Trump's National Security Adviser Warns China Wants Your Personal Information - NPR

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Robert O'Brien, President Trump's new national security adviser, has dire warnings for U.S. allies considering Huawei as a partner for 5G networks. Saul Loeb/AFP via Getty Images hide caption

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Saul Loeb/AFP via Getty Images

President Trump's new national security adviser is warning of a information security doomsday scenario for U.S. allies that allow Chinese telecommunications company Huawei to build their next generation 5G networks.

Ambassador Robert O'Brien said countries that allow Huawei in could give China's communist government backdoor access to their citizens' most sensitive data.

"So every medical record, every social media post, every e-mail, every financial transaction, and every citizen of the country with cloud computing and artificial intelligence can be sucked up out of Huawei into massive servers in China," O'Brien told NPR in an interview.

"This isn't a theoretical threat," O'Brien said before speaking at the Reagan National Defense Forum, an annual gathering of defense industry and military officials.

The Trump administration has taken measures to keep Huawei and other companies with ties to the Chinese government out of U.S. telecommunications systems. It's working hard to convince allies to do the same.

Australia, New Zealand and Japan block Huawei, but other allies such as Canada and Britain have said they are open to allowing the company build some less sensitive 5G networks.

O'Brien warned it would be difficult to have full intelligence sharing information with a partner whose network was tied to Beijing.

He described how China has assigned a "social credit score" to its own citizens based on information it gathers — information used to determine whether people can get on an airplane, buy a train ticket or get a particular job.

"But what if China had a social credit score for every single person in the world?" O'Brien said. "What if, for democracies, China knew every single personal, private piece of information about any of us and then could use that to micro-target people to influence elections?"

O'Brien's concerns underscore the complexity of current relations between the United States and China.

The Trump administration is in the throes of a bitter trade war with Beijing, has imposed visa restrictions on Chinese officials believed to be involved in human rights abuses and has proposed a $2 billion U.S. weapons sale to Taipei, which Beijing objects to, claiming Taiwan is part of greater China.

O'Brien and Defense Secretary Mark Esper, both of whom have only been in their positions a few months, have already spent considerable time traversing the globe warning of the Chinese threat.

During his own speech at the Reagan National Defense Forum on Saturday, Esper also warned of the spread of Huawei. And he said the United States needs to reallocate military forces and resources from Afghanistan and the Middle East to Asia.

Esper pointed to the National Defense Strategy, released last year, which cites China's "predatory economics," and calls for building up military operations in the Pacific to counter China's global ambitions and military expansion.

"China's economic rise has allowed it to triple its annual military spending since 2002, with estimates reaching close to $250 billion last year," Esper said in his speech. "Beijing continues to violate the sovereignty of Indo-Pacific nations and expand its control abroad under the pretense of 'belt-and-road' infrastructure investments."

President Trump has also raised concerns with allies about Huawei and 5G, but said there are limits to his powers of persuasion.

"Everybody I've spoken to is not going forward," Trump said last week at a summit with NATO leaders. "But how many countries can I speak to? Am I going to call up and speak to the whole world? It is a security risk, in my opinion, in our opinion. We're building it and we've started. But we're not using Huawei."

China has been willing to provide cash, resources and equipment to foreign governments in ways the United States is not. Foreign diplomats say it's difficult to turn down China when they desperately need cash for infrastructure and job-creating projects like new roads, telecommunications equipment and energy systems.

O'Brien said the Chinese government has made Huawei very attractive through subsidies. Western competitors like Qualcomm, Nokia, Ericsson or Cisco can't compete at the same price and still make a profit.

But O'Brien said foreign governments lured by the cheaper prices are missing the big picture.

"It's great to get a discount," O'Brien said. "It's great to get something for free. But at the end of the day, it really isn't free. There's no free lunch. And folks, our allies, need to consider the long term consequences of taking the cheap Huawei equipment now and what that's going to mean for them and their country in the long term."

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2019-12-10 10:00:00Z
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SoftBank selling its stake in dog-walking app - reports - BBC News

Technology giant SoftBank has reportedly agreed to sell its stake in dog-walking app Wag.

If confirmed, it would mark another disappointment for SoftBank's Vision Fund investment arm.

