Story 1: President Trump Signs Executive Order Targeting Institutions and People Doing Business With North Korea — Communist China Trades With and Enabled North Korea Nuclear Weapon and Missile Programs — Waiting For Embargo Banning All Trade and Investment in Communist China — Videos —
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Trump signs order aiming to cut off funding for North Korean missile program
President Donald Trump signs an executive order to expand his authority to target people and institutions doing business with North Korea.
With the action, he aims to reduce funding going to the dictatorship’s nuclear and missile programs.
Trump unveils order aiming to cut off funding for North Korean missile program
President Donald Trump on Thursday signed an executive order expanding his authority to target people and institutions that do business with North Korea.
Through the measure, the president aims to cut off the communist dictatorship’s funding and deter its nuclear and missile ambitions amid a string of recent tests and provocations.
“North Korea’s nuclear weapons and missile development is a grave threat to peace and security in our world and it is unacceptable that others financially support this criminal, rogue regime,” Trump said before a meeting with Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in. “Our new executive order will cut off sources of revenue that fund North Korea’s efforts to develop the deadliest weapons known to humankind. The order enhances the Treasury Department’s authorities to target any individual or entity that conducts significant trade in goods, services or technology with North Korea.”
President Donald Trump speaking as he meets with South Korean president Moon Jae-in during the U.N. General Assembly in New York, September 21, 2017.
Last week, the U.N. Security Council unanimously passed fresh measures to punish the communist dictatorship economically, with the support of China and Russia. Trump has repeatedly pressed China, North Korea’s only major ally, to do more to force Pyongyang to abandon its nuclear ambitions.
Trump on Thursday highlighted that China’s central bank has told its banks to strictly implement U.N. sanctions. He thanked President Xi Jinping for what he called a “bold” and “somewhat unexpected” move.
On Tuesday, he also commended Beijing for signing on to two recent sanctions packages enacted by the Security Council. The U.S. sees China’s commitment to sanctions as crucial to forcing Pyongyang to end its nuclear and missile programs.
Trump appeared to try to quash speculation that he is targeting China or other North Korean trading partners with the action.
“I want to be clear — the order targets only one country, and that country is North Korea,” he said.
Trump said the order identifies industries including textiles, fishing, information technology and manufacturing, which the Treasury Department can target with “strong sanctions.” The president added that the order includes “measures designed to disrupt” shipping and trade networks to reduce North Korea’s ability to avoid the sanctions.
Earlier, national security advisor H.R. McMaster said Trump would take more action to stop North Korea “short of war.” Trump’s advisors have repeatedly said they prefer to use diplomatic methods to curb North Korea’s aggression.
The president again said that he seeks the “complete denuclearization” of North Korea.
Trump had separate bilateral meetings scheduled with both Moon and Abe on Thursday.
Trump announces new economic sanctions targeting North Korea over nuclear program
By David NakamuraSeptember 21 at 12:45 PM
President Trump announced an executive order on Sept. 21 to enforce economic sanctions on North Korea and countries that do business with the “rogue regime” of North Korea. (The Washington Post)
NEW YORK — President Trump announced an executive order Thursday granting the Treasury Department additional authority to enforce economic sanctions on North Korea and target foreign companies and individuals that do business with the rogue nation in Northeast Asia.
Trump said the new powers aim to cut off international trade and financing that dictator Kim Jong Un’s regime uses support its nuclear and ballistic missile weapons programs. The president also said that Chinese President Xi Jinping had ordered Chinese banks to cease conducting business with North Korean entities. Trump called the move “very bold” and “somewhat unexpected,” and he praised Xi.
“North Korea’s nuclear program is a grave threat to peace and security in our world, and it is unacceptable that others financially support this criminal, rogue regime,” Trump said in brief public remarks during a meeting with the leaders of South Korea and Japan to discuss strategy to confront Pyongyang.
He added that the United States continues to seek a “complete denuclearization of North Korea.”
He added that the order will give Treasury Secretary Steve Mnuchin the “discretion to target any foreign bank knowingly facilitating specific transactions tied to trade with North Korea.”
President Trump meets with South Korean president Moon Jae-in during the U.N. General Assembly in New York on Thursday. (REUTERS/Kevin Lamarque)
A White House fact sheet said the executive order imposes a ban on airplanes or ships that have visited North Korea will be banned for 180 days from visiting the United States, a move to crack down on illicit trade.
“This significantly expands Treasury’s authority to target those who enable this regime…wherever they are located,” Mnuchin said.
Trump’s announcement came as he has sought to rally international support for confronting Pyongyang during four days of meetings here at the United Nations General Assembly. In a speech to the world body on Tuesday, Trump threatened to “totally destroy” the North if necessary and referred derisively to Kim as “rocket man.” But the president and his aides have emphasized that they are continuing to do what they can to put economic and diplomatic pressure on the North in order to avoid a military conflict.
“We are witnessing a very dangerous confrontation spiral,” Russian Foreign Minister Sergey Lavrov said in a speech to the United Nations, filling in for President Vladimir Putin, who skipped the forum. “We resolutely condemn the nuclear missile adventures of Pyongyang in violation of Security Council resolutions. But military hysteria is not just an impasse, it’s disaster…There is no alternative to political and diplomatic ways of settling the nuclear situation on the Korean Peninsula.”
China is North Korea’s largest trading partner, but Mnuchin emphasized that “this action is in no way specifically directed at China,” and he said he called Chinese officials ahead of the announcement to give them a heads up.
In recent weeks, the U.N. Security Council has approved two rounds of economic sanctions but also left room for further penalties. For example, the sanctions put limits on the nation’s oil imports but did not impose a full embargo, as the United States has suggested it supports. The Trump administration has signaled it also wants a full ban on the practice of sending North Korean workers abroad for payments that largely go to the government in Pyongyang.
Sitting down with South Korean President Moon Jae-in before the trilateral discussion with Japan, Trump said the nations are “making a lot of progress.”
Moon praised Trump’s speech to the U.N., saying through a translator that “North Korea has continued to make provocations and this is extremely deplorable and this has angered both me and our people, but the U.S. has responded firmly and in a very good way.”
The Security Council had also applied tough new export penalties in August, and Secretary of State Rex Tillerson said Wednesday that there are signs those restrictions are having an economic effect.
“We have some indications that there are beginning to appear evidence of fuel shortages,” Tillerson said in a briefing for reporters. “And look, we knew that these sanctions were going to take some time to be felt because we knew the North Koreans…had basically stockpiled a lot of inventory early in the year when they saw the new administration coming in, in anticipation of things perhaps changing. So I think what we’re seeing is a combined effect of these inventories are now being exhausted, and the supply coming in has been reduced.”
There is no sign, however, that economic penalties are having any effect on the behavior of the Kim regime and its calculation that nuclear tests and other provocations will ensure its protection or raise the price of any eventual settlement with the United States and other nations.
All U.N. sanctions have to be acceptable to China, North Korea’s protector and chief economic partner. China’s recent willingness to punish its fellow communist state signals strong disapproval of North Korea’s international provocations, but China and fellow U.N. Security Council member Russia have also opposed some of the toughest economic measures that could be applied, such as banking restrictions that would affect Chinese and other financial institutions.
“We continue to call on all responsible nations to enforce and implement sanctions,” Trump said.
Trump said the United States had been working on the North Korea problem for 25 years, but he asserted that previous administrations had “done nothing, which is why we are in the problem we are in today.”
Through executive orders and other measures extending back to the Clinton administration, the United States has been trying to undermine the economic underpinnings of the North Korean nuclear weapons program.
Each new sanction from Washington has been followed by evasive measures by Pyongyang, and then another attempt from Washington to ramp up pressure. Earlier sanctions restricted trade between U.S. companies and businesses involved with the North Korean regime and its weapons efforts. Until recently, however, such sanctions had limited effects because North Korea continued an expansive trade with other countries, mainly China.
In recent years, the United States has sought to expand the economic pressure by working through the international banking system, where the country has particular leverage because so much of international trade is conducted in dollars. The “vast majority of international transactions are denominated in dollars, the world’s reserve currency,” a Congressional report found last year.
Even when the companies are outside the United States, trade conducted in dollars typically must run through U.S. banks, and last year, that provided the Obama administration an opportunity to interrupt such business.
In November 2016, a special measure implemented by the Treasury barred U.S. banks from providing the accounts that handle such transactions for any North Korean bank or any party acting on its behalf. The measure essentially cut off North Korean banks from any trade denominated in U.S. dollars.
