reality is only those delusions that we have in common...

Saturday, November 22, 2014

week ending Nov 22

Quantitative Easing Is Over, But What About The Fed Balance Sheet? - The “elephant in the room” at the Fed is that rates need to return to more normal historical levels at some point. This will be in the context of a massive Fed balance sheet. This creates issues on many different levels. The Fed also noted that we’re more or less in uncharted territory. While the Fed doesn’t anticipate increasing rates any time soon, it’s starting to figure out which monetary levers will be most effective. The Fed staff will continue to research this question.  Quantitative easing (or QE) has increased the size of the Fed’s balance sheet almost eight-fold since the turn of the century. From holding just over $500 billion in assets in 2000, it passed $4 trillion at the end of last year. Some of the recent FOMC participants worried that additional purchases would result in capital losses. This fear isn’t insignificant. Currently, the Fed supports over $4 trillion in assets with ~$55 billion in equity. Under any other entity, this leverage ratio would be unthinkable. During the September FOMC meeting, the Fed discussed when the appropriate time would be to stop rolling over maturing Treasuries. It doesn’t look like the FOMC continued to work on that issue at the October meeting. Everyone agreed that the goals of QE have been met. They also agreed the Fed should maintain the current size of its balance sheet in order to “help maintain accommodative financial conditions.”

FRB: H.4.1 Release--Factors Affecting Reserve Balances--November 20, 2014: Federal Reserve statistical release: Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks

FRB: Press Release--Minutes of the Federal Open Market Committee, October 28-29, 2014--November 19, 2014: The Federal Reserve Board and the Federal Open Market Committee on Wednesday released the attached minutes of the Committee meeting held on October 28-29, 2014.

FOMC Minutes: "a few expressed concern that inflation might persist below the Committee's objective for quite some time" -- From the Fed: Minutes of the Federal Open Market Committee, October 28-29, 2014. Excerpts:  In their discussion of the economic situation and the outlook, most meeting participants viewed the information received over the intermeeting period as suggesting that economic activity continued to expand at a moderate pace. Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate; on balance, participants judged that the underutilization of labor resources was gradually diminishing. Participants generally expected that, over the medium term, real economic activity would increase at a pace sufficient to lead to a further gradual decline in the unemployment rate toward levels consistent with the Committee's objective of maximum employment. Inflation was continuing to run below the Committee's longer-run objective. Market-based measures of inflation compensation declined somewhat, while survey-based measures of longer-term inflation expectations remained stable. Participants anticipated that inflation would be held down over the near term by the decline in energy prices and other factors, but would move toward the Committee's 2 percent goal in coming years, although a few expressed concern that inflation might persist below the Committee's objective for quite some time. Most viewed the risks to the outlook for economic activity and the labor market as nearly balanced. However, a number of participants noted that economic growth over the medium term might be slower than they currently expected if the foreign economic or financial situation deteriorated significantly.

Hilsenrath Confirms Hawkish Fed Focused Domestically, Rate Hikes Coming -- Instead of reading between the lines of the 28 page FOMC minutes, we have The Wall Street Journal's Jon Hilsenrath to explain to us what we should believe. His message is not dovish. Despite tumult in financial markets, weak economic conditions abroad, and risks that low inflation could drift lower, Hilsenrath notes that the Fed forged ahead with a decision to end the central bank’s bond-buying program because the domestic economy and labor market appeared to be on course for further improvement. Furthermore, officials added a new twist: a debate about whether they should add new information in their official policy statement on how quickly rates will rise once increases commence.

6 Months Before The Fed Is Said To Hike Rates, It Still Has No Idea How It Will Do That - - As recently as a month ago we were pounding the table that the Fed's reverse-repo program, which was long said to be, alongside the IOER, the key component that would enable the Fed to hike rates in an environment in which the Fed Funds rate is no longer relevant, is a joke, most notably in "Why The Fed Is Full Of It: Reverse Repo Is A Fairy Tale." What we also repeated is that while the RRP is meaningless for actual monetary policy it is quite meaningful as a Fed-funded and subsidized quarter-end window dressing facility, widely used by money market funds and banks at the end of every quarter to make their balance sheets appear of higher quality than they are. Bottom line: It has become quite clear that the Fed neither has the intention, nor the market mechanism to do any of that, and certainly not in a 3-6 month timeframe. Which may explain the Fed's hawkish words on any potential surge in market vol. After all, if the nearly $3 trillion in excess reserves remain on bank balance sheets for another year, then the only reason why vol could surge is if the Fed lose the faith of the markets terminally. At that point the last worry anyone will have is whether and how the Fed will tighten monetary policy.

Federal Reserve Could Add to Toolkit for Raising Rates - Federal Reserve officials discussed at their October meeting a new tool to use when it comes time for them to start raising short-term interest rates from near zero, according to minutes of the meeting released Wednesday. In the past, the Fed adjusted rates by moving its benchmark federal funds rate, an overnight rate on interbank lending, by adding or withdrawing reserves out of the banking system. Raising the fed funds rate would cause other borrowing costs to rise throughout the economy, such as those for mortgages, credit cards and business loans. Lowering it had the opposite effect.  But after injecting trillions of dollars of new reserves into the financial system since the 2008 crisis, central bank officials don’t think the fed funds rate alone will be as effective as it was in the past when the time comes to raise rates broadly. So they are experimenting with complex new tools to do the job. The Fed plans to use as its primary tool the interest rate it pays on bank reserves parked overnight at the central bank–a rate currently set at 0.25%. However, the Fed cannot pay interest on reserves to money market funds and government-sponsored housing agencies like Fannie Mae and Freddie Mac, which also hold some of the money that flooded into the financial system. The central bank has been testing a number of other tools to use as well, including the rates it pays participants in overnight repurchase agreements—or reverse repos—and on term deposits, loans of cash by banks to the Fed for a set period. Through both tools, the Fed takes money from financial institutions in return for interest. Now, it is looking at a possible additional measure, which would boost the supply of highly safe assets in financial markets to prevent runs like the ones seen during the financial crisis. “The manager reported on potential arrangements that would allow depository institutions to pledge funds held in a segregated account at the Federal Reserve as collateral in borrowing transactions with private creditors and would provide an additional supplementary tool during policy normalization,” the minutes said.

Fed’s Bullard: Fed Has Boxed Itself In When It Comes to June Rate Hike - –Broad expectations the Federal Reserve will start raising short-term interest rates next summer are being driven not so much by economic considerations as they are by quirks in how the U.S. central bank conducts its policy meetings, and that’s a bad thing, a top Fed official said Thursday. In an interview that expressed continued confidence the Fed can raise short-term rates off currently near-zero rates next spring, Federal Reserve Bank of St. Louis President James Bullard said markets are in large part betting on a June 2015 rate increase because that’s one of the four meetings scheduled to be followed by a press conference by Chairwoman Janet Yellen. “The probabilities about when the Fed would move off the zero bound are all piling up on this June meeting” because the U.S. central bank has led observers to believe major policy actions can only happen at meetings with a press conference to explain what just happened, Mr. Bullard said. The Fed’s talk about “being data dependent isn’t as credible as it should be” given this situation, he said. The Fed could fix this by having a press conference after all of the eight policy meetings scheduled for 2015, which would provide the institution far more latitude to act when it needs to, Mr. Bullard said.

Fed’s Kocherlakota Is Worried About Premature Rate Hikes --  Federal Reserve Bank of Minneapolis President Narayana Kocherlakota worried on Tuesday that the U.S. central bank may be getting ready to end its ultra-easy money-policy stance too soon. Speaking with reporters after an address in St. Paul, Minn., the policymaker said the same worries that caused him to dissent at the most recent Federal Open Market Committee meeting in late October are likely to be in play again when officials meet next month. Last month, officials edged closer to the increase in short-term interest rates most officials think will come some time next year. Mr. Kocherlakota opposed that evolution in Fed policy, and has argued repeatedly over recent weeks that he believes any move to raise rates next year would be a mistake given that inflation has been and will likely continue to be well below the Fed’s 2% target. While he did not say if he would vote against the FOMC consensus again, he told reporters “the concerns I had in October, I anticipate having in December.” “We have to be very cautious” about sending signals that short-term interest rates will be lifted off of near zero levels too soon, given the current levels of growth and inflation, he said. “I think we’re creating risks for ourselves on the credibility front,” Mr. Kocherlakota said. “I do worry about an unduly tightening of monetary policy,” he said, adding “I wish we were in a position where monetary policy was providing sufficient stimulus.” Mr. Kocherlakota has emerged as the Fed’s most steadfast supporter of aggressive action to help spur better levels of growth and inflation that hits the Fed’s 2% target. Many of his colleagues, however, are increasingly preparing for the day in which the Fed will raise rates. Many saw the Fed’s decision last month to end its bond-buying stimulus campaign and upgrade its economic view as a step along the way to interest rate increases.

Conundrums: A glut-wrenching experience | The Economist: IN THE mid-2000s the Federal Reserve found itself facing something of a problem. Beginning in 2004 the Fed has started raising the federal funds rate in response to strengthening economic conditions. Yet rising short-term rates did not lead to the expected increases in long-term rates. That was a problem, because the Fed very much wanted mortgage rates to go up in order to take some air out of an inflating housing bubble. This phenomenon, in which short and long rates become delinked, has been labeled "Greenspan's conundrum", and Matthew Boesler warns that it may soon return to afflict Janet Yellen's Fed.  The yield on long-term bonds can be broken down into three different contributing variables: average short-term rates, expected inflation, and a term premium. These factors can interact in complicated ways; higher expected short rates may lead markets to expect less inflation, resulting in an ambiguous result for long-term yields. Over the last ten years falling inflation expectations have contributed to lower long-term rates but, as Ben Bernanke discussed in a speech on the subject last year, the biggest contributor to low rates over the period was a decline in the term premium. The term premium is basically a residual—what's left to explain of long-term rates after accounting for the effect of short rates and inflation—which is commonly taken to represent the additional compensation borrowers demand for lending over longer periods. That compensation has fallen dramatically over the last decade. The term premium was nearly zero back when Mr Greenspan was scratching his chin. In recent years it has occasionally turned negative.

Treasury Liquidity Freakout: Searching for a Market-Maker --Yves Smith  --As someone old enough to have done financial analysis in the Paleolithic pre-personal computer era, investor expectations that market liquidity should ever and always be there seem bizarre, as well as ahistorical. Yet over the past month or two, there has been an unseemly amount of hand-wringing about liquidity in the bond market, both corporate bonds, and today, in a Financial Times story we’ll use as a point of departure, Treasuries.  These concerns appear to be prompted by worries about what happens if (as in when) bond investors get freaked out by the Fed finally signaling it is really, no really, now serious about tightening and many rush for the exits at once. The taper tantrum of summer 2013 was a not-pretty early warning and the central bank quickly lost nerve. The worry is that there might be other complicating events, like geopolitical concerns, that will impede the Fed’s efforts at soothing rattled nerves, or worse, that the bond market will gap down before the Fed can intercede (as if investors have a right to orderly price moves!). And that despite the now-widely-accepted view that investors have a right to liquidity, dealers not answering the phone during a panic actually is salutary. It’s an unofficial circuit breaker, exactly the sort of device that operates formally in stock markets when market moves during a day are deemed to be so large as to reflect panic. At least this article does place primary blame on the increased role of high-speed trading and electronic order-matching. It also argues that regulations play a part, in that banks are no longer allowed to engage in proprietary trading. Without belaboring that issue, this is one of the few areas where using VaR as a measure of trading risk would be helpful, and allowing banks to take outsided positions on one side of a market or other to facilitate trading that they’d be required to “flatten” in a reasonable period of time (to be determined with further analysis, but the idea would be more like days, rather than much longer periods that many prop positions were built and then liquidated. As we’ve written, this was a serious flaw in Volcker Rule implementation and does warrant being revisited).

Monetary policy: Quite Enough: “The Federal Reserve completed…its taper of the programme popularly known as QE3…. The Fed’s move looks shortsighted and dangerous…. There is little sign that labour markets are running out of slack. There are lots of downside risks abroad. The Fed should be trying to overshoot its target in order to build up more of a cushion against low inflation and interest rates, and so on. But… let’s stick with the most basic argument of all…. The Fed’s mandates… maximum employment and stable prices…. The best way to deliver on those mandates, it reckons, is by targeting a rate of inflation of 2%, as measured by the price index for personal consumption expenditures. This is monetary orthodoxy of the highest order, delivered directly from the Fed. It could not be clearer. Here is what has happened to the price index for personal consumption expenditures since that time: Market-based measures of inflation expectations are not perfect, but… they have indicated that inflation is likely to be below target on average over the next five years. It would be shocking if that were not the case, given that the most recent Fed projections also indicate that inflation will be below target for the foreseeable future. We can debate whether the Fed has the right target…. Do you know what’s not up for debate?… Setting a public target, consistently missing that target, projecting that the target will be consistently missed in future, and conducting policy so as to make sure the target is in fact missed: that is lousy monetary policy making. And I cannot understand why the Fed does not see this record as detrimental to the recovery and highly corrosive of the Fed’s credibility….

What The Fed Has Wrought - The financial, economic and political system has been captured by corporate fascist psychopaths. The Federal Reserve has aided and abetted this takeover. Their monetary manipulations have resulted in this deformity. The American middle class has been murdered. Decades of declining real wages have left them virtually penniless, in debt up to their eyeballs, angry, frustrated, and unable to jump start our moribund economy by buying more Chinese produced crap. Yellen, her Wall Street puppeteers, and the corporate titans should enjoy those record profits and record stock market highs. The artificial boom will lead to a real depression. Luckily for the oligarchs, most middle class Americans are already experiencing a depression and won’t notice the difference.

Forecaster Survey Sees Analysts Lowering Already Tepid Inflation Outlook - Economic forecasters are cutting their estimates of where they expect inflation to come in over the next few years, according to a report released Monday by the Federal Reserve Bank of Philadelphia. The bank said in the latest version of the long-running Survey of Professional Forecasters that economists now believe inflation will stay below the Fed’s 2% target range at least through 2016. If the economists are right, that could create new challenges for any move to raise short-term interest rates, given the expectation price pressures may fall short of where central bankers want them to be. In the fourth-quarter survey, forecasters predict the Fed’s preferred price index, the personal consumption expenditures price index, to average 1.5% for this year, versus their 1.8% estimate three months ago. The forecasters cut their view of expected inflation next year from 2% to 1.8%, and from 2.0% in 2016, to 1.9%. The projected long-term average of the PCE price index for 2014 through 2018 is now 1.9%, from the prior quarter’s estimate of 2%. The findings of the survey could catch central bankers’ attention. Inflation in the U.S. has been consistently falling short of the Fed’s 2% target for some time now, with current annualized inflation only up by 1.4%. Many Fed officials and private forecasters expect it to weaken further over the next few months as price indexes react to the impact of falling gasoline prices. But as they have for some time, Fed officials continue to believe inflation will rise toward their goal, in large part based on ongoing growth and labor market gains, coupled with the relative stability of expected inflation held by economists and the broader public.

Low Inflation Replaces Joblessness as Reason Fed Won’t Raise Rates - — The sluggish pace of inflation is replacing unemployment as the main reason the Federal Reserve is not ready to start raising interest rates.The members of the Fed’s policy-making committee saw little reason to shift course at their most recent meeting in late October, according to an official account published Wednesday. Economic growth and job growth remain unusually steady, and Fed officials continued to predict both trends would continue.But the stability of the Fed’s plans obscures a shift in the focus of its concerns. Even as officials are increasingly heartened by evidence that the labor market is improving, they are worried about signs that inflation is rising too slowly. Low inflation impedes economic adjustments, and raises the specter of deflation.“Inflation hazard light trumps labor market dashboard,” was the summary offered by Michael Feroli, chief United States economist for JPMorgan Chase.The Fed’s account also made clear that policy makers were not particularly worried about signs of economic weakness in Europe and Asia, nor about recent market volatility.“It was observed that if foreign economic or financial conditions deteriorated further, U.S. economic growth over the medium term might be slower than currently expected,” the account said. “However, many participants saw the effects of recent developments on the domestic economy as likely to be quite limited.”

Fed Officials’ Inflation Views More Diverse Than Meeting Minutes Suggest - Minutes of the Federal Reserve’s October policy meeting said officials collectively agree that failing to hit their 2% inflation target from either above or below is equally unwelcome.So what to make of the divergent comments on the topic by several Fed officials in recent weeks? With inflation running below target for more than two years, they have provided a surprisingly diverse range of individual responses. Some are unworried and would rather talk about raising short-term interest rates from near zero. Others fret that the shortfall will undermine public confidence in the Fed’s desire or ability to achieve its goal. Meanwhile, some have said they’d be willing to overshoot the target if that would help generate more job gains. The range of views appears at odds with the Fed’s official position, which complicates efforts to assess the outlook for interest rate policy. Fed officials are dealing with a frustrating inflation environment. The personal consumption expenditures price index, their preferred measure, shows annual inflation at 1.4%. Fed officials continue to believe inflation will rise back to 2% over time, but they’ve thought that for a while, only to see their forecasts repeatedly dashed, even as the economy grows and the jobless rate falls. A report Monday from the San Francisco Fed warns 2% inflation may not arrive until after the end of 2016. Officials’ prediction that inflation will rise is based in part on the relative stability of inflation expectations, which have generally hovered near the Fed’s target. As Richmond Fed President Jeffrey Lacker has explained it, expectations of future price rises have a “gravitational pull” on readings of current inflation.

SF Fed Paper Warns Fed May Not Hit Price Target Until After 2016 -- New research from the Federal Reserve Bank of San Francisco warns the U.S. central bank’s inflation target may prove more elusive than many policymakers now think, in a fresh wrinkle for any move by officials to end their easy-money policy stance. The report, written by bank economist Vasco Curdia and published Monday, says the Fed may not see its 2% inflation objective achieved until “after the end of 2016.” The finding generates fresh uncertainty around current Fed projections, which hold that the likely range of inflation in 2016 will be between 1.7% and 2%. For 2017, the likely range seen by officials is 1.9% to 2%. If the paper’s findings proves accurate, it creates possible issues for Fed officials who largely agree that if the economy performs as they expect, short-term rates will be boosted off of near-zero levels some time next year. The Fed’s official view is that inflation above or below its 2% is equally undesirable. Most officials expect price pressures to steadily drift back toward their official goal, but those expectations have been repeatedly dashed. Raising rates when inflation is under 2% creates a communications issue for central bankers who say they want to achieve their price target. The San Francisco Fed economist warns in his paper that if anything, “the probability of low inflation by the end of 2016 is twice as high as the probability of high inflation–the opposite of historical projections.” Mr. Curdia sees little risk right now that monetary policy, as aggressive as it has been, will fuel an inflation break out. “There is little evidence that monetary policy constitutes a major source of inflation risk,” the economist said. If anything, Fed policy, with rock bottom rates and its recently completed bond-buying stimulus effort, has been a stabilizing influence on price pressures.

Key Measures Show Low Inflation in October - The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.6% annualized rate) in October. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.   Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers did not change (0.0% annualized rate) in October. The CPI less food and energy rose 0.2% (2.5% annualized rate) on a seasonally adjusted basis.  Note: The Cleveland Fed has the median CPI details for October here. Motor fuel declined at a 31% annualized rate in October!This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy rose 1.8%. Core PCE is for September and increased just 1.5% year-over-year.  On a monthly basis, median CPI was at 2.6% annualized, trimmed-mean CPI was at 1.8% annualized, and core CPI increased 2.5% annualized.

Today’s CPI release: If you just squint, you’ll see … - The FOMC minutes released yesterday and today’s CPI data release underscore a remarkable shift. Over the past five years, the state of the labor market has dominated monetary policy discussions, but for the first time since the crisis inflation is now taking center stage. All through the recovery, of course, inflation hawks have warned that inflation would soon demand our attention. But probably neither hawks nor doves predicted that excessively low inflation would be our concern as unemployment moved closer to normal. And yet today’s CPI data and the FOMC commentary reported yesterday remind us that, in the short run, inflation is probably headed lower. Today and in coming months, analysts at the Fed and elsewhere will be parsing the data and squinting extra hard to see signs that inflation will, without additional policy measures, move back up to desired levels. The difficulty, of course, is that factors such as the falling price of oil and of other commodities and the rising value of the dollar are putting downward pressure on inflation.<1> A centerpiece of inflation analysis in situations like this is examining the behavior of sub-components of inflation that are less likely to be affected by transitory forces. These indices, one hopes, will give a clearer sense of where a shadowy beast known as underlying inflation may be headed. The baseline view of many analysts is that underlying inflation is headed slowly back to the Fed’s objective. This may be the right baseline, but recent data have, in our view, significantly eroded the confidence we can have in this baseline view.

The Economy's Ebb And Flow - In boom periods, businesses begin to expand, higher rates occur and there is little interest in bonds, especially when stocks are doing well.  This would definitely be the case during an inflationary period similar to the one that occurred during the late 1960s through the 1970s. New investment is a necessity when there are shortages of capacity, goods and high inflation rates. In this scenario, high rates and heavy-handed government borrowing become strong deterrents. After the fall bubble boom of 1983 to 2007, both businesses and consumers over-borrowed and over-invested. Even when central banks reduce short-term interest rates to zero and long-term rates near or below zero real returns, businesses aren’t lining up to borrow, nor are consumers (especially the older baby boomers who still dominate the economy). Government deficits and increases in borrowing don’t compete with the private sector. The chart below shows how private debt has deleveraged or shrunk slightly since the crisis of 2008, while government debt levels have continued to soar. Has inflation gone up with $4 trillion of money printing and $7 trillion and rising in deficits since 2008? No, it has actually fallen. Has government borrowing crowded out business? Definitely not. They have just used most of what they have borrowed to buy back their own stock and increase earnings per share, as most don’t need more plant and capacity. Deflationary periods occur once in a lifetime when debt bubbles cause over-expansion and financial asset speculation. When those bubbles deleverage and debt and wealth is rapidly destroyed, you have less money chasing the same goods which is the classic definition of deflation!

Deep Recessions Leave Permanent Scars, Fed Research Finds - Harsh downturns tend to permanently lower the economy’s growth potential, according to new research from the Federal Reserve that upends conventional theory and suggests early and aggressive policy action is advisable when dealing with recessions. “Output typically does not return to pre-crisis trend following recessions, especially deep ones,”  A lower postrecession potential rate of growth, however, also implies the central bank may have less room to leave interest rates very low than it otherwise would. Policy makers tend to think about the appropriate level of interest rates in part by trying to estimate how far the economy is running beneath or above its full potential–the point at which inflation pressures start to build. Fed officials have held their short-term interest rate near zero for nearly six years, in part because they believe the difference between the economy’s output and its potential—the so-called output gap—is large, and should therefore hold down inflation pressures. But if the economy’s potential rate of growth is lower than they thought, that would mean the output gap is smaller than estimated and inflation price increases could start picking up sooner than expected. That would argue for raising interest rates sooner than currently envisioned. “The sustained deviation of the level of output from pre-crisis trend points to flaws in the way the economics profession models the recovery of output to economic shocks and raises further doubts about the reliance on measures of output gaps to determine economic slack,” the authors write.

Congressional Republicans consider using short-term funding bill to pressure Obama -  Congressional Republicans said Friday that they might create a series of showdowns over funding the government to try to force President Obama to back down on his expected plans to overhaul the nation’s immigration system. Instead of passing a spending bill in the coming days that would fund the government through the end of the fiscal year, Republicans are considering a short-term measure that would expire early next year, according to more than a dozen top lawmakers and their aides who spoke on the condition of anonymity. When Congress reconvenes in the new year, Republicans would then pass other short-term bills, each designed to create a forum to push back against the president and, possibly, gain concessions. Republicans also are planning to file a lawsuit against the president over his use of executive authority, according to the lawmakers and aides. The efforts are seen by Republicans as ways to pressure Obama to relent and pull back his expected executive orders to change immigration policy, which are likely to include protecting millions from being deported.

Who Won the Election Again? -- Pardon me for being confused. Two weeks ago, voters turned the Senate and several state houses over to Republicans and increased the GOP majority in the House. Now, in a new Wall Street Journal-NBC News poll, (firewall) Americans have firmly embraced—a Democratic agenda. They want more government spending on roads and Ebola, They want to raise the minimum wage and lower the cost of student loans. And they want to address climate change by limiting carbon emissions. The don’t want to: Raise the Social Security retirement age, reduce Medicare benefits for high-income retirees, lower corporate tax rates, cut funding for the Affordable Care Act, or enact new trade agreements. The only Democratic issue that does not have strong public support is the one with the highest profile these days: immigration.Yet, a majority of those surveyed are happy about the results of the election and want Congress to take a lead role in setting policy. And, by 2-1, they want the parties to work together. In other words, they want congressional Republicans to pass a mostly-Democratic agenda. Or, to put it another way, the want a liberal government with fewer liberals.

 When Government Succeeds, by Paul Krugman -- The great American Ebola freakout of 2014 seems to be over. ...  When the freakout was at its peak, Ebola wasn’t just a disease — it was a political metaphor. It was, specifically, held up by America’s right wing as a symbol of government failure. ... Leading Republicans suggested ignoring everything we know about disease control and resorting to extreme measures like travel bans, while mocking claims that health officials knew what they were doing. Guess what: Those officials actually did know what they were doing. The real lesson of the Ebola story is that sometimes public policy is succeeding even while partisans are screaming about failure. And it’s not the only recent story along those lines. Here’s another: Remember Solyndra? It was a renewable-energy firm that borrowed money using Department of Energy guarantees, then went bust, costing the Treasury $528 million. And conservatives have pounded on that loss relentlessly... Last week the department revealed that the program that included Solyndra is, in fact, on track to return profits of $5 billion or more.  Then there’s health reform. As usual, much of the national dialogue over the Affordable Care Act is being dominated by fake scandals drummed up by the enemies of reform. But if you look at the actual results so far, they’re remarkably good. ... One last item: Remember all the mockery of Obama administration assertions that budget deficits, which soared during the financial crisis, would come down as the economy recovered? ... Well,... the deficit has indeed come down rapidly...

Top incomes soared as tax rates fell -  For those at the very top 2010 will be remembered as a very good year. While most Americans struggled to recover from the worst economic collapse since the Great Depression, top incomes soared while tax burdens for those incomes fell. The 400 tax returns for those with the highest reported incomes showed 31 percent more income in 2010 than in 2009, when the recession officially ended at midyear. Soaring stock prices fueled the increase at the top. On average incomes of $265.1 million the top 400 paid 18 percent in federal income taxes, down from 19.9 percent in 2009. The lowest tax on the top 400 was 16.6 percent in 2007. Each of the top 400 paid tax at the same rate as a single worker making $80,000 in 2010. Assuming a 40-hour workweek, it took each of the top 400 about 40 minutes to earn that much. These figures from an IRS report released Friday show how much government policy has helped those at the top amass even larger fortunes thanks to lower tax rates. It also shows how far the United States has moved away from the ancient principle of progressive taxation, born in Athens nearly 2,500 years ago and endorsed by political thinkers and economists from Aristotle and Adam Smith to Alfred Marshall and Milton Friedman.

60% Of Households Get More Benefits Than They Pay In Taxes -- The Congressional Budget Office (CBO) just released its annual report on “The Distribution of Household Income and Federal Taxes” analyzing data through 2011 on American households. The major finding of the CBO report is that the households in the top income quintile are the real “net payers” of the US economy. The highest income quintile is basically financing the entire system of transfer payments to the bottom 60% and the entire operation of the federal government. And yet don’t we hear all the time that “the rich” aren’t paying their fair share of taxes and that they need to shoulder a greater share of the federal tax burden?

Seven big U.S. companies paid CEOs more than Uncle Sam in 2013: study  (Reuters) - Seven of the 30 largest U.S. corporations paid more money to their chief executive officers last year than they paid in U.S. federal income taxes, according to a study released on Tuesday that was disputed by at least one of the companies. Amid talk in Washington about corporate tax reform, the study said the seven companies, which in 2013 reported more than $74 billion in combined U.S. pre-tax profits, came out ahead on their taxes, gaining $1.9 billion more than they owed. At the same time, the CEOs at each of the seven companies last year was paid an average of $17.3 million, said the study, compiled by two Washington think tanks. true The seven companies cited were Boeing Co (BA.N), Ford Motor Co (F.N), Chevron Corp (CVX.N), Citigroup Inc (C.N), Verizon Communications Inc (VZ.N), JPMorgan Chase & Co (JPM.N) and General Motors Co (GM.N). The Institute for Policy Studies and the Center for Effective Government, the study's co-authors, said its findings reflected "deep flaws in our corporate tax system." In reply, Verizon said it paid $422 million in income taxes in 2013. "We do not provide a breakdown between federal vs. state in that total; however, I am confirming for you that the federal portion of that number is well more than Verizon's CEO's compensation," a spokesman said in an email.

When Mega Corporations Get Mega Tax Breaks, We All Pay | The Nation: Is corporate CEO pay really out of control? Well, consider Fleecing Uncle Sam, a new report from the Institute for Policy Studies and the Center for Effective Government. Of the 100 highest-paid CEOs in the US, the study finds, twenty-nine of them received more compensation than their companies paid in federal income tax. Take American Airlines, for example. CEO W. Douglas Parker took home $17.7 million in total compensation in 2013, while his company received a $22 million tax refund. It makes you wonder. After all, American didn’t have a lot of income on which to pay taxes—the company’s pre-tax income in 2013 was negative $2 billion—so is AA sending us a message that tax avoidance, and not air transport, is their real business? Parker certainly piloted his company to be more success at the former than he did the latter. But the heavyweight champion of corporate tax refunds is JPMorgan Chase, which earned more than $17 billion in 2013 in pre-tax income. Their tax “payment” took the form of a $1.3 billion refund.   Scott Klinger, Director of Revenue and Spending Policies at the Center for Effective Government, co-authored of the report. “Our corporate tax system is so broken,” he says, “that large, profitable firms can get away without paying their fair share and instead funnel massive funds into the pockets of top executives.”

GAO Report: SEC Is Bungling Collection and Accounting of Billions in Fines: For at least the past 20 years, the Government Accountability Office (GAO) has been telling the Securities and Exchange Commission to clean up its act when it comes to the proper handling, collection, disbursement and financial reporting of penalties and disgorgements it is supposed to be collecting from violators of securities laws. Yesterday, the GAO filed yet another report on the subject, this time finding that “during our fiscal year 2014 audit, we identified continuing and new deficiencies in SEC’s internal control over disgorgement and penalty transactions that constituted a significant deficiency in SEC’s internal control over financial reporting.” Unfortunately, the GAO’s own opaque presentation on this subject leaves the public in the dark about just how bad the situation is at the SEC. As part of the SEC’s enforcement responsibilities, ostensibly to catch and punish securities law violators, it is also frequently assigned the job of collecting and administering the penalties and disgorgements of the guilty parties. Once there is a final judgment naming the SEC as the designated party to collect the disgorgement or penalty, the SEC is supposed to promptly record an accounts receivable item for the amount the violator owes. Because the collected amounts are earmarked for either harmed investors or the general fund of the U.S. Treasury, the SEC is required to simultaneously record an equal and offsetting liability for those amounts on its balance sheet. The GAO dropped the following bomb in its report yesterday and then walked away, leaving the reader completely in the dark as to what conclusion to draw from it:

Prosecutors troubled by extent of military fraud: — Fabian Barrera found a way to make fast cash in the Texas National Guard, earning roughly $181,000 for claiming to have steered 119 potential recruits to join the military. But the bonuses were ill-gotten because the former captain never actually referred any of them. Barrera's case, which ended last month with a prison sentence of at least three years, is part of what Justice Department lawyers describe as a recurring pattern of corruption that spans a broad cross section of the military. In a period when the nation has spent freely to support wars on multiple fronts, prosecutors have found plentiful targets: defendants who bill for services they do not provide, those who steer lucrative contracts to select business partners and those who use bribes to game a vast military enterprise. Despite numerous cases that have produced long prison sentences, the problems have continued abroad and at home with a frequency that law enforcement officials consider troubling. "The schemes we see really run the gamut from relatively small bribes paid to somebody in Afghanistan to hundreds of millions of dollars' worth of contracts being steered in the direction of a favored company who's paying bribes," Assistant Attorney General Leslie Caldwell, head of the Justice Department's criminal division, said in an interview.

Elizabeth Warren to oppose Antonio Weiss as Treasury undersecretary - Sen. Elizabeth Warren plans to oppose President Barack Obama’s nomination of Antonio Weiss, a Wall Street investment banker, to be Treasury Undersecretary for Domestic Finance, another sharp-elbowed move by the progressive movement’s most prominent leader. Weiss, head of global investment banking at Lazard, is widely respected on Wall Street. But he advised on Burger King’s acquisition of Canadian doughnut chain Tim Horton’s, a so-called “tax inversion deal.” Defenders say the deals are commonplace across Wall Street and Weiss did not advise on the tax portion. Such arguments have not swayed the Massachusetts Democratic senator, a persistent Wall Street critic who appears headed to a leadership role in the next Congress. Story Continued Below A Warren adviser told POLITICO: “She is a no on Antonio Weiss. She was a Treasury official herself, she cares a lot about who is in the domestic finance role. It oversees Dodd-Frank implementation and other core economic policy-making.”

It's the leverage, stupid!: In the 30 months following the 2000 stock market peak, the S&P 500 fell by about 45%. Yet the U.S. recession that followed was brief and shallow. In the 21 months following the 2007 stock market peak, the equity market fell by a comparable 52%. This time was different: the recession that began in December 2007 was the deepest and longest since the 1930s.  The contrast between these two episodes of bursting asset price bubbles ought to make you wonder. When should we really worry about asset price bubbles? In fact, the biggest concern is not bubbles per se; it is leverage. And, surprisingly, there remain serious holes in our knowledge about who is leveraged and who is not. ... All of this leads us to draw two simple conclusions. First, investors and regulators need to be on the lookout for leverage; that’s the biggest villain. In the United States and many other countries, mortgage borrowing has been at the heart of financial instability, and it may be so again in the future. But we should not be lulled into a sense of security just because banks’ real estate exposure has declined. If leverage starts rising in real estate or elsewhere – on or off balance sheet – then we should be paying attention.