It caps off a year in which the Japanese company's investment decisions have been heavily criticised.

The failure of the planned sale of shares in the WeWork office leasing service has come under particular scrutiny.

SoftBank declined to comment on the reports. Wag did not immediately reply to a request for comment from the BBC.

According to media reports, Wag chief executive Garrett Smallwood said in a memo to staff: "We are amicably parting ways with SoftBank and SoftBank will no longer have Board representation. We thank the Vision Fund for their support in the company to date."

The memo also indicated that Wag has laid off staff as a result of the decision, saying: "Today, we said goodbye to a number of our friends and colleagues as we align our organization with the needs of our business."

In January last year SoftBank agreed to pay $300m (£228m) for an almost 50% stake in Wag.

Although no official indication has been given on how much SoftBank will get for the stake it is thought it will be below its purchase price.

It's the latest blow to the almost $100bn Vision Fund after the valuation of WeWork slumped following the cancelling of its highly anticipated stock market debut earlier this year.

In November SoftBank's chief executive, Masayoshi Son, admitted that his judgement had been poor in relation to the investment in the office space start-up.

The weak stock market performance of Uber has also left SoftBank in the red.

The Japanese conglomerate poured more than $7.6bn into the ride-hailing giant in early 2018.

Uber shares were priced at $45 each when they made their New York Stock Exchange debut in May 2019. They are currently worth less than $28.

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2019-12-10 04:15:55Z
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Former Fed Chairman Paul Volcker Dies at 92 - NPR

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Federal Reserve Board Chairman Paul Volcker listens to a question as he appears before the Senate Banking Committee in Washington, D.C., in 1980. Chick Harrity/AP hide caption

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Chick Harrity/AP

Updated at 10:30 a.m. ET

Former Federal Reserve Chairman Paul Volcker, the closest thing to a rock star economist as this country has seen, died Monday at 92, NPR has confirmed. He was reportedly suffering from prostate cancer.

It has been more than three decades since Volcker stepped down from the Fed. And it's a safe bet that many younger Americans do not even know his name.

Here's how Robert Kavesh, a professor at New York University, remembers his life-long friend: "The economic hero of post-World War II America I would have to say was Paul Volcker. And that's saying something."

Indeed. Volcker's leadership moment came shortly after President Carter appointed him chairman of the Fed in 1979. The U.S. economy was in crisis. Stagflation — a highly unusual combination of both high inflation and rising unemployment — gripped the country.

To address spiraling inflation, Volcker dramatically constricted the nation's money supply and let interest rates rise. The interest rates on a conventional mortgage soared to more than 18 percent.

Within two years, his plan worked. But it's hard to overstate how much the public reviled Volcker at the time. Unemployment increased, and Volcker was blamed for plunging the country into recession — deliberately. Many say he ruined Carter's re-election chances. Ads pointed out Volcker's middle name was Adolph, insinuating similarities to Adolph Hitler.

Friends say Volcker privately worried about the impact of his policies, yet never wavered in his convictions.

"Ultimately, the only way, I think that just say flatly interest rates will be brought down and stay down is to get the inflation rate down," he said at a Senate Banking Committee hearing in 1981.

Janet Yellen, who served as Fed chair from 2014 to 2018, said Volcker "embodied the values we hold most dear: devotion to public service, the courage to do the right thing, even when it's immensely unpopular."

Yellen credited with "taming inflation and ushering in a long period of macroeconomic stability."

Ben Bernanke, who preceded Yellen as Fed chairman, echoed her sentiments in remarks to The New York Times. He told the Times that Volcker "personified the idea of doing something politically unpopular but economically necessary."

Volcker was born in Cape May, N.J., and grew up in Teaneck, a well-off community where his father was city manager.

He was a man of stature. Literally. He stood over 6-foot-7 and towered over all the presidents he served under.

Volcker believed that times of crisis give leaders more freedom to enact change.

"Well, when you've been in government and in public life a long time, you begin to realize you need a crisis to move the United States government, and other governments aren't all that different," he said in an NPR interview in 1992.

As the recession deepened in the early 1980s, Volcker received death threats, so he had Secret Service protection.