North Korea, however, has continued to conduct such trades by using front companies located in third countries, at least some of which are in China.
The new executive order expands the U.S. pressure on the North by allowing the Treasury to single out those front companies, and any banks helping to finance any trade with North Korea, for sanctions. Those sanctions would cut off trade with those companies or forbid them from conducting transactions in dollars.
Anne Gearan in New York, Abby Phillip in Washington and Peter Whorisky contributed to this report.
US-North Korea standoff could spark economic war with China
The escalating saber rattling between the U.S. and North Korea has raised the prospects of an economic confrontation between America and China.
So far, economic sanctions against Pyongyang have done little to convince North Korean leader Kim Jong Un to curb his ambitions to develop a nuclear missile capable of striking the U.S. mainland.
Now, critics of those measures are calling for stepped-up pressure on China, North Korea’s largest trading partner.
President Donald Trump (L) and Chinese President Xi Jinping (R) walk together at the Mar-a-Lago estate in West Palm Beach, Florida, April 7, 2017.
The escalating saber rattling between the U.S. and North Korea has raised the prospects of an economic confrontation between America and China.
At issue are a series of sanctions against Pyongyang designed to convince North Korean leader Kim Jong Un to curb his ambitions to develop a nuclear missile capable of striking the U.S. mainland.
But those measures have had little impact on the increasingly bellicose stand-off, and on Thursday President Donald Trump repeated his complaint that Beijing needs to lean harder on Pyongyang to defuse rising tensions.
“I think they can do a lot more and I think they will do a lot more,” the president told reporters. “We lost hundreds of billions of dollars a year on trade with China. They know how I feel. It’s not going to continue like that.”
On Tuesday, Trump threatened to inflict “fire and fury” on North Korea if it continues to pursue its nuclear weapons program. A recent series of successful North Korean test launches were matched Wednesday by Kim’s threats to launch a missile at the U.S. territory of Guam.
The latest round of sanctions includes fresh restrictions, unanimously approved Saturday by the United Nation Security Council, that target North Korean exports of coal, iron, iron ore, lead, lead ore and seafood. The measures also ban countries from hiring more North Korean laborers, bar new joint ventures with North Korea and ban fresh investment in existing joint ventures.
“We say to China, ‘You have a choice whether you do business with North Korea or you do business with the U.S. but you can’t do both.'”-Sen. Chris Van Hollen, D-Md.
Economic sanctions so far have proved ineffective largely because North Korea has found ways to get around them with “evasion techniques that are increasing in scale, scope and sophistication,” according to a February U.N. report.
“Designated entities and banks have continued to operate in the sanctioned environment by using agents who are highly experienced and well trained in moving money, people and goods, including arms and related material, across borders,” the U.N. report found.
The widest flow of goods and cash, by far, crosses North Korea’s border with China. As North Korea’s largest trading partner, China accounted for roughly 85 percent of overall volume in 2015, according to data from the United Nations Comtrade database.
Coal and other minerals accounted for more than 40 percent of North Korean exports in 2015, followed by textiles (29 percent), metals (7 percent) and machinery (6 percent). North Korea’s biggest imports included textiles, machinery and raw materials including minerals, metals and plastics.
Though China has taken some steps to curb imports from North Korea, exports rose by nearly 30 percent in the first half of this year, according to Chinese customs data. During the six-month period, overall trade flows across the North Korean-China border rose 10 percent to $2.65 billion.
That’s why critics of the existing North Korean sanctions say the measures don’t go nearly far enough in cutting off the flow of cash and goods to the Pyongyang regime.
Some of those critics are calling for “secondary sanctions,” which would cut off trade and financial flows to any country doing business with North Korea.
“We say to China, ‘You have a choice whether you do business with North Korea or you do business with the U.S., but you can’t do both,'” Sen. Chris Van Hollen, D.-Md., told MSNBC on Thursday. “That is what got people’s attention with the Iran sanctions, and that’s what we need to do now.”
Last month, Van Hollen co-sponsored a bill with Sen. Pat Toomey, R.-Pa., that would impose secondary sanctions targeting third parties and countries that do business with North Korean companies and individuals.
Secondary sanctions offer a powerful financial weapon by allowing the U.S. government to bar foreign banks access to the U.S. financial system.
In late June, the White House imposed limited secondary sanctions on two Chinese citizens and a shipping company for helping North Korea develop nuclear weapons and also accused a regional Chinese bank, the Bank of Dandong, of laundering money for Pyongyang, Reuters reported.
Beyond cutting off cash and supplies to the North Korean regime, secondary sanctions squeeze the flow of cash to individuals, putting pressure on Kim’s political allies, according to David Cohen, a senior CIA official in the Obama administration.
“Imposing secondary sanctions would send a strong message to North Korean leader Kim Jong Un that the financial noose is tightening in a way that could drive a wedge between Kim and the Pyongyang elite critical to his continued hold on power,” Cohen wrote in a recent op-ed piece.
Imposing secondary sanctions that single out major Chinese banks and state enterprises comes with the risk of economic retaliation from Beijing.
To minimize that risk, the White House will need to build a much wider coalition of Asian countries, says Nicholas Burns, former U.S. ambassador to NATO during the George W. Bush administration.
But developing that coalition will be a tough task for an administration that has yet to fill dozens of key diplomatic positions. So far, the White House has filled fewer than half of the State Department positions that require Senate confirmation.
“It really is a time for diplomacy,” Burns told CNBC on Thursday. “But there’s no American ambassador to South Korea, there’s no secretary of State for East Asia. So, you’ve also got to fill out the ranks.”
U.S. President Donald Trump has made it clear that he considers North Korea a legitimate threat. In early April, Trump dispatched the USS Carl Vinson aircraft carrier and its battle group to waters off the Korean Peninsula, and said “major, major conflict” was quite possible.
Tensions have since soared over fears that North Korea may be about to conduct its sixth nuclear weapons test. On Friday, the country sent a letter to American lawmakers, saying any sanctions would only cause its nuclear testing program to “gather greater pace, beyond anyone’s imagination.”
But how did a country as isolated and impoverished as North Korea get its hands on nuclear weapons in the first place?
The Korean War
In 1950, a few months into the Korean War, U.S. President Harry Truman said in a press conference that the use of an atomic bomb was under “active consideration.”
Truman’s nuclear threat remained just that, with the Korean War formally ending in an armistice in 1953. But U.S. forces still laid waste to North Korean targets, dropping over 650,000 tons of bombs and napalm, according to The Korean War: A History.
U.S. Air Force Gen. Curtis LeMay estimated that the U.S. “killed off 20 per cent of the Korean population.”
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After the war, North Korea tried to convince its wartime ally China to share its nuclear weapons technologies. Supreme Leader Kim Il-Sung, grandfather of present-day leader Kim Jong-Un, twice asked Chinese ruler Mao Zedong for help but was refused both times, according to The Two Koreas: A Contemporary History.
Denied an easy path to a nuclear bomb, North Korea set about cobbling together an indigenous nuclear weapons program.
Soviet support
It helped that the country already had basic nuclear infrastructure in place.
The Soviets even helped North Korea set up its first nuclear reactor in 1964. The reactor was used to produce radioactive isotopes for medicinal, industrial and research purposes.
But in the years that followed, the country began to explore weapons capabilities, summoning its best scientists home — including from Canada, according to NTI — to work on its fledgling nuclear weapons program.
But while North Korea’s scientists had the technical training, they lacked designs for the highly sophisticated facilities needed to produce nuclear weapons.
Path to a plutonium weapon
In the ‘70s and ‘80s, North Korea set about acquiring sensitive nuclear technologies from Europe, taking advantage of the lack of adequate nuclear information safeguards at the time.
At one point, North Korean agents went to a conference in Vienna and chatted up some Belgian scientists who had a design for a plutonium separation plant, The Atlantic reported.
“Lo and behold, it wasn’t long before the North Koreans obtained the design information for that installation… and then eventually over a period of 10 to 15 years, they set that technology up, they deployed the plant, they started to experiment with it and use it,” Mark Hibbs, a senior fellow with the Carnegie Endowment for International Peace, told The Atlantic.
In 2003, CIA director George Tenet told the Senate Armed Services Committee that North Korea “probably” has one or two plutonium-based nuclear warheads, according to The Statesman’s Yearbook 2012.