Fresh SEC crackdown on ‘flash crashes’ - Trading firms and exchanges will face heavier scrutiny from US regulators aimed at preventing glitches like those that have triggered market chaos and seen investors lose hundreds of millions of dollars in a matter of minutes. The Securities and Exchange Commission announced rules requiring certain market participants – including the Nasdaq and New York stock exchanges – to ensure their technology meets specific criteria, to conduct routine testing of systems and to notify authorities in the event of market disruptions. The decision came as regulators grapple with the issue of how to formulate rules to prevent glitches of the kind that have shaken confidence in financial markets, which are increasingly dominated by computerised high-frequency trading. “Investors deserve better,” said SEC chairwoman Mary Jo White. “Failures must be minimised and, when they occur, they must be remediated as quickly as possible and promptly reported to the commission. “Investors should expect no less of the world’s premier securities markets – indeed, investor confidence depends on it.” In one of the most high-profile mishaps so far, Nasdaq was hit last year with the largest fine yet imposed on an exchange, paying $10m for the botched Facebook IPO. Its system had been overwhelmed by the number of orders, which delayed opening trades and caused investors to lose hundreds of millions of dollars. But smaller market events have roiled markets. In 2012 trading firm Knight Capital said it lost $440m in 30 minutes because of software glitches, which also sparked chaos in the markets.

Senate Report Finds Goldman and JPMorgan Can Influence Commodities - A two-year Senate-led investigation is throwing back the curtain on the outsize and sometimes hidden sway that Wall Street banks have gained over the markets for essential commodities like oil, aluminum and coal.The Senate’s Permanent Subcommittee on Investigations found that Goldman Sachs and JPMorgan Chase assumed a role of such significance in the commodities markets that it became possible for the banks to influence the prices that consumers pay while also securing inside information about the markets that could be used by their own traders.Bankers from both firms, along with other industry executives and regulators, will testify about the allegations at hearings on Thursday and Friday.The hearings will cover topics including conditions at a Goldman-owned coal mine in Colombia and the airline fuel arrangements that Morgan Stanley struck with United Airlines.The report provides extensive details about the enormous global operations the banks have built up in recent years since politicians and regulators lifted longtime curbs on banks owning physical commodities and infrastructure.

Report blasts US banks’ physical commodities operations - Goldman Sachs, JPMorgan and Morgan Stanley exposed themselves to catastrophic financial risks, environmental disasters and potential market manipulation by investing in oil, metals and power plant businesses, according to a Senate report. The findings of the two-year probe by the Senate permanent subcommittee on investigations said the banks’ involvement in physical commodities put them in the same vulnerable position as BP, which has been hit with multiple lawsuits and billions in fines as a result of the 2010 Gulf of Mexico oil spill. “Imagine if BP had been a bank,” said senator John McCain, the senior Republican on the subcommittee. “The liability from the oil spill would have led to its failure, leading to another taxpayer bailout.” A 2012 Federal Reserve of New York commodities team review found that the three banks and a fourth unnamed financial group had shortfalls of up to $15bn to cover “extreme loss scenarios”, the report said. The Fed is considering restricting banks’ physical commodity activities. In addition to potential environmental disasters, the subcommittee said the banks’ ownership or investments in physical commodity businesses gave them inside knowledge that allowed them to benefit financially through market manipulation or unfair trading advantages. Executives of the three banks will defend their businesses in testimony on Thursday before the subcommittee. The banks say they play a crucial market making role for clients by providing financing, liquidity and hedging capabilities, while also reducing market volatility.

Senate Spars With Goldman Sachs Over Commodities - — Goldman Sachs executives spent Thursday locked in a testy public face-off with members of Congress, fighting suggestions that the bank had taken too large a role in the commodities market.In a hearing in Washington, Senator Carl Levin, the chairman of the Senate’s Permanent Subcommittee on Investigations, hammered away at Goldman’s ownership of aluminum warehouses in Detroit, coal mines in Colombia and a uranium trading company in London, which he said put the firm in position to influence the prices of commonly used commodities. The hearings also touched on the large commodities businesses run by JPMorgan Chase and Morgan Stanley, but executives from both banks emphasized that they were generally planning to wind down their ownership of assets like power plants and oil tankers.Goldman Sachs, on the other hand, has said it is not planning to exit the business. At the hearing, the firm’s representatives defiantly rejected criticism of their operations, frequently leading to verbal sparring matches with Senator Levin.“I’m glad that at least two of the three of you are pulling back significantly,” Senator Levin said to a panel with executives from all three banks.Until about 20 years ago, regulated banks faced tight constraints that barred them from owning physical commodities and limited them to trading in financial contracts that were linked to the prices of commodities. But a substantial relaxation of the rules allowed the banks to own actual commodities, known on Wall Street as physical assets

Federal Reserve put financial system at risk, Senate report finds - The Senate has rapped the Federal Reserve on the knuckles for the central bank’s failure to oversee big banks who bullied their way into dominant positions in commodities like copper and aluminum.  A report released today by the US Senate Permanent Subcommittee on Investigations announced “subcommittee finds Wall Street commodities actions add risk to economy, businesses, consumers.” Senate investigators found that banks including Goldman Sachs, Morgan Stanley and JPMorgan bought metals warehouses, crude oil tankers and other prospects in the physical commodities world, then used these businesses to gain unfair advantages and influence markets. “It’s time to restore the separation between banking and commerce and to prevent Wall Street from using nonpublic information to profit at the expense of industry and consumers,” said retiring Sen. Carl Levin, who runs the committee.

Why Is a Wall Street Regulator Embracing “Broken Window Theory?  - Alexis Goldstein - If you look at the Securities and Exchange Commission’s (SEC) list of recent enforcement actions, it reads like a laundry list of small-time offenders. From penny stock promoters, to “pump and dump” schemers, to an unregistered broker in Tampa, everyone seems to be targeted by the SEC. Everyone, that is, except executives. That’s because, under the leadership of Mary Jo White, the SEC has adopted a controversial enforcement strategy known as “broken windows.” The theory argues that if one broken window goes unrepaired, soon all windows will be broken, because letting petty crimes go unpunished will evidence that the community doesn’t care about disorder. But the strategy — traditionally employed in the policing of street crime — has shown itself over the years to be incredibly controversial. White took over the SEC in April 2013, entering the agency at a time when many had lost confidence in their capacity and will to pursue financial crisis-era violations. In fact, given her background as a prosecutor, many held out hope that White’s tenure would usher in a new era where the agency would be tough-on-crime, with the incoming Chair promising Senators a “bold and unrelenting” focus on enforcement, should she be confirmed. In the intervening time, White appears to have fulfilled her “bold and unrelenting” promise in a peculiar way: instead of prosecuting widespread, systemic frauds at the nation’s largest financial institutions, the SEC has instead embraced a persistent focus on low-level offenders. Given how harshly the SEC has been criticized for their failure to hold elites accountable, why would the agency use a failed and racially coded approach to securities law enforcement?

Standard Chartered Is Outraged That It Is Treated Like A Criminal For Its Criminal Acts -- William K. Black -- After a decade of committing tens of thousands of felonies that the U.S. government believes helped fund terrorism and Iran’s development of nuclear weapons, having the great fortune of settling the cases without any senior officers being prosecuted or its license to operate in the U.S. being pulled, having immediately violated the settlement agreement by lying about its prior actions, being discovered to have mislead the U.S. during the settlement negotiations, and being found to have continued to violate the same U.S. laws after entering into the settlement, one might think that Standard Chartered’s leaders would learn to keep their mouths shut and to obey the law at least until the settlement agreement restrictions lapse. Standard Charter’s senior leadership, however, is composed of the most arrogant and entitled class. When the bank’s Chairman of the Board is “Sir John Peace” entitlement (but no longer noblesse oblige) comes naturally. So, instead of mea culpa, the Standard Chartered mantra is: how dare you criticize us?  The latest example of this is one of the bank’s senior leaders complaining that the U.S. regulators and (non) prosecutors are treating the bank’s criminal acts as criminal. If that sounds like irony, I can assure you that these banksters are not capable of it.  The first point to keep in mind is that Standard Chartered’s officers enthusiastically aided Iran’s evasion of U.S. sanctions knowing that the U.S. believed that Iran was developing nuclear weapons and that such bank fund transers were aiding that development.  The second, and more telling point, is that Standard Chartered’s officers’ conduct indicates that they would enthusiastically aid any nation in violating sanctions in order to develop, deploy, and use weapons of mass destruction for genocidal purposes.

Lobbying Used to Be a Crime: A Review of Zephyr Teachout’s New Book on the Secret History of Corruption in America -- Matt Stoller -  If there’s one way to summarize Zephyr Teachout’s extraordinary book Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United, it is that today we are living in Benjamin Franklin’s dystopia. Her basic contention, which is not unfamiliar to most of us in sentiment if not in detail, is that the modern Supreme Court has engaged in a revolutionary reinterpretation of corruption and therefore in American political life. This outlook, written by Supreme Court Justice Anthony Kennedy in the famous Citizens United case, understands and celebrates America as a brutal and Hobbesian competitive struggle among self-interested actors attempting to use money to gain personal benefits in the public sphere.  What makes the book so remarkable is its scope and ability to link current debates to our rich and forgotten history. Perhaps this has been done before, but if it has, I have never seen it. Liberals tend to think that questions about electoral and political corruption started in the 1970s, in the Watergate era. What Teachout shows is that these questions were foundational in the American Revolution itself, and every epoch since. They are in fact questions fundamental to the design of democracy.

Private Equity Now Looking to Even Bigger Chumps, Namely 401 (k)s and Retail -- Yves Smith  One of the reasons that private equity has managed to flourish is that its biggest investor group is what is traditionally referred to as dumb money: public pension funds, which account for 25% of industry assets. Readers may recall that even CalPERS, widely considered to be the savviest public pension fund, recently had a public board meeting where the questions asked of prospective gatekeepers, the pension fund consultants, were, with one exception, softballs. And that question was the only one to address the SEC’s revelation that private equity firms have been engaging in large scale fee-skimming and other forms of grifting. And remember, the SEC also stated that the investors in these funds, known in industry nomenclature as limited partners, have done a crappy job of negotiating their agreements.  But in predictable fashion, as one group of marks, um, sales targets, starts to dry up, private equity funds, aka general partners, are hunting for new ones. And having gone very systematically after every conceivable large pot of money, the only place left for them to go is down market, in terms of size and sophistication. As private equity industry expert Eileen Appelbaum explains in The Hill, both public and private pension funds, another big money source for private equity, are shrinking as pensions generally are under attack. So the prize for private equity is to get its hands on retail investors, namely, even lower tier wealthy and 401 (k) plans.  Before we get into how this is happening, we need to step back and underscore why this is a terrible idea. Private equity returns, even for institutional investors, are exaggerated. These reported returns do not beat stocks on a risk-adjusted basis. So understand this: private equity’s entire raison d’etre is its allegedly superior returns. If that is bunk, the rationale for investing in private equity collapses.

Launching More Super Secret Private Equity Limited Partnership Agreements -  Yves Smith --Private equity fund managers keep insisting that private equity limited partnership agreements need to remain confidential or their businesses will suffer irreparable harm. We've already shown that claim to be ludicrous. We published a dozen of these supposedly sacrosanct documents at the end of May. They had been accidentally made public by the Pennsylvania Treasury, but no one seemed to have noticed. They included funds of major industry players such as KKR, TPG, and Cerberus. Yet miraculously, they sky has not fallen in on their businesses as a result of the release of this information. We have obtained ten more limited partnership agreements from a source authorized to receive them who is not bound by a confidentiality agreement. These include limited partnership agreements from Blackstone, Oak Hill, and New Mountain, as well as smaller players. You can see all these limited partnership agreements here.

Private Equity Firms Start ‘Fessing Up to Cheating --Yves Smith --The Wall Street Journal describes how some private equity firms are attempting to clean up their act by admitting to dubious practices in revised regulatory filings with the SEC. There’s a wee problem with this approach. Securities law is not like the Catholic Church, where confession and a promise not to sin again buys you redemption.  And it isn’t as if these firm are even making a sincere confession. The abuses mentioned in the Wall Street Journal account have been reported in media stories. The general pattern is that general have engaged in charging fees they didn’t report to investors or shifting expenses to the fund that the investors were led to believe were on the general partner’s dime. This grifting has been the subject of SEC whistleblower filings. SEC speeches and news reports have led investors to ask the general partners in funds in which they’ve invested about undisclosed charges. So cleaning up SEC filings is a bare minimum effort to feign compliance. The Journal story reports that a dozen firms so far have taken the unusual step of revising forms that are filed annually in the middle of the year, and has an interactive graphic that lets readers see how the reports from four of the firms changed, including those of industry leaders Apollo and KKR. As much as these revised filing show that the private equity firms are beginning to feel some discomfort from SEC and media pressure, let us not kid ourselves as to where we stand. Until the SEC cracks down on a firm for abuses, a high proportion of industry players will have succeeded in getting away with what amounts to embezzlement. So far, the SEC has fined firms only in what amount to penny-ante cases.  Under Mary Jo White’s financial firm friendly leadership, there is good reason to be skeptical that serious enforcement actions are forthcoming. But given the timetable for developing cases, and the seriousness of these abuses, it’s not out of the question that the SEC might crack down on some of the worst behavior at top firms to send a message.

The Real Roots of Hedge Fund Manager Rage -The anger of the investing class has curdled into paranoia.   Paul Singer, the head of the $25 billion hedge fund Elliott Management, had an Edvard Munch moment in his most recent letter to his investors. "Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth," he wrote. Some commenters think the economy is improving, but he wrote, "We do not think this optimism is warranted, and we think a lot of the data is cooked or misleading."   This is only the latest howl about incipient inflation from the hedge fund manager crowd over the last several years. These inflation truthers have come in for consistent mockery, and deservedly so. They have aligned with conservative economists to attack the Federal Reserve and warn that its loose monetary policies are debasing the dollar and spurring sure-to-come, any-day-now runaway inflation. As The Washington Post's Matt O'Brien noted, Mr. Singer made a classic, and in this case pretty hilarious, mistake of generalizing from his own experience. "Check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like," Mr. Singer wrote.  When zillionaires spend their millions on balloon dogs, they may be suckers, but it's not a harbinger of Zimbabwe.   If anything, we have dangerously too little inflation. And the government isn't "cooking" the data. As Floyd Norris pointed out last week, the incentives simply don't work that way.  Still, I come not to bury the wealthy investors, but to try to clarify what I think might be informing their perspective. 

New Scrutiny of Goldman's Ties to the New York Fed After a Leak - From his desk in Lower Manhattan, a banker at Goldman Sachs thumbed through confidential documents — courtesy of a source inside the United States government.The banker came to Goldman through the so-called revolving door, the symbolic portal that connects financial regulators to Wall Street. He joined in July after spending seven years as a regulator at the Federal Reserve Bank of New York, the government’s front line in overseeing the financial industry. He received the confidential information, lawyers briefed on the matter suspect, from a former colleague who was still working at the New York Fed.The previously unreported leak, recounted in interviews with the lawyers briefed on the matter who spoke anonymously because the episode is not public, illustrates the blurred lines between Wall Street and the government — and the potential conflicts of interest that can result. When Goldman hired the former New York Fed regulator, who is 29, it assigned him to advise the same type of banks that he once policed. And the banker obtained confidential information, along with several publicly available facts, in the course of assignments from his bosses at Goldman, the lawyers said.The information provided Goldman a window into the New York Fed’s private insights, the lawyers said, including details about at least one of Goldman’s clients, a midsize bank regulated by the Fed. Although it is unclear how Goldman bankers used the information, if at all, the confidential details could have helped them advise the client.The emergence of the leak comes as questions mount about a perceived coziness between the New York Fed and Wall Street banks — Goldman in particular. Revelations from a former New York Fed employee, Carmen Segarra, recently stoked that debate. Ms. Segarra released taped conversations suggesting that her supervisors went soft on Goldman, specifically over a deal that one regulator called “legal, but shady.” Senator Sherrod Brown of Ohio, a senior Democrat on the Senate Banking Committee, plans to hold a hearing on Friday about Ms. Segarra’s accusations.

New York Fed, Goldman in Criminal Investigation for Sharing Confidential Information -  Yves Smith -- A New York Times story manages to bury the lead, even given the salacious material, in an important story that provides more evidence of the overly-cozy relationship between the New York Fed and its favored large banks, particularly Goldman. The issue is sensitive in the wake of former New York Fed staffer Carmen Segarra releasing hours of tape recordings that show undue deference by the Fed employees towards Goldman. One particularly troubling incident was the Fed allowing Goldman to pretend it had gotten Fed approval for a derivatives deal designed to snooker Spanish banking regulators. Another was Goldman's lack of a conflicts of interest policy (see former regulator Justin Fox's discussion of why this is a serious matter). What is striking about the New York Times expose is how tortuous the writing is, and how it takes (and I am not exaggerating) three times as many words as necessary to finally describe what happened. For instance, it isn't until the 9th paragraph that the article mentions that this sharing of confidential information can be a crime and the authorities are giving a serious look into that very question. But the really damaging part is it looks as if Goldman waited to take action on its having obtained impermissible information until the Carmen Segarra story with secret tapes of how the New York Fed toadied to Goldman broke when they could finally see how damaging it actually was. And Goldman and the Fed clearly knew that story was coming weeks in advance.

The Latest Scandal: Goldman, Fed Employees Busted For Illegally Sharing Confidential Information -- On the morning of Friday, September 26, in addition to the shocking news of Bill Gross' departure from Pimco, the world was just as shocked, or not as the case was for many, that a former NY Fed staffer, Carmen Segarra, who had been previously fired for suggesting that Goldman Sachs has an undue influence on the NY Fed and gets a preferential treatment (certainly as a result of NY Fed's president Bill Dudley being working previously at Goldman Sachs), had released nearly 50 hours of tapes confirming her allegations: that the NY Fed was nothing but a branch of the bank that controls every central bank. The full details were presented in "How Goldman Controls The New York Fed: 47.5 Hours Of "The Secret Goldman Sachs Tapes" Explain." Ironically it was on that very day that another recent Goldman hire from the NY Fed - a classic case of, as the NY Times puts it, the "revolving door, the symbolic portal that connects financial regulators to Wall Street" - a 29-year-old former New York Fed regulator named Rohit Bansal, got into hot water after something "shocking" was revealed: he had an inside source at the NY Fed who was providing him with illegal, confidential information on a regular basis.

The NY Fed's Attempt To Explain That It Is Not A Subsidiary Of Goldman Sachs -- The most shocking, if already completely buried, news of the day was that - in yet another confirmation that Goldman Sachs is in charge of the New York Fed - a NY Fed staffer was colluding and leaking confidential, material information to a 29-year-old Goldman vice president, himself a former Federal Reserve employee. This only happened because on the day Carmen Segarra disclosed her 47 hours of "secret Goldman tapes" on This American Life, Goldman executives asked the former Fed staffer where he had gotten what appeared to be confidential information from. To nobody's surprise the answer was: The New York Fed. So as the latter, also known as the biggest hedge fund of the western world with $2.7 trillion in AUM, is scrambling to once again prove it is shocked, shocked, that it has become merely the latest subsidiary of Goldman Sachs, Inc., it released the following statement explaining what "really" happened.

Fed’s Dudley Sees Loss of Trust in Banks as Threat to Stability -- A raft of settlements and criminal charges against big Wall Street firms reinforces a loss of public faith in the banking system that poses a threat to the country’s financial stability, said William Dudley, president of the Federal Reserve Bank of New York. “This loss of trust is so severe that it has become a financial stability concern,” Mr. Dudley said in remarks prepared for delivery in testimony before a subcommittee of the Senate Banking Committee on Friday. Mr. Dudley’s remarks are aimed at defending the central bank’s role as a bank regulator after widespread accusations that supervisors had been too soft on or close to the investment giants they are charged with overseeing. “If bad behavior persists, it would not be unreasonable–and may even be inevitable–for one to conclude that large firms are too big and complex to manage effectively,” said Mr. Dudley, a former partner at Goldman Sachs. The testimony comes just as Goldman and the New York Fed were dealt more blows to their public images. A two-year Senate investigation found the bank and many of its peers exercised undue influence on metals markets and skirted regulatory requirements, faulting the Fed for weak oversight. Separately, Goldman Sachs fired two employees, one of whom was a former NY Fed staffer, for obtaining confidential information from a former colleague at the regional central bank. Mr. Dudley said his institution had already addressed many of the shortcomings made apparent by the financial crisis, including raising capital requirements and tightening rules on bank liquidity. In addition, he said, the NY Fed had implemented changes to its supervisory process aimed at making regulation more objective. A report from ProPublic and This American Life chronicled secret recordings from a former New York Fed employee showing regulators were reluctant to stand up to Goldman Sachs bankers.

Note to Dudley: Everyone Questions the NY Fed’s Motives – For Good Reasons -- William K. Black - The NY Fed and Goldman have combined again to produce fingers scraping on a moral blackboard. The story is – not – told coherently in a NY Times piece.  First, contrary to the NYT portrayal of the story, there is typically no ambiguity about whether regulatory information is confidential and there was no ambiguity about the particular information that we read (albeit, not in the NYT) that the NY Fed employee leaked to his former colleague after he joined Goldman Sachs. Second, the NY Fed’s head, William Dudley’s, response to the latest scandal was “I don’t think anyone should question our motives.” I will argue that given the NY Fed’s intolerable institutional conflicts of interest, and the defense of continuing that conflict by the NY Fed’s leadership, e.g., Dudley, everyone should the regional Feds’ motives.The NYT article revealed that a former NY Fed employee “Rohit Bansal, the 29-year-old former New York Fed regulator, was [hired by Goldman]. At the time he left the Fed, Mr. Bansal was the “central point of contact” for certain banks.” You have to read two-thirds of the story before you learn Bansal’s name and reading the entire story doesn’t tell you his positions and duties at the NY Fed or Goldman. The most diligent of NYT readers learned only:“Goldman determined that the spreadsheet contained confidential bank supervisory information. Federal and state rules classify certain records, including those generated during bank exams, as confidential. Unless the Federal Reserve provides special approval, it can be a federal crime to share them outside the Fed.

Bill Black: Why the New York Fed isn’t Trustworthy - naked capitalism - Yves here. Readers may recall that we criticized the New York Times' reporting on an important story on a criminal investigation underway involving both Goldman and New York Fed employees. A Goldman employee who had worked at the New York Fed and his boss were fired because the ex-Fed staffer allegedly had obtained confidential bank supervisory information. A New York Fed employee was also fired immediately after the Goldman terminations. The piece was composed as if the intent was to be as uninformative as possible and still meet the Grey Lady's writing standards. Readers were left in the dark as to where the two Goldman employees fit in the organization and what the sensitive information was. Bill Black dug through later news reports, did some additional sleuthing, and based on is experience as a regulator, concluded that there is no way the Goldman employee, Rohit Bansal, didn't recognize that he was misusing confidential bank supervisory information. That matters because whether or not breach is criminal hinges on whether he "willfully" broke the law

Elizabeth Warren Blasts New York Fed President William Dudley - Yves Smith - This Elizabeth Warren grilling of New York Fed William Dudley over the revelations in tapes made by ex-New York Fed employee Carmen Segarra, is a bit more Socratic than her normal approach, presumably because she has more than the typical five minutes for questions. Don’t be deceived by her pacing.  Warren goes after a derivatives transaction that Goldman did with Bank Santander to help the bank create the impression it had more capital than it did. What is appalling about the exchange is it revealed that the New York Fed’s general counsel Tom Baxter effectively pulled the supervisory team off the transaction by deeming it to be legal. But he never checked with the intended victim, the European Banking Authority, to see if it was kosher. Worse, Dudley acts as if this is all fine because the deal was public. In fact, the transaction was so complex that even Bloomberg’s house derivatives maven Matt Levine couldn’t puzzle it out. There’s another deceptive element that Warren doesn’t mention: that Goldman in its closing documents stated that Goldman was required to present the deal to the New York Fed and have the Fed say it had no objection to the deal. That had never happened. So Goldman also falsely implied that the Fed gave tacit approval when no such thing had taken place. Back in the stone ages of my youth, if Goldman or any bank had tried that stunt with a regulator, they would have gotten in some serious hot water. Here, all it appears the Fed did was shrug its shoulders.

N.Y. Fed President Dudley: I’m More of a Fire Warden, Not a Cop on the Beat - Federal Reserve officials are infamous for their love of using metaphors to explain complex monetary policy. Think taking away punch bowls when the party gets swinging. During a tense hearing Friday, the metaphors extended to the Fed’s other key duty: overseeing the nation’s largest financial firms, a role that grew for the central bank after the 2008 crisis. Sen. Elizabeth Warren (D., Mass.) during the hearing.Bloomberg NewsSen. Elizabeth Warren (D., Mass.) asked New York Fed President William Dudley to describe his organization’s supervisory responsibilities. Would he liken it to a cop walking the beat? she asked. That’s not quite how Mr. Dudley sees it. He offered a different comparison: a fire warden that focuses on making sure a building doesn’t catch on fire and burn down. “I don’t think our primary purpose as supervisors is a cop on the beat,” he said. The New York Fed’s job is mainly about “ensuring the safety and soundness of the institutions that we supervise,” he said.

New York Fed Chief Stands Firm Against Charges of Weak Oversight - – For almost two hours Friday, the president of the Federal Reserve Bank of New York defended heated assertions from Democratic senators that his institution is too cozy with big banks to be an effective guardian of the financial system. At times stammering and flustered, New York Fed President Bill Dudley stood behind the work of his staff and insisted that the nation's too-big-to-fail banks were safer for it. The Senate Subcommittee on Financial Institutions and Consumer Protection called the hearing to explore issues of regulatory capture in light of reports by ProPublica and This American Life and other news media that the New York Fed had failed to act aggressively in the face of suspect transactions or questions raised by its examiners. But Dudley insisted the New York Fed had adopted an array of changes since the 2008 financial crisis, including steps to remedy what a 2009 study said was a culture of deference and unwillingness to hear dissenting views.

It’s Up To Congress How to Fill My Job, New York Fed Chief Tells Senator - If Congress wants the president to pick the New York Fed chief, that’s just fine with William Dudley. “It’s the province of the Congress to decide how the Federal Reserve Act is written and how the president of the Federal Reserve Bank in New York and other Federal Reserve presidents are selected,” Mr. Dudley told Sen. Jack Reed (D., R.I.) during a heated hearing Friday. Mr. Reed was asking whether Mr. Dudley objected to legislation recently introduced by the Rhode Island Democrat that would require the president to nominate the New York Fed president, with the consent of the U.S. Senate. The New York Fed president, like the heads of the other 11 Fed Reserve Banks, are elected by members of the reserve bank’s board of directors, with final approval by the Fed Board of Governors. “The perception is that you essentially were hired by the people you’re regulating. I think that…permeates throughout the entire organization,” Mr. Reed said. To that, Mr. Dudley objected, pointing out that the 2010 Dodd-Frank law changed the election process. So-called Class A directors–three members that represent the banks in that particular Fed district–are no longer allowed to vote on the president. The decision is left to class B and C directors, which are chosen to represent the public. “I am definitely not hired and appointed by the people that I regulate,” Mr. Dudley said. Mr. Reed wasn’t done. Class B directors, while meant to represent the public, are elected by banks (Class C directors are picked by the Fed board). “And that’s not lost on anyone,” Mr. Reed said.

A Quick Look At Goldman's Takeover Of The US Judicial System: NY Fed Edition -  And then this shocker: the judge on the case was conflicted, and had a close relationship to Goldman which was represented by her husband also a lawyer, clearly was "irrelevant":  Clearly the last thing she wanted is for someone to "wrongfully convict" the Ny Fed. And just whom do we have to thank for Judge Ronnie Abrams? Senator Kirsten Gillibrand recommended Abrams to fill a judicial vacancy on the United States District Court for the Southern District of New York. On July 28, 2011, President Barack Obama formally nominated Abrams to the Southern District of New York. She replaced Judge Lewis A. Kaplan who took senior status in 2011. The Senate Judiciary Committee held a hearing on her nomination on October 4, 2011 and reported her nomination to the floor on November 3, 2011.Who are Kristen Gillibrand's biggest campaign donors?   One really just can't make this up. Perhaps the Fed inspector general, when he is done "fixing" the corruption at the NY Fed will be so kind to take a look at the Goldman takeover of the US judicial system next.

Fed Launches Review of Practices for Supervising Big Banks - WSJ: —The Federal Reserve launched a sweeping review of how it supervises big banks amid growing criticism that its process for policing Wall Street isn’t effective and stifles internal dissent. The Fed said the review is focused on whether senior staff are given enough information when making decisions affecting the largest financial firms, including “whether channels exist for decision makers to be aware of divergent views.” A team of Fed staff in Washington will look into the matter, as will, separately, the Fed’s inspector general. Criticism of the Fed’s oversight, which mounted in the wake of the 2008 financial crisis, has flared up in recent weeks. In September, a former examiner at the Federal Reserve Bank of New York said her desire to get tough on Goldman Sachs Group Inc. was suppressed by her supervisors. In October, the Fed’s inspector general said the regulator missed an opportunity to catch the risky trading that led to J.P. Morgan Chase & Co.’s “London whale” trading debacle in 2012, in which botched trades eventually cost the bank $6 billion.

Fed’s Little Known IG Moves Front and Center - The Federal Reserve has asked its inspector general, Mark Bialek, to scrutinize the manner in which the central bank oversees large financial companies, potentially pulling back the curtain on an area that has seen endless criticism since the financial crisis. The Fed disclosed Thursday its general counsel Scott Alvarez, who has faced political criticism for several years over the Fed’s role leading up to the 2008 banking panic, and another top official wrote to Mr. Bialek asking two basic questions:

  • 1) What “methods” can Fed officials use to obtain the information they need “to ensure adequate supervision?
  • 2) Does the Fed’s structure allow “divergent views” about central problems at big banks to make sure that they are addressed by supervisors?

These questions can be connected, in part, to several recent scandals, principally related to the Federal Reserve Bank of New York, which supervises the big Wall Street investment banks, among other firms.The Fed’s supervisory regime has long had a complex structure, with regulations written in Washington and implemented by the Fed’s 12 regional district. The system has supporters and critics, and Fed Chairwoman Janet Yellen, when she led the San Francisco Reserve Bank, complained that the structure allowed things to fall through the cracks. All eyes will now turn to Mr. Bialek, who took over as the Fed’s IG in July 2011 after working as deputy inspector general at the Environmental Protection Agency. He has also worked in the IG offices at the State Department and the Department of Commerce.

What Is It Like to Be a Banker? -  I assume we all believe that bankers have experience. After all, they are human beings, and there is no more doubt that they have experience than that accountants or baristas or firemen have experience. I have chosen bankers instead of lawyers or politicians because if one travels too far down the phylogenetic tree, people gradually shed their faith that there is experience there at all. Bankers, although arguably more closely related to us than those other examples, nevertheless present a range of activity and a sensory apparatus so different from ours that the problem I want to pose is exceptionally vivid (though it certainly could be raised with other species). Even without the benefit of philosophical reflection, anyone who has spent some time in an enclosed space with an excited banker knows what it is to encounter a fundamentally alien form of life. I have said that the essence of the belief that bankers have experience is that there is something that it is like to be a banker. Now we know that most bankers (investment bankers, to be precise) perceive the external world primarily by money sense, or moolah-location, detecting the reflections, from monetary instruments or securities within range, of their own rapid, subtly modulated, high-frequency shrieks. Their brains are designed to correlate the outgoing impulses with the subsequent jingling or rustling of exchangeable claims to value, and the information thus acquired enables bankers to make precise discriminations of denomination, fungibility, composition, and theft-prevention protections comparable to those we make by vision. But banker money sense, though clearly a form of perception, is not similar in its operation to any sense that we possess, and there is no reason to suppose that it is subjectively like anything we can experience or imagine. This appears to create difficulties for the notion of what it is like to be a banker. We must consider whether any method will permit us to extrapolate to the inner life of the banker from our own case, and if not, what alternative methods there may be for understanding the notion.

Bank of North Dakota Outperforms Wall Street -- While 49 state treasuries were submerged in red ink after the 2008 financial crash, one state’s bank outperformed all others and actually launched an economy-shifting new industry.  So reports the Wall Street Journal this week, discussing the Bank of North Dakota (BND) and its striking success in the midst of a national financial collapse led by the major banks. Chester Dawson begins his November 16th article:  It is more profitable than Goldman Sachs Group Inc., has a better credit rating than J.P. Morgan Chase & Co. and hasn’t seen profit growth drop since 2003. Meet Bank of North Dakota, the U.S.’s lone state-owned bank, which has one branch, no automated teller machines and not a single investment banker. He backs this up with comparative data on the BND’s performance: [I]ts total assets have more than doubled, to $6.9 billion last year from $2.8 billion in 2007. . . . Return on equity, a measure of profitability, is 18.56%, about 70% higher than those at Goldman Sachs and J.P. Morgan. . . . Dawson goes on, however, to credit the BND’s remarkable performance to the Bakken oil boom; he contends: The reason for its success? As the sole repository of the state of North Dakota’s revenue, the bank has been one of the biggest beneficiaries of the boom in Bakken shale-oil production from hydraulic fracturing, or fracking. In fact, the bank played a crucial part in kick-starting the oil frenzy in the state in 2008 amid the financial crisis. That is how the Wall Street-owned media routinely write off the exceptional record of this lone publicly-owned bank, crediting it to the success of the private oil industry. It would be more accurate to say that the bank made the boom.

Unofficial Problem Bank list declines to 415 Institutions -- This is an unofficial list of Problem Banks compiled only from public sources.  Here is the unofficial problem bank list for Nov 14, 2014.  :   Four removals this week from the Unofficial Problem Bank List that push the list count down to 415 institutions with assets of $128 billion. From last week, assets have declined by $3.9 billion, with $2.9 billion coming from the roll to Q3 from Q2 assets. A year ago, the list held 655 institutions with assets of $223.2 billion.  Actions have been terminated against Community First Bank & Trust, Columbia, TN ($436 million) and Devon Bank, Chicago, IL ($239 million). Through a merger partner, Highlands Independent Bank, Sebring, FL ($251 million) and Grant County Deposit Bank, Williamstown, KY ($76 million) have found a way off the list.  Next week, we anticipate the OCC will provide an update on its latest enforcement action activity. CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now back down to 415.

Bank of America Granted Penalty Relief in SEC Mortgage Case - The U.S. Securities and Exchange Commission resolved an impasse over punishing Bank of America Corp. in a mortgage-bond case, clearing the way for the lender to complete a $16.7 billion global settlement, people familiar with the matter said. In a private meeting earlier this week, SEC commissioners voted to waive most of a set of additional sanctions that could have seriously curtailed the bank’s asset management business and ability to raise money for private companies, according to the people, who asked not to be named because the decision isn’t yet public. Some of the relief is conditioned on the bank’s good behavior and comes with an outside monitor, the people said. The bank also got hit with a penalty that takes away its ability to issue more shares or bonds without getting SEC approval for each deal. The SEC’s decision came as Bank of America and the agency neared a deadline for a federal judge in North Carolina to sign off on the settlement. The two sides had twice sought more time from the court as negotiations dragged on. The agreement ends a legal headache for Bank of America, which, like most Wall Street firms, has been working to conclude numerous government probes stemming from the 2008 financial crisis. The contretemps at the SEC also portends future difficulties for large banks seeking to end enforcement cases, especially if they are repeat offenders. Bank of America’s case was held up on a 2-2 deadlock between Republican and Democratic commissioners. Chair Mary Jo White, who as a private attorney represented ex-Bank of America Chief Executive Officer Kenneth Lewis, was recused.