"We read the papers at the time and we knew what he was doing and trying to do was not popular, obviously," his son James Volcker said. "And I think the entire family knew that this was one of the things that comes with public service."

James Volcker, who was born with cerebral palsy, says his parents were not ones to shy away from hardship. At a time when many with his disease were kept out of public, he says his parents encouraged him to live in what he calls the "able-bodied world."

Paul Volcker's tenure as Fed chairman lasted eight years, until 1987. He returned to Wall Street, and then came back to Washington as an adviser to President Obama in the aftermath of the worst financial crisis since the Great Depression.

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Paul Volcker testifies before the Joint Economic Committee in 2008. Win McNamee/Getty Images hide caption

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During that time, he proposed a measure, which became known as the Volcker Rule, that sought to reduce the risk big banks posed to the economy by curbing their ability to trade their own funds speculatively. It took years for the Volcker Rule to be implemented and it was watered down along the way, but it is still part of the regulatory overhaul known as Dodd-Frank. In 2017, President Trump ordered the rule be be rewritten to further soften its impact.

If Volcker was the nation's most powerful money man for a number of years, his lifestyle was one that spoke of neither wealth nor power. As chairman of the Fed, he lived in a tiny Washington apartment. He wore flimsy suits and smoked cheap cigars. His son says one of his greatest pleasures was making Thanksgiving dinner every year.

In a 1982 People Magazine profile, his late wife Barbara joked that his government job — as Fed chairman — could no longer afford them nights out. Broadway tickets for two — at $40 a piece — were not in the budget. She took a bookkeeping job to make ends meet.

When it came to household purchases, James Volcker recalls his father's bouts with buyer's remorse. "He agonized for a month after they bought the sofa that they could have gotten a better deal on another sofa. It kinda drove my mom crazy, in a way. And she told me more than once, 'When you grow up, don't be a Volcker! ' "

It was only after his 60th birthday that Volcker took his first big Wall Street salary.

The late Fed historian Allan Meltzer said history has vindicated Paul Volcker's policy stands. Meltzer said Volcker will be remembered for his rare combination of economic acumen and his ability to defend his principles against fierce political criticism.

"I think he's regarded as one of the stellar people of his generation," Meltzer said.

Volcker left public life for some time to care for his wife of four decades, Barbara Volcker, who suffered from diabetes. She died in 1998. Twelve years later, at the age of 82, Volcker married his long-time assistant, Anke Dening.

He is survived by Dening and his children.

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2019-12-09 14:44:00Z
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Paul Volcker, the Carter-Reagan Fed chairman who beat inflation, dies at age 92 - CNBC

President Reagan and Fed Chairman Paul Volcker meet in the Oval Office on July 16, 1981.

Bettmann | Bettmann | Getty Images

Paul Volcker, who as chairman of the Federal Reserve under Presidents Jimmy Carter and Ronald Reagan helped tame inflation with 22% interest rates that also crunched American manufacturing, farming, and real estate but led the way to two decades of expansion, has died. He was 92.

He died Sunday at 5 p.m. ET, according to a spokeswoman for the Volcker Alliance.

Years after the Great Recession, Volcker headed President Barack Obama's Economic Recovery Advisory Board and pushed to create a namesake regulation, the Volcker rule, which sought to rein in commercial banks by prohibiting them from making the risky investments that helped spark the 2007 financial collapse.

The cigar-smoking Volcker, who stood 6-foot-7 and was known as "Tall Paul," was appointed Fed chairman by Carter in August 1979, was renominated by Reagan in 1983 and served until 1987. Even before his 1979 nomination, he had a reputation as an inflation buster.

"In terms of economic stability in the future, that [inflation] is what is likely to give us the most problems and create the biggest recession," Volcker said in a 1979 Fed Open Markets Committee meeting months before he became the central bank's chairman.

The inflation rate was 1% under President Lyndon Johnson in 1965 but ballooned to a breakneck 14.8% in March 1980. To combat the price rises, Volcker's Fed jacked up the federal funds rate and tightened the money supply. The rate, used by banks and credit unions for overnight loans to other depository institutions, reached a record 22.36% in July 1981. (By comparison, it was zero to 0.25% from December 2008 to December 2015, during the financial crisis and its aftermath.) Shortly after becoming Fed chairman, Volcker raised the discount rate by 0.5%, which would be considered a sizable jolt today.