The following year, second-generation Supreme Leader Kim Jong-Il invited a delegation of Western nuclear scientists to North Korea to see its plutonium extraction facility. One of them, American scientist Dr. Siegfried Hecker, revealed in a Google Tech Talk lecture that North Korean officials at one point brought out two marmalade jars of plutonium.
“Inside one was a plutonium powder and the other one had plutonium metal,” Hecker said.
He even held one of the jars in his hand, and concluded from its appearance, weight and warmth that it contained radioactive plutonium.
By then, the country’s scientists had increasingly begun redirecting their efforts away from plutonium-based nuclear weapons to uranium-based ones, according to NTI. This is because the facilities needed to produce weapons-grade uranium can more easily be hidden underground, away from prying satellites and weapons inspectors.
North Korea wanted to cover all its bases.
Pakistani proliferation
The groundwork for North Korea’s uranium nuclear weapons program was laid in the ‘90s, with substantial help from Dr. A.Q. Khan, the pioneer of Pakistan’s atomic bomb program.
According to the book’s author, Mark Fitzpatrick, some of Khan’s deals were likely tied to existing official agreements between the two countries, wherein North Korea provided ballistic missile technologies to Pakistan.
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In 2003, the U.S. learned of North Korea’s plans to build a uranium-enrichment facility with Pakistan’s help. The following year, Khan admitted to running a global nuclear proliferation ring, with Iran and Libya among his other clients.
He even released what he claimed was a 1998 letter from Jon Pyong-ho, one of the architects of North Korea’s nuclear program, in which Pyong-ho assures that $3 million has been transferred to Pakistan’s army chief, and asks that Khan dispatch “the agreed documents, components, etc.” via a North Korean emissary.
Khan was later pardoned by Pakistani leader Gen. Pervez Musharraf.
“By freely selling enrichment equipment and putting the designs on computer disks, Khan significantly lowered the technical barriers to nuclear weapons development,” Fitzpatrick wrote.
And no country benefited more from Khan’s largesse than North Korea.
In 2010, Dr. Siegfried Hecker was again invited to North Korea, and was this time taken on a tour of a uranium enrichment facility. He described what he saw as “truly mind-boggling” — around 2,000 centrifuges that appeared to contain highly enriched, weapons-grade uranium.
“[The North Koreans] take whatever they can get, and then they build things themselves, and they do it quite well,” Hecker concluded in his Google Tech Talks lecture.
The Nuclear Silk Road
In early 2015, debris from a North Korean satellite launch were analyzed by experts and found to contain components manufactured in the U.K. and routed through Chinese companies, according to a United Nations Panel of Experts report.
The following year, foreign journalists on a tour of a Pyongyang factory spotted a shipment of boxes from Calgary-based chemical producer Dow Canada, the Washington Post reported.
These are but two of several known instances of North Korea evading international sanctions and export controls to procure weapons components.
WATCH: China says it will impose more sanctions on North Korea if missile test conducted: Tillerson
“North Korea is very creative in the way that it goes about sanctions evasion, and the patterns in which it goes about it vary,” Andrea Berger, a senior researcher with the James Martin Center for Nonproliferation Studies, told Global News.
Berger says North Korea often sends trusted nationals to China to set up front companies, often in collaboration with Chinese citizens. These companies then import equipment from Western manufacturers, who often have no way of knowing that the companies are really fronts controlled by the North Korean regime.
“Let’s say you’re Siemens in Germany and you get a purchase request from ‘Golden Star General Trading Corporation’ in China. You look into that company and it doesn’t have a big web presence — because most Chinese small and medium-sized enterprises don’t — and you assume, after some limited due diligence, that it’s probably fine,” Berger says.
Even Chinese banks themselves often get deceived, she adds.
“The bank account might be under, say, ‘Golden Star General Trading Corporation’ or a Chinese director,” Berger says. “The Bank of China might not immediately be the wiser that there’s a North Korean beneficiary behind that account.”
By covering their tracks in this manner, front companies procure sensitive goods before re-exporting them to North Korea, evading Chinese export controls via misleading shipping labels or creative smuggling techniques.
Shenyang Machine Tools promptly broke the agreement by embedding the products into its own line of industrial machines, which were then exported to North Korea.
The equipment in question is commonly used to manufacture missile parts and uranium centrifuges.
Financial skullduggery
So how does North Korea pay for the expensive parts that it acquires illegally?
Turns out it doesn’t just use front companies to buy — it also uses them to sell its own military products.
Earlier this year, the UN Panel of Experts reported the interception of a shipment of 45 military radios bound for Eritrea. The shipment was sent by a Malaysian-based company called Glocom — which investigators found to be controlled by the North Korean intelligence agency.
Glocom was selling the radios to developing countries at North Korea’s behest — for $8,000 per unit.
Berger, who is familiar with the Glocom investigation, said the company was “being used to facilitate sales of that technology specifically.”
The combination of such clandestine military deals, the sale of missile technologies and the export of coal and minerals have enabled North Korea to fund its nuclear procurement, the UN report suggested.
The “disco ball” warhead
In March 2016, North Korean state media released photographs of Kim Jong-Un standing in front of what it claimed was a miniaturized nuclear warhead “standardized to be fit for ballistic missiles,” Reuters reported.
The object was silver, shiny and shaped like a giant orb. It was roundly mocked on Twitter for resembling a disco ball.
Melissa Hanham, a researcher who analyzes open source data and photos to assess North Korea’s weapons programs, says it’s “plausible” that the object is a working nuclear warhead.
“We can’t see inside it to say, ‘Yes, it is’ or ‘No, it isn’t’ a nuclear warhead,” Hanham told Global News. “But they’ve had five nuclear tests, so it wouldn’t be surprising for them to have that kind of compact warhead by that many tests.
“I can tell you that we’ve measured it a lot, and it does fit into the payload of many of their missiles.”
Hanham admits it’s bizarre that North Korea would let its Supreme Leader stand so close to the real thing, but points out that “there are other photographs of Kim Jong-Un engaging in really dangerous activities that confuse us as well” — referring to photos of him smoking next to a solid-fuel rocket engine and standing underneath a heavy object dangling from a crane.
A legitimate threat
The purported warhead may have been goofy-looking, but it represented one of many milestones in a ramped-up schedule of North Korean nuclear weapons development over the past year and a half.
“North Korea in 2016 spent a lot of time doing a point-for-point refutation of every major narrative of the things it ‘couldn’t do’ in its nuclear missile program,” Berger says.
“All the developments we’re seeing in the nuclear missile program are deeply serious, and the more we continue to laugh about it, the more North Korea will attempt to demonstrate that it has a credible military program that is making rapid advancement.”
WATCH: Should we be worried about North Korea?
That advancement is the result of over half a century of steadily accumulated scientific know-how and single-minded subterfuge, with North Korea taking advantage of lax regulations and shady foreign partners to hoodwink the international non-proliferation regime.
Berger says China’s “conscious negligence” — in relation to both clamping down on front companies and tightening export controls — has resulted in such a huge flow of illicit goods to North Korea that it would take “an enormous effort” to rein it in at this point.
“The problem we have is enormous policy inertia, and very few good ideas of how to address the situation,” Berger says.
Hanham agrees. “I think there are probably still opportunities to slow or disrupt their program, but they’ve already crossed a lot of important thresholds that make it unlikely that they will give up their [nuclear] program entirely,” she says.
“North Korea has shown that it’s dedicated to acquiring nuclear weapons, and it’s very hard to stop any country that’s completely dedicated.”
Story 2: Fed To Start Quantitative Tightening In October 2017 by Selling Some ($10 Billion Per Month or $120 Billion Per Year) of $4,500 Billion Bond Portfolio As U.S. Economy Slows in 2017? — Videos
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Fed will finally wind down historic rescue program
by Donna Borak @donnaborakSeptember 20, 2017: 3:13 PM ET
The Federal Reserve is leaving interest rates alone to give the economy room to keep growing.
But the central bank did take historic action on Wednesday: It will begin undoing the extraordinary steps it took to prop up the economy for almost a decade after the financial crisis. The Fed said it would begin shedding some of the $4.5 trillion in investments starting next month.
The announcement marks a milestone in the long recovery from 2008, and reflects confidence by Fed officials that the economy will continue to grow.
Starting in October, the Fed will begin unloading $10 billion of debt from its so-called balance sheet, including $6 billion in Treasury securities and $4 billion in agency debt each month through December.
For years, the central bank piled up purchases of Treasury and mortgage-backed securities, a strategy intended to stimulate the economy by reducing borrowing costs for everyone.At the time, it also reduced its benchmark interest rate to zero, and only began raising it in December 2015, seven year after the crisis.