Loan Servicer Busted for Backdating, But Foreclosure Victims Say Shenanigans Haven’t Stopped - On October 24, Ron Faris, CEO of Ocwen Financial, made an unusual move for the head of a $2 billion-a-year corporation: He apologized. Specifically, he sent out a mea culpa-filled open letter addressing the 2.7 million homeowners whose mortgages are serviced by Ocwen, apologizing for a glitch that backdated time-sensitive letters. “Letters were dated when the decision was made to create the letter versus when the letter was actually created,” Faris confessed. The missive came on the heels of well-publicized allegations by New York’s Dept of Financial Services (DFS) accusing the company of doing just that, and suggesting that the delayed loan modification letters may have resulted in foreclosures. At first, Faris claimed that only 283 New York homeowners had been impacted. However, he quickly retreated from that number after DFS said the number could be higher, way higher—perhaps in the “hundreds of thousands”—and not confined to New York.  Tommy Cooper, a homeowner in Manvel, Texas, is not sure whether he’s been subject to backdating, but the maze of confusing communications he’s received from Ocwen in the course of a months-long battle against foreclosure have caused him considerable distress—When I asked Ocwen about the denial, and why there was no response to Cooper’s questions, the company declined to comment. Cooper, who is still struggling to keep his home, sent me some recent examples of Ocwen’s Gatling gun approach to homeowner communications. This October, he received three separate letters from Ocwen within a day of each other: one acknowledging receipt of an application, one denying a loan modification, and one thanking Tommy for his inquiry regarding his loan and saying his application is under review. Cooper says none of these letters came in response to any requests he made.

Borrowers, Beware: The Robo-signers Aren’t Finished Yet - Remember the robo-signers, those mortgage loan automatons who authenticated thousands of foreclosure documents over the years without verifying the information they were swearing to?Well, they’re back, in a manner of speaking, at least in Florida. Their dubious documents are being used to hound former borrowers years after their homes went into foreclosure.Robo-signer redux, as it might be called, has come about because of an aggressive pursuit of former borrowers by debt collectors hired by Fannie Mae, the mortgage finance giant. What Fannie is trying to recoup from these borrowers is the difference between what the borrowers owed on the mortgages when they were foreclosed and the amount Fannie received when it resold the properties.These monetary amounts — and they can be significant — are known as deficiency judgments. It is legal in most states for lenders to pursue them. (California is one notable exception.) The time limit for debt collectors to go after former borrowers varies from state to state; Florida allows deficiencies to be pursued for 20 years, and borrowers must pay a compounded annual interest rate of 4.5 percent. The problem, experts say, arises when robo-signed documents enabled banks to foreclose even when they didn’t have legal standing to do so.  “Sending these cases to debt collectors when the underlying foreclosures involved unlawful robo-signing is unfair and potentially even deceptive,”. “Fannie Mae is not entitled to collect on those debts when the foreclosure was unlawful.”

“An ongoing criminal enterprise”: Why America’s housing disaster is back and wreaking terror - Dave Dayen - According to housing analyst RealtyTrac, foreclosure filings shot up 15 percent last month, the largest increase in over four years. Almost 60,000 homes were newly scheduled for auction in October, a spike far beyond the usual seasonal rush to complete repossessions before the holidays. Auctions rose 53 percent in Nevada, 118 percent in New Jersey and an amazing 399 percent in Oregon.Continued demand for foreclosed properties by institutional investors and increased sale prices finally make it cost-effective to sell these homes, after persistent delays. “Distressed properties that have been in a holding pattern for years are finally being cleared for landing at the foreclosure auction,” said Daren Blomquist, vice president at RealtyTrac.If lenders have finally begun to finish their oldest foreclosure cases, you might assume that they have moved past their problems with processing foreclosures. After all, for years, mortgage servicing companies, who file foreclosures on behalf of the owners of the loans, presented millions of false documents to courts. They also engaged in “robo-signing,” where employees signed affidavits attesting to the validity of foreclosure actions, despite having no knowledge about the underlying cases. The five leading servicers agreed to a $25 billion settlement over these problems, vowing to reform their ways. But you would be wrong to assume that anything has changed in our foreclosure courts.  New evidence over the last month shows that servicers employ virtually the same improper techniques when foreclosing. Instead of robo-signers, they use robo-witnesses, or robo-verifiers; more on them in a moment. Regardless, they are breaking laws and degrading the integrity of the courts to kick people out of their homes, a sad and enduring legacy of the destruction of the nation’s property system during the housing bubble years.

Black Knight: Mortgage Delinquencies decreased in October, Lowest in Seven Years - According to Black Knight's First Look report for October, the percent of loans delinquent decreased in October compared to September, and declined by 12% year-over-year.  Mortgage delinquencies are at the lowest level since November 2007. Also the percent of loans in the foreclosure process declined further in October and were down 33% over the last year.  Foreclosure inventory was at the lowest level since February 2008. Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 5.44% in October, down from 5.67% in September. The normal rate for delinquencies is around 4.5% to 5%. The percent of loans in the foreclosure process declined to 1.69% in October from 1.76% in September. The number of delinquent properties, but not in foreclosure, is down 393,000 properties year-over-year, and the number of properties in the foreclosure process is down 418,000 properties year-over-year. Black Knight will release the complete mortgage monitor for October in early December.

Elizabeth Warren Blasts FHFA’s Mel Watt: “You Haven’t Helped a Single Family”  - Elizabeth Warren tore into FHFA director Mel Watt over his failure to develop a program for Fannie and Freddie to provide principal modifications to underwater borrowers at risk of foreclosure. She also got in a dig for his failure to stop the agencies from pursuing deficiency judgments. That means going after former homeowners when the sale of the house they lost didn't recoup enough to cover the mortgage balance. In the stone ages, when banks kept the mortgage loans they made, they never pursued deficiency judgements. They knew there was no point in trying to get blood from a turnip. Not surprisingly, the sadistic Fannie/Freddie policy has also proven to be spectacularly unproductive in financial terms. An FHFA inspector general study found that recoveries were less than 1/4 of 1% of the amount sought. Moreover, since those mortgage balances were often inflated by junk fees and other dubious costs, and mortgage servicers have done a poor job of maintain properties (they are too often stripped of copper and appliances, or get mold), any deficiency might be significantly or entirely the servicer's fault.

WSJ: Audit shows FHA Back in Black -- Here is the summary Summary of FY2014 FHA Annual Report to Congress on the Financial Health of the Mutual Mortgage Insurance Fund. Joe Light at the WSJ writes: Federal Housing Authority in the Black for First Time Since 2011 The audit found that the FHA’s insurance fund had an economic value of $4.8 billion at the end of September, up from negative $1.1 billion last fiscal year. Its capital-reserve ratio, which the FHA is supposed to keep above 2%, grew to 0.41%. While an improvement, it was still short of last year’s projection....More important, the report estimated that the FHA won’t return to the congressionally mandated 2% threshold until 2016, a year later than formerly estimated.  Recent FHA loans have performed very well, and the better performance combined with higher fees has led to the improvement.

MBA: Mortgage Applications Increase in Latest MBA Weekly Survey - From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 4.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 14, 2014. This week’s results included an adjustment for the Veterans Day holiday. ...The Refinance Index increased 1 percent from the previous week. The seasonally adjusted Purchase Index increased 12 percent from one week earlier to the highest level since July 2014.... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.18 percent from 4.19 percent, with points decreasing to 0.24 from 0.26 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. The refinance index is down 70% from the levels in May 2013. Even with the recent slight small increase in activity - as people who purchased in the last year or so refinance - refinance activity is very low this year and 2014 will be the lowest since year 2000. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is down about 6% from a year ago.

Open The Floodgates: Chinese Inquiries On US Real Estate Soar 35% After Easing Of Visa Rules -- In a nation in which 1 out of every 3 homes is unaffordable, you’d think the primary goal of public policy wouldn’t be to ensure real estate becomes even more out of reach for the average citizen. It’s bad enough that American financial oligarchs have leveraged free money polices of the Federal Reserve to purchase tens of billions of dollars in real estate only to rent it back to people who were kicked out of their homes during the 2008 crisis, but the government is now going out of its way to allow Chinese (and other foreign criminals) to launder money via U.S. property.

Existing Home Sales in October: 5.26 million SAAR, Inventory up 5.2% Year-over-year -- The NAR reports: Existing-Home Sales Rise in October, First Year-Over-Year Increase since October 2013  Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.5 percent to a seasonally adjusted annual rate of 5.26 million in October from an upwardly-revised 5.18 million in September. Sales are at their highest annual pace since September 2013 (also 5.26 million) and are now above year-over-year levels (2.5 percent from last October) for the first time since last October. ...Total housing inventory at the end of October fell 2.6 percent to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace – the lowest since March (also 5.1 months). Unsold inventory is now 5.2 percent higher than a year ago, when there were 2.11 million existing homes available for sale.

A Few Comments on October Existing Home Sales - Once again housing economist Tom Lawler's forecast of 5.31 million SAAR was closer than the consensus (5.15 million) to the NAR reported sales (5.26 million).  The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 5.2% year-over-year in October.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data.  However this increase in inventory has slowed price increases.
The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data.This shows that inventory bottomed in January 2013 (on a seasonally adjusted basis), and inventory is now up about 11.7% from the bottom. On a seasonally adjusted basis, inventory was up 0.1% in October compared to September. Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, many "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

Housing Starts decrease to 1.009 Million Annual Rate in October - From the Census Bureau: Permits, Starts and Completions: Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,009,000. This is 2.8 percent below the revised September estimate of 1,038,000, but is 7.8 percent above the October 2013 rate of 936,000. Single-family housing starts in October were at a rate of 696,000; this is 4.2 percent above the revised September figure of 668,000. The October rate for units in buildings with five units or more was 300,000.  Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,080,000. This is 4.8 percent above the revised September rate of 1,031,000 and is 1.2 percent above the October 2013 estimate of 1,067,000. Single-family authorizations in October were at a rate of 640,000; this is 1.4 percent above the revised September figure of 631,000. Authorizations of units in buildings with five units or more were at a rate of 406,000 in October. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) decreased in October (Multi-family is volatile month-to-month). Note that permits were strong for multi-family, so multi-family starts will probably increase in November. Single-family starts (blue) increased solidly in October. The second graph shows total and single unit starts since 1968.

Comments on October Housing Starts - A few key points:
• Housing permits in October were at the highest level since 2008. Last year, in 2013, there was a surge in multi-family permits in October - and that was followed by an increase for starts in November. It looks like that might happen again this year.
• Multi-family completions have increased sharply (2nd graph below). Completions are what matter for apartment market supply, and with more completions it appears that the apartment vacancy rate has reached bottom and even increased a little (but still low). More apartments on the market will probably mean higher vacancy rates and less upward pressure on rents.
• Single family starts are increasing, but are still extremely low (last graph below). As we've been discussing for several years, demographics have been very favorable for apartments (and the housing bust boosted apartments too).  However, looking forward, the demographics will become more favorable for home ownership. This is a positive for single family housing and for the overall economy.
On starts: There were 848 thousand total housing starts during the first ten months of 2014 (not seasonally adjusted, NSA), up 9.6% from the 774 thousand during the same period of 2013.  Single family starts are up 5%, and multifamily starts up 20%.  The key weakness has been in single family starts. The following table shows the annual housing starts since 2005, and the percent change from the previous year (estimates for 2014). The housing recovery has slowed in 2014, especially for single family starts.  However I expect further growth in starts over the next several years.

Could Decline in Median New-Home Size Herald Return of Entry-Level Buyers? - Newly built, single-family homes in the U.S. finally are getting smaller, a sign that a long-awaited shift of builders to slightly smaller, more affordable homes likely has started. Commerce Department data released Wednesday shows the median size of a single-family home built in the third quarter was 2,414 square feet, down 2.3% from the second quarter measure of 2,472. The third-quarter figure is the lowest since 2012’s fourth quarter, and it is the second consecutive quarterly decline following a 0.2% drop in this year’s second quarter. Median new-home sizes had been on a general upward swing since 2012 as builders focused on building increasingly larger, more expensive homes to cater to the better-heeled buyers with the income and credit to buy homes. Entry-level buyers, meanwhile, remained largely sidelined by tepid wage growth, mounting student debt and stringent mortgage-qualification standards.Now, early signs are emerging that entry-level buyers are coming back. National home builder D.R. Horton Inc. last week posted a 38% gain in sales orders for its fiscal fourth quarter ended Sept. 30, fueled partly by hefty gains from its new Express brand of homes priced at less than $200,000. On Wednesday, Commerce reported that construction starts for single-family homes increased by 4.2% from a year earlier to a seasonally adjusted annual rate of 696,000. The most likely source for that greater volume of starts is entry-level buyers.Thus, the third-quarter decline in median new-home size “doesn’t reflect changes in preferences, necessarily,” said Robert Dietz, an economist with the National Association of Home Builders. “It reflects who’s buying new, single-family homes.” The median new-home size now stands 3% below its recent high of 2,491 square feet in the third quarter of 2013. But it still is 8% higher than its recent low of 2,236 square feet in the third quarter of 2011.

Rental Apartment Construction Is At a 27-Year High -  New figures offer the latest reminder of an apartment boom. Housing starts fell in October because of a 15.5% drop in the multifamily sector, which is notoriously volatile. But the broader picture shows that apartments have been on a tear this year. Construction of multifamily housing units—those with five units or more—is running at its strongest 12-month pace since 1989. Moreover, the share of those units being constructed as rentals is at its highest since record-keeping began in 1974. More than 93% of units in buildings with at least two units are being constructed as rentals. Multifamily construction is now higher than it was during the peak in the previous housing cycle, reached in 2006. But back then, far more of these units were being built as condominiums, not as rentals. This means that the number of rental units in multifamily buildings built over the last 12 months—around 330,000 units had begun construction as of October—is the highest since 1987. Construction of single-family homes has been much weaker. Even though building permits for single-family homes hit their second highest level since the downturn in October, permits are running just 1% ahead of last year’s pace through October.

Quarterly Housing Starts by Intent - In addition to housing starts for October, the Census Bureau also released the Q3 "Started and Completed by Purpose of Construction" report yesterday. It is important to remember that we can't directly compare single family housing starts to new home sales. For starts of single family structures, the Census Bureau includes owner built units and units built for rent that are not included in the new home sales report. However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis. The quarterly report released yesterday showed there were 125,000 single family starts, built for sale, in Q3 2014, and that was above the 111,000 new homes sold for the same quarter, so inventory increased in Q3 (Using Not Seasonally Adjusted data for both starts and sales).The first graph shows quarterly single family starts, built for sale and new home sales (NSA).In 2005, and most of 2006, starts were higher than sales, and inventories of new homes increased. The difference on this graph is pretty small, but the builders were starting about 30,000 more homes per quarter than they were selling (speculative building), and the inventory of new homes soared to record levels. Inventory of under construction and completed new home sales peaked at 477,000 in Q3 2006.  The second graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

After Recession, Home-Remodeling Is Back On the Rise -  Renovation nation’s rising again. Wednesday’s report on housing starts suggests a steady trend for construction. But new houses aren’t the only support to economic growth. Updating a bathroom or adding a deck also contributes. The Bureau of Economic Analysis tracks home improvements as part of the residential investment sector of gross domestic product. (Single-family homes, the fast-growing apartment sector, dormitories and manufactured homes are also in the residential investment category.) “These are major improvements to your house,” says Michael Armah, a BEA economist. That includes major replacement projects, adding a room and rehabbing a kitchen. Painting a living room or installing a dimmer switch doesn’t count. Like other subsectors of home construction, spending on improvements took a hit in the recession. So far in this expansion, apartment-building has been the lead construction performer because of a consumer shift to renting rather than owning. But remodeling spending has also climbed back, thanks to the usual upkeep and maintenance, as well as the decision of some homeowners to upgrade or expand their current residences rather than move. Rising home values have also helped. In Home Depot earnings call Tuesday, the building-supply retailer’s chief executive Craig Menear said, “As home value appreciation has happened, customers are certainly more willing to invest in their homes.” Inflation-adjusted spending on home improvements has slipped a bit in 2014, but in the third quarter it stood just 10% below the subsector’s peak in 2005.

NAHB: Builder Confidence increased to 58 in November -- The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 58 in November, up from 54 in October. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Rises Four Points in November Builder confidence in the market for newly built single-family homes rose four points to a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.“Growing confidence among consumers is what’s fueling this optimism among builders,”  “Members in many areas of the country continue to see increasing buyer traffic and signed contracts.”“Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery,”  “After a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015.”...All three HMI components increased in November. The index gauging current sales conditions rose five points to 62, while the index measuring expectations for future sales moved up two points to 66 and the index gauging traffic of prospective buyers increased four points to 45.

Home-Builder Confidence in the Northeast Rises to an Eight-Year High --For the first time since the spring of 2006, a majority of home builders in the Northeast feel more confident than depressed about the market for newly built homes.The National Association of Home Builders said Tuesday that its index of builder confidence in the U.S. market for new single-family homes rose by four points to a seasonally adjusted level of 58 this month. The national index jumped in September to 59, its highest reading since November 2005, then fell to 54 in October. On the regional level, sentiment rose by three points in the Midwest to 56, ticked up two points in the South to 62 and climbed seven points in the West to 60. But the biggest increase came in the Northeast, where the index jumped 12 points to 51 this month.The region last saw a reading of 50 in April 2006, and it hasn’t been above that threshold since March of that year. It remains to be seen if the upward trend will hold in the coming months. The three-month moving average for the Northeast rose to 44 in November from 41 in October, reaching its highest level since June 2006 but remaining well below the 50-point mark. Starts on new single-family homes declined 5.5% in the Northeast during the first nine months of 2014 compared with the same period a year earlier, according to the Commerce Department. But construction of multifamily dwellings, like apartment buildings, has been much robust. Overall, housing starts in the region are up 18.1% so far this year compared with 2013.

AIA: Architecture Billings Index shows slower expansion in October - Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From AIA: Pace of Demand Slows Slightly, but Positive Outlook for Architecture Billings Index Continues Headed by the continued strength in the multi-family residential market and the emerging growth for institutional projects, demand for design services continues to be healthy as exhibited in the latest Architecture Billings Index (ABI). As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the October ABI score was 53.7, down from a mark of 55.2 in September. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 62.7, following a mark of 64.8 the previous month. The AIA has added a new indicator measuring the trends in new design contracts at architecture firms that can provide a strong signal of the direction of future architecture billings. The score for design contracts in October was 56.4. “Though it has been slow in emerging, we’re finally seeing some momentum develop in design activity for nonprofits and municipal governments, and as such we’re seeing a new round of activity in the institutional sector,”

CoStar: Commercial Real Estate prices increased in September  Here is a price index for commercial real estate that I follow.   From CoStar: Commercial Real Estate Price Surge Continues In Third Quarter. Both the value-weighted and the equal-weighted U.S. Composite Indices of the CCRSI made strong gains in September 2014 to close the quarter. The value-weighted index, which is heavily influenced by core transactions, advanced by 1.9% in the month of September and 3.3% in the third quarter of 2014. The value-weighted index is now 2.8% above its prerecession high and continues to make solid gains. The equal-weighted U.S. Composite Index, which is heavily influenced by smaller non-core deals, increased by 1.3% in September and 4.2% in the third quarter of 2014.... The retail, industrial, and office segments all moved up toward 2007 pricing levels in September 2014 and are now within 11.4%, 14.4%, and 21.2% of their previous peaks, respectively. The multifamily sector, which recovered earlier than the other property types, is now 1% above its previous peak.

Headline Consumer Price Index Remained Unchanged in October - The Bureau of Labor Statistics released the October CPI data this morning. Year-over-year unadjusted Headline CPI came in at 1.66% (rounded to 1.7%), unchanged from the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.81% (rounded to 1.8%), slightly higher than the previous month's 1.73% (rounded to 1.7%). The non-seasonally adjusted month-over-month Headline number was down 0.25% (-0.25%), and the Core number was up 0.24%. On a seasonally-adjusted basis, the all items index was unchanged.  Here is the introduction from the BLS summary, which leads with the seasonally adjusted data monthly data:  The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.  Gasoline and other energy indexes declined, offsetting increases in shelter and an array of other indexes to leave the seasonally adjusted all items index unchanged. The gasoline index fell for the fourth month in a row, declining 3.0 percent, and the indexes for natural gas and fuel oil also decreased. The food index rose slightly in October, with major grocery store food groups mixed.   The index for all items less food and energy increased 0.2 percent in October. Besides the shelter index, airline fares, household furnishings and operations, medical care, recreation, personal care, tobacco, and new vehicles were among the indexes that increased. The indexes for used cars and trucks and for apparel declined in October.  The all items index increased 1.7 percent over the last 12 months, the same increase as for the 12 months ending September. The index for all items less food and energy increased 1.8 percent over the span, and the food index rose 3.1 percent. In contrast, the energy index declined 1.6 percent over the last 12 months.   [More…]  The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. I've highlighted 2 to 2.5 percent range, which the Federal Reserve currently targets for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

CPI unchanged in October; Weekly Initial Unemployment Claims at 291,000 -- From the Bureau of Labor Statistics (BLS): Consumer Price Index - October 2014 The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment. The index for all items less food and energy increased 0.2 percent in October. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. On weekly unemployment claims, the DOL reported:In the week ending November 15, the advance figure for seasonally adjusted initial claims was 291,000, a decrease of 2,000 from the previous week's revised level. The previous week's level was revised up by 3,000 from 290,000 to 293,000. The 4-week moving average was 287,500, an increase of 1,750 from the previous week's revised average. The previous week's average was revised up by 750 from 285,000 to 285,750. There were no special factors impacting this week's initial claims.  The previous week was up to 293,000. The following graph shows the 4-week moving average of weekly claims since January 2000.

Sugar Prices Got Sweeter for Consumers In October - The price consumers paid for sugar fell the most on record last month, Labor Department data showed Thursday. The consumer price index’s measure for sugar and artificial sweeteners tumbled 2.2% in October and is down 3.8% from a year earlier. That bucked overall trends for food prices, which are up 3.1% from a year ago, and overall consumer costs, which rose 1.7%. Separate U.S. Department of Agriculture data show retail refined sugar prices in the third quarter of this year fell to a little over 60 cents a pound, the lowest quarterly figure since 2009. The sweet reprieve for consumers comes amid uncertainty over sugar imports, which are a potential boon for sweets makers but bad news for domestic sugar producers. “The U.S. producer price for sugar has fallen dramatically,” said Jack Roney, economist at the American Sugar Alliance, a trade group for U.S. producers. “That is mainly because we’ve been flooded with subsidized and dumped Mexican sugar.” U.S. producers filed a claim at the Department of Commerce in March arguing that the Mexican government subsidizes the domestic industry and in August the U.S. government imposed preliminary tariffs on imports. Another round of penalties followed last month but rather than risk a trade war, the U.S. and Mexico struck a deal that would halt duties in return for minimum prices and other provisions limiting Mexican exports to the U.S. If the final agreements are signed, Commerce would suspend its investigations and the U.S. would refund earlier payments. The agency is still collecting industry feedback and the agreement won’t be signed before Nov. 26.

A Real Measure of Inflation  -- As most of us are aware, the Federal Reserve has determined that inflation at the rate of 2 percent, as measured using the annual change in the price index for personal consumption expenditures, is most consistent with the Fed's goals of maintaining both stable prices and maximizing employment.  Rather than using the normal Consumer Price Index or CPI, researchers at the American Institute for Economic Research (AIER) have developed a measure of inflation that they call the Everyday Price Index or EPI.  The EPI measures the day-to-day changes in the price of goods and services that people purchase most frequently; these goods and services are purchased at least once every month.   These items include food, utilities, gasoline, personal care products, motor vehicle insurance, various recreational expenses including cable fees and club dues, communication costs and costs of prescription drugs among others.  Unlike the CPI, the EPI deliberately excludes infrequently purchased good including automobiles, computers, electronic goods and payments that are fixed in size by contractual arrangements like rent and mortgages.  Each of the components in the EPI is then weighted by the share of expenditures that it consumes which are equal to the weights used in the Bureau of Labor Statistics CPI calculation.  The EPI is also not seasonally adjusted, rather, it reflects the actual prices paid by consumers.  Most importantly, as you'll note, the EPI assumes that a larger share of household budgets are consumed by energy costs, something that most of us can attest to.  In a world where energy prices are extremely volatile, particularly to the upside, it is quite obvious that increasing costs of energy can have a detrimental impact on household budgeting. Here is a chart showing the expenditure categories and weights used in calculating the EPI:

Producer Price Index: A Small Bounce, But Inflation Remains Tame -- Today's release of the October Producer Price Index (PPI) for Final Demand came in at 0.2% month-over-month seasonally adjusted. That's a bounce from the previous month's -0.1% decline, which was first monthly decline since August of last year. Core Final Demand (less food and energy) was up 0.4% from last month. The year-over-year change in Final Demand is up 1.5%, a slight decline from last month's YoY of 1.6%. Here is the essence of the news release on Finished Goods:The Producer Price Index for final demand rose 0.2 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase followed a 0.1-percent decline in September and no change in August. On an unadjusted basis, the index for final demand advanced 1.5 percent for the 12 months ended in October, the smallest 12-month increase since a 1.2-percent rise in February 2014....  In October, the 0.2-percent rise in final demand prices can be traced to the index for final demand services, which advanced 0.5 percent. In contrast, prices for final demand goods moved down 0.4 percent. More…  Now let's visualize the numbers with an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000, seasonally adjusted. As we can see, the YoY trend in Core PPI (the blue line) declined significantly during 2009 and stabilized in 2010, increased in 2011 and then eased during 2012 and most of 2013, falling as low as 1.15% last August. It shot up in the early winter near the 2% benchmark and has hovered below that level for the past six months.

Wholesale Inflation Heats Up Due To Jump In Car, Food Costs, New Calculation Method - Janet Yellen will be pleased... or not. Producer Price Inflation printed hotter than expected across all its various incarnations (good news, no deflation; bad news, no deflation excuse for The Fed). Ex Food-and-Energy prices rose 1.8% YoY (4-month highs), considerably more than the 1.5% expectations but surged 0.4% MoM - the most in 16 months. PPI Final Demand rose 1.5% YoY (1.3% exp). The rise in PPI appears driven by Food prices which are up 1.0% (the most since April) and Trade PPI (+1.5%) thanks to a 26.1% jump in margins for fuels and lubricants retailing (under new calculation methods) accounted for nearly 40% of the rise in final demand.

Hidden story in US PPI increase - The US core PPI surprised to the upside yesterday.  Improved pricing power for US firms? Hardly. Did you ever have the feeling of being ripped off at the gas station when oil prices are falling while prices at the pump barely move? Well, it’s not just a feeling.   GS: - The headline PPI rose 0.2% in October (vs. consensus -0.1%). The surprise was entirely due to core prices, which rose 0.4% (vs. consensus +0.1%), while energy prices declined 3.0%. Within the core, the volatile trade services category—which measures retail and wholesale margins—rose 1.5%, adding three-tenths to the core. Drilling down further, a sizable part of the jump in trade services came from a huge 26% month-on-month increase in fuel retail margins (i.e., gasoline stations). While counterintuitive in light of the decline in energy prices on the month, the increase in this category reflects retail prices declining more slowly than wholesale prices. On balance, we would heavily discount this month's report in light of the volatility in trade services. The core PPI according to the "old methodology"—finished goods less food and energy—increased a more modest 0.1%.

Economists Call October Inflation Measure ‘Distorted,’ a ‘Statistical Quirk’ - The Labor Department this year revamped its producer-price index to capture a wider swath of the economy. They succeeded, though perhaps a little too well. Up until December, PPI only reflected somewhat steady prices on goods. Now, the index also includes more volatile components such as profit margins at retailers, figures that may do little to clarify underlying inflation trends. The producer-price index for final demand, which measures changes in the prices firms receive for their goods and services, rose a seasonally adjusted 0.2% in October from a month earlier, the Labor Department said Tuesday. The consensus view, underpinned by falling energy prices and months of tame inflation, was for a 0.1% fall. Some economists faulted the Labor Department rather than their own forecasts for the miss. “The Labor Department is doing everyone a disservice by releasing distorted, unreliable monthly seasonally adjusted data,” Joshua Shapiro, chief U.S. economist at MFR Inc., said in a note to clients. PPI is an indication of inflation and can show if price pressures are starting to build in the economy, though traditionally it’s not as closely watched as consumer prices or the price index for personal consumption. The Labor Department since January has included prices for services in addition to prices for goods. The idea was to capture more economic activity. The revamped measure doubled PPI coverage to more than 75% of domestic production, the Labor Department said.But that has also meant including some volatile measures, notably trade services. The subindex captures changes in profit margins at wholesalers and retailers. It rose 1.5% in October, the biggest jump on record, and added 0.4 percentage point to the headline PPI index. Mr. Shapiro faulted seasonal adjustments, a statistical technique meant to cancel out the impact of weather, holidays and other recurring events from economic data.

Record Beef Prices Soaring By 28% Got You Down? Then Drown Your Sorrows In Cheaper Booze --The bad news in today's PPI inflation report: pork prices surged yet again, rising 6.8% on the month, and up 24% from a year ago, while beef/veal costs rose by 2.1% on the month to a record indexed 251.8% (we dread to wade through the BLS "hedonic-adjustment" calculation for that particular food product) and are now up a sticky 27.4% from a year ago, which is just shy of the recent record Y/Y jump of 28.6% posted in August. So for all those who still see no inflation, could you please share you Delmonico's expense account with the rest of us? The good news: for the first time in years, booze prices declined from a year ago. So, with compliments of the hoapy president: don't be moapy and start drinking cheap booze, preferably early and often, as you try to remember - in an alcoholic daze - what beef tastes like.

Authorities Have No Idea How Family Bought LSD-Contaminated Beef At Walmart – Consumerist: How does a package of beef become contaminated with the hallucinogenic drug LSD? Authorities in Florida and in the federal government have been trying to figure that out for the last right months. Last week, local police in Tampa released their report and made the case inactive. They still have no idea how the drug got there. The family who were drugged consisted of a pregnant woman, her boyfriend, and her 6- and 7-year-old daughters. Everyone ate the contaminated meat, which was a bottom round steak purchased at a nearby Walmart. Investigators with the Food and Drug Administration traced the beef, which came from agricultural giant Cargill, all the way back to the slaughterhouse in Georgia. No one noticed any tampering with the product once it reached Walmart, and it had traveled in a sealed container from the slaughterhouse to a distribution facility. The best lead was surveillance camera footage from the Walmart store of the meat case where the beef was on display: two men were captured acting strangely near the case, but investigators ultimately cleared them. At the time they were drugged, the family went to a local hospital. The mother and daughters were hyperventilating, and had breathing tubes placed. The baby was delivered by emergency cesarean section. Tampa police along with USDA and FDA agents interviewed the family and found no evidence that the parents had drugged the meat themselves. There was no sign of it in the oven (which they had not used before making the steak wraps) or elsewhere, but LSD was detected in the uneaten steak.

The Effect of Oil Price Declines on Consumer Prices -  Cleveland Fed --  Oil prices have declined significantly in recent weeks, reaching levels not seen in several years. At the same time, the year-over-year percent change in the most widely known measure of inflation, the Consumer Price Index (CPI), came in at 1.7 percent for September, which is below policymakers’ targeted levels. Given these circumstances, there is some concern that low oil prices, which have continued to remain below $90 a barrel through October, will keep inflation persistently below or even push it further from targeted levels. A look at historical relationships between oil prices and various price measures can help gauge the potential pass-through of the recent oil-price declines to other domestic prices. ...Oil price changes can potentially play a large role in the US economy. With respect to inflation, the two most likely channels through which they could do so are retail gasoline prices and producer prices. However, as consumers use savings from lower energy prices for other goods and services, these prices are likely to rise in response, offsetting the initial disinflationary impact of lower oil prices. Accordingly, as the FOMC observed in its Statement on Longer-Run Goals and Monetary Policy Strategy, “the inflation rate over the longer run is primarily determined by monetary policy,” rather than by movements in individual price components.

Destroying The Myth That Lower Gas Prices Boost Consumption - The recent plunge in oil prices has brought both optimism and pessimism to the economic landscape. Anyone who lives in Houston, as I do, knows that the price of oil is an important driver of the economic landscape. The plunge in oil prices in the 1980's is a solemn memory for many Houstonians, particularly for those in the oil patch that lived through it.  The problem with falling oil prices, economically speaking, is that oil and gas production make up a hefty chunk of the "mining and manufacturing" component of the employment rolls. Since 2000, when the oil price boom gained traction, Texas has comprised more than 40% of all jobs in the country according to first quarter data from the Dallas Federal Reserve. Higher oil prices have led to more employment as energy companies explored and developed more aggressively. This has particularly been the case since the financial crisis as cheap financing has lead to an exploration "boom" in "shale fields."  However, as I discussed recently, there is a dark side to that "miracle""First, the development of the “shale oil” production over the last five years has caused oil inventories to surge at a time when demand for petroleum products is on the decline as shown below." The obvious ramification of the surge in supply as demand stagnates is a “supply glut” which leads to further declines in oil prices. As prices fall, energy related business cut production by “shutting in” wells, cutting capital expenditure plans (which makes up almost 1/4th of all capex expenditures in the S&P 500), freezes and/or reductions in employement, and declines in revenue and profitability. Of course, the "ripple effect" of those actions impacts all of the related and ancilliary businesses from piping to coatings, trucking and transportation, restaurants and retail.

DOT: Vehicle Miles Driven increased 2.3% year-over-year in September - The Department of Transportation (DOT) reported: Travel on all roads and streets changed by 2.3% (5.6 billion vehicle miles) for September 2014 as compared with September 2013. Travel for the month is estimated to be 246.6 billion vehicle miles. Cumulative Travel for 2014 changed by 0.7% (16.7 billion vehicle miles).  The following graph shows the rolling 12 month total vehicle miles driven.  The rolling 12 month total is slowly moving up, after moving sideways for a few years.Currently miles driven has been below the previous peak for 82 months - almost 7 years - and still counting.  Currently miles driven (rolling 12 months) are about 1.8% below the previous peak. The second graph shows the year-over-year change from the same month in the previous year.In September 2014, gasoline averaged of $3.48 per gallon according to the EIA.  That was down from September 2013 when prices averaged $3.60 per gallon.