Paul Volcker, former chairman of the U.S. Federal Reserve.

Peter Foley | Bloomberg | Getty Images

One of his big concerns was to change the expectations, and hence the actions, of people who believed prices would continue to rise rapidly.

"We are dealing with an inflationary momentum, and patterns of thinking and behavior, that have developed over decades," Volcker told the National Press Club in September 1981. "Something like half the working population — those under age 35 — have never known price stability in their working experience. ... We have become accustomed to living with inflation, adjusting to it — and anticipating more. And as we have done so, we unwittingly set in motion forces that have kept it going."

Within two years of the Fed's peak interest rate, inflation fell below 3%, ending the period dubbed the Great Inflation.

Still, the high interest rates had their stifling effects. The economy plunged into recession. Before the 2007-09 bust, the 1981-82 recession had been the worst economic downturn in the United States since the Great Depression. The unemployment rate in 1982 hit 10.8% — more than 1 in 10 would-be workers — still the highest since 1940.

Volcker was vilified. A trade publication, the Tennessee Professional Builder, published a "wanted" poster of Volcker in early 1982 and accused him and the Fed of "premeditated and cold-blooded murder of millions of small businesses."

"Without his bold change in monetary policy and his determination to stick with it through several painful years, the U.S. economy would have continued its downward spiral," William Poole, former president of the St. Louis Federal Reserve, wrote in a 2005 tribute. "By reversing the misguided policies of his predecessors, Volcker set the table for the long economic expansions of the 1980s and 1990s."

Paul Volcker speaks while President Barack Obama listens before he signed an executive order establishing the Economic Recovery Advisory Board on Feb. 6, 2009, in Washington, DC.

Mark Wilson | Getty Images

Paul Adolph Volcker Jr. was born in Cape May, New Jersey, on Sept. 5, 1927, and grew up in Teaneck, where his father was the manager of the leafy northern Jersey suburb. He graduated summa cum laude from Princeton in 1949, later received a master's degree in political economy from Harvard and became an economist at the New York Federal Reserve in 1952. He went on to work at Chase Manhattan Bank and the Treasury Department, where he served as President Richard Nixon's undersecretary of the Treasury for international monetary affairs from 1969 to 1974.

With unemployment and inflation growing and demand for the dollar weakening, the economy was in crisis mode in 1971. Volcker was among the White House economic advisors, including Fed Chairman Arthur Burns and Treasury Secretary John Connally, who created the "Nixon shock" policies. First, they unilaterally canceled the direct international convertibility of the U.S. dollar to gold — effectively ending the post-war Bretton Woods system of fixed currency exchange rates — and then imposed a 90-day freeze on wages and prices to check inflation, the first such non-wartime controls.

Volcker left the Treasury in 1974 and became a senior fellow at Princeton's Woodrow Wilson School. Almost exactly a year after Nixon resigned as president in August 1974, Volcker returned to the central bank as president of the New York Fed, where he advocated monetary restraint.

Volcker's concern about inflation had a lasting impact on the central bank. Monitoring rising prices is one of the Fed's dual mandates, along with employment trends, in taking the pulse of the economy and setting interest rates.

After his inflation-busting days at the Fed, Volcker became chairman of the Wolfensohn & Co. investment firm. In 1996, he led a commission that investigated dormant Swiss bank accounts of Jewish victims of the Holocaust. His work led to a settlement of $1.25 billion.

In the aftermath of the Great Recession, he led Obama's economic recovery board from 2009 to 2011. He was critical of financial institutions' roles in bringing on the 2008 economic meltdown and called for limiting the size of the nation's biggest banks. As such, he was instrumental in the creation of the Volcker rule, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule sought to prevent commercial banks from using their own funds to invest in derivatives, hedge funds, and private-equity firms.

Volcker wrote nine books, including "Keeping At It: The Quest for Sound Money and Good Government," a memoir published in October 2018 — when he was 91.

"I had no intention of writing a book, but there was something that kind of was irritating me," he told The New York Times columnist and CNBC host Andrew Ross Sorkin at the time. "I'm really worried about this governance thing."