On Wednesday, the Fed left rates unchanged, hovering between 1% and 1.25%.
The central bank has raised that rate three times since December as the economy has gradually improved. Raising rates too quickly could risk hobbling the recovery.
Still, the majority of Fed policymakers signaled on Wednesday that they expect to lift rates one more time this year.
Central bankers pointed to signs of strength in the U.S. economy, including a pickup in household spending and growth in business investments, in a statement following the Federal Open Market Committee’s two-day meeting.
“Job gains have remained solid in recent months, and the unemployment rate has stayed low,” the Fed said in a statement.
While Fed officials cautioned that the devastation of Hurricanes Harvey, Irma and Maria would hold back the U.S. economy in the “near term,” they said the storms would not “materially alter” the country’s economy overall.
“Within a few months, rebuilding activity has typically kicked in, returning economic growth to normal—or maybe even a little higher than normal,” wrote Eric Winograd, AB senior economist in a note. “So, despite the storms, we’re still confident the U.S. economy will keep its momentum, because the foundations are sound.”
Some Fed officials have warned against raising interest rates until inflation — which reflects the prices of everything from meat and cheese to houses and cars — meets the goal of 2% that they consider healthy for the economy.
But inflation is still running below that target, even though the job market has picked up and other explanations have fallen away. In a press conference, Fed chair Janet Yellen described it as something of a“mystery.”
In past years, she said the Fed has been able to point to root causes of low inflation: the gap between those employed versus those that aren’t, energy prices and a rising dollar.
“This year’s inflation shortfall is more of a mystery,” Yellen told reporters at the press conference. “I will not say that the committee clearly understands what the causes are.”
Central bankers have been in a bind over when to lift rates again. Inflation has been stubbornly low for years, suggesting the Fed should hold off. But economic growth and low unemployment suggest they should act.
Fed officials cautioned that they do expect inflation to be higher than normal — at least for a little while — following the hurricanes that have devastated Texas, Florida and now Puerto Rico.
“Inflation remains the wild card of Fed policy and the temporary boost to gasoline prices following the hurricanes only clouds the picture further,” said Bankrate.com’s chief financial analyst Greg McBride. “Whether the Fed hikes in December will remain an open question until December.”
Along with one more rate hike this year, the Fed also predicted three more possible moves next year.
“It is too soon for the committee to conclude that the recent slowing in inflation was sufficiently permanent to alter the Fed’s plans,” Michael Gapen, a Barclay’s analyst wrote in a research note.
The Fed said it continues to expect inflation to remain at 1.6%, below its target, and the unemployment rate to be 4.3%, based on its updated economic projections.
The central bank did, however, offer a rosier picture of the overall economy, upping its economic growth forecast to 2.4% from 2.2%.
Yellen again declined to address speculation about whether President Trump will nominate her for a second four-year term leading the Fed. Her first term ends in February.
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By Matthew Rocco Published July 12, 2017 The Fed FOXBusiness Opens a New Window.
USA-FED/ The Federal Reserve building in Washington, D.C (Kevin Lamarque / Reuters)
Federal Reserve Chairwoman Janet Yellen will be on Capitol Hill for two days of congressional testimony starting Wednesday, and investors will be closely watching the proceedings for any clues about the central bank’s plans to shrink its securities portfolio.
The Fed has begun to pave the way toward cutting its balance sheet, which grew from about $1 trillion to $4.5 trillion in five years. The large increase is the result of an aggressive bond-buying stimulus program known as quantitative easing. The program was implemented to keep interest rates low and support a collapsed housing market. Since December 2015, the Fed has gradually raised the benchmark fed funds rate from near zero amid an improved labor market and U.S. economy. But its large portfolio of Treasury bonds and mortgage-backed securities has remained in place.
With officials phasing out its crisis-era monetary policies, the Fed is now discussing a timeline to start winding down its portfolio to about half its current size.
“[The Fed] is in uncharted territory. They’ll be very cautious because they are committed to reducing interest rates and reducing the balance sheet. The first foray will be fairly limited,” said Nariman Behravesh, IHS Markit’s chief economist.
Investors have mostly prepared themselves for the Fed’s next move by anticipating an increase in interest rates. If anything, the Fed tends to “do less than the market expected,” Behravesh added.
“I think the good thing is the Fed is raising rates in an environment that’s not gangbusters, but it’s decent. Rates will go up, no question, but if they go gradually, it won’t do a great amount of damage to the economy,” he said, noting that the fed funds rate remains historically low. “Monetary policy is becoming tighter, but at the end of next year, it still won’t be tight.”
Fed members have already decided on a plan of action. Currently, the Fed purchases new bonds to replace the ones that come due. Once it starts the clock, the central bank will allow bonds to mature and roll off its balance sheet.
At their June policy-setting meeting, members of the Federal Open Market Committee set up a plan to shed as much as $6 billion worth of government bonds and $4 billion in mortgage-backed securities each month as a starting point. The Fed would raise the amount every quarter, eventually hitting a cap of $30 billion in Treasury and $20 billion in mortgage bonds per month.
Federal Reserve Board Chairwoman Janet Yellen holds a news conference after the Fed released its monetary policy decisions in Washington, U.S., June 14, 2017. TPX IMAGES OF THE DAY – RTS1750PExpand / Contract
Federal Reserve Board Chairwoman Janet Yellen holds a news conference after the Fed released its monetary policy decisions in Washington, U.S., June 14. (Joshua Roberts / Reuters)
Demand for bonds will weaken once the Fed stays on the sidelines, thus lowering prices and forcing interest rates to climb. (Bond yields move in the opposite direction as prices.) The magnitude of that rate increase will depend on how gradually the Fed sells off its holdings, Behravesh explained.
The benchmark 10-year Treasury yield has declined about 0.081 percentage points since the start of the year, hitting 2.36% in recent trading.
As for when the Fed will kick off the process, several officials prefer to “announce a start to the process within a couple of months,” according to minutes of their June meeting Opens a New Window. . Others believed that a decision later in 2017 would give the Fed more time to study inflation, which has fallen short of the central bank’s target, and U.S. economic activity.
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The general consensus is that the Fed will make an announcement in September. In her prepared remarks to Congress Opens a New Window. , Yellen affirmed that the Fed will “likely” implement the program this year, as long as the economy “evolves broadly as anticipated.”
“We do not intend to use the balance sheet as an active tool for monetary policy in normal times,” Yellen said, adding that the Fed is prepared to “resume reinvestments” if it sees a deterioration in the economic outlook.
No matter when the Fed begins to shrink its portfolio, economists expect it to move in the same way it raises interest rates: slowly.
“It’s hard to tell how slowly they are going to go,” Behravesh said, but the Fed is determined to move one step at a time. The impact on the financial and housing markets isn’t fully clear, and the Fed plans to raise the fed funds rate at the same time it dumps assets.
In June, the Fed raised the fed funds rate another quarter of a percentage point to a range of 1% to 1.25%. The next rate hike is expected in December.
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The Pronk Pops Show 969, September 21, 2017, Story 1: President Trump Signs Executive Order Targeting Institutions and People Doing Business With North Korea — Communist China Trades With and Enabled North Korea Nuclear Weapon and Missile Programs — Waiting For Embargo Banning All Trade and Investment in Communist China — Videos — Story 2: Fed To Start Quantitative Tightening In October 2017 by Selling Some ($10 Billion Per Month or $120 Billion Per Year) of $4,500 Billion Bond Portfolio As U.S. Economy Slows in 2017? — Videos
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Story 1: President Trump Signs Executive Order Targeting Institutions and People Doing Business With North Korea — Communist China Trades With and Enabled North Korea Nuclear Weapon and Missile Programs — Waiting For Embargo Banning All Trade and Investment in Communist China — Videos —
BREAKING NEWS: President Donald Trump Announces New Sanctions on North Korea through Executive Order
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Chinese sanctions will help US trade deficit, but could backfire: Andrew Peek
Gordon Chang: China understands the effects of US sanctions
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Trump signs order aiming to cut off funding for North Korean missile program
CNBC.com
President Donald Trump on Thursday signed an executive order expanding his authority to target people and institutions that do business with North Korea.
Through the measure, the president aims to cut off the communist dictatorship’s funding and deter its nuclear and missile ambitions amid a string of recent tests and provocations.