Vehicle Sales Forecast: "Could Reach 17 Million" SAAR in November --The automakers will report November vehicle sales on Tuesday, December 2nd. Sales in October were at 16.35 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in November might be at or above 17 million SAAR. Note:  There were 25 selling days in November this year compared to 26 last year.Here is an early forecast from WardsAuto: Forecast: SAAR Could Reach 17 Million for Second Time in Four MonthsA WardsAuto forecast calls for U.S. light-vehicle sales to reach a 17 million-unit seasonally adjusted annual rate for just the second time since 2006, after crossing that threshold most recently in August, when deliveries equated to a 17.4 million SAAR. The WardsAuto report is calling for 1.29 million light vehicles to be delivered over 25 selling days. The resulting daily sales rate of 51,461 units represents an 8.1% improvement over same-month year-ago (over 26 days) and a 9.1% month-to-month gain on October (27 days), slightly ahead of an average 6% October-November gain over the past three years. The 17 million-unit SAAR would be significantly higher than the 16.3 million recorded year-to-date through October, and would help bring 2014 sales in line with WardsAuto’s full year forecast of 16.4 million units.  It appears there will be a strong finish to 2014 for both auto sales and the economy!

ATA Trucking Index increased 0.5% in October -- Here is an indicator that I follow on trucking, from the ATA: ATA Truck Tonnage Index Increased 0.5% in October American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index rose 0.5% in October, following a revised decline of 0.8% during the previous month. In October, the index equaled 132.1 (2000=100), which was the second highest level on record after August.   Compared with October 2013, the SA index increased 4.5%, up from September’s 2.9% year-over-year gain. Year-to-date, compared with the same period last year, tonnage is up 3.2%. ... “Tonnage made a nice comeback after declining in September,” said ATA Chief Economist Bob Costello. “The gain fits with the increases in retail sales and factory output during October, as well as with good anecdotal reports about the fall freight season.” “The solid month-to-month gain, coupled with the acceleration in the year-over-year growth rate, is a good sign for the fourth quarter,” Costello said. “In addition, I’m expecting a solid fall freight season as holiday sales are forecasted to see the largest increase since 2011.”  Trucking serves as a barometer of the U.S. economy, representing 69.1% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.7 billion tons of freight in 2013. Motor carriers collected $681.7 billion, or 81.2% of total revenue earned by all transport modes. Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

LA area Port Traffic in October: Strong Imports, Soft Exports - Note: There is a trucker strike in LA that might impact port traffic in November. From the LA Times: L.A.-area port truckers expand strike to three new companies A port truck driver strike at the twin ports of Los Angeles and Long Beach grew Monday, as protest organizers targeted three more companies that they accuse of wage theft. ... The expanded strike comes as tension at the nation’s busiest port complex is high. A powerful dockworkers union and multinational shipping lines are negotiating a new contract for about 20,000 workers on the West Coast.   Dockworkers have been without a contract since July ... Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for October since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average. On a rolling 12 month basis, inbound traffic was up 0.5% compared to the rolling 12 months ending in September.   Outbound traffic was down 0.9% compared to 12 months ending in September. Inbound traffic has been increasing, and outbound traffic has been mostly moving sideways.The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Govt: China could take down U.S. power grid - (CNN) -- China and "probably one or two other" countries have the capacity to shut down the nation's power grid and other critical infrastructure through a cyber attack, the head of the National Security Agency told a Congressional panel Thursday. Admiral Michael Rogers, who also serves the dual role as head of U.S. Cyber Command, said the United States has detected malware from China and elsewhere on U.S. computers systems that affect the daily lives of every American. "It enables you to shut down very segmented, very tailored parts of our infrastructure that forestall the ability to provide that service to us as citizens," Rogers said in testimony before the House Intelligence Committee. Rogers said such attacks are part of the "coming trends" he sees based on "reconnaissance" currently taking place that nation-states, or other actors may use to exploit vulnerabilities in U.S. cyber systems.A recent report by Mandiant, a cyber-security firm, found that hackers working on behalf of the Chinese government were able to penetrate American public utility systems that service everything from power generation, to the movement of water and fuel across the country. "We see them attempting to steal information on how our systems are configured, the very schematics of most of our control systems, down to engineering level of detail so they can look at where are the vulnerabilities, how are they constructed, how could I get in and defeat them," Rogers said. "We're seeing multiple nation-states invest in those kinds of capabilities." Admiral Rogers declined to identify who the other countries, beside China, because of the classified nature of their identities. Russia is generally regarded as also having an aggressive cyber program.

Boehner Kills Internet Sales Tax Bill: A bill granting states the ability to force out-of-state websites to collect Internet sales tax is dead, according to the Ohio Republican’s spokesman. “The speaker has made clear in the past he has significant concerns about the bill, and it won’t move forward this year,” said spokesman Kevin Smith. “The Judiciary Committee continues to examine the measure and the broader issue. In the meantime, the House and Senate should work together to extend the moratorium on internet taxation without further delay.”A bipartisan group passed the Marketplace Fairness Act out of the Senate last year on a 69-27 vote, led by Sens. Richard J. Durbin, D-Ill., and Michael B. Enzi, R-Wyo., but it has languished in the House. Backers hope to get the bill through during the lame-duck session, and aren’t yet throwing in the towel despite Smith’s comment. “The bill may change or even be folded into another piece of ‘must-pass’ legislation. The fight is far from over,” tweeted Stephen E. Schatz of the National Retail Federation. “We have about three weeks in the lame duck. Anything can happen. Retailers are all in to get this done this year.”

Signs That the Startup Bubble is Totally Maxed Out - Wolf Richter - There are now 48 pre-IPO startups valued at over $1 billion. Uber, which is currently getting tarred and feathered even on NPR, is sitting on top of the heap, with a valuation of $18 billion. But there are thousands of smaller startups, and they’re all scrambling for money and attention and love. Their valuations too have been soaring. In 2014, the median Series A valuation – the first major VC money after friends-and-family rounds and seed money – has hit $19 million, which surpassed even on an inflation-adjusted basis the median Series B valuations 10 years ago, according to Tomasz Tunguz, a partner at VC firm Redpoint Ventures. And Series B valuations now exceed Series C valuations from 10 years ago. Everything has moved up. Big money is gushing in all directions. Some of these millions are for startups not to develop a better mousetrap that would disrupt, but to buy other startups. So messaging startup Kik Interactive just announced that it had raised an additional $38.3 million, for a total of $70.5 million, and that it would blow some of this money on yet another overvalued messaging startup, Relay. Much of the remaining money is spent, not on building the newest mousetrap, but on advertising. Facebook is the biggest beneficiary of this VC-funded money flow to the point where Mat Honan at Wired suggested that “if the app bubble pops, Facebook’s money machine could seize up – just as it had happened to magazines a decade before.”

Fed: Industrial Production decreased 0.1% in October -- From the Fed: Industrial production and Capacity Utilization Industrial production edged down 0.1 percent in October after having advanced 0.8 percent in September. In October, manufacturing output increased 0.2 percent for the second consecutive month. The index for mining declined 0.9 percent and the output of utilities moved down 0.7 percent. At 104.9 percent of its 2007 average, total industrial production in October was 4.0 percent above its level of a year earlier. Capacity utilization for the industrial sector decreased 0.3 percentage point in October to 78.9 percent, a rate that is 1.2 percentage points below its long-run (1972–2013) average.
This graph shows Capacity Utilization. This series is up 11.9 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 78.9% is 1.2 percentage points below its average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007. The second graph shows industrial production since 1967. Industrial production decreased 0.1% in October to 105.1. This is 25.3% above the recession low, and 4.1% above the pre-recession peak. The monthly change for Industrial Production was below expectations.

Industrial Production October Ho-Hum, Capacity Utilization Still Stunted  -- The Federal Reserve Industrial Production & Capacity Utilization report shows a -1.0% decline in industrial production for October and September was revised down to 0.8% growth.  Manufacturing alone grew by 0.2%, but utilities dropped by -0.7% after last month's large gain.  Mining also decreased by almost a percentage point, -0.9%.  The G.17 industrial production statistical release is also known as output for factories and mines. Total industrial production has now increased 4.0% from a year ago.  Currently industrial production is 4.9 percentage points above the 2007 average.  Below is graph of overall industrial production's percent change from a year ago. Here are the major industry groups industrial production percentage changes from a year ago.  We can see the sudden jump up from utilities this month isn't a trend at all.

  • Manufacturing: +3.4%
  • Mining:             +9.9%
  • Utilities:           -1.3%

Manufacturing output is just 0.6 points above it's 2007 average.  This is an enormous amount of time just to reach 2007 levels.  This month's report has some foreboding news for motor vehicles and parts.  This sector has a multiplier effect so the below 400,000 unit decline is one piece of bad news past the percentages: These gains were partially offset by declines of more than 1 percent in the indexes for nonmetallic mineral products and for motor vehicles and parts. The decline in motor vehicles and parts resulted from a decrease in vehicle assemblies, which fell 400,000 units to an annual rate of 11.1 million. Mining with U.S. oil & gas production has been growing, although considering the latest free fall in oil prices we're not sure how long this will go on.  Mining showed a -0.9% monthly decrease and for the year has increased 9.9%.  Utilities are volatile due to weather and why the below graph shows the wild swings.   October showed a -0.7% decline but we can expect a blow out next month due to the latest arctic blast over much of the country.

Industrial Production Drops; Auto Manufacturing Slumps 3rd Month In A Row - Worst Run In 5 Years -- Driven by a combination of Mining (-0.9% - biggest drop in a year), Utilities (-0.7% led by a 3.2% plunge in Natural Gas) and most of all motor vehicle manufacturing (-1.2%), US Industrial Production slid 0.1% in October (notably missing expectations of a 0.2% rise). This is the 3rd monthly drop in motor vehicle & parts production - the worst consecutive run since Jan 2009. It seems the government-free-credit inspired subprime auto boom that provided just enough impetus to a fragile economy to enable the Fed narrative of "things are better" to play out... has ended... abruptly.

NY Fed: Empire State Manufacturing Survey indicates "pace of growth somewhat faster than last month’s" in November -- From the NY Fed: Empire State Manufacturing Survey The November 2014 Empire State Manufacturing Survey indicates that business activity continued to expand for New York manufacturers. The headline general business conditions index climbed four points to 10.2, indicating a pace of growth somewhat faster than last month’s. The new orders index rose eleven points to 9.1, and the shipments index advanced eleven points to 11.8. The index for number of employees edged down to 8.5 but remained positive, indicating that employment levels grew; the average workweek index, by contrast, was negative, pointing to a decline in hours worked. ...This is the first of the regional surveys for November.  The general business conditions index was at the consensus forecast of a reading of 10.5, and indicates slightly faster expansion in November than in October (above zero suggests expansion).

Empire State Manufacturing: Expansion Continues - This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions continued expanding at a stronger pace from the previous month. The headline number rose 4 points to 10.2, up from 6.2. The forecast was for a reading of 11.1. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state. Here is the opening paragraph from the report. The November 2014 Empire State Manufacturing Survey indicates that business activity continued to expand for New York manufacturers. The headline general business conditions index climbed four points to 10.2, indicating a pace of growth somewhat faster than last month’s. The new orders index rose eleven points to 9.1, and the shipments index advanced eleven points to 11.8. The index for number of employees edged down to 8.5 but remained positive, indicating that employment levels grew; the average workweek index, by contrast, was negative, pointing to a decline in hours worked. After falling sharply last month, the prices paid index was little changed at 10.6—a sign that input prices had increased only modestly. The prices received index fell to zero, indicating that selling prices were flat. Indexes for the six-month outlook were generally higher this month and conveyed a strong degree of optimism about future business conditions. Here is a chart illustrating both the General Business Conditions and Future General Business Conditions (the outlook six months ahead):

Empire Fed Manufacturing Misses 2nd Month In A Row, Workweek Plunges -- Following last month's collapse, hopes were high for the Keynesian data mean-reversion to bounce Empire Fed Manufacturing data solidly higher... it didn't. A small bounce to 10.16 (against expectations of 12.2) is the 2nd miss in a row and below January's mid-polar-cortex levels. Under the covers, it was even uglier as average workweek and prices received plunged to their lowest levels in 2014 (as prices paid only inched lower - sparking fears over margins). The number of employees also fell (despite a rise in new orders?) but the headline print was saved from worse by a surge in 'hope' yet again as the business outlook jumped by 6 points to 47.61 - its highest since Jan 2012!!

Philly Fed Business Outlook: Growth Surges; General Activity Highest Since 1993 -- The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. The latest gauge of General Activity came in at 40.8, a surge over last month's 20.7. The 3-month moving average came in at 28.0, up from 23.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook slipped to 48.0 from last month's 54.5. Here is the introduction from the Business Outlook Survey released today:Responses to the Manufacturing Business Outlook Survey suggest that regional manufacturing activity increased notably in November. The survey’s broad indicators for new orders and shipments showed similar improvement this month. Responding firms also indicated that employment was higher this month. In addition, the broadest indicator of future activity suggests that firms expect growth to continue over the next six months. (Full PDF Report)  Today's 40.8 came in substantially above the 18.5 forecast at It is the highest General Activity reading since December 1993. The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012 and a shallower contraction in 2013. The indicator is now above its post-contraction peak in September of last year.

Philly Fed Explodes To 21 Year Highs, Beats By 10 Standard Deviations | Zero Hedge: Against expectations of a small drop to 18.5, the Philly Fed business outlook 'survey' printed 40.8 - its highest since 1993. This is a 10-sigma event, more than doubling last month's 20.7 print. New Orders surged (17.3 to 35.7), Shipments doubled, Prices Paid collapsed (27.6 to 17.3) and Prices received plunged. As the number of employees rose to 2011 highs. It appears we are going to need a better seasonal adjustment... Biggest beat on record, highest in 21 years... The analysts nailed it... The Breakdown... Charts: Bloomberg

US Manufacturing PMI Misses By Most On Record, Lowest Since January -- Recovery, we have a problem... November's Flash US Manufacturing PMI printed a 10-month lows 54.7, missing expectation sof 56.3 by the most on record and tumbling for the third month in a row. The last 2 mnths have seen the biggest drop since June 2013 ands as Markit notes, suggests a further drop in GDP growth expectations of only 2.5% in Q4. Output is down for the 3rd straight month and Surprise!! Export market weakness is being blamed... as it seems the US cannot decouple from the rest of the world's slump after all and is - as we have explained numerous times - merely on a lagged cycle. We're gonna need more Fed-fueled subprime-auto-loan malarkey to keep this dream alive.

Kansas City Fed: Regional Manufacturing "Activity Expanded Further" in November - From the Kansas City Fed: Growth in Tenth District Manufacturing Activity Expanded Further The Federal Reserve Bank of Kansas City released the November Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded at a slightly faster pace in November, and producers’ expectations for future activity increased further.“Regional factory growth improved somewhat in November, although many contacts reported that the cost to retain or hire quality employees is rising, said Wilkerson. The majority of firms expected activity to improve considerably in the next six months.”The month-over-month composite index was 7 in November, up from 4 in October and 6 in September. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.... The employment index decreased from 16 to 10 ... The future composite index moved higher from 17 to 22, and the future production, shipments, and order backlog indexes also rose. The future employment index jumped from 16 to 31, its highest level in almost nine years. In contrast, the future new orders index eased from 26 to 24, and the future capital expenditures index also edged lower.

Falling Wages at Factories Squeeze the Middle Class - Even as the White House and leaders on Capitol Hill and in Fortune 500 boardrooms all agree that expanding the country’s manufacturing base is a key to prosperity, evidence is growing that the pay of many blue-collar jobs is shrinking to the point where they can no longer support a middle-class life. A new study by the National Employment Law Project, to be released on Friday, reveals that many factory jobs nowadays pay far less than what workers in almost identical positions earned in the past.  Perhaps even more significant, while the typical production job in the manufacturing sector paid more than the private sector average in the 1980s, 1990s and early 2000s, that relationship flipped in 2007, and line work in factories now pays less than the typical private sector job. That gap has been widening — in 2013, production jobs paid an average of $19.29 an hour, compared with $20.13 for all private sector positions. Pressured by temporary hiring practices and a sharp decrease in salaries in the auto parts sector, real wages for manufacturing workers fell by 4.4 percent from 2003 to 2013, NELP researchers found, nearly three times the decline for workers as a whole. Despite that widening gap, Washington still paints the manufacturing sector as a gateway to the middle class, even if the gate is closing.  After losing more than six million factory jobs from 2000 to 2010, the sector has rebounded a bit in recent years, with more than 700,000 positions created since early 2010. A total of 12.2 million Americans work in manufacturing, according to the Bureau of Labor Statistics.

New Jobless Claims Come in a Bit Higher Than Forecast - Here is the opening statement from the Department of Labor: In the week ending November 15, the advance figure for seasonally adjusted initial claims was 291,000, a decrease of 2,000 from the previous week's revised level. The previous week's level was revised up by 3,000 from 290,000 to 293,000. The 4-week moving average was 287,500, an increase of 1,750 from the previous week's revised average. The previous week's average was revised up by 750 from 285,000 to 285,750.   There were no special factors impacting this week's initial claims. [See full report]  Today's seasonally adjusted number at 291K was above the forecast of 286K and was looking for 285K. The four-week moving average at 287.5K is now 8.5K above its 14-year interim low set two weeks ago.  Here is a close look at the data over the past few years (with a callout for the past year), which gives a clearer sense of the overall trend in relation to the last recession and the volatility in recent months.

Initial Jobless Claims Hit 2-Month Highs, Continuing Claims Tumble To 14-Year Lows -- It is still far too early to call a turn in the long-term trend of initial jobless claims but this is the 5th week that new lows have not been made, 4th miss in a row, and (despite last week's upward revision) claims sit at 2-month highs. Initial claims printed 291k (against 284k expectations) down very slightly from an upwardly revised 293k last week. However, continuing claims continue to tumble to fresh cycle lows at 2.33 million (below expectations and well down from last week's jump).

BLS: Thirty-four States had Unemployment Rate Decreases in October --From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were generally little changed in October. Thirty-four states and the District of Columbia had unemployment rate decreases from September, 5 states had increases, and 11 states had no change, the U.S. Bureau of Labor Statistics reported today.... Georgia had the highest unemployment rate among the states in October, 7.7 percent. North Dakota again had the lowest jobless rate, 2.8 percent. This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The states are ranked by the highest current unemployment rate. Georgia, at 7.7%, had the highest unemployment rate for the third consecutive month. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 8% (light blue); Eight states and D.C. are still at or above 7% (dark blue).

State Unemployment Map Goes Monochrome for October 2014 -- The October state employment statistics shows the unemployment rate has evened out and become more similar across states.  The national unemployment rate was 5.8% and 22 states show similar unemployment rates, 12 plus the D.C. area were above the national average and 16 were below.  For the month, 34 states plus the District of Columbia saw their unemployment rate go down while 5 states experienced an increase.  Below is the BLS map of state's unemployment rates for the month and they do not change the scale to show how nationwide the United States is supposedly out of the red when it comes to unemployment.  The fact the entire map is now shades of beige shows how nationwide unemployment has improved. There are eight states plus the District of Columbia with unemployment rates above 7%.  In order they are Georgia 7.7%, Mississippi 7.6%, D.C. 7.6%, Rhode Island 7.4%, California 7.3%, Nevada 7.1%, Tennessee 7.1%, Michigan 7.1% and Oregon 7.0%.  There are now many states with very healthy unemployment rates.  North Dakota leads with 2.8% and South Dakota touts a 3.3% unemployment rate.  Hawaii is 4.1% and even Colorado is 4.3%.  It's fairly clear some states have finally recovered from the great recession jobs slaughter in 2014.   The unemployment change from a year ago nationally has declined by -1.4 percentage points.  The biggest improvement has been in Illinois with a -2.5 percentage point improvement . Nevada's rate has also improved for the year, with a -2.3 percentage point change from October 2013.  Colorado's rate declined 2.2 percentage points and Ohio's unemployment rate declined by -2.1 percentage points over the past year.  All in all, 42 states plus D.C. showed an unemployment rate decline since October 2013.  The decrease in unemployment rates isn't that news by itself since the rates can be declining due to lower labor participation rates.

Joblessness Fell in Most States in October. How Does Yours Compare? (interactive table) The lowest unemployment rates in the U.S. remained concentrated in the Midwest last month, though broad improvement across the country signals a steadily improving economy. Thirty-four states and the District of Columbia saw falling unemployment rates in October compared with September, the Labor Department said Friday. The rate rose in five states and held steady in 11. Kentucky had the biggest decrease, 0.5 percentage point to 6.2%, the lowest level in more than six years — though still above the national average of 5.8%. The state last month added jobs but also saw people drop out of the labor force.“People are retiring, so the labor force is shrinking some,” . “But instead of losing those jobs like in the recession, employers are filling them with new people now.”Colorado, Idaho, Missouri and North Carolina all saw their unemployment rate fall 0.4 percentage point, though only the Rocky Mountain states have overall rates below the national average. Nationwide, U.S. employers added 214,000 jobs to payrolls last month, helping push the unemployment rate down to 5.8% from 5.9% the prior month.

For Middle-Skill Occupations, Where Have All the Workers Gone? - Atlanta Fed macroblog - Considerable discussion in recent years has concerned the “hollowing out of the middle class.” Part of that story revolves around the loss of the types of jobs that traditionally have been the core of the U.S. economy: so-called middle-skill jobs.These jobs, based on the methodology of David Autor, consist of office and administrative occupations; sales jobs; operators, fabricators, and laborers; and production, craft, and repair personnel (many of whom work in the manufacturing industry). In this post, we don't examine why the decline in middle-skill jobs has occurred, just how those workers have weathered the most recent recession. But our Atlanta Fed colleague Federico Mandelman offers an explanation of why this has occurred. So how have workers in middle-skill occupations fared during the last recession and recovery? Let's examine a few facts from the Current Population Survey from the U.S. Bureau of Labor Statistics. Only employment in middle-skill occupations remains below prerecession levels ... Those in middle-skilled occupations were most likely to become unemployed... Underemployment has improved only slowly at all skill levels... Those who held middle-skill jobs are more likely to obtain high-skill jobs than before the recession Currently, of those in middle-skill occupations who remain in a full-time job, about 83 percent are still working in a middle-skill job one year later (see chart 4). What types of jobs are the other 17 percent getting? Mostly high-skill jobs; and that transition rate has been rising. The percent going from a middle-skill job to a high-skill job is close to 13 percent: up about 1 percent relative to before the recession. The percent transitioning into low-skill positions is lower: about 3.4 percent, up about 0.3 percentage point compared to before the recession.

Millennials are the most underemployed generation - Who is the most underemployed of them all? New research taps the youngest and most highly educated members of the workforce. Some 34% of millennials who hold a PhD report being underemployed, compared to 27% for Generation Xers and 25% of boomers, according to a new report by Millennial Branding, a branding and consulting firm, and PayScale, a company that collects data on salaries. Millennial MDs are underemployed at a rate of 30%, versus 22% of Gen Xers and 21% of boomers. Underemployment can mean they are underpaid for their education and training, not using their education and training in their current job and/or are working part-time, but are still seeking full-time work. Despite (or perhaps because of) this, millennials are also the most educated of all. Some 79% hold at least a bachelor’s degree, compared to 69% of Gen Xers and 62% of boomers. “Furthering their education is one way they can buy some time and save money and search for a job,” says Dan Schawbel, founder of Millennial Branding and author of “Promote Yourself: The New Rules for Career Success.” As college education and advanced degrees become more common, those who don’t major in highly sought-after majors like engineering also struggle with heavier student debt, he adds.

Most Young Americans Unsure or Glum on Job Prospects, Fed Survey Says - The last U.S. recession made it harder for young workers to find stable, full-time work, leaving most of them either pessimistic or uncertain about their future employment prospects, according to a Federal Reserve survey published Tuesday. “Young adults in the United States have experienced higher rates of unemployment and lower rates of labor force participation than the general population for at least two decades. The Great Recession exacerbated this phenomenon,” the Federal Reserve Board’s Division of Consumer and Community Affairs said in its report. In the survey, 34% said they were unsure of their future employment outlook and 21% said they were pessimistic; 45% said they were optimistic. “Data suggest young workers entering the labor force are affected by a long-running increase in the use of ‘contingent’ work arrangements, characterized by contracted, part-time, temporary and seasonal work,” the report said. The national unemployment rate was 6.7% last December, when the survey was conducted. It has fallen since then to 5.8% in October. The jobless rate for Americans aged 20 to 24 was 10.1% in October, while the rate for workers between the ages of 25 and 34 was 6.1%, both higher than the overall rate. The numbers get a lot worse when broken down by race: The jobless rate last month was 10.7% for African-Americans, 6.8% for Hispanics and 4.8% for whites.

Does It Pay for Firms to Invest in Their Workers’ Wellbeing?  - naked capitalism - Yves here. While the findings of this short paper on the merits of employers promoting their workers' job conditions, that viewpoint is perversely unfashionable today. It is somehow seen as more beneficial to employers to keep their minions cowed and fearful. One of the most active threats is the ease of firing workers. And of course, the belief that employment is tenuous works against the notion of making any investment in employees, even ones that are actually self-serving. But notice that this article does have a specific definition as to what "wellbeing" amounts to, which is workplace satisfaction. A major element appears to be bosses not acting like jerks.

Measuring Labor Market Slack: Are the Long-Term Unemployed Different? - NY Fed - [First in a three-part series] There has been some debate in the Liberty Street Economics blog and in other outlets, such as Krueger, Cramer, and Cho (2014) and Gordon (2013), about whether the short-term unemployment rate is a better measure of slack than the overall unemployment rate. As the chart below shows, the two measures are sending different signals, with the short-term unemployment rate back to its pre-recession level while the overall rate is still elevated because of a high long-term unemployment rate. One can argue that the unemployment rate is exaggerating the extent of underutilization in the labor market, based on the premise that the long-term unemployed are, in practice, out of the labor force and likely to exert little pressure on earnings. If this is indeed the case, inflationary pressures might start building up sooner than suggested by the overall unemployment rate. In a three-part series, we study the available evidence on the long-term unemployed and argue against this premise. The long-term unemployed should not be excluded from measures of labor market slack. In today’s post, we consider several important characteristics of long-term unemployed workers and compare them to the characteristics of three other groups of potential workers: the short-term unemployed, nonparticipants who report that they want a job, and nonparticipants who do not want a job (whom we refer to as “other nonparticipants”).

How Attached to the Labor Market Are the Long-Term Unemployed? - NY Fed - In this second post in our series on measuring labor market slack, we analyze the labor market outcomes of long-term unemployed workers to assess their employability and labor force attachment. If long-term unemployed workers are essentially nonparticipants, their job-finding prospects and attachment to the labor force should resemble those of nonparticipants who are not looking for a job and should differ considerably from those of short-term unemployed workers. Using data that allow us to follow workers over longer time periods, we find that differences in labor market outcomes between short- and long-term unemployed workers exist, but these differences narrow at longer horizons. In contrast, labor market outcomes for the long-term unemployed are substantially different from those of nonparticipants who do not want a job.

The Long-Term Unemployed and the Wages of New Hires - NY Fed -This is the third in a series of blog posts on the topic of measuring labor market slack. In this post, we assess the relationships between short- and long-term unemployment and wages by comparing the differences in states’ experiences over the business cycle. While all states felt the impact of the Great Recession, some fared better than others. Consequently, it is possible to use differences in the composition and shifts of short- and long-term unemployment to determine whether short-term unemployment exerts a greater influence on wage determination. The results suggest that there is little difference in how long-term and short-term unemployment affect wages, and as a consequence, the long-term unemployed shouldn’t be dismissed when evaluating labor market slack.

Long-Term Unemployment a Sign of Slack, NY Fed Economists Say - The long-term unemployed are just as much a part of the U.S. workforce as those jobless for shorter spells, and should not be discounted as policy makers try to assess much unused capacity remains, New York Fed economists write in a new blog post. The finding counters papers by economists such as former White House adviser and Princeton University professor Alan Krueger, who argued the large numbers of workers out of a job for six months or longer would not provide a cushion against inflation because they face greater challenges in returning to work. “The long-term unemployed should not be excluded from measures of labor market slack,” the New York Fed authors write. “If anything, the long-term unemployed group has the largest share of prime-age workers, the age group likely to have the strongest labor force attachment.” They cite high levels of long-term unemployment in a wide range of sectors as a sign that this is an “economy-wide phenomenon, spread across industries and occupations.”The debate is an important one for Fed policy. If the long-term unemployed are considered part of job market slack, then the Fed can wait longer than otherwise before raising short-term interest rates from near zero. Conversely, counting the long-term jobless as somehow more detached from the labor force would argue for lifting rates sooner. The New York Fed research is fairly unequivocal in choosing sides: “It’s hard to argue that they should not be considered as part of labor market slack.”

Repeat After Me: The Quantity of Labor Demanded is Not Always Equal to the Quantity Supplied: I've been teaching a class on intermediate macroeconomics this quarter. Increasingly, over the past twenty years or more, intermediate macro classes at UCLA (and in many other top schools), have focused almost exclusively on economic growth. That reflected a bias in the profession, initiated by Fynn Kydland and Ed Prescott, who persuaded macroeconomists to use the Ramsey growth model as a paradigm for business cycle theory. According to this Real Business Cycle view of the world, we should think about consumption, investment and employment 'as if' they were the optimal choices of a single representative agent with super human perception of the probabilities of future events.  Although there were benefits to thinking more rigorously about inter-temporal choice, the RBC program as a whole led several generations of the brightest minds in the profession to stop thinking about the problem of economic fluctuations and to focus instead on economic growth. Kydland and Prescott assumed that labor is a commodity like any other and that any worker can quickly find a job at the market wage. In my view, the introduction of the shared belief that the labor market clears in every period, was a huge misstep for the science of macroeconomics that will take a long time to correct. ... Ever since Robert Lucas introduced the idea of continuous labor market clearing, the idea that it may be useful to talk of something called 'involuntary unemployment' has been scoffed at by the academic chattering classes. It's time to fight back. The concept of 'involuntary unemployment' does not describe a loose notion that characterizes the sloppy work of heterodox economists from the dark side. It is a useful category that describes a group of workers who have difficulty finding jobs at existing market prices. ...Repeat after me: the quantity of labor demanded is not always equal to the quantity supplied.

The Real Reason For America's Collapsing Labor Force - Back in July we wrote "Slamming The Door Shut On The "Plunging Labor Force Participation Rate" Debate Once And For All", in which we showed, definitively we thought, that contrary to the pervasive and erroneous propaganda, the collapse in the labor force has little to do with the alleged millions of retiring baby boomers (quite the contrary: as a result of ZIRP crushing their lifetime savings, baby boomers have been forced to remain in the workforce in ever greater numbers) and everything to do with the lack of employment opportunities, or perhaps an unwillingness to work, for young Americans. As the Census Bureau said then: "In 2010, 16.2 percent of the population aged 65 and over were employed, up from 14.5 percent in 2005. In contrast, 60.3 percent of the 20 to 24 age group were employed in 2010, down from 68.0 percent in 2005. Employment shares declined from 2005 to 2010 for all age groups younger than age 55. There was no statistical change in the employment share for workers aged 55 to 64 nor those aged 70 to 74. Engemann and Wall (2010) found that more people aged 55 and over were employed during the recession than would have been if there was no recession. Using the Bureau of Labor Statistics employment data, Engemann and Wall found that during the 2007–2009 period, employment grew by 7.4 percent for the population aged 55 and over. Based on trends prior to the recession, employment for this age group was expected to grow by only 6.1 percent. All younger age groups experienced a decline in employment during the same 2007 to 2009 period."

American Workers Put Last in Obama's Amnesty  - The word is Obama at all costs is going to grant work permits along with amnesty to millions here illegally in the United States.  This is when the jobs market still has not recovered.  The latest leak shows Obama plans on giving amnesty and work permits to another 4.5 million illegals and U.S. permanent resident status to over half a million imported workers currently on guest worker Visas.  In a nutshell if any of this plan is true, once again the U.S. worker will get the shaft.Doesn't it seem no matter what, which party, which President, they are determined to screw over the American worker?  Yeah, seems that way to us too.  Obama and the corporations who fund these politicians really must hate U.S. workers.  They seem bound and determined to give American jobs to anyone but U.S. workers.  This is when America just gained the same amount of jobs she had in 2007, now almost seven years ago.  From this time last year, the United States has gained 2.6 million jobs, obviously not enough to employ yet another 4.5 newly minted legal workers if Obama gets his way.  Tech jobs are even more obscene.  Workers are brought in on temporary Visas, they are supposed to go home.  Yet Obama wants to give permanent legal status to half a million of them.  Now that doesn't sound so bad until once realizes all of those guest worker Visas will be suddenly freed up to pull in yet another half a million guest workers to guessed it, American jobs.  There are only 1.77 million computer design and related jobs in the United States, clearly not enough jobs to accommodate Americans plus the massive labor increases Obama's executive orders would bring. The money pouring into amnesties, green cards and more foreign workers is obscene, yet the New York Times doesn't acknowledge the corporate money pushing for more cheap labor and outsourcing being at the forefront of the push:

President Obama To Dictate Immigration Executive Order In Vegas On Friday - While what normally happens in Vegas, stays in Vegas; President Obama's decision to dictate his Immigration Executive Order from sin city will likely have repurcussions across the entire nation. As NY Times reports, Obama is preparing to use his executive authority to provide work permits for up to five million people who are in the US illegally, and to shield them from deportation. But these new arrivals will not receive one key benefit: government subsidies for health care available under Obamacare. The immigrants would also be unlikely to receive benefits like food stamps, Medicaid coverage or other need-based federal programs offered to citizens and to some legal residents. "The costs of extending these programs to millions of low-wage illegal immigrants would be enormous," said Senator Jeff Sessions "this is yet another danger posed to Americans by the president’s unconstitutional action."