Referring to the state of the nation, he added: "We're in a hell of a mess in every direction."

Survivors include his wife, Anke Dening, and two children from his first marriage to Barbara Bahnson, who died in 1998.

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2019-12-09 14:03:00Z
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Paul A. Volcker, Fed Chairman Who Waged War on Inflation, Is Dead at 92 - The New York Times

Paul A. Volcker, who helped shape American economic policy for more than six decades, most notably by leading the Federal Reserve’s brute-force campaign to subdue inflation in the late 1970s and early ’80s, died on Sunday in New York. He was 92.

The death was confirmed by his daughter, Janice Zima.

Mr. Volcker, a towering, taciturn and somewhat rumpled figure, arrived in Washington as America’s postwar economic hegemony was beginning to crumble. He would devote his professional life to wrestling with the consequences.

As a Treasury Department official under Presidents John F. Kennedy, Lyndon B. Johnson and Richard M. Nixon, Mr. Volcker waged a long, losing struggle to preserve the postwar international monetary system established by the Bretton Woods agreement.

As a senior Federal Reserve official from 1975 to 1987, in addition to battling inflation, he sought to limit the easing of financial regulation and warned that the rapid growth of the federal debt threatened the nation’s economic health.

In his last official post, as chairman of President Barack Obama’s Economic Recovery Advisory Board, formed in response to the 2008 financial crisis, he persuaded lawmakers to impose new restrictions on big banks — a measure known as the “Volcker Rule.”

Mr. Volcker interlaced his long stretches of public service with a lucrative career on Wall Street, most prominently as chief executive of the investment bank Wolfensohn & Company.

His reputation for austere integrity also made him a popular choice as an independent arbiter. In one instance he oversaw the reclamation of deposits that Swiss banks had failed to return to the families of Holocaust victims.

His defining achievement, however, was his success in ending an extended period of high inflation after President Jimmy Carter chose him to be the Fed’s chairman in 1979.

He prevailed by delivering shock therapy, driving the economy into a deep recession to persuade Americans to abandon their entrenched expectation that prices would keep rising rapidly.

The cost was steep. As consumers stopped buying homes and cars, millions of workers lost their jobs. Angry homebuilders mailed chunks of two-by-fours to the Fed’s marble headquarters in Washington. But Mr. Volcker managed to wring most inflation from the economy.

His victory inaugurated an era in which the leaders of both political parties largely deferred to the central bank, allowing technocrats to chart the course of monetary policy with little political interference.

Ben S. Bernanke, the Fed’s chairman from 2006 to 2014, kept on his bookshelf one of the chunks of wood that Mr. Volcker received during the anti-inflation campaign.

“He came to represent independence,” Mr. Bernanke said in an interview for this obituary. “He personified the idea of doing something politically unpopular but economically necessary.”

Proud, confident and 6-foot-7 in socks, Mr. Volcker struck many as remote and intimidating. Those who knew him well said the gruff exterior concealed a shy man with a puckish wit. His first wife told a biographer that she had waited vainly for a proposal before she finally asked him if he wanted to marry.

He was famously frugal, favoring drugstore cigars and ill-fitting suits. In the 1960s, when the driver’s seat in his Nash Rambler collapsed, Mr. Volcker propped it up with a chair and continued to drive the car. As chairman of the Fed, he lived in an apartment building populated by George Washington University students and took his laundry to his daughter’s house in the Virginia suburbs.

His time in the national spotlight began in August 1979. Mr. Carter, struggling to salvage public confidence in his administration, decided to reshuffle his cabinet, plucking the Fed chairman G. William Miller to serve as Treasury secretary. Mr. Volcker, who was then serving as president of the Federal Reserve Bank of New York, was not Mr. Carter’s first choice as a replacement.

Mr. Volcker was known to be frustrated with the Fed’s halfhearted efforts to curb inflation, leading Mr. Carter’s aides to warn that he might drive the economy into recession.

Meeting Mr. Carter in the Oval Office, Mr. Volcker slumped on a couch, a familiar cigar in hand, and gestured at Mr. Miller, who was in the room. “You have to understand,” Mr. Volcker said he told the president, “if you appoint me, I favor a tighter policy than that fellow.”