“North Korea’s nuclear weapons and missile development is a grave threat to peace and security in our world and it is unacceptable that others financially support this criminal, rogue regime,” Trump said before a meeting with Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in. “Our new executive order will cut off sources of revenue that fund North Korea’s efforts to develop the deadliest weapons known to humankind. The order enhances the Treasury Department’s authorities to target any individual or entity that conducts significant trade in goods, services or technology with North Korea.”
The isolated nation has tested ballistic missiles and an apparent hydrogen bomb in recent weeks in the face of international economic sanctions and warnings. On Tuesday, Trump told the U.N. General Assembly that the U.S. “will have no choice but to totally destroy North Korea” if it is forced to defend itself or its allies.
Last week, the U.N. Security Council unanimously passed fresh measures to punish the communist dictatorship economically, with the support of China and Russia. Trump has repeatedly pressed China, North Korea’s only major ally, to do more to force Pyongyang to abandon its nuclear ambitions.
Trump on Thursday highlighted that China’s central bank has told its banks to strictly implement U.N. sanctions. He thanked President Xi Jinping for what he called a “bold” and “somewhat unexpected” move.
On Tuesday, he also commended Beijing for signing on to two recent sanctions packages enacted by the Security Council. The U.S. sees China’s commitment to sanctions as crucial to forcing Pyongyang to end its nuclear and missile programs.
Trump appeared to try to quash speculation that he is targeting China or other North Korean trading partners with the action.
“I want to be clear — the order targets only one country, and that country is North Korea,” he said.
Trump said the order identifies industries including textiles, fishing, information technology and manufacturing, which the Treasury Department can target with “strong sanctions.” The president added that the order includes “measures designed to disrupt” shipping and trade networks to reduce North Korea’s ability to avoid the sanctions.
Earlier, national security advisor H.R. McMaster said Trump would take more action to stop North Korea “short of war.” Trump’s advisors have repeatedly said they prefer to use diplomatic methods to curb North Korea’s aggression.
The president again said that he seeks the “complete denuclearization” of North Korea.
Trump had separate bilateral meetings scheduled with both Moon and Abe on Thursday.
https://www.cnbc.com/2017/09/21/trump-to-make-north-korea-announcement-mcmaster-says.html
Trump announces new economic sanctions targeting North Korea over nuclear program
By David Nakamura September 21 at 12:45 PM
NEW YORK — President Trump announced an executive order Thursday granting the Treasury Department additional authority to enforce economic sanctions on North Korea and target foreign companies and individuals that do business with the rogue nation in Northeast Asia.
Trump said the new powers aim to cut off international trade and financing that dictator Kim Jong Un’s regime uses support its nuclear and ballistic missile weapons programs. The president also said that Chinese President Xi Jinping had ordered Chinese banks to cease conducting business with North Korean entities. Trump called the move “very bold” and “somewhat unexpected,” and he praised Xi.
“North Korea’s nuclear program is a grave threat to peace and security in our world, and it is unacceptable that others financially support this criminal, rogue regime,” Trump said in brief public remarks during a meeting with the leaders of South Korea and Japan to discuss strategy to confront Pyongyang.
He added that the United States continues to seek a “complete denuclearization of North Korea.”
[Timeline of North Korea’s nuclear threat under Trump]
He added that the order will give Treasury Secretary Steve Mnuchin the “discretion to target any foreign bank knowingly facilitating specific transactions tied to trade with North Korea.”
President Trump meets with South Korean president Moon Jae-in during the U.N. General Assembly in New York on Thursday. (REUTERS/Kevin Lamarque)
A White House fact sheet said the executive order imposes a ban on airplanes or ships that have visited North Korea will be banned for 180 days from visiting the United States, a move to crack down on illicit trade.
“This significantly expands Treasury’s authority to target those who enable this regime…wherever they are located,” Mnuchin said.
Trump’s announcement came as he has sought to rally international support for confronting Pyongyang during four days of meetings here at the United Nations General Assembly. In a speech to the world body on Tuesday, Trump threatened to “totally destroy” the North if necessary and referred derisively to Kim as “rocket man.” But the president and his aides have emphasized that they are continuing to do what they can to put economic and diplomatic pressure on the North in order to avoid a military conflict.
“We are witnessing a very dangerous confrontation spiral,” Russian Foreign Minister Sergey Lavrov said in a speech to the United Nations, filling in for President Vladimir Putin, who skipped the forum. “We resolutely condemn the nuclear missile adventures of Pyongyang in violation of Security Council resolutions. But military hysteria is not just an impasse, it’s disaster…There is no alternative to political and diplomatic ways of settling the nuclear situation on the Korean Peninsula.”
China is North Korea’s largest trading partner, but Mnuchin emphasized that “this action is in no way specifically directed at China,” and he said he called Chinese officials ahead of the announcement to give them a heads up.
In recent weeks, the U.N. Security Council has approved two rounds of economic sanctions but also left room for further penalties. For example, the sanctions put limits on the nation’s oil imports but did not impose a full embargo, as the United States has suggested it supports. The Trump administration has signaled it also wants a full ban on the practice of sending North Korean workers abroad for payments that largely go to the government in Pyongyang.
Sitting down with South Korean President Moon Jae-in before the trilateral discussion with Japan, Trump said the nations are “making a lot of progress.”
Moon praised Trump’s speech to the U.N., saying through a translator that “North Korea has continued to make provocations and this is extremely deplorable and this has angered both me and our people, but the U.S. has responded firmly and in a very good way.”
The Security Council had also applied tough new export penalties in August, and Secretary of State Rex Tillerson said Wednesday that there are signs those restrictions are having an economic effect.
“We have some indications that there are beginning to appear evidence of fuel shortages,” Tillerson said in a briefing for reporters. “And look, we knew that these sanctions were going to take some time to be felt because we knew the North Koreans…had basically stockpiled a lot of inventory early in the year when they saw the new administration coming in, in anticipation of things perhaps changing. So I think what we’re seeing is a combined effect of these inventories are now being exhausted, and the supply coming in has been reduced.”
There is no sign, however, that economic penalties are having any effect on the behavior of the Kim regime and its calculation that nuclear tests and other provocations will ensure its protection or raise the price of any eventual settlement with the United States and other nations.
[In U.N. speech, Trump threatens to ‘totally destroy North Korea’]
All U.N. sanctions have to be acceptable to China, North Korea’s protector and chief economic partner. China’s recent willingness to punish its fellow communist state signals strong disapproval of North Korea’s international provocations, but China and fellow U.N. Security Council member Russia have also opposed some of the toughest economic measures that could be applied, such as banking restrictions that would affect Chinese and other financial institutions.
“We continue to call on all responsible nations to enforce and implement sanctions,” Trump said.
Trump said the United States had been working on the North Korea problem for 25 years, but he asserted that previous administrations had “done nothing, which is why we are in the problem we are in today.”
Through executive orders and other measures extending back to the Clinton administration, the United States has been trying to undermine the economic underpinnings of the North Korean nuclear weapons program.
Each new sanction from Washington has been followed by evasive measures by Pyongyang, and then another attempt from Washington to ramp up pressure. Earlier sanctions restricted trade between U.S. companies and businesses involved with the North Korean regime and its weapons efforts. Until recently, however, such sanctions had limited effects because North Korea continued an expansive trade with other countries, mainly China.
In recent years, the United States has sought to expand the economic pressure by working through the international banking system, where the country has particular leverage because so much of international trade is conducted in dollars. The “vast majority of international transactions are denominated in dollars, the world’s reserve currency,” a Congressional report found last year.
In November 2016, a special measure implemented by the Treasury barred U.S. banks from providing the accounts that handle such transactions for any North Korean bank or any party acting on its behalf. The measure essentially cut off North Korean banks from any trade denominated in U.S. dollars.
North Korea, however, has continued to conduct such trades by using front companies located in third countries, at least some of which are in China.
The new executive order expands the U.S. pressure on the North by allowing the Treasury to single out those front companies, and any banks helping to finance any trade with North Korea, for sanctions. Those sanctions would cut off trade with those companies or forbid them from conducting transactions in dollars.
Anne Gearan in New York, Abby Phillip in Washington and Peter Whorisky contributed to this report.
https://www.washingtonpost.com/news/post-politics/wp/2017/09/21/trump-says-the-u-s-will-impose-new-sanctions-on-north-korea/?utm_term=.f13cecf3e9e7
US-North Korea standoff could spark economic war with China
CNBC.com
The escalating saber rattling between the U.S. and North Korea has raised the prospects of an economic confrontation between America and China.