Obama’s Risky Course on Immigration -- Obama is about to put the Democratic Party on record for amnesty, enabling millions of immigrants to avoid deportation and, most likely, obtain some type of temporary work permits. The legal basis appears to be the executive's "prosecutorial discretion." My Bloomberg View colleague Ramesh Ponnuru points out that Democratic claims that previous Republican presidents used this tool do not justify Obama's action, which would vastly exceed all previous efforts. At the Washington Post, Greg Sargent takes the opposite view, arguing that the action is generally within legal and political norms. That debate will be thrashed out over the weeks ahead. Either way, there is an element of hypocrisy to the president's plan -- he hasclaimed before that he lacked the authority for such sweeping action and clearly wanted to avoid taking it. There is an element of political calculation: There are votes and coalitions at stake, and Republicans seem well poised to forfeit them. And there is an element of humane desperation: The absence of legal status thwarts human potential, and Republicans appear unwilling to remove the obstacles (since their base prefers to remove the people). There is also an element of considerable risk. Yes, any executive action would be temporary. Yes, Congress could pass legislation to supersede it. But this could prove to be a turning point in the partisan polarization of Washington. Having reshaped itself in Newt Gingrich's image, the Republican Party has proved increasingly willing toundermine democratic norms -- and institutions -- in hopes of inheriting the rubble.  It's not hard to understand why Obama is doing this, and perhaps party relations in Washington really can't get much worse. But I think they will.

White House Touts Economic Impact of Immigration Plan - The White House on Friday said its immigration plan would have a plethora of positive economic effects, including higher growth and boosting wages for all Americans, countering criticism from some economists who have argued it could create more competition for open jobs. The White House’s Council of Economic Advisers said the plan by 2024 would raise gross domestic product by at least 0.4%, expand the size of the labor force by between 147,000 and 297,000 workers, and raise average wages for U.S.-born workers by 0.3%. The labor force change would not be seismic, the White House said, representing an increase of between 0.1% and 0.2%. In an assertion that is likely to draw fire from opponents of President Barack Obama’s executive order, the White House said the immigration plan would “have no impact on the likelihood of employment for U.S.-born workers.” There are widely different views about the economic impact of immigration changes. Many economists agree that giving legal working status to a large number of previously undocumented immigrants will help boost their wages in the near-term, but there is an unsettled argument about what happens to the wages of existing workers. A number of economists believe that if you increase the supply of labor, you will put downward pressure on wages. Critics will likely try and poke holes in the CEA’s findings, as it reflects a combination of anecdotal studies stretching back decades and concrete mathematical formulas. In calculating future GDP changes, the CEA used at least two complex mathematical equations, showing, for example, how the GDP would be affected given a larger labor force as well as working-age population.

Obama Pretends to Put Immigration Reform in Play -- Yves Smith  -- I’d like to use this piece to serve as a point of departure for discussing what a good immigration reform policy would look like, so we can have benchmarks for measuring what comes out of Obama’s promise that he would move immigration reform reform forward in an address Thursday evening.  But bear in mind that Obama’s speech and proposal for immigration reform is almost all public relations to cover up an action that is hard to swallow: making a bad situation worse by suspending deportations for illegal immigrants. Of course, cynics might argue that we’ve had flagrant non-enforcement of the law as far as elite bankers were concerned; why not extend that privilege to the other end of the food chain?   Obama’s pretext is that this action is a forcing device to get the Republicans to pass a “responsible” immigration reform bill. But the real political calculus is all too obvious. Given the Democratic Party’s floundering performance in the midterms, securing the loyalty of Hispanic voters is the best and most obvious shot in the arm the party has available to it. It also has the advantage of being one of the few places where, in large measure, playing the identity politics card also provides some tangible economic benefits (the Democrats found, much to their dismay, that trying to woo women solely on reproductive rights, sexual harassment, and other gender issues wasn’t a compelling sale; many women turned against Democratic party candidates over the party’s poor performance as far as middle and lower class economic issues were concerned). The fact that the Democrats have so much to gain from getting an immigration reform bill passed means that the Republicans will make sure that it is dead on arrival.

Obama Details Immigration Executive Actions, GOP Considers Lawsuit -- Last night President Barack Obama laid out the executive actions he would take to help some undocumented immigrants stay in the country. In the speech Obama broke his plan into three parts – border security, opportunities for high-skilled immigrants, and his plan to allow roughly five million undocumented immigrants stay in the country and not face deportation.  The last part is where the real controversy lies. Obama’s plan protects parents of citizens who have been in the country for more than five years as well as undocumented immigrants who came to America as children – the so-called DREAMers.  The Republican response to the plan and speech has, not surprisingly, been explosive. Obama has been labeled an “emperor” and a “king” with Senator Ted Cruz invoking Cicero and Kansas’ Secretary of State mentioning ethnic cleansing as a possible consequence.  Republican members of Congress have said they will take Obama to court for exceeding his executive authority and states such as Texas are considering lawsuits.  Outside of the courtroom Republicans are planning to challenge the executive actions by trying to defund any bill that would help implement the executive actions as well as punish the Obama Administration by blocking nominees. There has also been some mentions of shutting down the government again though that appeared to have more limited support.

5 Million Illegal Immigrants To Realize Dreams Of Slightly Less Uncertainty - Saying that they had finally attained a life of slightly less uncertainty, 5 million of the nation’s illegal immigrants confirmed that the executive order announced by President Obama Thursday night would allow them to at last realize their dreams of having their deportation deferred for an indeterminate period of time. “When I came to this country 11 years ago, it was in the hope that one day, if I worked hard enough, I could be granted a temporary, tenuous reprieve from the threat of being forcefully removed,” said undocumented immigrant Luiz Adelo, adding that, like millions of his fellow illegal immigrants, he was overjoyed to learn that he will not be detained by Immigration Services in the very immediate future. “After escaping the drug cartel violence of my village and fleeing to America, it was the thought of a life suspended in complete limbo that kept me going as I traveled through the grueling desert terrain for three days. To be tacitly allowed to live and work in this country that I love, all the while knowing that this protection could disappear in two years, or even two months—it’s made it all worth it.”

The economic effects of the Obama immigration order | FT Alphaville: The first thing to be said about the macroeconomic impact of Obama’s executive order on immigration is that it will be small but not trivial. The second thing to be said is that although the impact will be small, it will also be positive. The second statements is more controversial than the first, but neither is about the political merits of the order or about the potential for the new policy to affect individual lives. Mostly they just reflect the maths involved. The order is likely to result in just a slight increase in the size of the labour market, though the White House estimates that the gains from higher productivity growth will be more meaningful. That’s according to the published rationale offered by the President’s Council of Economic Advisors, which is largely persuasive. As a very brief primer, what the order does is to remove the possibility of deportation for undocumented immigrants who arrived when they were children and have been in the country five years or longer and for the undocumented parents of US citizens or of permanent residents, making it possible for them to work openly. The order also makes it easier for spouses of some legal immigrants to work, and gives some high-skilled immigrants and entrepreneurs more flexibility in moving from job to job.Changes to immigration policies, or to any policies that target the labour market, can influence economic growth through some combination of three effects: by expanding the potential size of the US labour force (from more immigration), by increasing the labour force participation rate (from making it easier for immigrants to work), and by raising productivity growth (from greater specialisation, partly depending on the skill level of the immigrants). Obama’s order would likely raise economic growth through the last two effects, while the first effect would be negligible. Allowing undocumented immigrants to emerge from hiding will lead to higher labour force participation, while the flexibility granted to high-skilled immigrants in particular should boost productivity growth.

President Obama’s Executive Action on Immigration Will Improve the Wages and Working Conditions of Unauthorized Immigrants and U.S.-Born Workers Alike - The internet and Twitter have virtually exploded over President Obama’s announcement regarding the actions he will take to reform the immigration system without Congress, relying on the legal authority he has to execute the laws of the United States. Most of the discussion surrounding this has focused on: 1) what the substance of the reforms will be and, regarding the most important reform—shielding unauthorized immigrants from deportation—estimating the share of the unauthorized population that will be eligible; 2) whether the executive reforms are lawful without a legislative directive from Congress; and 3) how the reforms will impact American politics (including whether there will be a government shutdown and if the reforms will “poison the well” for cooperation between Republicans and Democrats on other topics).  I’ve already discussed at length here and here how temporarily removing the threat of deportation (also known as “deferred action”) for up to four or five million unauthorized immigrants who have resided in the United States for at least five or ten years, and granting them employment authorization—is well within the bounds of the president’s legal authority to act. The Constitution allows the president prosecutorial discretion to enforce the law selectively when he has limited resources available to him, and he’ll be targeting those resources more effectively if he focuses the government’s immigration enforcement machinery on criminals and terrorists, rather than otherwise law-abiding immigrants who have deep ties to the nation and U.S. citizen children and spouses. Regarding the political impacts of the action, I’ll leave that up to the political analysts and prognosticators. But the one aspect that receives too little attention is the positive impact that deferred action and work authorization will have on the wages and workplace bargaining power of the unauthorized immigrant workers in our labor market who might qualify for the president’s new deferred action.

CPI Shows Real Wages Continue to be Flat - While the economy continues to create jobs, we’ve been tracking nominal wages as well as job growth, and it’s clear from this that continued slack in the labor market has left workers without bargaining power to bid up their wages. And it may be some time before wage growth gets anywhere near 3.5 to 4 percent, a growth rate that would be consistent with the Fed’s 2 percent inflation target and assumption of 1.5 percent productivity. Eventually, wage growth at that rate could even begin to claw back labor share of corporate-sector income, which has not even started moving in the right direction since the recession began. This week, the Bureau of Labor Statistics released the Consumer Price Index for October 2014. These data allow us to look at real (inflation-adjusted) wages. The figure below shows real average hourly earnings of all private employees (top line) and production/nonsupervisory workers (bottom line) since the recession began in December 2007. For both series, you can see that real wages fell during the recession, then jumped up in late 2008 in direct response to a drop in inflation. When inflation falls and nominal wages hold steady, the mathematical result is a rise in inflation-adjusted wags. After the deflation leading up to 2009 stopped boosting real wages, wage growth has been flat.

Washington Post ‘Wage Freeze’ Brain Freeze -- The Washington Post published an editorial on the “wage freeze” on Sunday, revealing the emptiness of its analysis and offering no recommendations for generating wage growth. At least there was acknowledgment of the problem, that “middle-class family incomes are still not growing very much” and “average income for the bottom 90 percent of households has barely grown at all, in real terms, over the last four decades.”Why care is answered with:“If you believe that democracy’s social foundation is a strong middle class, this trend is worrisome not only for its human cost, but also for the threat it poses to U.S. political health.” So far so good, the problem is widespread (the entire bottom 90 percent), it is long-term (last four decades) and it matters (for our democracy). I agree. What shall we do? The editorial says we need to acknowledge how “difficult it will be to reverse middle-class income stagnation” and offers no suggestions whatsoever. I guess that’s better than bad suggestions, such as tax cuts, either temporary or permanent, or that sending more people to college is the answer (it is not: the wages of college graduates are stagnant, especially young college grads many of whom are working in jobs that don’t require a college degree.).  Mostly the Washington Post issues a smug assessment that “[n]othing in the last four decades refutes the basic case for flexible, innovative, American-style capitalism” but then immediately negates this conclusion by saying “if the system doesn’t work for the middle class, it really isn’t working at all.” If, in fact, the economy is not working for most everybody then perhaps it is worth challenging the way the economy operates, including many of the ways the Post advocates it should operate!

Why Tax Cuts Aren’t the Answer to Wage Problems -- The New York Times David Leonhardt is a sharp observer of American economic trends, but I think he took a wrong turn in his Monday piece on wages–and data released Wednesday by the Congressional Budget Office helps show why. Mr. Leonhardt pointed out the dismal wage trends for the vast majority of American workers in recent decades and how it would be a heavy policy lift to reverse them. This seems right to me. But then he wrote: “Washington could definitely do more to help growth: better infrastructure, a less burdensome tax code, a less wasteful health care system, more bargaining power for workers and, above all, stronger schools and colleges, to lift the skills of the nation’s work force.”  The root of the U.S. wage problem (which is, in turn, the root of America’s inequality problem) is that most workers aren’t seeing their wages keep pace with overall productivity growth. The policies on Mr. Leonhardt’s list are worthy, but most would not reliably close this gap between productivity and pay. Boosting the bargaining power of workers would. Finally, Mr. Leonhardt argues that middle-class tax cuts could well be the solution for how Americans’ living standards could increase without wage growth in the future. For several reasons, this seems like the wrong path for this issue. means that eventually we’d need to cut spending or raise taxes on the very well-off to make up the difference. Cutting spending is disastrous for middle-income households, so that’s no real help. And raising tax rates on the very well-off (something I definitely support) is about as heavy a policy lift as exists in U.S. politics. In fact, I’d argue that keeping taxes low on the very rich is Republicans’ No. 1 economic priority. Remember the sturm und drang over the “fiscal cliff“ at the end of 2012? In the end, top tax rates on incomes above $400,000 ($450,000 for married couples) increased by about 4.6 percentage points. This occurred only because all of the political leverage at the time was on the side of raising rates. Had Congress failed to act and the Bush tax cuts simply expired, the baseline tax increase for high-income households would have been considerably larger.

Piketty Shreds Marginal Productivity as Neoclassical Justification for Supersized Pay by Ed Walker. Yves here. One of the main agendas of neoclassical economics is to give Panglossian defenses of the current order a veneer of intellectual legitimacy. If our system is the result of individuals and businesses behaving in logical ways, at least in the minds of economists, surely the outcome is inevitable, and therefore virtuous, or else those operators would do things differently. The Big Lie in all of this is that neoclassical economics takes power completely out of the equation. While it does assume selfishness, in that everyone is out or himself to maximize his utility, it also assumes atomized actors who lack the power to influence markets. One instructive way to see how these arguments break down is by looking at neoclassical economists justify large disparities in pay. Piketty shows that the idea that people are paid what they are worth, or in neoliberal-speak, according to their marginal productivity, to be a sham

Whatever Happened to Overtime?: If you’re in the American middle class—or what’s left of it—here’s how you probably feel. You feel like you’re struggling harder than your parents did, working longer hours than ever before, and yet falling further and further behind. The reason you feel this way is because most of you are—falling further behind, that is. Adjusted for inflation, average salaries have actually dropped since the early 1970s, while hours for full-time workers have steadily climbed. Meanwhile, a handful of wealthy capitalists like me are growing wealthy beyond our parents’ wildest dreams, in large part because we’re able to take advantage of your misfortune. So what’s changed since the 1960s and '70s? Overtime pay, in part. Your parents got a lot of it, and you don’t. And it turns out that fair overtime standards are to the middle class what the minimum wage is to low-income workers: not everything, but an indispensable labor protection that is absolutely essential to creating a broad and thriving middle class. In 1975, more than 65 percent of salaried American workers earned time-and-a-half pay for every hour worked over 40 hours a week. Not because capitalists back then were more generous, but because it was the law.It still is the law, except that the value of the threshold for overtime pay—the salary level at which employers are required to pay overtime—has been allowed to erode to less than the poverty line for a family of four today. Only workers earning an annual income of under $23,660 qualify for mandatory overtime. You know many people like that?

Back to 1917 – the wealth distribution in the US | Bill Mitchell – -- Where does the real income that the workers lose by being unable to gain real wages growth in line with productivity growth go? Answer: Mostly to profits. One might then claim that investment will be stimulated. As the real wage declines and the gap between productivity rises, the Investment ratio (percentage of private investment in productive capital to GDP) has barely risen over the course of the crisis period. Some of has gone into paying the massive and obscene executive salaries that we occasionally get wind of. Some will be retained by firms and invested in financial markets fuelling the speculative bubbles around the world. For workers, the problem is that they rely on real wages growth to fund consumption growth and without it they borrow or the economy goes into recession. The former is what happened around the world in the lead up to the crisis (and caused the crisis). The latter is more or less what is happening now. There was a very interesting paper released – Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data – by Emmanuel Saez (UC Berkeley) and Gabriel Zucman (London School of Economics).
You can also get their – Full Dataset and the Appendix Data – is you are so inclined. It was reported on in the latest edition of the Economist (Noovember 8, 2014) – Forget the 1%.
In brief, the paper uses income tax returns combined with “Flow of Funds data to estimate the distribution of household wealth in the United States since 1913″. You can study the paper if you are interested in how they compiled the dataset and computed the outcomes. I will leave that aside. Like everything, one could contest elements of their approach and the way they use the source data but the message would not change much – that is, I consider the outcomes to be relatively insensitive to some of the alternative classifications that one could make. I compiled a few graphs from their dataset. The first shows the shares in total wealth (%) held by the bottom 90 per cent and the top 0.1 per cent from 1917 to 2012. Note that is not the top 1 per cent but the top 0.1 per cent. The shares are back to where they were in the early 1930s when robber barons ruled. The top 0.1 per cent now hold 22 per cent of the total wealth in the US about the same as the bottom 90 per cent. The difference is held by the group defined by the 90th to 99.9th percentile which holds 54.4 per cent.

Inequality, Unbelievably, Gets Worse -THE Democrats’ drubbing in the midterm elections was unfortunate on many levels, but particularly because the prospect of addressing income inequality grows dimmer, even as the problem worsens.To only modest notice, during the campaign the Federal Reserve put forth more sobering news about income inequality: Inflation-adjusted earnings of the bottom 90 percent of Americans fell between 2010 and 2013, with those near the bottom dropping the most. Meanwhile, incomes in the top decile rose.Perhaps income disparity resonated so little with politicians because we are inured to a new Gilded Age.But we shouldn’t be. Nor should we be inattentive to the often ignored role that government plays in determining income distribution in each country.Here’s what’s rarely reported:Before the impact of tax and spending policies is taken into account, income inequality in the United States is no worse than in most developed countries and is even a bit below levels in Britain and, by some measures, Germany.However, once the effect of government programs is included in the calculations, the United States emerges on top of the inequality heap.That’s because our taxes, while progressive, are low by international standards and our social welfare programs — ranging from unemployment benefits to disability insurance to retirement payments — are consequently less generous. Conservatives may bemoan the size of our government; in reality, according to the Organization for Economic Cooperation and Development, total tax revenues in the United States this year will be smaller on a relative basis than those of any other member country.

Forget the 1% – Economist - “It is the 0.01% who are really getting ahead in America.”--  AMONG the most controversial of Thomas Piketty’s arguments in his bestselling analysis of inequality, “Capital in the Twenty-First Century”, is that wealth is increasingly concentrated in the hands of the very rich. Rising wealth inequality could presage the return of an 18th century inheritance society, in which marrying an heir is a surer route to riches than starting a company. Critics question the premise: Chris Giles, the economics editor of the Financial Times, argued earlier this year that Mr Piketty’s data were both thin and faulty. Yet a new paper suggests that, in America at least, inequality in wealth is approaching record levels.* Earlier studies of American wealth have tended to show only small increases in inequality in recent decades. Mr Piketty’s book, which drew on this previous work, showed similarly modest rises in wealth inequality in America. A new paper by Mr Saez and Gabriel Zucman of the London School of Economics reckons past estimates badly underestimated the share of wealth belonging to the very rich. It uses a richer variety of sources than prior studies, including detailed data on personal income taxes (which the authors mine for figures on capital income) and property tax, which they check against Fed data on aggregate wealth. The authors note that not every potential source of error can be accounted for; tax avoidance strategies, for instance, could cause either an overestimation of the wealth share of the rich (if they classify labour income as capital income in order to take advantage of lower rates) or an underestimation (if they intentionally seek out lower yielding investments for their tax advantages). Yet they believe their estimates represent an improvement over past attempts.

Another Widening Gap: The Haves vs. the Have-Mores - In just about every economic cycle, sales of small jets and big jets tended to move together — rising and falling with financial markets and fortunes of the wealthy.Now, however, the jet market is splitting in two. Sales of the largest, most expensive private jets — including private jumbo jets — are soaring, with higher prices and long waiting lists. Smaller, cheaper jets, however, are piling up on the nation’s private-jet tarmacs with big discounts and few buyers.“The real demand is at the very top,” said Mr. Rushton, the president of Aviatrade, a private-jet brokerage and advisory company. “The big guys, the billionaires, have plenty of money, and they’re buying. But the middle and lower end has been much slower to recover from the crisis.”The wealthy now have a wealth gap of their own, as economic gains become more highly concentrated at the very top. As the top one-hundredth of the 1 percent pulls away from the rest of that group, the superrich are leaving the merely very rich behind. That has created two markets in the upper reaches of the economy: one for the haves and one for the have-mores.  Whether the product is yachts, diamonds, art, wine or even handbags, the strongest growth and biggest profits are now coming from billionaires and nine-figure millionaires, rather than mere millionaires. “The very wealthy are often the ones pulling the trigger right now, and they have a very big trigger,”

And Now the Richest .01 Percent - Robert Reich - The richest Americans hold more of the nation’s wealth than they have in almost a century. What do they spend it on? As you might expect, personal jets, giant yachts, works of art, and luxury penthouses. And also on politics. In fact, their political spending has been growing faster than their spending on anything else. It’s been growing even faster than their wealth.   According to new research by Emmanuel Saez of the University of California at Berkeley and Gabriel Zucman of the London School of Economics, the richest one-hundredth of one percent of Americans now hold over 11 percent of the nation’s total wealth. That’s a higher share than the top .01 percent held in 1929, before the Great Crash. We’re talking about 16,000 people, each worth at least $110 million.One way to get your mind around this is to compare their wealth to that of the average family. In 1978, the typical wealth holder in the top .01 percent was 220 times richer than the average American. By 2012, he or she was 1,120 times richer. It’s hard to spend this kind of money.The uber rich are lining up for the new Aerion AS2 private jet, priced at $100 million, that seats eleven and includes a deluxe dining room and shower facilities, and will be able to cross the Atlantic in just four hours. Why should we care?Because this explosion of wealth at the top has been accompanied by an erosion of the wealth of the middle class and the poor. In the mid-1980s, the bottom 90 percent of Americans together held 36 percent of the nation’s wealth. Now, they hold less than 23 percent. Despite larger pensions and homes, the debts of the bottom 90 percent – mortgage, consumer credit, and student loan – have grown even faster.

It’s almost Thanksgiving, so Walmart is asking employees to donate food to co-workers: Walmart is once again asking employees to donate canned goods to help their less-fortunate coworkers celebrate Thanksgiving. An employee shared a photo Thursday afternoon of a donation bin set up at an Oklahoma store on the Making Change at Walmart Facebook page. “Rather than agree to pay a decent wage or provide full-time hours, Walmart and its owners (the Waltons) continue to earn massive profits while too many of the workers who make the company a success go hungry,” said the caption to the posted photo. A worker at an Indiana store told Making Change at Walmart that managers at her location were organizing bake sales and encouraging employees to donate food to their co-workers. “We are all in need, but we feel a sort of obligation to take care of our co-workers who are also struggling,” said Tanya Roudebush, who works for Walmart in Frankfort, Indiana. “The cycle is crazy. It doesn’t make any sense.”The retailer was widely criticized for setting up donation bins last year at an Ohio Walmart, but a company spokesperson said the food drive was proof its employees cared about one another. The Making Change at Walmart group, which is made up of employees and community activists, is bringing food Thursday to workers who are striking in Ohio to protest low wages. “My co-workers and I don’t want food bins,” said La’Randa Jackson, who works for Walmart in Cincinnati. “We want Walmart and the Waltons to improve pay and hours so that we can buy our own groceries.”

Where Do Poverty and Inequality in the U.S. Overlap? - Poverty and income inequality are two of America’s biggest problems. So where are both present in great quantities? A new study by demographers Mark Mather and Beth Jarosz of the Population Reference Bureau, a nonprofit demographic research group, points to the South—where a majority (59%) of counties now struggle with both high poverty and inequality. “In the 1980s and 1990s, income inequality and poverty intersected primarily in Appalachia, the Deep South, and parts of California and the Southwest….But during the past decade, poverty and inequality spread to new areas in Alabama, the Carolinas, Georgia, Michigan and Tennessee,” the authors say. While the double-whammy of poverty and inequality is a Southern problem, it’s also a national one. The share of high-poverty, high-inequality counties in the U.S. is growing—and hit 37% in 2008-12 from 29% in 1989. Conversely, the share of low-poverty, low-inequality counties has fallen to 34% from 50% in 1989. As might be expected, racial and ethnic differences matter. African-Americans and Latinos were 29% of the U.S. population last year, yet they accounted for 41% of the population living in America’s high-poverty and high-inequality counties, which are disproportionately found in the South and southwestern U.S.

Rent-Stabilized Leases Shielded in Bankruptcy - In a decision with implications for millions of tenants, New York State’s highest court ruled Thursday that a lease for a rent-regulated apartment is a public benefit and cannot be seized as an asset in a personal bankruptcy.In a 5-to-2 vote, the Court of Appeals said that a rent-stabilized lease was exempted from a bankruptcy estate as a public assistance benefit, just like disability or unemployment benefits. Bankruptcy lawyers in New York who were closely monitoring the case said that not keeping the lease off limits would have made it easier for landlords to evict rent-stabilized tenants if they file for bankruptcy, even when they pay their rent.

Number Of Homeless Children In America Surges To All-Time High: Report: — The number of homeless children in the U.S. has surged in recent years to an all-time high, amounting to one child in every 30, according to a comprehensive state-by-state report that blames the nation's high poverty rate, the lack of affordable housing and the impacts of pervasive domestic violence. Titled "America's Youngest Outcasts," the report being issued Monday by the National Center on Family Homelessness calculates that nearly 2.5 million American children were homeless at some point in 2013. The number is based on the Department of Education's latest count of 1.3 million homeless children in public schools, supplemented by estimates of homeless pre-school children not counted by the DOE. The problem is particularly severe in California, which has one-eighth of the U.S. population but accounts for more than one-fifth of the homeless children with a tally of nearly 527,000.  Carmela DeCandia, director of the national center and a co-author of the report, noted that the federal government has made progress in reducing homelessness among veterans and chronically homeless adults. "The same level of attention and resources has not been targeted to help families and children," she said. "As a society, we're going to pay a high price, in human and economic terms."

Child homelessness surges to nearly 2.5 million (+video) - One out of every 30 children in the United States experiences homelessness at some point during the year. That’s nearly 2.5 million children, up from 1.6 million in 2010, reports The National Center on Family Homelessness in Waltham, Mass., part of the American Institutes for Research. “When you look at the resources and where they’ve been driven … there’s been a national priority to address the issues for the chronic homeless and for veterans … and we’ve seen those numbers decline,” says the center’s director, Carmela DeCandia. “That’s a good thing. The problem is the same level of attention has not been paid to kids and families.” . The report relies on the definition of homelessness that schools are required to use under the federal McKinney-Vento Act, which is broader than the definition used by federal housing authorities and includes children “doubled up” with friends or relatives because of economic hardship. Based on recently released 2012-2013 data, it also includes an estimate of the number of children under 6 whose families experience homelessness.

Mission Accomplished: Stocks & Homeless Kids Hit All-Time Highs - Something is dreadfully wrong with this picture. In a report just released today by the National Center on Family Homelessness, a team of academics has demonstrated that the number of homeless children in the Land of the Free now stands at 2.5 million. This is far and away an all-time high and constitutes roughly one out of every 30 children in America. The report goes on to explain that among the major causes of this problem are the continuing impacts of the Great Recession that began in 2008. Funny thing, someone ought to tell these homeless kids that the economy is doing great. Of course, we know this to be true because the stock market is near its all-time high. The Dow Jones Industrial Average now stands at 17,633, just off its all-time high. Also near its all-time highs is the bond market, and coincidentally, the US debt—which is now within spitting distance of $18 trillion. In other words, if these kids ever do manage to pick themselves up off the streets, they’ll work their entire lives to pay off a debt that they never signed up for.

CA's AGO Argues against Court-Ordered Prisoner Release in order to Keep "Important Labor Pool": I've heard California Attorney General Kamala Harris's name floated on many occasions for either Senate (when Boxer or Feinstein eventually retires) or Governor (when Jerry Brown retires). She is widely praised as a liberal rising star. Or maybe not-so-liberal..... Federal judges on Friday ordered California to launch a new parole program that could free more prisoners early, ruling the state had failed to fully implement an order last February intended to reduce unconstitutional crowding. The judges, for a second time, ordered that all nonviolent second-strike offenders be eligible for parole after serving half their sentence. They told corrections officials to submit new plans for that parole process by Dec. 1, and to implement them beginning January. … Most of those prisoners now work as groundskeepers, janitors and in prison kitchens, with wages that range from 8 cents to 37 cents per hour. Lawyers for Attorney General Kamala Harris had argued in court that if forced to release these inmates early, prisons would lose an important labor pool. That's right: the California Attorney General's Office argued that it couldn't release non-violent offenders because they are too valuable a source of cheap labor. $0.08-$0.37 per hour cheap.

America: "Land Of The Not-So-Free" If You're A Woman -- According to the International Centre for Prison Studies, nearly a third of all female prisoners worldwide are incarcerated in the United States of America. There are 201,200 women in US prisons, representing 8.8% of the total American prison population. As Forbes' Niall McCarthy reports, China comes a very distant second to the US with 84,600 female prisoners in total or 5.1% of the overall Chinese prison population. Russia is in third position – 59,000 of its prisoners are women and this comes to 7.8% of the total. Either American women are the worst-behaved in the world, or the politically-expedient "prisons-first" culture has gone too far.

Jim Crow Returns - Election officials in 27 states, most of them Republicans, have launched a program that threatens a massive purge of voters from the rolls. Millions, especially black, Hispanic and Asian-American voters, are at risk. Already, tens of thousands have been removed in at least one battleground state, and the numbers are expected to climb, according to a six-month-long, nationwide investigation by Al Jazeera America. At the heart of this voter-roll scrub is the Interstate Crosscheck program, which has generated a master list of nearly 7 million names. Officials say that these names represent legions of fraudsters who are not only registered but have actually voted in two or more states in the same election — a felony punishable by 2 to 10 years in prison. Until now, state elections officials have refused to turn over their Crosscheck lists, some on grounds that these voters are subject to criminal investigation. Now, for the first time, three states — Georgia, Virginia and Washington — have released their lists to Al Jazeera America, providing a total of just over 2 million names.The Crosscheck list of suspected double voters has been compiled by matching names from roughly 110 million voter records from participating states. Interstate Crosscheck is the pet project of Kansas’ controversial Republican secretary of state, Kris Kobach, known for his crusade against voter fraud. . The three states’ lists are heavily weighted with names such as Jackson, Garcia, Patel and Kim — ones common among minorities, who vote overwhelmingly Democratic. Indeed, fully 1 in 7 African-Americans in those 27 states, plus the state of Washington (which enrolled in Crosscheck but has decided not to utilize the results), are listed as under suspicion of having voted twice. This also applies to 1 in 8 Asian-Americans and 1 in 8 Hispanic voters. White voters too — 1 in 11 — are at risk of having their names scrubbed from the voter rolls, though not as vulnerable as minorities.

Tax haven benefits are not investment incentives - Tim Worstall at Forbes takes issue with my last post, claiming that we actually don’t know that U.S. state and local governments give more in location incentives than EU Member States do. He then says that while it is true that EU states give less in cash grants and other kinds of subsidies defined as “state aid” in EU law, these same states give more than the U.S. in other types of tax benefits. His argument then moves quickly through Ireland’s 12.5% corporate income tax (though he gives no examples) to Amazon’s European sales all being channeled through Luxembourg subsidiaries. Worstall claims that the tax advantages created by this financial gimmickry comprise a location incentive just like providing Tesla $1.3 billion to build a factory in Nevada is.  I’ve been researching U.S. and EU incentives for 20 years, and I certainly don’t expect Worstall to have read everything I’ve written on the subject, including two books. So this makes as good a time as any to clarify the terms I use and the analysis I’ve made.  My default term for my object of study is “investment incentives,” as in the title of my last book. But you can’t say that phrase multiple times on every page of the book, so I use a specific set of synonyms when I write: Investment incentive = location incentive = investment subsidy = location subsidy = development incentive and sometimes, as in the headline of the last post, simply “incentive,” though I also use that term in its more generic sense. Note that the term Worstall uses in his headline, “tax incentive,” is not a synonym, because investment incentives and subsidies more generally can take forms other than tax breaks, i.e. cash grants, low-interest loans, free infrastructure, etc.

With community eligibility, what data source will replace the free / reduced price rate? --U.S. school children with household incomes below 130% of the federal poverty guideline have long been eligible for free school lunch and breakfast, while those with slightly higher income but still below 185% of the poverty guideline are eligible for reduced-price lunch. With a new community eligibility provision, some districts will provide free lunches to all children.The most important thing to know about this policy is that it may feed more children.This blog post is about a less important secondary question that nonetheless has some potential interest for readers in U.S. food policy: "What new source of data will replace the free / reduced price rate as a proxy variable for local poverty?" In the past, the percentage of children who received free and reduced price meals served to indicate the level of local poverty -- a higher percentage meant the neighborhood is comparatively poor.  At FiveThirtyEight, Ben Wieder explains the many policy and research uses for this proxy poverty measure. Two analyses (.pdf) found that school lunch data has been used in about 1 in 5 studies looking at academic achievement conducted by education researchers; that doesn’t take into account its role in work by psychologists, sociologists, economists and researchers in a host of other disciplines. The data has been used in studies looking at best teaching practices, school discipline and whether playing an instrument improves academic performance. It was a measure of poverty for a study on why kids start smoking, used to differentiate swimming ability among minority students, and a measure of socioeconomic status in at least one article in the Journal of Happiness Studies.

Controversial Texas textbooks headed to classrooms: Did Moses influence the Founding Fathers? Is all international terrorism linked to Islamist fundamentalists? Was slavery not a key contributor to the Civil War? These are questions scholars say are raised by social studies textbooks headed for Texas classrooms that are misleading, racially prejudiced and, at times, flat-out false. The elementary and intermediate geography, history and U.S. government books were written according to a set of standards created by Texas education officials four years ago — called the Texas Essential Knowledge and Skills — that could potentially alter traditional learning methods, they say. And it's not just a Texas issue. The state is so large that publishers commonly market the books made for Texas to other states, said Josh Rosenau, programs and policy director for the National Center for Science Education, a California-based non-profit group that has reviewed some of the books. If approved by the state school board on Friday, these textbooks could trickle out to the rest of the country and be used in classrooms for the next decade, he said. It's the first time since 2002 the board will vote on the books. "What happens in Texas doesn't stay in Texas,"Rosenau said. "All of these books, once they get through the process in Texas, are going to show up in other states."

