expert, GPS jamming would become a larger problem if GPS is the only method for navigating a UAS. This problem can be mitigated by having a second or redundant navigation system onboard the UAS that is not reliant on GPS, which is the case with larger UAS typically operated by DOD and DHS.

Encrypting civil GPS signals could make it more difficult to “spoof” or counterfeit a GPS signal that could interfere with the navigation of a UAS. Non-military GPS signals, unlike military GPS signals, are not encrypted and transparency and predictability make them vulnerable to being counterfeited, or spoofed. In a GPS-spoofing scenario, the GPS signal going from the ground control station to the UAS is first counterfeited and then overpowered. Once the authentic (original) GPS signal is overpowered, the UAS is partially under the control of the “spoofer.” This type of scenario was recently demonstrated by researchers at the University of Texas at Austin at the behest of DHS. During the demonstration at the White Sands Missile Range, researchers spoofed one element of the unencrypted GPS signal of a fairly sophisticated small UAS (mini-helicopter) and induced it to plummet toward the desert floor. The research team found that it was straightforward to mount an intermediate-level spoofing attack, such as controlling the altitude of the UAS, but difficult and expensive to mount a more sophisticated attack. The research team recommended that spoof-resistant navigation systems be required on UAS exceeding 18 pounds.

Human Factors

UAS stakeholders have been working to develop solutions to human factor issues for both small and large UAS. According to FAA, human factors research examines the interaction between people, machines, and the environment to improve performance and reduce errors. Human factors are important for UAS operations as the pilot and aircraft are not collocated. The separation of pilot and aircraft creates a number of issues, including loss of sensory cues valuable for flight control, delays in control and communications loops, and difficulty in scanning the visual environment surrounding the unmanned aircraft. As part of its UAS Integration in the National Airspace System Project, NASA is working to develop human factor guidelines for ground control stations and plans to share the results with RTCA SC-203 to inform recommended guidelines. In addition, the Department of the Army is working to develop universal ground control stations, which would allow UAS pilots to fly different types of UAS without having to be trained on multiple configurations of a ground control station.

Source: GAO

Zero Hedge

Who Is The Most Active User Of Drones Over The United States?