In taking the job, Mr. Volcker strained his finances and his family life.

The job of chairman paid half as much as his post at the New York Fed, and Mr. Volcker’s wife at the time, Barbara Volcker, who struggled for much of her life from debilitating rheumatoid arthritis as well as diabetes, remained in New York to be near her longtime physician. (She died in 1998.) Their son, James, who was born with cerebral palsy, also remained in New York.

Mr. Volcker married Barbara Bahnson in 1954. After her death, he married Anke Dening, his longtime assistant, in 2010. Besides her, he is survived by his son, James; a daughter, Janice Volcker Zima; a sister, Virginia Streitfeld; and four grandchildren.

When Mr. Volcker arrived in Washington, the national inflation rate was exceeding 1 percent a month. (By comparison, in 2017 inflation was less than 2 percent for the whole year.) Rapid and unpredictable inflation encourages spending while discouraging investment, a combination that creates economic instability and, often, political instability.

Henry C. Wallich, a Fed governor who had lived through the hyperinflation of Weimar Germany and often told of paying 150 billion marks to use a neighborhood swimming pool, was among those warning that the Fed was losing control.

Many economists still argued that the Fed could reduce inflation gently, without causing a recession, by raising interest rates just enough to slow economic activity. But Mr. Volcker said inflation had become a self-fulfilling prophecy. People had come to expect prices and wages to rise, so they borrowed and spent more and demanded larger pay increases, and prices and wages rose.

The Fed had been promising to crack down on inflation for more than a decade, but it had repeatedly caved in to intense political pressure so as to avoid a recession. Mr. Volcker decided a dramatic gesture was necessary to convince the public that this time would be different.

“I wanted to move the story at least to the front page,” he told a biographer.

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2019-12-09 13:51:00Z
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Celadon Group makes bankruptcy official, shuts down after 34 years - FreightWaves

This morning, Celadon Group (OTC: CGIP) executives told its employees that the company filed for bankruptcy protection under Chapter 11 and will shut down the operations of its over-the-road fleet. The official announcement came after a chaotic weekend of credit, customer, and driver issues when word got out about Celadon’s impending Chapter 11 bankruptcy filing. 

Employees were instructed to come to a meeting at the corporate headquarters in Indianapolis to be held this morning. But then in the middle of the night, fleet-wide messages went out to drivers’ telematics devices:

Competitors of the troubled carriers started aggressively posting offers for assistance and interest in hiring as news broke over the weekend. For many, a new career will start off on a sad note, but many were optimistic about the opportunities and new beginnings.

For office and professional staff at company headquarters, the struggle will be bigger to find equivalent opportunities. Many of the employees had spent decades working at the company and will be forced to look in other industries. Celadon was the largest trucking company based in Indiana, with no equivalent competitor in the area. As such, finding an employer or group of employers that can absorb the size of the truckload administrative workforce will be difficult. 

While Celadon’s demise took many years to play out, its final stages could be described as chaotic. 

Last Thursday, December 5, rumors swirled as lenders began repossessing equipment from Celadon. The next day, internal sources at Celadon told FreightWaves about the planned filing. On Friday Celadon also began advising its largest customers to find other transportation providers, but did not inform its own employees about the expected bankruptcy or shutdown. Customer service and driver managers found out from customers and drivers that the company was in trouble on Friday night, but lacked context. While management had informed shipper customers, they failed to inform internal staff. 

FreightWaves received notice late Friday from a person not affiliated with the company that FedEx and other accounts had cut the company off. Other shippers, including Walmart, MillerCoors and Conagra also started to cancel pre-planned loads.  In some cases, Celadon drop trailers with freight pre-loaded at shipper locations were unloaded and the freight given to other carriers.

When shippers started to cancel loads that were pre-booked late Friday, the jig was up. It became apparent inside of headquarters that the rumors had some teeth to them and questions started to be asked.

Over the weekend, Comdata shut off fuel cards, briefly re-activated them and then cut them again. FreightWaves heard reports from other carriers’ drivers who witnessed Celadon trucks being repossessed and towed away from truck stops. 