Court rules Michigan has no responsibility to provide quality public education – In a blow to schoolchildren statewide, the Michigan Court of Appeals ruled on Nov. 7 the State of Michigan has no legal obligation to provide a quality public education to students in the struggling Highland Park School District.A 2-1 decision reversed an earlier circuit court ruling that there is a “broad compelling state interest in the provision of an education to all children.” The appellate court said the state has no constitutional requirement to ensure schoolchildren actually learn fundamental skills such as reading — but rather is obligated only to establish and finance a public education system, regardless of quality. Waving off decades of historic judicial impact on educational reform, the majority opinion also contends that “judges are not equipped to decide educational policy.” “This ruling should outrage anyone who cares about our public education system,” said Kary L. Moss, executive director of the American Civil Liberties of Michigan. “The court washes its hands and absolves the state of any responsibility in a district that has failed and continues to fail its children.” The decision dismisses an unprecedented “right-to-read” lawsuit filed by the ACLU of Michigan in July 2012 on behalf of eight students of nearly 1,000 children attending K-12 public schools in Highland Park, Mich. The suit, which named as defendants the State of Michigan, its agencies charged with overseeing public education and the Highland Park School District, maintained that the state failed to take effective steps to ensure that students are reading at grade level.

Cops Decide Running Surprise School Shooter Drill During Class At A Middle School Is A Great Idea -  What began with terrorism drills on school buses and then devolved into unannounced school-shooting drills is getting to be so full-on crazy that I sort of can't believe that anyone thinks any of this is a good idea. The latest story involves police running an unannounced "active shooter drill" at a local middle school while classes were in session. As a part of this insane exercise, police officers went around bursting into classrooms filled with terrified students, weapons out, as they acted out their fun little thespian experience of horror. And, to add insult to injury, school officials notified parents of the drill long after unknowing students were informing their parents that an actual shooting was taking place at the school.  Were the parents supposed to be part of this drill as well? Otherwise, exactly what was the point of sending terrified parents barreling towards the school to see exactly what the hell was going on? You'd think school officials must be issuing one hell of a mea culpa, right? Of course not. Realism is the key, yo.  “Unfortunately, no one gets an advanced notice of real life emergencies,” Polk County Public Schools spokesman Jason Gearey said in an e-mailed statement to The Washington Post. “We don’t want students to be scared, but we need them to be safe.”  And you can see his point. But why stop at school shootings? If terrifying students is done in the name of preparing them for terrifying, if not in any way likely events, why not prepare them for tragedies much more likely to occur? Why not tell kids every once in a while that their parents are dead, just to get them used to the eventual occurrence?

Black students walk out over school official’s tweet: ‘Every white girl’s father’s worst nightmare’: Students at Booker T. Washington High School in Norfolk, Virginia walked out of class on Monday to protest a school official’s Twitter message that referred to young black men as a “nightmare” for white fathers. According to WVEC, the Twitter post was made in June by the school administrator, but students only recently noticed it. The tweet was a reposting of a message from an account called @OrNahhTweets. It showed a photograph of seven white girls in prom-style dresses with seven African-American young men in tuxedos. The caption on the photo read, “every white girl’s father’s worst nightmare or not.”

Wisconsin as a Frontier of School Privatization: Will Anyone Notice the Looting? - Yves Smith -- I never dreamed that a class I took in college, The Politics of Popular Education, which covered the nineteenth century in France and England, would prove to be germane in America.  The course framed both the policy fights and the broader debate over public education in terms of class, regional, and ideological interests. The participants in these struggles were acutely aware that the struggle over schooling was to influence the future of society: what sort of citizens would these institutions help create?  As the post below on the march of school privatization in Wisconsin demonstrates, those concerns are remarkably absent from current debates. The training of children is simply another looting opportunity, like privatizing parking meters and roads. The objective is yet another transfer from some of the remaining members of the middle class, public school teachers, to the promoters. And this process also produces an important side benefit for socially unenlightened capitalists: that of slowly breaking one of the last influential unions.   And lest you had any doubt, despite the claim that charter schools help children, the evidence is that it doesn’t. Moreover, the pattern in capitalism American style is towards ever-greater crapification. So imagine what private schools, where the operators are on relatively good behavior because the project is still in its demonstration phase, look like in ten years.Moreover, international comparisons show that higher teacher pay is strongly correlated with better educational outcomes, which should hardly seem surprising. Higher compensation, if nothing else, is a sign that society confers some stature to teachers, which helps in attracting capable people into that role.

California’s 28% Tuition Boost Pits Napolitano Against Brown - A University of California proposal to boost tuition as much as 28 percent pits President Janet Napolitano against Governor Jerry Brown, who says it reneges on a deal to fetter costs in exchange for more state funding. The plan would end a three-year tuition freeze at the 10-campus system and steer Napolitano, 56, a former Arizona governor and secretary of Homeland Security, into a clash with Brown, a 76-year-old Democrat who just won election to an unprecedented fourth term. Brown is an ex-officio member of the Board of Regents, which is to review the plan today in San Francisco. The governor has said the university needs to be smarter and leaner about educating its 233,000 students, and rely less on taxpayer subsidies.“We are part of the state budget where there has been significant disinvestment in the last 20 years,” said Nathan Brostrom, the university’s chief financial officer. “We have been whipsawed by the boom-and-bust cycle in state funding. And the university itself has passed on that volatility to its students and their families.” The plan calls for raising tuition as much as 5 percent annually for five years. The increase would push undergraduate tuition to $15,564 a year by 2019 from $12,192 now. Napolitano said the money is needed to stabilize volatile funding for a system that is an incubator of leaders for government, industry and Silicon Valley in California’s economy, the eighth-largest in the world.

UC tuition-hike plan advances, but debate just beginning -  -- University of California regents voted Wednesday to raise tuition annually for the next five years if the state doesn't give the system more funding, making an aggressive -- if wildly unpopular -- first move in a high-stakes state-funding fight. The answer to avoiding the dreaded fee hikes is simple, UC Regent Bonnie Reiss told state leaders who attended the Wednesday session to object to the move: "(Give) $97 million to UC, and we don't have to raise tuition. You have the power to do that." But her newly appointed colleague John Perez, a former Assembly speaker, said he had a problem with what he called UC's "hostage-taking posture," which he described as "Give us X or this is what we're going to do with our students. It's not the most effective way to go about it," he said.It appears to be the way UC is going. The 7-2 committee vote -- with only Gov. Jerry Brown and a student representative opposed -- sets up an almost certain approval from the full Board of Regents on Thursday. The increase plan would break a tuition freeze imposed by Brown and raise in-state undergraduate fees, now $12,192, by up to $600 next year alone and 5 percent annually in ensuing years, up to $15,560 in 2019.

Lower Education: How A Disgraced College Chain Trapped Its Students In Poverty: Not long ago, Amber Brown, a student at Everest University, saw an article on Facebook about one of the many lawsuits against her school. The story, she wrote to BuzzFeed News, “dumbfounded” her: It mentioned former students facing mountains of debt for their degrees, but that didn’t seem to apply to her. Brown believed that she was “on a 100% Pell Grant through the government” and didn’t owe a cent. Everest even paid for her books and her laptop, she wrote, and sent her a stipend check every semester. “Will I have to pay this back or am I one of the few students being treated genuinely by Everest University?” she asked. In reality, most of what Brown believed to be a Pell Grant was actually loans: A review of documents she provided showed she owes more than $26,000. Brown, 29, who lives in Kentucky and enrolled at Everest in 2011, has yet to learn that she is going into debt for her degree. (Her last name has been changed because she is a current student.) She no longer has a phone because she is unable to pay the bills, and she sent her student loan documents from a computer at a nearby food bank where she accesses the internet. She has since been hospitalized, unreachable by phone or email. Like thousands of other students, Brown has fallen victim to a predatory lender that exploits the aspirations of the poor and disadvantaged. She had good reason to trust Everest Colleges and Universities and its representatives: It is a nationally accredited college, plugged into the government-backed student loan system that pays for the education of millions of students each year. But for thousands of desperate and financially unsophisticated students at Everest, that trust was deeply misplaced.

What Do College Undergrads Spend Their Student Loans On: High-School Classes -- Over the weekend we closed the chapter on the "mystery" of America's collapsing labor force and the record 90+ million Americans out of the labor force. As Pew reported, confirming what we had said all along, it has little to nothing to do with Boomers retiring - simply because under ZIRP they can't afford to retire - and everything to do with Millennials staying in school because they can't find the well-paying jobs they had expected, raking up $1.2 trillion (and exponentially rising) in government-funded student debt in the process. While the impact of the student loan bubble on the labor participation rate has been extensively covered in the past, there is a just as important question of just what these "students" spend their money on. Among the items revealed: "A U.S. Middle District Court indictment alleges that Price spent much of the loan money on crack cocaine, cars, motorcycles, jewelry, tattoos and video games." And iPhones of course, because someone has to indirectly provide US subsidies to the NSA's favorite company. Now we know one more thing that America's young adults, of whom some 24% expect that their debt will ultimately be forgiven, are blowing Uncle Sam's debt on. The answer: high-school level classes. According to the WSJ, "college students are increasingly spending federal financial aid and taking on debt for high school-level courses that don’t count toward a degree, despite mounting evidence the courses are ineffective and may contribute to higher dropout rates."

Average Student Loan Debt Rises, Tops $30,000 In 6 States - Student loan debt rose 2% from 2012 to 2013, and in six states, the average student loan burden surpassed $30,000, according to a new report by The Project on Student Debt, an initiative of The Institute for College Access & Success (TICAS), a nonprofit organization working to make higher education more affordable. In 2013, 69% of graduates from both public and nonprofit colleges emerged with student loan debt. (So few for-profit colleges reported the debt burden of their students that they were excluded.) At public and nonprofit colleges, average student loan debt increased to $28,400 in 2013, from $27,850 in 2012, with the state averages ranging from as low as $18,650 to as high as $32,800. High-debt states were concentrated in the Northeast and Midwest, as in previous years, and low-debt states were clustered in the West and South. (See lists below.) Private loans made up about one-fifth (19%) of the Class of 2013’s debt. Such loans typically charge higher interest rates and offer fewer consumer protections and worse repayment options than federal loans. For instance, private loans often lack features such as unemployment deferment, income-driven repayment, and loan forgiveness. Because private loans are most common at for-profit colleges, with 41% of their seniors graduating with private loans in 2012, this report likely understates the overall burden of private loans.

Kentucky Teachers' Retirement System seeks new pension bond: . – The Kentucky Teachers' Retirement System is proposing that the state issue a new bond to help shore up underfunded teacher pensions. Officials from KTRS will present the proposal to lawmakers on the Interim Joint Committee on State Government on Wednesday afternoon. An official said last week that the plan will center on using existing revenue streams that will soon become available once the state retires debt service on older bonds. According to the 2013 valuation, KTRS faces more than $13.8 billion in unfunded liabilities and has only 52 percent of the money it needs to pay out pension benefits in coming decades. The system has asked the state to provide around $400 million in additional funding each year to keep the system solvent. Meanwhile, Randy Wieck, a U.S. history teacher at duPont Manual High School in Louisville, has filed a lawsuit demanding that KTRS do more to seek funding and communicate its financial problems with members.

Pension pain: TVA retirement plan $4.8 billion underfunded --  TVA boosted its net income and employee pay while paying down its debt in fiscal 2014. But for all its financial success, the federal utility failed to close a $4.8 billion shortfall in the pension program for nearly 36,000 current and retired TVA employees and their families. In fact, under an updated calculation made in 2014 to reflect the lower interest rate environment, TVA's underfunded pension plan appears to have gotten even worse in the past year. "Most companies are increasing their pension funding levels, and it is very disturbing that TVA is going in the other direction," said Dan Pitts, a TVA retiree who works as an independent financial services broker in Knoxville. "With the improvements we saw in the investment markets this year, you would have expected to see better improvement, even if you change the discount rate assumption for future earnings. TVA simply needs to put more money into the fund." Pitts compared the employee pension funds of seven major electric utilities last year in a study for the trade publication Pension and Investments. TVA had the worst funded pension among those utilities. TVA insists it has adequate reserves to pay out all of the promised benefits. But in its annual financial report released Monday, TVA disclosed that its retirement plan had only 61 percent of the amount actuaries estimate it needs to fully fund future obligations. A year ago, the plan was 63 percent funded. Two years ago, the fund was only 59 percent funded.

Hawaii's $8.5 billion in unfunded retirement liabilities, a national trend: — A new report from State Budget Solutions, a national nonprofit organization focusing on states’ fiscal responsibility, warns it’s time for newly elected state officials in Hawaii and throughout the country to address unfunded liabilities in the retirement system. The share of Hawaii’s $30-billion unfunded liability per resident is $21,852, the seventh highest in the nation, said Joe Luppino-Esposito, the study’s author. He said Hawaii’s Employees’ Retirement System is only 29 percent funded because the state isn’t putting enough money into the system to pay future promised benefits. The unfunded liability amounts to 41 percent of the state’s gross domestic product. State officials paint a different — if still grim — picture, showing the pension system as 60 percent funded. The translation in real dollars is $8.5 billion. That’s a major discrepancy from the SBS $30 billion estimate. The main difference, Luppino-Esposito said, is the discount rate used. That’s the rate that determines how much money is needed today to have enough revenues in the future to meet obligations to retirees. Hawaii uses a 7.75 percent discount rate, assuming the plan will average 7.75 percent investment growth over time, a number Luppino-Esposito said “is far too high.”

Wall Street is Taking Over America's Pension Plans - Wall Street spent upwards of $300M to influence the election results. And a key part of its agenda has been a plan to move more and more of the $3 trillion dollars in unguarded government pension funds into privately managed, high-fee investments — a shift that may well constitute the biggest financial story of our generation that you’ve never heard of.Illinois, Massachusetts, and Rhode Island all recently elected governors who were previously executives and directors at firms which managed investments on behalf of state pension funds. These firms are now, consequently, in position to obtain even more of these public funds. This alone represents a huge payoff on that $300M investment made by the financial industry, and is likely to result in more pension money going into investments which offer great benefits for Wall Street but do little for the broader economy. But Wall Street’s agenda goes beyond any one election cycle. It has been fighting to turn public pensions into private profits for quite some time, steering retirement nest eggs into investments that are complex, charge hefty fees, and that generate big profits for management firms. And it has been succeeding. Of the $3 trillion in public assets currently in pension funds throughout the country, almost a quarter of that has already found its way into so-called “alternative investments” like hedge funds, private equity and real estate. That translates to roughly $660 billion of public money now under private management, invested in assets that are often arcane and opaque but that offer high management and placement fees to Wall Street financiers.

Pension Benefit Guarantee Corporation is Heading into a "Perfect Storm" --One interesting thing I've noticed after my nearly two-year break from blogging is how some of the worst economic news these days gets reported in such a hum-drum manner. You would think that a story as big as a near doubling of the Pension Benefit Guarantee Corporation's annual deficit would generate a huge amount of coverage given that the agency is all that stands between over 40 million retirees and the poor house. But no, you'd be forgiven if you missed it given that CNBC gave it exactly FOUR short paragraphs on its website:   The federal agency that insures pensions for about 41 million Americans saw its deficit nearly double in the latest fiscal year. The agency said the worsening finances of some multi-employer pension plans mainly caused the increased deficit.At about $62 billion for the budget year ending Sept. 30, it was the widest deficit in the 40-year history of the Pension Benefit Guaranty, which reported the data Monday. That compares with a $36 billion shortfall the previous year. Multi-employer plans are pension agreements between labor unions and a group of companies, usually in the same industry. The agency said the deficit in its multi-employer insurance program jumped to $42.4 billion from $8.3 billion in 2013. By contrast, the deficit in the single-employer program shrank to $19.3 billion from $27.4 billion.

Social Security and Paid-Up Workers -- Americans are living longer and retiring earlier. But how, as an individual or as a country, can you finance a 30-year retirement with a 40-year career? Stanford Professor John Shoven recently visited UCSD and presented some interesting policy suggestions. Professor Shoven noted that the current structure of Social Security in some cases amounts to a pure tax on those who work for more than 35 years in order to transfer those funds to individuals who retire early. He suggested that one change we should consider would be to recognize the status of “paid-up workers.” The idea is that if you’ve already put in 40 or more years of paying into Social Security, at that point your personal Social Security bill would be declared to be paid in full, and neither you nor your employer would be asked to make any more Social Security contributions for as long as you continue working. This would create more incentive for older citizens to keep on working and for employers to want to hire them.  I am deeply skeptical of claims that any cut in tax rates could actually produce an increase in tax revenue. But there is at least some offset in this case. If some people work longer than they otherwise would as a result of Shoven’s proposed change, while there would be less Social Security taxes collected from those individuals and their employers, the IRS would collect future income tax from those people that they otherwise would not get. And a number of academic studies (e.g., [1], [2], [3], [4], [5]) have concluded that the decisions of individuals to keep working in their later years can be quite sensitive to their take-home wage, meaning that the income-tax offset could be significant.

Health benefits debate hits Harvard -- Lots of colleges and universities have recently made changes to employee health care benefits, and some have encountered strong opposition from the faculty -- most notoriously at Pennsylvania State University, which tried to fine employees for not completing annual screenings with personal questions about mental health and family planning. Most of the Penn State plan was abandoned amid faculty outcry, but key components remained; there, and in most cases, administrators have said at least some benefits changes are necessary, pointing to ballooning health care costs, concerns about complying with the Affordable Care Act, and budget woes. But what about the wealthiest institution in the world? Does it really have to overhaul the benefits it offers faculty? That’s what professors at Harvard University are asking – and protesting. Last week, Harvard’s Faculty of Arts and Sciences – its most powerful faculty, according to the university’s governance structure – voted unanimously to ask President Draw Faust and the Harvard Corporation to halt planned changes to non-unionized employee benefits, including the introduction of coinsurance. Starting in January, faculty and non-unionized staff will have to shoulder annual deductibles of $250 per person, or $750 per family, and coinsurance for up to 10 percent of costs for hospital stays and other non-routine care. The annual out-of-pocket maximum is $1,500 for individuals and $4,500 for families.  The university has argued that in return for the changes, all employees’ monthly premiums will go down. For the first time, there is also an additional high-deductible plan linked to a health care savings account to give faculty members more flexibility. But faculty critics say the monthly premium decrease is nominal, and that the sudden introduction of coinsurance leaves the most vulnerable among them in a bind (currently, office visits cost $20 and emergency room visits cost $75). They say junior faculty members – especially those with children – and those with ongoing health concerns are especially at risk. And for everyone, they say, it’s a compensation – if not a pay – cut.

"Some Folks Lied" - How The Administration Fabricated Obamacare Enrollment Numbers -- Two months ago, to much fanfare by the progressive community, HHS, if not Dr. Jonathan Gruber, were delighted to report that as of August 15, Obamacare enrollment had hit 7.3 million sign ups, well above the 7.0 million goal. Then a week ago we learned that "projection mistakes were made" after the "Obama administration revised its estimate for Obamacare enrollment, now saying - with the bruising midterms safely in the rearview mirror - that it expects some 9.9 million people to have coverage through the Affordable Care Act’s insurance exchanges in 2015, millions fewer than outside experts predicted." Fast forward to today when moments ago Bloomberg reported, that "the Obama administration included as many as 400,000 dental plans in a number it reported for enrollments under the Affordable Care Act, an unpublicized detail that helped surpass a goal for 7 million sign-ups."

Back to the healthcare debate  -- As we all wait in dread for the day conservatives to take to the streets and start speaking in tongues when John Roberts lugubriously tells America that Obamacare needs a little congressional "fix" in order to be legal --- a "fix" which everyone knows is impossible under a Republican congress. It's a diabolically clever way for the Supremes to overturn the law without taking responsibility for it that you have to stand back in awe. (Just to be clear, I assume they will do this --- it will restore my faith in our system just a bit if they don't.)  This happened to us. My husband was on the road and got a kidney stone. He went to the ER which was (obviously) out of network. We ended up paying thousands of dollars out of pocket. We expected that the insurance company and the hospital would negotiate costs on our behalf but the insurance company told us we were on our own and the hospital told us to pay up. Now we buy extra travel medical insurance on top of our premiums when we travel --- yet another hoop to go through in order to stave off thousands of dollars in possible medical costs. It's not terribly expensive but it's a pain.  Oh, and by the way, the plan I bought last year through Covered California has been discontinued. So I have to go through the process again and possibly switch doctors and hospitals again. It's not the end of the world (and yes, it could have happened before Obamacare, although it never did) but it's a major pain. At this point I'm just marking off the years until I can get on the nation's single payer plan that works extremely well without all these complications. You know, the one they call Medicare.

Jonathan Gruber, ObamaCare, and “Stupid Voters”: It Couldn’t Happen to a Nicer Shill -- Schadenfreude is a dish best served, and MIT Professor and Larry Summers student Jonathan Gruber, who played a key (though conflicted) role in legislating both ObamaCare and ObamaCare’s precursor, RomneyCare, certainly had it coming. Here’s the YouTube where he calls the American voter stupid.  (There are other tapes[1], but this is the one that made the splash.) And here’s the transcript: JONATHAN GRUBER, OBAMACARE ARCHITECT: This bill was written in a tortured way to make sure that the CBO (Congressional Budget Office) did not score the mandate as taxes. If CBO scored the mandate as taxes, the bill dies. Okay. So it was written to do that. In terms of risk-rated subsidies, if you had a law that said healthy people are going to pay in — if you made it explicit that healthy people pay in sick people get money it would not have passed. Okay. Lack of transparency is a huge political advantage. And basically call it the stupidity of the American voter, or whatever, but basically that was really, really critical in getting the thing to pass, and, you know, it’s the second best argument. And I wish Mark was right, we could make it all transparent, but I’d rather have this law than not.  Predictably, Republicans clutched their pearls and headed for the fainting couch. I think this is the best, or at least the most orortund, quote: “The strategy was to hide the truth from the American people,” [Senator Jeff] Sessions said. “I’m not into this post-modern world where you can say whatever you want to in order to achieve your agenda [indeed not]. That is a threat to the American republic… This is far deeper and more significant than the fact that he just spoke.”

What’s a Tax? — Last week, a year-old video of MIT economist Jonathan Gruber sparked yet another Obamacare controversy. In the video, Gruber said, “This bill was written in a tortured way to make sure the C.B.O. did not score the mandate as taxes. If C.B.O. scored the mandate as taxes, the bill dies.” Opponents of Obamacare have predictably jumped on these statements, claiming that the Affordable Care Act was a fraud perpetrated on the American people by a clique of elitist snobs. This line of attack is premised on the idea that the individual mandate really is a tax, and that the Obama administration pretended that it wasn’t a tax in order to put one over on the American people. The first problem with this argument is that none of this was ever a secret. The Congressional Budget Office itself laid down the rules for what it would score as a tax, and the administration wrote the law to fit around those rules. These types of legislative maneuvers are everyday life on Capitol Hill. But there’s another, bigger issue here.  The word “tax” can be applied to a wide spectrum of government policies. At one extreme are things that just about anyone would consider a tax, like the individual federal income tax: because I work, I have to pay a certain portion of my income to the federal government; that money goes to pay for lots of different things, some of which I like, some of which I don’t like.Then what about Social Security? Social Security is funded by 6.2 percent of your gross salary, plus another 6.2 percent paid by your employer. But conceptually it’s no different from any other defined benefit plan: you are forced to pay money now in exchange for future benefits that will be determined by a formula and that you may never see (if you die too early). In the case of Social Security, you also get disability insurance. So why do most people call that 12.4 percent a “payroll tax”? There’s no good reason.

A Pundit Explains What's Wrong With Washington - Paul Krugman -- Or, actually, demonstrates by example what’s wrong with Washington. Matt Yglesias finds Ron Fournier saying this about health reform:On health care, we needed a market-driven plan that decreases the percentage of uninsured Americans without convoluting the U.S. health care system. Just such a plan sprang out of conservative think tanks and was tested by a GOP governor in Massachusetts, Mitt Romney. Instead of a bipartisan agreement to bring that plan to scale, we got more partisan warfare. The GOP resisted, Obama surrendered his mantle of bipartisanship, and Democrats muscled through a one-sided law that has never been popular with a majority of the public. The mind reels. How is it possible for anyone who has been following politics and, presumably, policy for the past six years not to know that Obamacare is, in all important respects, identical to Romneycare? It has the same three key provisions — nondiscrimination by insurers, a mandate for individuals, and subsidies to make the mandate workable. It was developed by the same people. I and many others have frequently referred to ObamaRomneycare.  Well, I’ve know for years that many political pundits don’t think that understanding policy is part of their job. But this is still extreme. And I’m sorry to go after an individual here — but for God’s sake, don’t you have to know something about the actual content of a policy you critique?

The Structure of Obamacare - Krugman - The big revelation of this week has been how many political pundits have spent six years of the Obama administration opining furiously about the administration’s signature policy without making the slightest effort to understand how it works. They’re amazed and in denial at the suggestion that it has the same structure as Romneycare, which has been obvious and explicit all along... So, why was Obamacare set up this way? It’s mainly about politics, but nothing that should shock you. Partly it was about getting buy-in from the insurance industry; a switch to single payer would have destroyed a powerful industry, and realistically that wasn’t going to happen. Partly it was about leaving most people unaffected: employment-based coverage, which was the great bulk of private insurance, remained pretty much as it was. ... And yes, avoiding a huge increase in on-budget spending was a consideration, but not central. The main point was to make the plan incremental, supplementing the existing structure rather than creating massive changes. And all of this was completely upfront; I know I wrote about it many times.  Look, I understand why the hired guns of the right have to act ignorant and profess outrage. But I really am shocked at centrists who apparently thought they could opine on the politics of health reform, year after year, without taking a hour or two to learn how the darn thing was supposed to work.

Another rude Obamacare surprise awaits -- Taxes are bad enough when you know they’re coming—and much worse when they arrive unexpectedly.  As the Affordable Care Act enters its second year of operability, a key and controversial element of the plan will begin to affect several million Americans for the first time. People who didn’t have health insurance during 2014 may soon have to pay a penalty fee that starts at $95 and goes up based on how much you earn. Some Americans know about the penalty, and they’ve budgeted for it or at least accepted its inevitability. But several million others could be in for a rude surprise when Washington assesses a fee they didn’t even know was coming.  The uninsured rate has fallen since Obamacare, as the ACA is known, went into effect at the start of  2014. But there are still roughly 40 million adult Americans who lack health insurance, according to Census Department data. A recent poll by Gallup shows that about 55% of the uninsured plan to get insurance, while 35% say they’re willing to pay the fine for not having coverage. That leaves 10% of the uninsured — 4 million people or so -- who appear to be unaware they need to have insurance or pay a penalty. Plus, some of the 55% who say they plan to get coverage inevitably won’t, including a portion who probably don’t know they’ll get stuck paying a penalty.

People Who Use Obamacare Sure Do Like It - Jonathan Cohn points us today to a Gallup poll with yet more good news for Obamacare. In a recent survey, the people who are actually using Obamacare gave it very high marks: 74 percent said the quality of health care they received was good or excellent, and 71 percent said the overall coverage was good or excellent. What's remarkable is that these numbers are nearly the same as those for everyone else with health insurance, which includes those with either employer coverage or Medicare. Here's the bottom line from Cohn: You hear a lot about what’s wrong with the coverage available through the marketplaces and some of these criticisms are legitimate. The narrow networks of providers are confusing, for example, and lack of sufficient regulations leaves some patients unfairly on the hook for ridiculously high bills. But overall the plans turn out to be as popular as other forms of private and public insurance. It’s one more sign that, if you can just block out the negative headlines and political attacks, you’ll discover a program that is working.

The ACA is working. So why is the opposition to it so strong and persistent? -- These are early days, but so far the Affordable Care Act is working. Rates of uninsured persons are down. Millions of people are enrolling. The Congressional Budget Office thinks that it will cost less than they originally projected. The Massachusetts Mortality Study showed that RomneyCare, the ACA’s model, is improving health outcomes (see discussion by Austin here, here, and here; Adrianna here; and me here, here, and here.)). And even seems to be working. Nevertheless, the ACA’s successes haven’t improved the public’s view of the ACA. The bill was always controversial and just barely passed Congress. However, proponents expected that as the bill was implemented and began to work, it would gain popularity. But instead it’s losing ground. Similarly, Gallup finds that more Americans think that they and their families will be harmed by the ACA than those who think they will benefit. So why is the law doing better and yet, to most people, looking worse? Here are two explanations. The first explanation is that a lot of Americans are misinformed about the ACA. They say they like what’s in the bill, but they don’t like the bill itself. To be clear: plenty of people know what’s in the law and oppose it for just that reason. But most of us don’t have a detailed knowledge of the ACA. And it seems that the less you know, the less you like it.   Let’s ask who wins and who loses on a cash basis as a result of the bill. The ACA does lots of things and one of them is to shift money around so that some people who were previously unable to afford health insurance can now pay for it. Henry Aaron and Gary Burtless estimated the net percentage income gains and losses for Americans as a result of the ACA for each decile of the income distribution. As you see, the ACA reduces the incomes of the top 80% and increases those in the bottom 20%.

U.S. Annual Healthcare Spending Is A Stunning $3.4 Trillion, Says Study -- As part of ongoing research into national healthcare spending, the Deloitte Center For Health Solutions recently published their findings based on health data from 2012. According to the new report, there’s an additional amount of healthcare consumer spending that isn’t included in the federal calculations (often referred to as the National Healthcare Expenditure or just NHE). The new Deloitte calculations represent out‒of‒pocket expenses by consumers and amount to an additional $672 billion for 2012.  By Deloitte’s accounting, this additional amount puts the NHE for 2012 at $3.46 trillion. These increases are expected to continue as employers shift to high-deductible offerings and individuals gain coverage through insurance marketplaces. The annually reported national estimates do not tell the whole story. Deloitte’s Center for Health Solutions has analyzed data from the Medicare Expenditure Panel Survey and other sources to develop a more complete picture of resources going to health care, including the out‒of‒pocket costs incurred by consumers. Dig Deep ‒ Impacts and Implications of Rising Out‒of‒Pocket Health Care Costs ‒ Deloitte Center For Health Solutions The Deloitte study suggests that the federal definition of out-of-pocket doesn’t include multiple direct costs to consumers and the largest single category of “imputed indirect costs associated with supervisory care.” In other words, the additional costs that consumers spend every years either directly or as caregivers for family members or friends with an illness. Deloitte believes these two categories combined equals $672 billion which should be added to the NHE figures.  Deloitte used this chart to help identify the additional out-of-pocket expenses and their relation to the NHE.

People Who Wanted Market-Driven Health Care Now Have it in the Affordable Care Act, by Alice M. Rivlin -- As the Affordable Care Act moved into its second open enrollment period on Nov. 15, critics seized on the fact that some beneficiaries are in for unpleasant surprises. Some of those who enrolled last time will face higher premiums if they stay with their current plans. They will have to shop around on the exchange to find a plan with a lower price. When they return to the Web site, they are likely to find more plans to choose from than they did last year. More choices - how confusing! When shoppers find a cheaper plan, they may find they have to pay more of their health-care bills out of their own pockets. The cheaper plan may also have a narrower network of providers. If they want to stick with a more expensive doctor or hospital, they might have to pay more. If they opt for the higher costs and are eligible for a federal subsidy, they will find that the subsidy will leave more of their premiums uncovered than it did last year. But wait a minute: Isn't that how markets are supposed to work? The United States never adopted a simple national health plan to cover everyone. Instead, we have relied primarily on employer-based health insurance, generously favored by tax laws. In 1965, we covered older people by enacting Medicare and lower-income people by enacting Medicaid. But there was a huge hole: Millions of people were left out of employer-based coverage and were not old enough or poor enough to qualify for the public programs. For 50 years, we have been arguing over how to fill that hole. Meanwhile, health care became more effective but also more expensive, and the number of people without coverage grew.

Americans put health insurers on the hate list - CBS News: There are some industries that Americans love to hate. This year, health insurers have joined the club. They've hit a 10-year low in customer satisfaction, ranking the industry alongside the much-hated airlines and cable companies, according to a new report from the American Customer Satisfaction Index. Interestingly, individual policies -- those consumers buy on their own behalf -- maintained a stable rating, but group policies suffered a bit hit, according to the ACSI Finance and Insurance Report. The findings reflect widespread displeasure with health insurance provided through employer-sponsored programs, which remains the most common type of health insurance, covering about 45 percent of Americans. Rising health care costs, as well as employers shifting more of that burden onto their workers, may be largely to blame, on top of a lack of choice,. The plunge in satisfaction "is really about the management of cost. It's about the amount employers are kicking in,"insurance, covering about 45 percent of Americans. Rising health care costs, as well as employers shifting more of that burden onto their workers, may be largely to blame, on top of a lack of choice.   The plunge in satisfaction "is really about the management of cost. It's about the amount employers are kicking in," The 150 million Americans who receive health insurance through their employer or their spouse's employer are not only paying more for health coverage but their deductibles are also on the rise, according to a September report from the Henry J. Kaiser Family Foundation.  Employees now contribute about $4,823 annually for family coverage, a jump of more than 80 percent since 2004, when they contributed $2,661. Over the same period, employers' contributions rose only 69 percent.  Deductibles have reached an average of $1,217, a rise of 47 percent from 2009, the Kaiser study found.

Soaring Generic Drug Prices Spark Backlash: Some low-cost generic drugs that have helped restrain health care costs for decades are seeing unexpected price spikes of up to 8,000 percent, prompting a backlash from patients, pharmacists and now Washington lawmakers. Members of the Senate meet Thursday to scrutinize the recent, unexpected trend among generic medicines, which are copies of branded drugs that have lost patent protection. They usually cost between 30 to 80 percent less than the original medicines. Experts point to multiple, often unrelated, forces behind the price hikes, including drug ingredient shortages, industry consolidation and production slowdowns due to manufacturing problems. But the lawmakers convening Thursday's hearing, led by Vermont Senator Bernie Sanders, say the federal government needs to do more to bring down prices. "These companies have seen the opportunity to make a whole lot of money and are seizing that opportunity," said Sanders, who chairs the Senate Subcommittee on Primary Health and Aging.  "There is no rational economic reason for prices to go up 1000 percent," he said. One strategy Sanders favors: requiring generic drugmakers to pay rebates to the federal Medicare and Medicaid drug plan when the prices of their medications outpace inflation. Those payments are already mandatory for branded drugs, but have never applied to generics.

Got Milk? Might Not Be Doing You Much Good -- Almost no one will dispute that when a baby is born, breast milk is the best nutrition a mother can provide. All mammals nurse their young, and breast milk benefits a newborn infant in ways above and beyond nutrition.  More and more evidence is surfacing, however, that milk consumption after childhood may not only be unhelpful, it might also be detrimental.   But if you believe the advertising of the dairy industry, and the recommendations of many scientific bodies, they are missing out on some fantastic benefits to milk consumption: that milk is good for bones, contains calcium and vitamin D, and “does a body good.”There’s not a lot of evidence for these types of claims. In 2011, The Journal of Bone and Mineral Research published a meta-analysis examining whether milk consumption might protect against hip fracture in middle-aged and older adults. Six studies containing almost 200,000 women could find no association between drinking milk and lower rates of fractures.  More recent research confirms these findings. A study published in JAMA Pediatrics this year followed almost 100,000 men and women for more than two decades. Subjects were asked to report on how much milk they had consumed as teenagers, and then they were followed to see if that was associated with a reduced chance of hip fractures later in life. It wasn’t. A just-released study in The BMJ that followed more than 45,000 men and 61,000 women in Sweden age 39 and older had similar results. Milk consumption as adults was associated with no protection for men, and an increased risk of fractures in women. It was also associated with an increased risk of death in both sexes.