At issue are a series of sanctions against Pyongyang designed to convince North Korean leader Kim Jong Un to curb his ambitions to develop a nuclear missile capable of striking the U.S. mainland.
But those measures have had little impact on the increasingly bellicose stand-off, and on Thursday President Donald Trump repeated his complaint that Beijing needs to lean harder on Pyongyang to defuse rising tensions.
“I think they can do a lot more and I think they will do a lot more,” the president told reporters. “We lost hundreds of billions of dollars a year on trade with China. They know how I feel. It’s not going to continue like that.”
On Tuesday, Trump threatened to inflict “fire and fury” on North Korea if it continues to pursue its nuclear weapons program. A recent series of successful North Korean test launches were matched Wednesday by Kim’s threats to launch a missile at the U.S. territory of Guam.
The latest round of sanctions includes fresh restrictions, unanimously approved Saturday by the United Nation Security Council, that target North Korean exports of coal, iron, iron ore, lead, lead ore and seafood. The measures also ban countries from hiring more North Korean laborers, bar new joint ventures with North Korea and ban fresh investment in existing joint ventures.
Economic sanctions so far have proved ineffective largely because North Korea has found ways to get around them with “evasion techniques that are increasing in scale, scope and sophistication,” according to a February U.N. report.
“Designated entities and banks have continued to operate in the sanctioned environment by using agents who are highly experienced and well trained in moving money, people and goods, including arms and related material, across borders,” the U.N. report found.
The widest flow of goods and cash, by far, crosses North Korea’s border with China. As North Korea’s largest trading partner, China accounted for roughly 85 percent of overall volume in 2015, according to data from the United Nations Comtrade database.
Coal and other minerals accounted for more than 40 percent of North Korean exports in 2015, followed by textiles (29 percent), metals (7 percent) and machinery (6 percent). North Korea’s biggest imports included textiles, machinery and raw materials including minerals, metals and plastics.
Though China has taken some steps to curb imports from North Korea, exports rose by nearly 30 percent in the first half of this year, according to Chinese customs data. During the six-month period, overall trade flows across the North Korean-China border rose 10 percent to $2.65 billion.
That’s why critics of the existing North Korean sanctions say the measures don’t go nearly far enough in cutting off the flow of cash and goods to the Pyongyang regime.
Some of those critics are calling for “secondary sanctions,” which would cut off trade and financial flows to any country doing business with North Korea.
“We say to China, ‘You have a choice whether you do business with North Korea or you do business with the U.S., but you can’t do both,'” Sen. Chris Van Hollen, D.-Md., told MSNBC on Thursday. “That is what got people’s attention with the Iran sanctions, and that’s what we need to do now.”
Last month, Van Hollen co-sponsored a bill with Sen. Pat Toomey, R.-Pa., that would impose secondary sanctions targeting third parties and countries that do business with North Korean companies and individuals.
Secondary sanctions offer a powerful financial weapon by allowing the U.S. government to bar foreign banks access to the U.S. financial system.
In late June, the White House imposed limited secondary sanctions on two Chinese citizens and a shipping company for helping North Korea develop nuclear weapons and also accused a regional Chinese bank, the Bank of Dandong, of laundering money for Pyongyang, Reuters reported.
Beyond cutting off cash and supplies to the North Korean regime, secondary sanctions squeeze the flow of cash to individuals, putting pressure on Kim’s political allies, according to David Cohen, a senior CIA official in the Obama administration.
“Imposing secondary sanctions would send a strong message to North Korean leader Kim Jong Un that the financial noose is tightening in a way that could drive a wedge between Kim and the Pyongyang elite critical to his continued hold on power,” Cohen wrote in a recent op-ed piece.
Imposing secondary sanctions that single out major Chinese banks and state enterprises comes with the risk of economic retaliation from Beijing.
To minimize that risk, the White House will need to build a much wider coalition of Asian countries, says Nicholas Burns, former U.S. ambassador to NATO during the George W. Bush administration.
But developing that coalition will be a tough task for an administration that has yet to fill dozens of key diplomatic positions. So far, the White House has filled fewer than half of the State Department positions that require Senate confirmation.
“It really is a time for diplomacy,” Burns told CNBC on Thursday. “But there’s no American ambassador to South Korea, there’s no secretary of State for East Asia. So, you’ve also got to fill out the ranks.”
https://www.cnbc.com/2017/08/10/us-north-korea-standoff-could-spark-economic-war-with-china.html
How did North Korea get nuclear weapons?
By Rahul KalvapalleNational Online Journalist Global News
The “hermit kingdom” is estimated to have between 13 and 30 nuclear weapons, according to the Institute for Science and International Security. It could have up to 50 by the year 2020.
U.S. President Donald Trump has made it clear that he considers North Korea a legitimate threat. In early April, Trump dispatched the USS Carl Vinson aircraft carrier and its battle group to waters off the Korean Peninsula, and said “major, major conflict” was quite possible.
WATCH: Trump discusses military option for North Korea
Tensions have since soared over fears that North Korea may be about to conduct its sixth nuclear weapons test. On Friday, the country sent a letter to American lawmakers, saying any sanctions would only cause its nuclear testing program to “gather greater pace, beyond anyone’s imagination.”
But how did a country as isolated and impoverished as North Korea get its hands on nuclear weapons in the first place?
The Korean War
In 1950, a few months into the Korean War, U.S. President Harry Truman said in a press conference that the use of an atomic bomb was under “active consideration.”
Truman’s nuclear threat remained just that, with the Korean War formally ending in an armistice in 1953. But U.S. forces still laid waste to North Korean targets, dropping over 650,000 tons of bombs and napalm, according to The Korean War: A History.
U.S. Air Force Gen. Curtis LeMay estimated that the U.S. “killed off 20 per cent of the Korean population.”
WATCH: North Korea propaganda video puts White House in crosshairs, simulates strike on US Capitol
After the war, North Korea tried to convince its wartime ally China to share its nuclear weapons technologies. Supreme Leader Kim Il-Sung, grandfather of present-day leader Kim Jong-Un, twice asked Chinese ruler Mao Zedong for help but was refused both times, according to The Two Koreas: A Contemporary History.
Denied an easy path to a nuclear bomb, North Korea set about cobbling together an indigenous nuclear weapons program.
Soviet support
It helped that the country already had basic nuclear infrastructure in place.
As a founding member of the Soviet-led Joint Institute for Nuclear Research, North Korea had for years sent its scientists to the Soviet Union for nuclear energy training, according to a timeline compiled by the Nuclear Threat Initiative (NTI).
The Soviets even helped North Korea set up its first nuclear reactor in 1964. The reactor was used to produce radioactive isotopes for medicinal, industrial and research purposes.
READ MORE: Mike Pence urges China, Russia to pressure North Korea to abandon weapons program
But in the years that followed, the country began to explore weapons capabilities, summoning its best scientists home — including from Canada, according to NTI — to work on its fledgling nuclear weapons program.
But while North Korea’s scientists had the technical training, they lacked designs for the highly sophisticated facilities needed to produce nuclear weapons.
Path to a plutonium weapon
In the ‘70s and ‘80s, North Korea set about acquiring sensitive nuclear technologies from Europe, taking advantage of the lack of adequate nuclear information safeguards at the time.
At one point, North Korean agents went to a conference in Vienna and chatted up some Belgian scientists who had a design for a plutonium separation plant, The Atlantic reported.
“Lo and behold, it wasn’t long before the North Koreans obtained the design information for that installation… and then eventually over a period of 10 to 15 years, they set that technology up, they deployed the plant, they started to experiment with it and use it,” Mark Hibbs, a senior fellow with the Carnegie Endowment for International Peace, told The Atlantic.
READ MORE: North Korea says it’s ready for war if Donald Trump wants
In 2003, CIA director George Tenet told the Senate Armed Services Committee that North Korea “probably” has one or two plutonium-based nuclear warheads, according to The Statesman’s Yearbook 2012.
The following year, second-generation Supreme Leader Kim Jong-Il invited a delegation of Western nuclear scientists to North Korea to see its plutonium extraction facility. One of them, American scientist Dr. Siegfried Hecker, revealed in a Google Tech Talk lecture that North Korean officials at one point brought out two marmalade jars of plutonium.
“Inside one was a plutonium powder and the other one had plutonium metal,” Hecker said.
He even held one of the jars in his hand, and concluded from its appearance, weight and warmth that it contained radioactive plutonium.