The lack of communication from company leadership contributed to the confusion over the weekend. Some drivers were apparently told to get out of their trucks; others were told to finish their loads. Meanwhile, rival carriers offered jobs, transportation, and legal advice to stranded Celadon drivers. 

Drivers, dispatchers, and office workers traded rumors, expressed their feelings, and asked for help on social media during the weekend.

One Celadon driver who was stuck in Laredo spoke to FreightWaves about his plan to leave the company but preferred not to be identified.

“I loved working for Celadon,” the driver said. “They treated me with respect. I wanted to stick around with Celadon, but I have a wife and kid back in Florida and I got to do what is best for my family.”

This is a developing story. FreightWaves will have more news on the Celadon shutdown on FreightWaves.com and FreightWaves TV. Download the FreightWaves TV app for iPhones or Android. FreightWaves TV is also streaming on AppleTV and Roku.

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2019-12-09 12:12:13Z
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A new theory on what shocked the overnight lending market - CNN

When turmoil erupted in the US overnight lending market in September, it came as a big surprise.

The spike in overnight borrowing rates forced the Federal Reserve to come to the rescue, pumping in lots of cash and restarting bond purchases. This eased any panic, and appears to have helped juice the stock market as an unintended side effect.

But a big question has loomed: What caused the shock, unprecedented since the global financial crisis?

In a new report, the Bank for International Settlements points to larger problems at play. This corner of the market relies heavily on the largest four US banks — and those banks have been holding more liquid assets in US Treasuries compared to what they store with the Federal Reserve, BIS notes. This could have contributed to the cash crunch.

Another factor: hedge funds, which have been financing more trades through this part of the market, per BIS.

The debate over what caused the problems in so-called "repo" markets is likely to continue. In the meantime, stocks could keep benefitting from the Fed's intervention.

Morgan Stanley estimates that global stocks have seen nearly $175 billion in inflows since September, with two-thirds of that heading to the United States. "So long as central banks keep pumping this liquidity in, and trade negotiations don't break down, we see little reason to think this can't continue," the bank's equity strategists told clients Monday.

Investors gear up for a huge week

If markets look calm this morning, it's just because traders are holding their breath ahead of what looks to be a very eventful week.

On the calendar:

• The Federal Reserve announces its latest decision on interest rates Wednesday. The European Central Bank will follow on Thursday.
• The United Kingdom holds its third general election in four years on Thursday, with big consequences for Brexit (and the pound).
• Another round of US tariffs on Chinese goods is set to go into effect on Sunday, December 15. That gives President Donald Trump less than a week to strike some kind of trade agreement with China.

Investors expect the Fed and the ECB to stay on hold as the trade environment remains uncertain, and the pound has rallied as traders bet that Prime Minister Boris Johnson will win the UK election, providing a clearer path forward on Brexit. But Wall Street is bracing for surprises.

"We may be reflecting back on this a week from now as hugely anticlimactic, but there's certainly huge potential for the opposite to be true," said Craig Erlam, senior market analyst at Oanda. "It's going to be exciting."

The outlook on trade, in particular, is extremely murky. With China posting a 1.1% drop in exports in November, there's clearly economic incentive to get a deal done. But whether both sides can actually reach an agreement by Sunday remains an open question.

Oil has jumped nearly 5% in the past week

Brent crude, the international benchmark for oil prices, is down 0.8% Monday. But it's still up nearly 5% in the past week, helped by the decision from OPEC, Russia and other oil producing nations to deepen production cuts in an attempt to support prices.

OPEC said Friday that the producer group would curb supplies by an additional 500,000 barrels per day, bringing the total cuts — which have been in place since 2017 — to 1.7 million barrels daily. Analysts said the rally gained strength after Saudi Arabia made clear it would continue to cut by more than its quota.

The timing for the surge is important. Shares of Saudi Aramco, Saudi Arabia's oil monopoly, start trading on Wednesday. Saudi leaders will be pleased that oil is now close to $64 a barrel, and not below $58, as in early October.

Chewy (CHWY) and Stitch Fix (SFIX) report results after US markets close. It's otherwise a slow day for economic data ahead of a very busy week.

Coming tomorrow: The UK releases GDP data for October ahead of Thursday's election.

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2019-12-09 12:09:00Z
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