Malpractice and Malfeasance: Ignore her delirium -- just shut the old lady up -  Sylvia Kronstadt -- As I walked down the hall of the dementia ward to have breakfast with my mother on Sunday, Nov. 9, I heard screams, sobs and moans. When I entered her room, she was pointing at the ceiling crying, "No! No!" When I bent over to hold her, she began yelling in an indistinguishable language, grasping my blouse and pulling me close to her face. "AHHHHH, AHHHH," she shrieked. She clutched her distended abdomen and grimaced, She was crying, but then she suddenly stopped, looked startled for a moment, and then began laughing in a shrill, Wicked Witch of the West fashion. "You," she said. "Oh honey!" She pulled me down onto the bed with her, and I held her while she jerked and trembled.   Here we go again. I had seen delirum before, and I had no doubt that my mother was in the acute phase of this disturbing condition. If it's treated early enough, it can be resolved within 8-12 hours.     But thanks to the apathy, cynicism and incompetence of the staff at this $74,000 a year facility, that's not what happened. Now, 11 days later, she is in the hospital, pouring gargantuan blood clots out of her rectum. "End of life" options are on the table. There may well be charges of negligent homicide if she isn't saved.

Stayin' Alive: Hospice flourishes, serving the profiteers by "caring for" those who die at a leisurely pace - sylvia kronstadt - The young lady in the Hospice for Utah shirt was giddy and shameless. She and her fellow employees were in the process of buying the "death with dignity" hospice business from the charismatic and energetic founder, Cathryn "Kit" Jackson, for $10 million. Pretty soon this lucrative operation would be all theirs, and the sky would be the limit, she told me two months ago.   "Where are you getting the funds to buy the company?" I asked the pleasant-faced Hospice girl.  "That's what's so great," she said. "Every quarter, we get to split up the left-over money. You know: the allotment that Medicare sent us to take care of the clients. We get that, plus our salaries! If we didn't keep the leftovers for ourselves, we'd have to send it all back to the government.  Kit's already rich, and now we've got a shot too." Kit, who is an admirable, enlightened person in many ways, is now content to bake cookies with her grandkids or ski the Alps, her website says. Even though I knew from my previous investigations that the vast majority of hospice firms are for-profit, it had never occurred to me that the profit they make consists of money disbursed  for patient care that is not spent for patient care. That should have been obvious, but I still find it shocking. The incentive to spend as little as possible on patient care is built into the system. More stupidity! Can't the government get anything right?  This is the story of how a compassionate, progressive concept morphed into one of the most fraudulent  (and painfully disappointing) (and profitable) enterprises in our economy.

Doctor Being Treated for Ebola in Omaha Dies -  A surgeon who contracted Ebola while working in Sierra Leone, Dr. Martin Salia, died Monday while being treated in a biocontainment center in Omaha.“We used the maximum amount of supportive care and every advanced technique available in an effort to save his life,” said Dr. Jeffrey P. Gold, chancellor of the University of Nebraska Medical Center.“We are reminded today that even though this was the best possible place for a patient with this virus to be, that in the very advanced stages, even the most modern techniques that we have at our disposal are not enough to help these patients once they reach the critical threshold,” Dr. Gold said. Dr. Salia, who is a citizen of Sierra Leone but lives in Maryland, had been working as a general surgeon at Kissy United Methodist Hospital in Sierra Leone’s capital, Freetown. It was not clear where he had come in contact with Ebola patients, though hospital officials said he worked in an area with many Ebola cases. Five other doctors in Sierra Leone have contracted Ebola; all have died.A hospital spokesman, Taylor Wilson, said that Dr. Salia died about 4 a.m. Monday. He came down with symptoms of the virus on Nov. 6 but initially tested negative. It is not uncommon for people tested in the early stages of the disease to get a false negative. His symptoms persisted and he tested positive a week ago.Dr. Salia arrived in Omaha on Saturday, 13 days into the course of the disease. His kidneys had already failed and he was breathing with great difficulty, said Dr. Daniel W. Johnson, the director of critical care at the Omaha hospital.

Brooklyn Woman On Ebola Monitoring List Drops Dead Bleeding From "Face, Mouth, Nose" -- Just a week after Dr. Craig Spencer was declared 'Ebola-free', The Daily Mail reports a woman, who had arrived from Guinea 18 days ago (and was on the NYC Ebola monitoring list), dropped dead in a Brooklyn hair salon this afternoon. FDNY sent their Special Operations and Hazmat units but she was declared dead at the scene. Witnesses said she was bleeding from the "face, nose, mouth, everything." As The Daily Mail reports, There are new fears of a possible Ebola outbreak in New York City after a woman dropped dead on Tuesday afternoon. FDNY activated the Special Operations and Hazmat units after the the woman, who had recently traveled from Guinea according to a source on the scene, died at Amy Professional African Hair Braiding in Brooklyn.  He then said he ran in there to find a woman laying on the floor.  When asked what she was bleeding from, Costa said, 'face, nose, mouth, everything.'

India quarantines man over Ebola sex risk: India has quarantined a man who was cured of Ebola in Liberia because of the possibility that he may spread the virus through sex. The man tested negative for Ebola in standard checks when he arrived at Delhi airport. However, officials said he was being quarantined because the virus was still present in his semen - and could be transmitted by the "sexual route". Ebola has killed more than 5,000 people this year, mostly in West Africa. Most of the cases in the latest outbreak - the deadliest ever - have been recorded in Liberia, Guinea and Sierra Leone. Men who have been successfully treated for the disease are advised against having sex - or to make sure they use a condom - because their semen can still carry traces of the virus for up to 90 days after they have been cured. The Indian Health Ministry said the man, a 26-year-old Indian national, had arrived in the country on 10 November. He had been carrying documents with him that stated he had been successfully treated for Ebola in Liberia. He was tested for the disease according to the guidelines of the World Heath Organization (WHO). No traces of the virus were found - effectively confirming that he had been cured. According to a government press release, however, the man was isolated at Delhi airport "as a matter of abundant caution". Semen samples were then taken, which tested positive for the virus.

US commander 'optimistic' Ebola war being won— The commander of U.S. troops in this West African nation is "cautiously optimistic" the war on Ebola is being won but says hard work remains to halt the spread of the deadly virus. "People start to see the progress that's been made and they say, 'Well, Liberia is good to go,' " Maj. Gen. Gary Volesky told USA TODAY in a wide-ranging interview at his headquarters here. "(But) we've got 20 brand-new cases every single day, and we're going to continue to put our foot on the accelerator until we get this thing out of Liberia." The rate of infection in Liberia has leveled off in recent weeks, but cases in nearby Sierra Leone and Guinea continue to climb, and Mali reported an outbreak last week. The epidemic has killed more than 5,000 in West Africa, about half of those in Liberia alone. The persistent stream of new infections plaguing Liberia is largely occurring in rural areas that lack Ebola treatment centers the U.S. military is helping to build, Volesky said. "There's a lot of work left to do in Liberia." In addition to building or supporting up to 17 new treatment centers, the U.S. military is training health care workers to staff them and is testing blood samples more rapidly for diagnoses.

Ebola Response in Liberia Is Hampered by Infighting - The global response to the Ebola virus in Liberia is being hampered by poor coordination and serious disagreements between Liberian officials and the donors and health agencies fighting the epidemic, according to minutes of top-level meetings and interviews with participants.Even now, three months after donors began pouring resources into Liberia, many confirmed cases still go unreported, countries refuse to change plans to erect field hospitals in the wrong places, families cannot find out whether their relatives in treatment are alive or dead, health workers sent to take temperatures sometimes lack thermometers, and bodies have been cremated because a larger cemetery was not yet open. The detailed accounts of high-level meetings obtained by The New York Times, the most recent from Monday, lift the veil on the messy and contentious process of running the sprawling response to Liberia’s epidemic, one that now involves more than a hundred government agencies, charities and donors from around the world. Despite these problems, with help from donors, Liberia, one of the three most afflicted West African countries, and the one with the highest death toll, has seen new cases drop to about 20 a day from about 100 a day two months ago. Experts attribute that to fearful Liberians touching one another less, more safe burials of bodies and distribution of protective gear to health care workers. But they also warn that cases are now holding steady and could explode again.

Ebola Could Hit Global Economy, G-20 Leaders Warn - WSJ —World leaders have warned West Africa’s worsening Ebola outbreak could have a serious impact on the global economy, as well as being a humanitarian disaster, calling for greater international efforts to combat the spread of the virus now blamed for more than 5,000 deaths. Leaders including U.S. President Barack Obama and China’s Xi Jinping , meeting at a summit of the Group of 20 major economies in Australia this weekend, said they were prepared to do anything necessary to extinguish the outbreak and address its economic and humanitarian costs, backing a financial relief package for the hardest hit countries from the International Monetary Fund, or IMF, and the World Bank. “We invite those governments that have yet to do so to join in providing financial contributions, appropriately qualified and trained medical teams and personnel, medical and protective equipment, and medicines and treatments,” the leaders said in a joint statement. The World Health Organization estimates more than 5,100 people have died from Ebola cases, mostly in the hardest-hit countries of Guinea, Liberia and Sierra Leone. The U.S.-based Centers for Disease Control and Prevention in September released worst-case modeling warning that unless new measures are adopted to counter the virus, between 550,000 people and 1.4 million people could be infected by mid-January in Liberia and Sierra Leone. The U.S. president, in an address to an Australian university on the sidelines of the G-20 summit Saturday, said the world should not try to deal with the crisis by closing down borders and introducing tighter screening controls.

Economic consequences of Ebola: The ignorance epidemic | The Economist: SAFARI tents remain zipped, hotel pools are empty, game guides idle among lions and elephants. Tour operators across Africa are reporting the biggest drop in business in living memory. A specialist travel agency,, says a survey of 500 operators in September showed a fall in bookings of between 20% and 70%. Since then the trend has accelerated, especially in Botswana, Kenya, South Africa and Tanzania. Several American and European agents have stopped offering African tours for the time being. The reason is the outbreak of the Ebola virus in west Africa, which has killed more than 5,000 people. The epidemic is taking place far from the big safari destinations in eastern and southern Africa—as far or farther than the homes of many European tourists (see map). There are more air links from west Africa to Europe than to the rest of the continent, whose airlines have in any case largely suspended flights. Moreover Ebola is hardly the biggest killer disease in Africa (AIDS and malaria are bigger). Yet, in the mind of many visitors, all of Africa is a single country. One despairing tour operator calls it an “epidemic of ignorance”. Directly and indirectly, tourism accounts for almost 10% of sub-Saharan Africa’s GDP and pays the salaries of millions of people. The industry is worth about $170 billion a year. In 2013 more than 36m people visited Africa, a figure that had been growing by 6% per year. Now many safari lodges are closer to extinction than the animals that surround them. Redundant workers might eventually turn to poaching

Bird Flu Confirmed at Dutch, UK Farms - — The Dutch government on Sunday banned the transport of poultry and eggs throughout the country after confirming an outbreak of bird flu at a chicken farm.The Ministry for Economic Affairs said the outbreak is deadly to poultry and can also be transmitted to humans. Spokesman Jan van Diepen said the exact strain of bird flu has not yet been established.All 150,000 chickens at the farm in Hekendorp, 65 kilometers (40 miles) south of Amsterdam, were being slaughtered. It was not clear how the farm became infected.As well as halting the movement of poultry, other birds and eggs nationwide for 72 hours, the government is imposing other restrictions, including banning the transport of byproducts such as poultry manure and hay that have been used in poultry farms.Also Sunday, British authorities confirmed a case of bird flu at a duck breeding farm in Yorkshire in northern England.Officials have not confirmed the strain of the virus, but said the risk to public health was very low and there was no risk to the food chain.A cull of all poultry at the farm was being carried out.

Bumble bee loss threatens food security - Futurity: Wild pollinators are just as important, and often more efficient, at pollinating crops than domestic honey bee colonies, but bumble bee colonies are vanishing. “This will be a surprise to the agricultural establishment,” says Rachael Winfree, professor of ecology, evolution, and natural resources in Rutgers’ School of Environmental and Biological Sciences, who was involved in the two new studies. “There’s a widespread assumption that domestic honeybees are doing the job. This work shows that’s not true.” The first study, published in Science, involved researchers from every continent but Antarctica, who visited 600 fields in which 41 varieties of crop were growing. About 75 percent of food crops require pollination, making pollinators an essential part of food security. The researchers found that almost half that pollination is the work of wild pollinators, primarily wild bees, flies, and other insects. The second study, published in Proceedings of the National Academy of Sciences, examines historical changes in the population of wild bees in the northeastern United States and southern Canada.  They found that wild bees as a whole had suffered some species losses but that these declines were moderate—about 15 percent of the more than 400 species over the 140 years. Bumble bee colonies, on the other hand, are disappearing. Since 1872, according to the PNAS study, the number of bumble bee species in the northeastern United States and southern Canada has declined about 30 percent.

Canadian, U.S. researchers tackle Great Lakes bee decline -  Bees, which are crucial to food security in the Great Lakes region, are declining in the northeastern United States and southern Canada, according to a recent study published by the American Association for the Advancement of Science. Bee pollination is necessary to produce crops in the region, including apples, blueberries, grapes and leafy greens. Bee pollination is responsible for $15 billion in increased crop value each year in the U.S., U.S. Department of Agriculture (USDA) data shows. “Bees play a key role in the productivity of agriculture through the pollination of fruits and vegetables,” according to the Honey Bee Research Centre at the University of Guelph in Ontario. “Honey bees have a crucial role in pollinating many of our staple crops. Without effective pollination we would face higher food costs and potential shortages.” Faculty and students at the university are investigating the effects of parasites and pesticides on the behavior and immune responses of honey bees.

Field of weeds: Could agriculture crisis crop up from herbicide resistance? - PBS NewsHour - Millions of acres of farmland in the U.S. have been affected by herbicide-resistant weeds, rendering some fields unable to be farmed. And the problem is spreading, which could mean more lost crops and lost profits. The EPA approved a new herbicide to be used with USDA-approved genetically modified seeds, but opponents have sued, warning it could harm the environment and human health. NewsHour Weekend's Megan Thompson reports.​

Monsanto settles with wheat growers over GM contamination -- On Wednesday, Monsanto announced that it had entered into a settlement agreement with farmers who suffered when land in the Pacific Northwest was contaminated with unlicensed genetically modified (GM) wheat last year. In May 2013, GM wheat developed by Monsanto was discovered on farmland in Eastern Oregon. The wheat had been engineered to resist herbicide applications but was never approved for commercial cultivation and was last trialled eight years before its discovery. The discovery led trade partners to suspend imports of US wheat until the US government was able to test for the GM wheat. Fearing that the suspensions would affect their businesses, several Oregon wheat growers took Monsanto to court in June 2013.  On Wednesday (12 November), Monsanto agreed to pay $2.13 million (£1.35m) into a settlement fund, which will go to farmers in Washington, Oregon, and Idaho who sold soft white wheat between 30th May and 30th November 2013, albeit "without any admission of liability" for the contamination. The Missouri-based agribusiness also agree to pay some of the plaintiffs' legal fees and $250,000 (£159,000) to wheat growers' associations, of which $100,000 will go to the National Wheat Foundation, and $50,000 each to the Washington Association of Wheat Growers, the Oregon Wheat Growers' League, and the Idaho Grain Producers’ Association.

Energy and the future of food | Eric Garza: This essay is about food. As human beings, we’re all engaged in a great game wherein we must exert effort to find food, to avoid starvation. If we excel at this game we’re graced with the privilege of survival; we live and grow, we raise children, we perpetuate our species. Because this essay is about food, it’s also about energy. All organisms sustain themselves by capturing metabolically valuable energy flows from their surroundings. That energy is then used to power the organism’s cells, organs and reproductive processes. Plants capture energy from sunlight, using it to turn carbon from the atmosphere into sugars via the process of photosynthesis. These sugars are the fuel that powers plant physiology, allowing these marvels to sprout, grow, flower and fruit. Animals capture energy by eating plants or other animals, digesting their tissues and using the resulting sugars, starches, fats, proteins and other biomolecules to power physiological processes. For plants and animals, food is energy. Food energy is never free. To acquire it, all animals and plants must expend energy. Plants must devote sugars and other metabolically valuable biomolecules towards the process of growth, always reaching upwards to avoid being shaded out by other plants so as to maintain their access to sunlight. They must also reach through the soil to gain access to new supplies of minerals. Animals search their surroundings for preferred foods, then defend it against their competitors.

Does global warming make food less nutritious? --“Humanity is conducting a global experiment by rapidly altering the environmental conditions on the only habitable planet we know,” reports Samuel Myers, a research scientist at the Harvard School of Public Health. Earlier this year, Myers and his colleagues released the results of a six year study examining the nutritional content of crops exposed to levels of atmospheric carbon dioxide (CO2) that are expected to exist by mid-century. The conclusions were indeed troubling. They found that in wheat grains, zinc concentrations were down some 9.3 percent and iron concentrations were down by 5.1 percent across the seven different crop sites (in Australia, Japan and the U.S.) used in the study. The researchers also noted reduced protein levels in wheat and rice grains growing in the CO2-rich test environment. According to Myers, the findings—published in June 2014 in the peer-reviewed journal Nature—are particularly troubling when one considers that some of the two to three billion people around the world who depend on wheat and rice for most of their iron and zinc already might not be getting enough of these essential nutrients. Zinc deficiency, which can exacerbate pneumonia, malaria and other health problems, is already linked to some 800,000 deaths each year among children under five. Meanwhile, iron deficiency is the primary cause of anemia, a condition that contributes to one in five maternal deaths worldwide.

High concentration of CO2 reduces man's intellectual abilities - Did you ever experience being at a lecture or a meeting in a room where you felt tired, your eyes were closing and no matter how hard you tried you could not concentrate? The reason did not have to be a boring subject or a mediocre lecturer – it is a common experience caused by high concentration of carbon dioxide in the air of a crowded and poorly ventilated conference room or a classroom. People exhale carbon dioxide. If the room is crowded, small and poorly ventilated, the concentration of carbon dioxide in the air grows. When in turn we inhale such air, the carbon dioxide contained in it gets dissolved in our blood and reacts with water to create carbonic acid [H2CO3], which, in turn dissolves into ions of hydrogen [H+] and bicarbonate [HCO3]. Increase in the concentration of hydrogen ions increases blood acidity and creates electrolyte imbalance, causing increased discomfort and decline in intellectual performance. We feel tired, numb and less capable of any mental or physical effort.  Studies show that while at elevated carbon dioxide concentrations we can effectively perform simple tasks, our ability to solve complex problems, strategic thinking and initiative quickly degrades. In the 2013 study, researchers from the University of Berkeley (Fisk et al., 2013, method description) conducted an experiment in which participants took part in a decision-making test - a computer game simulating the management of an organization experiencing a series of problems and crises. The test consisted of three parts, lasting 2.5 hours each, carried out in random order under identical conditions - except for the concentration of CO2, which was set to different levels of, respectively, 600 ppm, 1000 ppm and 2500 ppm. Researchers found that breathing air with a CO2 concentration of 1000 ppm causes a measurable decline in intellectual capacity. At a concentration of CO2 at the level of 2500 ppm, the initiative and strategic thinking of the participants has declined to a dysfunctional level. Similarly impaired was the ability of the participants to use the available information and the breadth of approach.

GM’s Latest Plan To Combat Climate Change: Protect Grass --Chevrolet, a unit of GM, will become the first company to purchase carbon credits in a new program administered by the U.S. Agriculture Department (USDA) in an effort to prevent natural grassland from being converted into cropland. GM is purchasing almost 40,000 metric tons of carbon credits from North Dakota ranchers, which will protect around 6,000 acres from large-scale crop development. Cropland conversion is a growing concern in the Midwest as commodity prices of staples like corn and soybeans rise along with their use in biofuels, Paul Schmidt, chief conservation officer with Ducks Unlimited, a conservation organization participating in the program, told the AP.Robert Bonnie, USDA’s undersecretary for natural resources and environment, is announcing the purchase at the USDA’s headquarters on Monday.  “Along with GM’s interest, our hope is there will be additional companies that will be interested in pursuing this,” Bonnie said Friday. He went on to say that it was important that the credits be “real” and that the government’s role in creating the methodology for valuing the credits was critical.

California’s Drought Gets Personal With Portable Showers, Rain Barrels, And Sewage Water -- While California’s ongoing drought may look like varying shades of red to those on the outside, as it settles into its fourth year the impacts are getting down and dirty. What once was experienced mostly in paltry precipitation numbers is now being felt in daily rituals and last month water and drought topped the list of Californian’s concerns for the first time since polling on the subject began in 1998.  On Tuesday, San Diego’s City Council voted unanimously in favor of a $2.5-billion plan to recycle wastewater in an effort to confront the drought and develop new, more sustainable sources of water supply. The city’s 1.4 million residents currently rely on imports from the over-allocated Colorado River and Northern California reservoirs for around 80 percent of their water supply. While the knee-jerk reaction to the notion of reusing sewage water is negative, the ongoing drought has worn down public opinion as well as helped educate citizens to the safety and overall benefits of wastewater recycling.  California and The Home Depot are collaborating to bring drought kits to low-income residents in northern California, with the first of these being to tribes along the northern coastline. About 2,500 of these kits — which include a low-flow shower head, faucet aerators, a garden hose nozzle with shutoff valve, toilet leak detectors, and a shower timer — have been distributed in the last month. Earlier this month the city of Los Angeles announced it was giving away 1,000 used Coca-Cola syrup barrels to be converted into rain barrels to collect precious precipitation for irrigating lawns and gardens. The city planned a slow rollout of the 45- and 55-gallon barrels over several weeks, but they were so popular that they were all claimed the first weekend. For residents still in need, the city then announced that they will offer a $100 discount for purchased barrels, which is expected to cover most of the cost.

Drought-stricken California town so dry, residents shower in church parking lot: — Hundreds of people living in a drought-stricken California farm town could soon be taking their first hot shower in months after county officials set up portable facilities in a church parking lot. Residents of East Porterville in the agricultural Central Valley must bring their own towel and soap, but the hot shower is free. Until now, many have been forced to bathe from buckets and drink bottled water. Andrew Lockman, manager of the Tulare County Office of Emergency Service, said Tuesday that officials were worried about residents taking sponge baths during the colder weather. “The poor certainly get poorer,” he said. “We’re trying to provide a safety net, a basic quality of life as people struggle through this disaster.” The county brought in 26 portable showers at a cost of $30,000 a month in the poor town with about 7,000 residents nestled against the Sierra Nevada foothills.  The wells in the area began running dry early this year, and Lockman said he knows of 600 households where people are taking sponge baths from buckets.

Dust Storms Again in the High Plains - A cold Arctic air mass swept southward across the high plains last Tuesday, its 50 mph winds dropping temperatures by 50 degrees overnight. Blowing over drought-parched farm soil, the wind created a huge dust storm in eastern Colorado, visible in striking photographs from aircraft and from space. The same region had seven dust storms last year. In 2012, a severe dust storm caused multiple traffic accidents in northern Oklahoma.  "You hear sand and dirt pounding against the window," said Colorado farmer Dave Hixson after a 2013 storm. "You know that it's your crop that's hitting the windows and blowing away, and it's not just affecting you, but also everyone else."  Wind takes nearly half the soil eroded from American farmlands. It does its worst in parts of the high plains, where agriculture is pushing its limits: eastern Colorado and nearby regions of Oklahoma and Texas, as well as North Dakota. East of the high plains, severe wind erosion affects the Red River valley of North Dakota-Minnesota. Unprotected soil blows away many times faster than it forms in these regions.  Dust  Wind rolls tiny clods along the ground to smash into other clods and release fine dust. It bounces smaller particles high in the air to impact a few feet downwind, stirring other particles and dust. The rolling and bouncing grains collect into drifts, sometimes forming dunes that can propagate downwind to smother undamaged cropland.

Utah may deprive NSA facility of all its water: “This is a bill about civil rights” - In what amounts to a pissing match on a national scale, a Utah state legislative committee will vote on a bill that could deprive a National Security Agency facility just outside Salt Lake City of its water, all in protest of the government agency’s collection of civilian data. Specifically, the bill prohibits municipalities from giving “material support or assistance in any form to any federal data collection and surveillance agency.”The Washington Post’s Reid Wilson reports:That’s a barely veiled reference to the Utah Data Center, a massive collection facility operated by the NSA in Bluffdale, a small suburb of Salt Lake City. The facility, completed last year at a cost of about $1.7 billion, houses super computers that require 65 megawatts of power, enough to power about 33,000 homes, according to the Associated Press. All those computers require a lot of water, which keeps them cool. Bluffdale issued $3.5 million in bonds to pay for water lines that will eventually pump a million gallons a day into the facility. Bluffdale signed an agreement with the NSA that allows the agency to pay less for water than city ordinances would otherwise require. The data center basically functions as a giant storage unit for phone calls, emails and online records culled and collected by the intelligence agency. The bill, proposed by Republican Congressman Marc Roberts would grandfather in that deal with Bluffdale, and when that deal expires, it would become forbidden to cooperate any further with the NSA. It would also prohibit other cities and water districts from signing new agreements with the government body, according to the Salt Lake Tribune.

Brazil's worst drought in 80 years from the air, in pictures

Earth’s Disappearing Groundwater -- NASA --With drought afflicting several parts of the world, and with aggressive use of groundwater in many agricultural regions, this precious water resource is under serious strain, warns NASA Jet Propulsion Laboratory hydrologist James Famiglietti. In a commentary published by Nature Climate Change in October 2014, Famiglietti wrote:  In many parts of the world, in particular in the dry, mid-latitudes, far more water is used than is available on an annual, renewable basis. Precipitation, snowmelt, and streamflow are no longer enough to supply the multiple, competing demands for society’s water needs. Because the gap between supply and demand is routinely bridged with non-renewable groundwater, even more so during drought, groundwater supplies in some major aquifers will be depleted in a matter of decades. The myth of limitless water and the free-for-all mentality that has pervaded groundwater use must now come to an end.  Most of the major aquifers in the world’s arid and semi-arid zones—the parts of the world that rely most heavily on groundwater—are experiencing rapid rates of depletion because of water use by farms. As shown in the chart above—based on data collected by the Gravity Recovery and Climate Experiment (GRACE)—this includes include the North China Plain, Australia’s Canning Basin, the Northwest Sahara Aquifer System, the Guarani Aquifer in South America, the High Plains and Central Valley aquifers of the United States, and the aquifers beneath northwestern India and the Middle East.

Ground water depletion driving global conflicts - NASA scientist - Global ground water supplies, crucial for sustaining agriculture, are being depleted at an alarming rate with dangerous security implications, a leading scientist said."It's a major cause for concern because most of the places where it (ground water depletion) is happening are major food producing regions," James Famiglietti, a University of California professor who conducts research for the National Aeronautics and Space Administration (NASA), said in an interview with the Thomson Reuters Foundation."India is the worst off, followed by the Middle East, and the U.S. is probably number three ... the Chinese, particularly on the north China plain, are more water limited than people believe."Famiglietti's conclusions are based on his latest research paper "The global ground water crisis" published in the journal Nature Climate Change last month.The study uses analysis of satellite images to warn that ground water in many of the world's largest aquifers is being exploited at a far faster rate than it can be naturally replenished.  Farming accounts for more than 80 percent of the United States' water use, according to the U.S. Department of Agriculture, and the figures are similar globally.Famiglietti has been called to the Pentagon a number of times to discuss the potential impact of groundwater scarcity with leading military planners. Water-related conflicts are already happening, he said, and security experts are bracing for more.

Plan for China’s Water Crisis Spurs Concern - North China is dying.  A chronic drought is ravaging farmland. The Gobi Desert is inching south. The Yellow River, the so-called birthplace of Chinese civilization, is so polluted it can no longer supply drinking water. The rapid growth of megacities — 22 million people in Beijing and 12 million in Tianjin alone — has drained underground aquifers that took millenniums to fill. Not atypically, the Chinese government has a grand and expensive solution: Divert at least six trillion gallons of water each year hundreds of miles from the other great Chinese river, the Yangtze, to slake the thirst of the north China plain and its 440 million people. The engineering feat, called the South-North Water Diversion Project, is China’s most ambitious attempt to subjugate nature. It would be like channeling water from the Mississippi River to meet the drinking needs of Boston, New York and Washington. Its $62 billion price tag is twice that of the Three Gorges Dam, which is the world’s largest hydroelectric project. And not unlike that project, which Chinese officials last month admitted had “urgent problems,” the water diversion scheme is increasingly mired in concerns about its cost, its environmental impact and the sacrifices poor people in the provinces are told to make for those in richer cities. Three artificial channels from the Yangtze would transport precious water from the south, which itself is increasingly afflicted by droughts; the region is suffering its worst one in 50 years. The project’s human cost is staggering — along the middle route, which starts here in Hubei Province at a gigantic reservoir and snakes 800 miles to Beijing, about 350,000 villagers are being relocated to make way for the canal. Many are being resettled far from their homes and given low-grade farmland; in Hubei, thousands of people have been moved to the grounds of a former prison.

Companies and water: Value diluted | The Economist: Water—its scarcity, quality and the regulations affecting it—is becoming a new corporate headache. A survey by CDP, a research firm that works for institutional investors, finds that in almost two-thirds of the world’s largest listed companies responsibility for dealing with water problems lies at board level. An increasing number of bosses say water is or will soon become a constraint on their firm’s growth. They are right to worry, but most firms are not doing much about the problem.  Shortages do not only affect those that use millions of gallons in their industrial processes (miners, say) or whose products are made of water (beer and soft-drinks makers). It also affects those whose inputs depend on the stuff (food companies) and, indirectly, almost all firms that do business in water-stressed countries, which include China. According to the CDP survey—sent to 2,200 firms—two-thirds of respondents think water risk could produce a substantial change in their business, mostly within three years. For example Diageo, a drinks firm, said the growth in its operations in Nairobi is likely to be constrained within five years by growing scarcity there. But not many firms make detailed assessment of such risks. General Motors says it requires all component suppliers to report the water risks they run. But 60% of respondents to CDP’s survey do not vet their supply chain. Every year, Lafarge, a French cement-maker, carries out a risk assessment of river basins in areas where it operates. But only 25% of companies do assessments at the watershed level.

Human-dolphin fishing cooperatives

  • 1. They have been reported to exist in Australia, India, Mauritania, Burma, and the Mediterranean, but the best known are in Brazil.
  • 2. In parts of southern Brazil, human fisherman have been cooperating with dolphins for many generations (of each species).
  • 3. If fishermen clap just the right way, dolphins will herd fish into the desired areas of fishermen, in muddy lagoon areas.
  • 4. The dolphins perform a distinctive kind of dive to signal to the humans it is time to cast the net for the fish.
  • 5. Only some individual dolphins are able (willing?) to do this well, perhaps the others belong to the forty-seven percent.
  • 5b. The dolphins which cooperate with the fisherman are also more social, more socially connected, and more cooperative with other dolphins.

Shipping Traffic Increases Fourfold Leading To Pollution Concerns -- Global ship traffic has exploded during the past two decades, likely bringing with it more air, water and even noise pollution, according to a new study by the American Geophysical Union. Using satellite data to estimate oceangoing transport, the Union estimated that the number of ships on the seas increased in every year covered by the study, from 1992 through 2012. It jumped by 60 percent between 1992 and 2002, then accelerated in the subsequent decade, reaching a peak of 10 percent annual growth in 2011, the study found. Total growth over the 20-year period was fourfold.   This growth in shipping occurred in every ocean throughout these 20 years except in waters off Somalia, where commercial shipping has come to a virtual halt since 2006 because of rampant piracy. The adjacent Indian Ocean, though, is the busiest area for maritime shipping, and there traffic grew by more than 300 percent during the study period. Tournadre said vessels powered by conventional fuels not only emit exhaust into the sea air, but also dump oil, fuel and waste into the water. And the noise of modern tankers and other commercial vessels is believed to be harmful to many species of marine mammals. The increase in maritime shipping has matched the rise in international trade in the past 20 years, and that has led to a parallel growth in the sizes of merchant fleets, according to the study, published Nov. 17 in the journal Geophysical Research Letters.

Hottest October And Year To Date On Record Globally, NOAA Reports  - It has been the warmest January-October on record and last month was the hottest October on record, the National Oceanic and Atmospheric Administration (NOAA) reported Thursday.  And while you wouldn’t know it from the cold temperatures in large parts of this country, NOAA’s “State of the Climate: Global Analysis,” projects that 2014 is almost certainly going to be the hottest year on record worldwide — probably by far. Land and sea surface temperature percentiles in October 2014. Hot spots in red. Click to enlarge. As the map shows, the oceans were especially warm. NOAA explains that ocean warming continues to blow records out of the water: The global oceans were the warmest on record for October, with a temperature that averaged 0.62°C (1.12°F) higher than the 20th century average. This marks the sixth month in a row (beginning in May 2014) that the global ocean temperature broke its monthly temperature record.

Sea surface temperature anomaly breaks September record -- "This summer has seen the highest global mean sea surface temperatures ever recorded since their systematic measuring started. Temperatures even exceed those of the record-breaking 1998 El Niño year," says Axel Timmermann, climate scientist and professor, studying variability of the global climate system at the International Pacific Research Center, University of Hawaii at Manoa. From 2000-2013 the global ocean surface temperature rise paused, in spite of increasing greenhouse gas concentrations. This period, referred to as the Global Warming Hiatus, raised a lot of public and scientific interest. However, as of April 2014 ocean warming has picked up speed again, according to Timmermann's analysis of ocean temperature datasets. "The 2014 global ocean warming is mostly due to the North Pacific, which has warmed far beyond any recorded value and has shifted hurricane tracks, weakened trade winds, and produced coral bleaching in the Hawaiian Islands," explains Timmermann. He describes the events leading up to this upswing as follows: Sea-surface temperatures started to rise unusually quickly in the extratropical North Pacific already in January 2014. A few months later, in April and May, westerly winds pushed a huge amount of very warm water usually stored in the western Pacific along the equator to the eastern Pacific. This warm water has spread along the North American Pacific coast, releasing into the atmosphere enormous amounts of heat -- heat that had been locked up in the Western tropical Pacific for nearly a decade. "Record-breaking greenhouse gas concentrations and anomalously weak North Pacific summer trade winds, which usually cool the ocean surface, have contributed further to the rise in sea surface temperatures. The warm temperatures now extend in a wide swath from just north of Papua New Guinea to the Gulf of Alaska," says Timmermann.