In 2006, two years after Hecker’s visit, North Korean state media announced the country’s first nuclear weapon test.
By then, the country’s scientists had increasingly begun redirecting their efforts away from plutonium-based nuclear weapons to uranium-based ones, according to NTI. This is because the facilities needed to produce weapons-grade uranium can more easily be hidden underground, away from prying satellites and weapons inspectors.
North Korea wanted to cover all its bases.
Pakistani proliferation
The groundwork for North Korea’s uranium nuclear weapons program was laid in the ‘90s, with substantial help from Dr. A.Q. Khan, the pioneer of Pakistan’s atomic bomb program.
Khan orchestrated the clandestine transfer of uranium centrifuges, enrichment machines and technical data to North Korea over a period of several years, according to the book Nuclear Black Markets: Pakistan, A.Q. Khan and the Rise of Proliferation Networks.
According to the book’s author, Mark Fitzpatrick, some of Khan’s deals were likely tied to existing official agreements between the two countries, wherein North Korea provided ballistic missile technologies to Pakistan.
WATCH: Pakistan test fires submarine-based cruise missile
In 2003, the U.S. learned of North Korea’s plans to build a uranium-enrichment facility with Pakistan’s help. The following year, Khan admitted to running a global nuclear proliferation ring, with Iran and Libya among his other clients.
Khan later told German magazine Der Spiegel that he was merely acting on behalf of the Pakistani leadership.
He even released what he claimed was a 1998 letter from Jon Pyong-ho, one of the architects of North Korea’s nuclear program, in which Pyong-ho assures that $3 million has been transferred to Pakistan’s army chief, and asks that Khan dispatch “the agreed documents, components, etc.” via a North Korean emissary.
READ MORE: Pakistan refuses to release doctor who helped US find Osama bin Laden
Khan was later pardoned by Pakistani leader Gen. Pervez Musharraf.
“By freely selling enrichment equipment and putting the designs on computer disks, Khan significantly lowered the technical barriers to nuclear weapons development,” Fitzpatrick wrote.
And no country benefited more from Khan’s largesse than North Korea.
READ MORE: Pakistan issues nuclear warning to Israel on Twitter after fake news story
In 2010, Dr. Siegfried Hecker was again invited to North Korea, and was this time taken on a tour of a uranium enrichment facility. He described what he saw as “truly mind-boggling” — around 2,000 centrifuges that appeared to contain highly enriched, weapons-grade uranium.
“[The North Koreans] take whatever they can get, and then they build things themselves, and they do it quite well,” Hecker concluded in his Google Tech Talks lecture.
The Nuclear Silk Road
In early 2015, debris from a North Korean satellite launch were analyzed by experts and found to contain components manufactured in the U.K. and routed through Chinese companies, according to a United Nations Panel of Experts report.
The following year, foreign journalists on a tour of a Pyongyang factory spotted a shipment of boxes from Calgary-based chemical producer Dow Canada, the Washington Post reported.
These are but two of several known instances of North Korea evading international sanctions and export controls to procure weapons components.
WATCH: China says it will impose more sanctions on North Korea if missile test conducted: Tillerson
“North Korea is very creative in the way that it goes about sanctions evasion, and the patterns in which it goes about it vary,” Andrea Berger, a senior researcher with the James Martin Center for Nonproliferation Studies, told Global News.
Berger says North Korea often sends trusted nationals to China to set up front companies, often in collaboration with Chinese citizens. These companies then import equipment from Western manufacturers, who often have no way of knowing that the companies are really fronts controlled by the North Korean regime.
“Let’s say you’re Siemens in Germany and you get a purchase request from ‘Golden Star General Trading Corporation’ in China. You look into that company and it doesn’t have a big web presence — because most Chinese small and medium-sized enterprises don’t — and you assume, after some limited due diligence, that it’s probably fine,” Berger says.
READ MORE: China defends trade practices with North Korea after Chinese-made vehicles seen towing ballistic missiles
Even Chinese banks themselves often get deceived, she adds.
“The bank account might be under, say, ‘Golden Star General Trading Corporation’ or a Chinese director,” Berger says. “The Bank of China might not immediately be the wiser that there’s a North Korean beneficiary behind that account.”
By covering their tracks in this manner, front companies procure sensitive goods before re-exporting them to North Korea, evading Chinese export controls via misleading shipping labels or creative smuggling techniques.
READ MORE: U.S. mulls North Korea sanctions, targeting cash that flows through Chinese banks
The racket doesn’t exclusively involve surreptitious front operations, however.
In 2015, a large Chinese company called Shenyang Machine Tools bought equipment from a European manufacturer under the explicit condition that the items wouldn’t be re-sold to North Korea, according to the Institute for Science and International Security.
Shenyang Machine Tools promptly broke the agreement by embedding the products into its own line of industrial machines, which were then exported to North Korea.
The equipment in question is commonly used to manufacture missile parts and uranium centrifuges.
Financial skullduggery
So how does North Korea pay for the expensive parts that it acquires illegally?
Turns out it doesn’t just use front companies to buy — it also uses them to sell its own military products.
Earlier this year, the UN Panel of Experts reported the interception of a shipment of 45 military radios bound for Eritrea. The shipment was sent by a Malaysian-based company called Glocom — which investigators found to be controlled by the North Korean intelligence agency.
Glocom was selling the radios to developing countries at North Korea’s behest — for $8,000 per unit.
READ MORE: U.S. urges UN Security Council to increase economic pressure on North Korea over weapons program
Berger, who is familiar with the Glocom investigation, said the company was “being used to facilitate sales of that technology specifically.”
The combination of such clandestine military deals, the sale of missile technologies and the export of coal and minerals have enabled North Korea to fund its nuclear procurement, the UN report suggested.
The “disco ball” warhead
In March 2016, North Korean state media released photographs of Kim Jong-Un standing in front of what it claimed was a miniaturized nuclear warhead “standardized to be fit for ballistic missiles,” Reuters reported.
The object was silver, shiny and shaped like a giant orb. It was roundly mocked on Twitter for resembling a disco ball.
View image on Twitter
View image on Twitter
But experts aren’t laughing.
Melissa Hanham, a researcher who analyzes open source data and photos to assess North Korea’s weapons programs, says it’s “plausible” that the object is a working nuclear warhead.
“We can’t see inside it to say, ‘Yes, it is’ or ‘No, it isn’t’ a nuclear warhead,” Hanham told Global News. “But they’ve had five nuclear tests, so it wouldn’t be surprising for them to have that kind of compact warhead by that many tests.
READ MORE: North Korea’s latest missile launch could be 2nd test of new technology, experts say
“I can tell you that we’ve measured it a lot, and it does fit into the payload of many of their missiles.”
Hanham admits it’s bizarre that North Korea would let its Supreme Leader stand so close to the real thing, but points out that “there are other photographs of Kim Jong-Un engaging in really dangerous activities that confuse us as well” — referring to photos of him smoking next to a solid-fuel rocket engine and standing underneath a heavy object dangling from a crane.
A legitimate threat
The purported warhead may have been goofy-looking, but it represented one of many milestones in a ramped-up schedule of North Korean nuclear weapons development over the past year and a half.
“North Korea in 2016 spent a lot of time doing a point-for-point refutation of every major narrative of the things it ‘couldn’t do’ in its nuclear missile program,” Berger says.
“All the developments we’re seeing in the nuclear missile program are deeply serious, and the more we continue to laugh about it, the more North Korea will attempt to demonstrate that it has a credible military program that is making rapid advancement.”
WATCH: Should we be worried about North Korea?
That advancement is the result of over half a century of steadily accumulated scientific know-how and single-minded subterfuge, with North Korea taking advantage of lax regulations and shady foreign partners to hoodwink the international non-proliferation regime.
Berger says China’s “conscious negligence” — in relation to both clamping down on front companies and tightening export controls — has resulted in such a huge flow of illicit goods to North Korea that it would take “an enormous effort” to rein it in at this point.
“The problem we have is enormous policy inertia, and very few good ideas of how to address the situation,” Berger says.
READ MORE: Could North Korea’s nuclear missiles reach Canada?
Hanham agrees. “I think there are probably still opportunities to slow or disrupt their program, but they’ve already crossed a lot of important thresholds that make it unlikely that they will give up their [nuclear] program entirely,” she says.
“North Korea has shown that it’s dedicated to acquiring nuclear weapons, and it’s very hard to stop any country that’s completely dedicated.”
Story 2: Fed To Start Quantitative Tightening In October 2017 by Selling Some ($10 Billion Per Month or $120 Billion Per Year) of $4,500 Billion Bond Portfolio As U.S. Economy Slows in 2017? — Videos
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Fed will finally wind down historic rescue program
by Donna Borak @donnaborakSeptember 20, 2017: 3:13 PM ET
The Federal Reserve is leaving interest rates alone to give the economy room to keep growing.
But the central bank did take historic action on Wednesday: It will begin undoing the extraordinary steps it took to prop up the economy for almost a decade after the financial crisis. The Fed said it would begin shedding some of the $4.5 trillion in investments starting next month.
The announcement marks a milestone in the long recovery from 2008, and reflects confidence by Fed officials that the economy will continue to grow.
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Starting in October, the Fed will begin unloading $10 billion of debt from its so-called balance sheet, including $6 billion in Treasury securities and $4 billion in agency debt each month through December.
For years, the central bank piled up purchases of Treasury and mortgage-backed securities, a strategy intended to stimulate the economy by reducing borrowing costs for everyone. At the time, it also reduced its benchmark interest rate to zero, and only began raising it in December 2015, seven year after the crisis.
On Wednesday, the Fed left rates unchanged, hovering between 1% and 1.25%.
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The central bank has raised that rate three times since December as the economy has gradually improved. Raising rates too quickly could risk hobbling the recovery.
Still, the majority of Fed policymakers signaled on Wednesday that they expect to lift rates one more time this year.
Central bankers pointed to signs of strength in the U.S. economy, including a pickup in household spending and growth in business investments, in a statement following the Federal Open Market Committee’s two-day meeting.
“Job gains have remained solid in recent months, and the unemployment rate has stayed low,” the Fed said in a statement.
While Fed officials cautioned that the devastation of Hurricanes Harvey, Irma and Maria would hold back the U.S. economy in the “near term,” they said the storms would not “materially alter” the country’s economy overall.
“Within a few months, rebuilding activity has typically kicked in, returning economic growth to normal—or maybe even a little higher than normal,” wrote Eric Winograd, AB senior economist in a note. “So, despite the storms, we’re still confident the U.S. economy will keep its momentum, because the foundations are sound.”
Related: Fed Chair Janet Yellen warns – Monitor your credit report!
Some Fed officials have warned against raising interest rates until inflation — which reflects the prices of everything from meat and cheese to houses and cars — meets the goal of 2% that they consider healthy for the economy.
But inflation is still running below that target, even though the job market has picked up and other explanations have fallen away. In a press conference, Fed chair Janet Yellen described it as something of a “mystery.”
In past years, she said the Fed has been able to point to root causes of low inflation: the gap between those employed versus those that aren’t, energy prices and a rising dollar.
“This year’s inflation shortfall is more of a mystery,” Yellen told reporters at the press conference. “I will not say that the committee clearly understands what the causes are.”
Central bankers have been in a bind over when to lift rates again. Inflation has been stubbornly low for years, suggesting the Fed should hold off. But economic growth and low unemployment suggest they should act.
Fed officials cautioned that they do expect inflation to be higher than normal — at least for a little while — following the hurricanes that have devastated Texas, Florida and now Puerto Rico.
“Inflation remains the wild card of Fed policy and the temporary boost to gasoline prices following the hurricanes only clouds the picture further,” said Bankrate.com’s chief financial analyst Greg McBride. “Whether the Fed hikes in December will remain an open question until December.”
Along with one more rate hike this year, the Fed also predicted three more possible moves next year.
“It is too soon for the committee to conclude that the recent slowing in inflation was sufficiently permanent to alter the Fed’s plans,” Michael Gapen, a Barclay’s analyst wrote in a research note.
The Fed said it continues to expect inflation to remain at 1.6%, below its target, and the unemployment rate to be 4.3%, based on its updated economic projections.
The central bank did, however, offer a rosier picture of the overall economy, upping its economic growth forecast to 2.4% from 2.2%.
Yellen again declined to address speculation about whether President Trump will nominate her for a second four-year term leading the Fed. Her first term ends in February.
http://money.cnn.com/2017/09/20/investing/federal-reserve-janet-yellen/index.html
Fed prepares to cut $4.5 trillion portfolio: What it means
By Matthew Rocco Published July 12, 2017 The Fed FOXBusiness Opens a New Window.
USA-FED/ The Federal Reserve building in Washington, D.C (Kevin Lamarque / Reuters)
Federal Reserve Chairwoman Janet Yellen will be on Capitol Hill for two days of congressional testimony starting Wednesday, and investors will be closely watching the proceedings for any clues about the central bank’s plans to shrink its securities portfolio.
The Fed has begun to pave the way toward cutting its balance sheet, which grew from about $1 trillion to $4.5 trillion in five years. The large increase is the result of an aggressive bond-buying stimulus program known as quantitative easing. The program was implemented to keep interest rates low and support a collapsed housing market. Since December 2015, the Fed has gradually raised the benchmark fed funds rate from near zero amid an improved labor market and U.S. economy. But its large portfolio of Treasury bonds and mortgage-backed securities has remained in place.
With officials phasing out its crisis-era monetary policies, the Fed is now discussing a timeline to start winding down its portfolio to about half its current size.
“[The Fed] is in uncharted territory. They’ll be very cautious because they are committed to reducing interest rates and reducing the balance sheet. The first foray will be fairly limited,” said Nariman Behravesh, IHS Markit’s chief economist.
Investors have mostly prepared themselves for the Fed’s next move by anticipating an increase in interest rates. If anything, the Fed tends to “do less than the market expected,” Behravesh added.
“I think the good thing is the Fed is raising rates in an environment that’s not gangbusters, but it’s decent. Rates will go up, no question, but if they go gradually, it won’t do a great amount of damage to the economy,” he said, noting that the fed funds rate remains historically low. “Monetary policy is becoming tighter, but at the end of next year, it still won’t be tight.”
Fed members have already decided on a plan of action. Currently, the Fed purchases new bonds to replace the ones that come due. Once it starts the clock, the central bank will allow bonds to mature and roll off its balance sheet.
At their June policy-setting meeting, members of the Federal Open Market Committee set up a plan to shed as much as $6 billion worth of government bonds and $4 billion in mortgage-backed securities each month as a starting point. The Fed would raise the amount every quarter, eventually hitting a cap of $30 billion in Treasury and $20 billion in mortgage bonds per month.
Federal Reserve Board Chairwoman Janet Yellen holds a news conference after the Fed released its monetary policy decisions in Washington, U.S., June 14, 2017. TPX IMAGES OF THE DAY – RTS1750PExpand / Contract
Federal Reserve Board Chairwoman Janet Yellen holds a news conference after the Fed released its monetary policy decisions in Washington, U.S., June 14. (Joshua Roberts / Reuters)
Demand for bonds will weaken once the Fed stays on the sidelines, thus lowering prices and forcing interest rates to climb. (Bond yields move in the opposite direction as prices.) The magnitude of that rate increase will depend on how gradually the Fed sells off its holdings, Behravesh explained.
The benchmark 10-year Treasury yield has declined about 0.081 percentage points since the start of the year, hitting 2.36% in recent trading.
As for when the Fed will kick off the process, several officials prefer to “announce a start to the process within a couple of months,” according to minutes of their June meeting Opens a New Window. . Others believed that a decision later in 2017 would give the Fed more time to study inflation, which has fallen short of the central bank’s target, and U.S. economic activity.
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The general consensus is that the Fed will make an announcement in September. In her prepared remarks to Congress Opens a New Window. , Yellen affirmed that the Fed will “likely” implement the program this year, as long as the economy “evolves broadly as anticipated.”
“We do not intend to use the balance sheet as an active tool for monetary policy in normal times,” Yellen said, adding that the Fed is prepared to “resume reinvestments” if it sees a deterioration in the economic outlook.
No matter when the Fed begins to shrink its portfolio, economists expect it to move in the same way it raises interest rates: slowly.
“It’s hard to tell how slowly they are going to go,” Behravesh said, but the Fed is determined to move one step at a time. The impact on the financial and housing markets isn’t fully clear, and the Fed plans to raise the fed funds rate at the same time it dumps assets.
In June, the Fed raised the fed funds rate another quarter of a percentage point to a range of 1% to 1.25%. The next rate hike is expected in December.
http://www.foxbusiness.com/markets/2017/07/12/fed-prepares-to-cut-4-5-trillion-portfolio-what-it-means.html
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