New study shows warm waters are melting Antarctica from below --- Just this week, a new study has appeared which describes a clever method for measuring the flows of ocean currents and their impacts on ice shelves. This study has identified a major mechanism for melting ice in the Southern Hemisphere.  The paper, co-authored by Andrew Thompson, Karen Heywood, and colleagues is very novel. The scientists used sea gliders to identify water flows that bring warm waters to the base of ice shelves in Antarctica. As I’ve written before, ocean currents are complex; you cannot neglect their impact on the Earth’s climate.  In some parts of the ocean, dense waters near the surface fall to the ocean floor and spread across the globe. In other regions, waters from the deep rise to the surface. Similarly, waters move horizontally and carry their heat with them. In some cases the surface waters and the mid-depth waters flow in different directions. But regardless of the direction of flow, these waters carry energy with them. This process, often called “advection,” results in a major redistribution of heat across the globe. Sometimes, warm waters flow into cold regions, transferring heat, and melting ice. It is this phenomenon that was at the center of the current paper.

At This Rate, The World Will Have To Cease All Carbon Emissions In 2040 To Stay Under 2°C - By 2040, the world will emit all the carbon it can afford while remaining within safe ranges of climate change, according to a report released last week. Scientists and policymakers have generally settled on 2°C as the amount of global temperature increase, over pre-industrial levels, the climate can take without creating truly dangerous upheavals. Because the effect of carbon in the atmosphere is cumulative, staying below that threshold requires a hard limit on the amount of carbon the world emits between now and 2100. We’ve already blown through a bit over half of that “carbon budget.” Last week’s World Energy Outlook 2014 from the International Energy Agency (IEA) projects that, on our current course, we’ll chew through the rest by 2040.  To remain under 2°C, all world carbon emissions would have to immediately drop to zero after that year, which of course they won’t. While IEA projects that renewables will grow aggressively between now and 2040, overtaking coal as the globe’s leading source of electricity, and that coal and oil use will effectively plateau by that point, fossil fuel use — and thus carbon emissions — will remain about 75 percent of the world’s energy consumption. That, according to IEA, puts us on course for roughly 3.6°C of global warming by 2100.  “By 2040, world energy supply is divided into four almost equal parts: low-carbon sources (nuclear and renewables), oil, natural gas and coal,” according to the IEA report’s press release. “In the central scenario, the entire carbon budget allowed under a 2°C climate trajectory is consumed by 2040, highlighting the need for a comprehensive and ambitious agreement at the COP21 meeting in Paris in 2015.”

Reinert Interview: Climate Change -- K. McDonald: What advice and cautions do you have for us regarding the subject of climate change?   Reinert: I worry about who the leading spokespersons are who are presuming authority on climate change. I worry about how too often it is nonexperts who have little understanding of energy who are the ones telling us what we need to do to prevent climate change. And, I worry about how well we can predict the future by extrapolating models because I’ve worked with models plenty in my life and I understand their limitations.  Lord Stern made cataclysmic predictions about climate change that didn’t come true. James Hansen speaks in a similar tone, and that concerns me. I see a lot of people who are the beacons of climate change and they are too often the people least prepared to discuss the science surrounding it..  I’ve done a lot of energy models, and, yes, we can curve fit and model the past, we can smooth out the curves and model carbon, but it is difficult to accurately predict the future from models. I’m worried about climate change and I think we need to address our use of carbon, and I think we’ve begun a hopeful downward trajectory. But while I’m very worried about the acidification of the oceans and the dying of the coral, I’m also worried about people who offer prescriptive remedies to address climate change who don’t understand the huge complexities within the energy systems and the unintended consequences that their often faulty prescriptions might have.

Top Republican bows to scientists on climate change - For too long, the country’s debate on climate change has been stuck on whether the phenomenon is happening at all, or on whether humans are responsible for it. As a Post editorial noted Monday, Republicans are mostly to blame for this, and key GOP leaders still seem unwilling to move the discussion forward now that they have won control of Congress.  It is in this dismal context that comments from Sen. John Thune (R-S.D.) on Fox News Sunday offer a glimmer of hope that at least some Republicans aren’t comfortable with their party’s role in the debate. Asked about the overwhelming agreement among experts on the cause and trajectory of global warming, Thune began with a familiar GOP climate-change dodge: “Climate change is occurring, it’s always occurring.” But then he said this: “There are a number of factors that contribute to that, including human activity. The question is, what are we going to do about it and at what cost?” In three sentences, the number-three Republican in the Senate admitted that human activity is affecting the climate and that this concern demands a policy response.

What New Deal Means For Obama And The CPC -- The New York Times reported that officials from the world’s largest two economies labored in secret for nine months to cobble the deal together. The fruit of their labors is impressive. Obama declared that the U.S. would cut its emissions by 26 to 28 percent by 2025 compared to 2005. The NYT correctly points out that, if successful, this would more than double the rate of reduction previously targeted for 2020. In return, China has made its greatest formal commitment to cut emissions, namely to see its peak carbon emissions level happen in 2030. Part of achieving this would see 20 percent of China’s energy come from renewables by the same year. Reactions to the deal were as varied as they were numerous. Bloomberg sought to chart who the deal would be most beneficial to, plumping for nuclear and shale. While these might seem unlikely winners when placed next to each other, if the deal stands, the U.S. will likely approve the construction of a raft of new nuclear power stations while dirty coal-powered plants will disappear, only to be replaced by gas-powered varieties. The latter option would also allow Obama and any future Democratic President a very powerful tool: the ability to fend off efforts by a hostile Congress to dismantle the climate change deal and by environmentalists to protest fracking. This particular balancing act could be done by pointing out that the shale gas boom is America’s most powerful engine of growth and that the targeted use of more natural gas will lead to an overall reduction in emissions.

Fact check: China pledged bigger climate action than the USA; Republican leaders wrong - This week, President Barack Obama and Chinese President Xi Jinping unveiled a secretly negotiated agreement for both countries to slow global warming by pledging to reduce carbon pollution. Specifically, President Obama pledged that the USA would cut its carbon pollution 26–28% below 2005 levels by 2025, while President Xi pledged that by 2030, Chinese carbon pollution will peak and 20% of the country’s energy will come from low-carbon sources.China has been developing rapidly with hundreds of millions of citizens rising out of poverty, thus demanding more energy. Much of that demand has been met with new coal power plants; China has added one and a half times the entire US coal power plant fleet in just the past decade. As a result, Chinese carbon pollution has been rising fast.  China could not meet its climate pledge by maintaining business-as-usual (BAU) and doing “nothing.” Quite the opposite; curbing those rising carbon emissions as China’s economy continues to grow will require substantial effort. That’s why President Xi also pledged that 20% of the country’s energy would come from low-carbon sources by 2030.  In comparison, the United States will have a relatively easy time meeting the pledge made by President Obama. US carbon pollution is already about 10–15% below 2005 levels and falling by about 1.5% per year. Achieving the target of 26–28% emissions cuts below 2005 levels by 2025 will only require continuing the current rate at which American carbon pollution is already falling.

4 reasons Republicans are losing their sh*t over the U.S.-China climate deal --Republican Senate Leader Mitch McConnell of Kentucky is not pleased about the historic joint announcement of planned carbon emission limits by the U.S. and China. McConnell has frequently complained that reducing our emissions is pointless if other countries won’t do the same. Just last month, explaining why the EPA’s proposed power plant regulations are all pain and no gain, he said, “nobody else is going to do that. The Indians and Chinese are building coal plants.”  Here are the four reasons why this deal bothers Republicans so much:

  1. Obama is throwing down the gauntlet. Republicans have been talking about forcing the president to drop the EPA’s proposed power plant regulations by attaching such a measure to a spending bill. Now Obama is saying in a big and public way that he’s not going to back down. Getting a global climate deal in Paris next December is what he hopes will be the crowning achievement of his second term.
  2. It takes away the “But we can’t do anything because China won’t” argument. Now their backup excuse about China’s inaction is out the window too, and they’re left grasping at straws.
  3. It’s another death knell for the coal industry. Exporting coal to China is supposed to boost the U.S. coal industry as American demand falls. But now the Chinese have decided they would rather be able to see sky instead of epic smog, so they are going to move away from coal and toward renewables. The fact that China is saying it’s willing to start that shift while it is still much poorer than the U.S. also sends a statement that even the authoritarian Communist Party cares enough about its citizens’ health to do what Republicans are unwilling to.
  4. Republicans are becoming internationally isolated, and it makes them look foolish. The European Union has long been ahead of the U.S. in carbon regulation. With China now on board, other developing countries might follow suit. Of the 10 biggest world economies, Russia is now the most intransigent. Do Republicans want to align themselves with Vladimir Putin? (Well, actually …).

U.S.-China Climate Pact Could Boost Indian Efforts: — This week's China-U.S. climate agreement between the world's top two polluting countries puts pressure on India, No. 3 on the list, to become more energy efficient and should encourage investment in renewable energy. But the pact is also a relief for India because it acknowledges the long-held view among developing economies that industrialized nations have been emitting heat-trapping gases for many more decades and so should shoulder more of the burden for tackling climate change. Emerging economies argue they should have fewer constraints to pollute as they grow. By showing the world's two largest economies are working together toward a common goal with different efforts, the breakthrough agreement signals greater global cooperation over the contentious issue. That eases tension that could help future global climate talks while also raising expectations for India to step up its efforts, experts and environmental activists say. "The international community will now expect India to make some firm commitments," said Jairam Ramesh, the former head of India's Environment Ministry. And if China and the United States are going to work to develop cheaper forms of renewable energy, that will expand the industry in ways that would benefit India.

India, China, And Other Developing Countries Agree To Talks To Phase Out A Potent Greenhouse Gas -- International talks to deal with a particularly potent greenhouse gas took a cautious step forward on Wednesday, as India and a host of other countries agreed to “informal discussions.” Under contention are hydrofluorocarbons (HFCs) — gases that, pound for pound, can trap up to a thousand times more heat than carbon dioxide when released into the atmosphere. HFCs came into common use after the late 1980s, after an international agreement called the Montreal Protocol phased out the use of another gas, chlorofluorocarbons (CFS), which were causing the hole in the ozone layer to expand. HFCs, by contrast, could serve the same purpose as CFCs — in technologies like refrigeration, air-conditioning, and so forth — without damaging the ozone. But once HFCs’ contribution to global warming was discovered, international talks began to phase out HFCs under the Montreal Protocol as well.  India, China, and other developing countries had opposed the move, with some suggesting HFCs should be dealt with in ongoing talks under the United Nations Framework Convention on Climate Change. But at a meeting of 180 countries in Paris this week, India, China, and a number of other developing countries partially relented. According to the Hindu BusinessLine, the agreement sets up “informal discussions on mechanisms for ensuring a sustainable phase-out of HCFCs in Article 5 countries as well as all issues in relation to management of HFCs for all parties and how to address HFC management in 2015.” Article 5 countries “include mostly developing nations,” according to the outlet.

U.S. Pledges $3 Billion To Developing Countries In The Global Fight Against Climate Change --On the heels of this week’s celebrated U.S.-China climate pact, the U.S. has pledged $3 billion to support the global effort to curb emissions and adapt to climate change.  The U.S. pledge to the Green Climate Fund (GCF), a new multilateral fund that will help developing countries shift to pathways of low-carbon and climate-resilient growth, is the largest national pledge to date. President Obama made the announcement Saturday, at the start of the G20 summit in Brisbane, saying that contributions to the GCF will allow developing countries to “leapfrog some of the dirty industries that powered our development [and] go straight to a clean energy economy that allows them to grow, create jobs, and at the same time reduce their carbon pollution.” Countries such as Germany, France, and Sweden led with significant commitments earlier this year. Shinzō Abe of Japan is also expected to announce a commitment during the summit this weekend, which reportedly will total $1 to $1.5 billion. If he does, the GCF would have over $7 billion as it heads into its formal pledging conference in Berlin this coming week. The fund is prepared for an initial capitalization of at least $10 billion.  The U.S. pledge follows and develops more than two decades of multilateral climate finance throughout both Democratic and Republican administrations. During the George W. Bush Administration, for example, the U.S. pledged $2 billion over a 3-year period to the Climate Investment Funds—the precursors of the GCF that were designed to sunset when the GCF comes online.

House Passes Bill That Makes It Harder For Scientists To Advise The EPA -- While their Senate colleagues were engaged in a fiery debate over the fate of the Keystone XL pipeline, the House on Tuesday quietly passed a bill that environmentalists say would hamper the Environmental Protection Agency’s ability to use the best scientific information when crafting regulations to protect public health and the environment.  The House voted 229-191 to pass H.R. 1422, which would change the rules for appointing members to the Science Advisory Board (SAB), a group that gives scientific advice to the EPA Administrator. Also called the Science Advisory Board Reform Act, the bill would make it easier for scientists with financial ties to corporations to serve on the SAB, prohibit independent scientists from talking about their own research on the board, and make it more difficult for scientists who have applied for grants from the EPA to join the board.

Climate Catastrophe, the Numéraire, and the Smokescreen of Technical Jargon -- I invite the reader to connect the dots and be horrified. If I tried to explain my interpretation of the passages below and the documents they come from you might not believe me, you may not want to grasp what I am trying to tell you. . Mistakes have been made. A mistake. A monumental error. The error has been detected but the magnitude of its consequences is incomprehensible... inconceivable. Nothing will be done to correct the error because there is too much at stake in admitting that public goods are different than private goods -- that the sign (plus or minus) of the sum of net benefits from a mixture of private and public goods is not independent of the choice of numéraire. This was the intuition behind John Kenneth Galbraith's observation, more than half a century ago, that "in an atmosphere of private opulence and public squalor, the private goods have full sway.""In all cases, therefore, where a certain policy leads to an increase in physical productivity, and thus of aggregate real income, the economist's case for the policy is quite unaffected by the question of the comparability of individual satisfactions; since in all such cases it is possible to make everybody better off than before, or at any rate to make some people better off without making anybody worse off." –

A Carbon Tax Could Bolster Green Energy -  In 2012, 13 gigawatts worth of wind-powered electricity generation capacity was installed in the United States, enough to meet the needs of roughly three million homes. That was some 40 percent of all the capacity added to the nation’s power grid that year, up from seven gigawatts added in 2011 and just over five in 2010. But then a federal subsidy ended. Only one gigawatt worth of wind power capacity was installed in 2013. In the first half of 2014, additions totaled 0.835 gigawatts. Facing a Congress controlled by Republicans with little interest in renewable energy, wind power’s future suddenly appears much more uncertain.   Despite the falling costs of renewable energy in the United States, the Energy Information Administration’s baseline assumptions project that in 2040 only 16.5 percent of electricity generation will come from renewable energy sources, up from some 13 percent today. More than two-thirds will come from coal and gas. Without some carbon capture and storage technology, drastic climate change is almost certainly unavoidable. What is necessary to get us on a safer path?  There is one tool available to trim carbon emissions on a relevant scale: a carbon tax. That solution, however, remains off the table. If a carbon tax were to be imposed next year, starting at $25 and rising by 5 percent a year, the Energy Information Administration estimates, carbon dioxide emissions from American power plants would fall to only 419 million tons by 2040, about one-fifth of where they are today. Total carbon dioxide emissions from energy in the United States would fall to 3.6 billion tons — 1.8 billion tons less than today. By providing a monetary incentive, economists say, such a tax would offer by far the most effective way to encourage business and individuals to reduce their use of fossil fuels and invest in alternatives.

Spin Alert: DOE Loans Are Losing Money, Not Making Profits -- The Department of Energy snookered the media last week with a report that seems to show that its clean energy lending programs are profitable. “Remember Solyndra? Those loans are making money,” went a typical headline. Unfortunately, that’s not true. Taxpayers are losing money on DOE lending. Less than originally expected, and less than you would expect given media coverage of Solyndra, Fisker, and a few other failed loans. But smaller losses are still losses, not profits. DOE takes credit for the interest that companies pay on their loans, but it doesn’t subtract—or even report—the interest costs that taxpayers pay to finance those loans. DOE’s report does not address this issue, except in a footnote in a table (cut and pasted above) revealing that its $810 million of “interest earned” was “calculated without respect to Treasury’s borrowing cost.” In other words, DOE reports gross interest received, not the net interest taxpayers have earned after subtracting Treasury borrowing costs. The incomplete figures in the table seem to suggest that DOE has eked out a $30 million profit on its lending ($810 million in interest less $780 million in loan losses). But when we account for Treasury borrowing costs, taxpayers are actually well behind.

EU Risks Blackouts Without Clean-Coal Inducement, IEA Says - Europe faces power shortages in the next decade unless it balances its drive for low-carbon energy with investment in clean-coal and nuclear generation, according to the International Energy Agency. Policy makers must boost incentives for coal-fired power that includes carbon-capture technology and spur investment in new atomic plants to replace aging reactors, Maria van der Hoeven, the executive director of the IEA, said in an interview. The investment in round-the-clock, or baseload, power is needed to cover intermittent wind and solar supply, she said. “Not everything can come just from having more renewables,” van der Hoeven said in London on Nov. 12. “The system has to be stable so that the lights aren’t going to turn off the moment the renewables aren’t there.” Europe needs 120 gigawatts of new baseload generation in the next decade, 1.6 times the U.K.’s existing total power capacity, according to IEA estimates. About 150 gigawatts of capacity will be retired in the period and lawmakers need to find ways to attract the $2 trillion of power-plant investments needed in Europe through 2050, the Paris-based agency said last week in its annual World Energy Outlook report. Electricity costs in Europe have been about $20 a megawatt-hour too low in “recent years” for new conventional plants to recover their investment, the IEA said in its report. Weak energy demand caused by a sluggish economy plus a surge in renewables pressured prices, with German power for 2015, a European benchmark, slumping 26 percent in the past two years to the equivalent of $43.72 a megawatt-hour today.

Lean times ahead: Preparing for an energy-constrained future - Some time this century, the era of cheap and abundant energy will end, and Western industrial civilization will likely begin a long, slow descent toward a resource-limited future characterized by "involuntary simplicity." That's the picture painted by University of Michigan environmental psychologist Raymond De Young, who argues in a new paper that behavioral scientists should begin now to prepare the public for this "energy descent," which he defines as a tightening of energy supplies accompanied by "a persistent step-wise downshift" to a new, reduced-consumption normal. De Young describes the energy descent and the role of behavioral scientists in the November edition of the journal Frontiers in Psychology. By the end of the century, day-to-day activities will need to consume nearly an order of magnitude less energy and materials than currently used, said De Young, an associate professor of conservation behavior at U-M's School of Natural Resources and Environment. Many Americans will likely be living in much smaller homes that contain far fewer consumer goods and modern conveniences, according to De Young. Air travel and automobile ownership may be unrealistic for many, due largely to declining fuel availability. The days of cheap, reliable electricity from the grid may be gone, and reliance on locally grown foods will increase, he said. "Frankly, it may not be possible for members of Western societies to maintain anything close to a contemporary life pattern while also living within this new biophysical context,"

Kentucky Coal Company Falsified Water Pollution Reports, Environmental Group Alleges - A major Kentucky coal company falsified its pollution reports in the first quarter of 2014, according to multiple environmental groups that filed an intent to sue notice against the company this week. Appalachian Voices, Kentucky Riverkeeper, Kentuckians For The Commonwealth, and the Waterkeeper Alliance sent a notice of intent to sue to Frasure Creek Mining Monday, alleging that the company failed to report water pollution to Kentucky regulators in late summer and early fall of 2014, instead falsifying the pollution report it submits each quarter. According to the groups, Frasure Creek, a company that largely specializes in mountaintop removal mining in Eastern Kentucky, “duplicated results” of water monitoring reports from quarter to quarter rather than issuing a new, updated report each quarter, in some cases changing only those results that would have triggered violations of pollution limits. Nearly half of the water pollution reports turned in by Fraser Creek in the first quarter of 2014 “contained the exact same data that Frasure Creek had already submitted for previous monitoring periods,” according to the groups.  Eric Chance, a water quality specialist with Appalachian Voices, told ThinkProgress that these false reports mean the people of Kentucky don’t know how polluted some of their streams are. And they could have reason to worry: mountaintop removal mining, a process in which coal companies blast away the tops of mountains in Appalachia in order to access the coal seams buried underground, is considered the most destructive way to extract coal. The practice destroys streams and can poisons drinking water.

China To Cap Coal Use By 2020 To Meet Game-Changing Climate, Air Pollution Targets - The Chinese government announced Wednesday it would cap coal use by 2020. The Chinese State Council, or cabinet, said the peak would be 4.2 billion tonnes, a one-sixth increase over current consumption.  This is a staggering reversal of Chinese energy policy, which for two decades has been centered around building a coal plant or more a week. Now they’ll be building the equivalent in carbon-free power every week for decades, while the construction rate of new coal plants decelerates like a crash-test dummy.  The 2020 coal peak utterly refutes the GOP claim that China’s recent climate pledge “requires the Chinese to do nothing at all for 16 years.” Indeed, independent analyses make clear a 2020 coal peak announcement was the inevitable outcome of China’s game-changing climate deal deal with the U.S. last week, where China agreed to peak its total carbon pollution emissions in 2030 — or earlier.  We already knew that China’s energy commitment to “increase the share of non-fossil fuels in primary energy consumption to around 20% by 2030” was going to require a staggering rate of deployment for carbon free energy. It means adding some 800-1,000 gigawatts of zero-carbon power in 16 years, which, the White House notes, is “more than all the coal-fired power plants that exist in China today and close to total current electricity generation capacity in the United States.” The CO2 and energy pledge together mean their energy revolution must start now and the planning for it must have started already, which it clearly has (a study from China’s National Coal Association earlier this year projected a 2020 coal peak). That’s because a CO2 peak in 2030 or (more likely) a few years earlier (see below), essentially required Chinese coal use to peak around 2020.

More research confirming large methane leakage from shale boom -- In a recent publication in Earth's Future, a German-US team of researchers showed increasing atmospheric methane abundances over two rapidly developing shale areas, the Bakken and Eagle Ford shales in North Dakota and south Texas, respectively. Their methane emissions estimate is based on the difference in atmospheric methane in these areas between the years prior said rapid development, 2006-2008, and during it, 2009-2011.  Data for the authors' analyses came from the European Space Agency (ESA) ENVISAT's instrument SCIAMACHY, and is unfortunately not available beyond early 2012, when contact with the satellite was lost. The instrument measured the total amount of methane in the atmosphere, the overwhelming amount of which is in the lower 10-12 km, the troposphere. Based on the resolution of the instrument, and the amount of time the satellite spent overhead, the authors used 3 years of data to get high enough precision for their study. They also accounted for how winds displaced the emitted methane differently between the two study periods. The result is depicted in Figure 1 below.  Yellow and orange colors indicate that methane abundance has increased between the periods. The overlap of these regions with the oil and gas wells alongside the slight displacement in accordance with the average wind differences as indicated by the arrows, is a clear sign of the industry's impact on methane. Unlike the recent studies by NOAA, comparisons to the same shale area over time avoids necessary corrections for methane sources other than oil and gas mining activities, since these other sources are not significantly changing in time.

How EPA Could Cut National Methane Leaks Almost In Half - Three top environmental groups released a report on Thursday detailing how the federal government could cut the country’s methane emissions almost in half.. As the rise of hydraulic fracturing has lead to a boom in natural gas (as well as oil) production in North America, it’s also become apparent that methane has a tendency to leak into the atmosphere at various points in the industry’s infrastructure. That’s a problem, because methane is an extremely potent greenhouse gas. It traps 36 times more heat than an equivalent amount of carbon dioxide overall, and in its first 20 years in the atmosphere it can trap 87 times more. According to the report — co-written by the Natural Resources Defense Council (NRDC), the Sierra Club and the Clean Air Task Force — specific new regulations could reduce these emissions by 42 to 48 percent, and thus prevent the release of anywhere from 3.2 to 3.7 million metric tons of methane per year. Over a two-decade time frame, this would be equivalent to preventing more than 320 million metric tons of carbon emissions each year. The rules recommended by the report would be implemented by the Environmental Protection Agency (EPA), and would be aimed at improving leak detection and repair, cleaning up older equipment, and curbing the industry’s habit of sometimes intentionally releasing the gas for various reasons. Right now many leaks at wellpads, processing plants, and other facilities often go undetected under EPA’s current standards. And many rules for maintaining equipment apply to new setups and sources, but not to existing ones — even though the latter are responsible for the vast majority of the leaks. Meanwhile, current EPA rules preventing “completion emissions” — the burst of gas that can happen right after hydraulic fracturing is complete — apply to natural gas wells but not oil wells, even though the latter often leak methane as well.

Concerns, protests over Ohio fracking: About a half-dozen members of Radioactive Waste Alert and Food & Water Watch protested outside a downtown Columbus hotel where Gov. John Kasich offered a pre-election speech. The environmental advocates are seeking a ban on horizontal hydraulic fracturing-related activities in the state. “We’re out here today to demand that Gov. Kasich give us answers on how he’s going to protect us from the toxic radioactive waste from fracking and how we can move forward with an honest debate about whether or not we should be fracking in the first place,” said Alison Auciello, an organizer with Food & Water Watch.   During that same speech, Kasich again smacked out-of-state oil and gas companies, industry groups and Republican lawmakers for refusing to back his proposed increase to severance taxes, saying he would continue to fight to implement higher rates on fuel produced via horizontal hydraulic fracturing. He said he may push for a higher rate than he initially proposed, using the proceeds to help local communities affected by the fracking industry and to cut overall tax rates. “This is a total and complete ripoff of the people of this state,” Kasich said of the current severance tax rate. “It’s outrageous.”

ODNR sued for approving fracking waste sites: A lawsuit was filed in Franklin County court against Gov. Kasich and the Ohio Department of Natural Resources for the approval of at least 23 fracking waste handling, storage, processing and recycling facilities to operate. The facilities were authorized by ODNR “Chief’s Orders," bypassing the official rule making process required to permit such facilities, according to a press release from the Fresh Water Accountability Project, which along with Food and Water Watch brought the suit. “I do not know what it takes to get our governing bodies to take action to protect Ohio’s environmental and economic future. These facilities are an imminent threat to public health,” Lea Harper, managing director of FWAP, said in a statement.

Groups Sue Ohio Governor for Illegally Making State a Fracking Waste Dump -- Two environmental watchdog groups have sued Ohio Governor John Kasich and the Ohio Department of Natural Resources (ODNR), charging that they illegally approved 23 facilities to handle the handling, storage, processing and recycling of fracking waste, bypassing the official rulemaking process. The lawsuit was filed by the Fresh Water Accountability Project and Food & Water Water Watch in the Franklin County court.  The suit says that ODNR skirted the formal process, including a legally required public comment period. No regulations have been made available to the public to comment on. The Ohio-based Fresh Water Accountability Project has already asked the ODNR, Governor Kasich and the U.S. Environmental Protection Agency to step in and stop the building and operation of frack waste facilities until the proper procedures are followed. But given Ohio’s track record on friendliness toward fracking operators and the governor’s own track record of anti-environmental policies, secrecy and failure to listen to opinions that diverge from his own, a lawsuit may have been the only way to go. “It truly is unfortunate that the only remedy that can now be sought is through the courts once again,” said Lea Harper, managing director of the Fresh Water Accountability Project

Fracking industry suing over drilling bans -- As fracking spreads in the United States, voters in more and more cities are banning drilling, waste disposal and other practices associated with deep-shale oil and gas wells. But those bans have prompted lawsuits filed by state governments or the oil and gas industry raising a legal question: Who gets to say where fracking can happen? “The Ohio legislature made it very clear that the state, not the local governments, controls this type of activity,” said John Keller, a Columbus lawyer who is representing Beck Energy Corp. of Ravenna in a lawsuit filed against the city of Munroe Falls in Summit County. “Just like the federal government can take control of certain activities, such as immigration, the state can pre-empt local governments from certain activities, one of which is oil and gas drilling,” Keller said. The Ohio Department of Natural Resources issues permits for oil and gas drilling, injection wells and other activities related to the field. But community leaders and environmental activists say the law is not that clear. The measure in Munroe Falls doesn’t outright ban oil and gas development, but it uses zoning laws to require a wider berth around the wells than what is required under state laws.

Waterless fracking comes to Tuscarawas County - A Canadian company that specializes in waterless fracking is putting its technology to use in the Utica Shale play in Tuscarawas County. Besides saving water, the new technology has the potential to give energy companies access to the oil trapped deep underground in the Utica play. GasFrac Energy Services uses liquid butane and mineral oil to fracture wells, instead of water — which is how all previous wells have been fracked in the Utica play. It generally takes more than 2 million gallons of fresh water to frack a well. The company announced last week that it had begun fracturing its first well in the Utica, but it did not disclose its partners in the well. It said a number of companies have an interest in the project. One of the likely partners is EV Energy Partners, which is drilling a test well in Clay Township near Port Washington with eight other companies. That well is being fractured with liquid butane and mineral oil. According to EV Energy, the well could begin production in December.

Company Halts Plan To Frack 3,000 Feet From Pennsylvania School -- A company’s plan to frack for natural gas about a half mile from a Pennsylvania school district of 3,200 kids has been suspended, just weeks after a group of concerned parents and environmentalists launched a legal challenge against the project. Rex Energy announced last week that it would stop preparing to drill on the farm of Bob and Kim Geyer in Middlesex, Pennsylvania — a property located about 3,000 feet from the Mars School District. The reason, Rex told the Butler Eagle, was a lawsuit brought in October by local families and environmental groups Delaware Riverkeeper Network and Clean Air Council.. “This isn’t just about the Geyer’s site — it’s about anybody that wants to develop, and the state government needs to realize that they need to stop putting children in harm’s way in order to continue to develop shale.” The lawsuit commenced last month argued that the Middlesex Township Board of Supervisors violated Pennsylvania’s state Constitution when it voted to change the township’s zoning law back in August. Those changes legally opened up most of the rural town of Middlesex for fracking, even on residential lands. The zoning law change has wide implications for drilling and fracking in Middlesex, but the main reason for the change was to pave the way for the proposed gas wells near the school. The Geyer well site would be placed on farmland owned by Middlesex residents Bob and Kim Geyer, and operated by a company called Rex Energy. The wells would be about 3,000 feet from all of the school district’s buildings, a youth homeless center, and just 800 feet from a residential community where many of the schoolkids live.

Chesapeake Energy Faces Subpoena on Royalty Payment Practices - The U.S. Department of Justice is investigating how Chesapeake Energy pays landowners for the natural gas it drills on their property, according to disclosures made earlier this month in the company's filings with the Securities and Exchange Commission.   The probe comes after years of complaints by landowners that they are being underpaid, and an investigation by ProPublica, which found the company was using the fees it had been been paying those landowners to repay billions of dollars of hidden corporate debt instead.  Chesapeake received subpoenas about its royalty practices from the federal government and several states, the company stated Nov. 6. The company did not respond to a request for comment from ProPublica.   In lawsuits filed in several states, Chesapeake has been accused of inflating its operating expenses and then deducting those expenses from the share of income it pays for the right to drill on peoples' land. Chesapeake has paid hundreds of millions of dollars in judgments and to settle some of these cases.  In mid-2013, landowners in Pennsylvania who had leased their gas rights to Chesapeake saw the payments they were receiving abruptly slashed by as much as 97 percent. In some cases checks for thousands of dollars a month were replaced with payments for less than a dollar. Those early complaints prompted a probe by Pennsylvania's Attorney General and a letter from the state's governor, Tom Corbett, to Chesapeake's chief executive calling the practices "unfair and perhaps illegal."

As fracking booms, waste spills rise — and so do arsenic levels in groundwater -  There are now 8,000 fracking wells in Pennsylvania, producing billions of gallons of "frackwater" — and an average of more than one wastewater spill per week so far this year.  And as the industry booms, scientists from the US Geological Survey, are trying determine the effects of this wastewater on local groundwater and the surrounding environment. "One of the main things we’re trying to do is identify what the important potential pathways to the environment are," says Isabelle Cozzarelli, a geochemist leading the team of USGS researchers.  Her team is looking closely at one question in particular: What happens when tiny organisms in the soil come in contact with frackwater? These bugs are like the Earth’s gut bacteria, Cozzarelli explains. This is where researchers have found an unexpected problem: the more food the bacteria get from a spill, the more iron they breathe. Iron minerals found in soil are a frequent host for another element: arsenic, a known human carcinogen. When a bacteria breathes in that iron, the arsenic is released and becomes water-soluble. And suddenly unsafe levels of arsenic get released into the groundwater.

Where Not to Frack a Big Gas Well -- Where there already is a high likelihood of methane leakage into groundwater.  Which indicates that localized faulting is venting bigogenic and thermogenic gas layers into the aquifer.  Not a good place to punch thousands of massively big fracking holes. . . which simply act as conduits for gas deposits into groundwater.  – Well-water tested in Wayne and Pike counties contains low-to-moderate concentrations of naturally occurring methane, according to new studies by the U.S. Geological Survey.  None of the water tested in these two studies exceeded the Pennsylvania Department of Environmental Resources action level of 7 milligrams per liter for methane in well water.  In Wayne County, about 65 percent, or 22 of the 34 private drinking-water supply wells tested-contained concentrations of dissolved methane high enough to detect in laboratory testing, but most methane concentrations were low, less than 0.1 milligrams per liter. Three — or about 10 percent — of the 34 tested wells in Wayne County produced groundwater with dissolved methane concentrations near or greater than 1 milligram per liter and as high as 3.3 milligrams per liter; these relatively elevated concentrations are at least 10 times greater than methane concentrations in the other well-water samples. In the Pike County study, about 80 percent — or 16 of 20 tested wells — contained detectable concentrations of methane, with two wells having methane concentrations greater than 1 milligram per liter and as high as 5.8 milligrams per liter. The concentrations of dissolved methane in about 10 percent of well-water samples in both studies were high enough to allow for isotopic analysis to identify the type of natural gas in the water.

Williams Exploration Bails on NE Marcellus - WPX Energy Inc. will divest from the Marcellus Shale with no plans to drill any new wells in Pennsylvania for the foreseeable future. The Tulsa-based company spun off from Williams Companies Inc. in 2011. Its new CEO, petroleum engineer Rick Muncrief, joined the company in May and took a hard look at WPX’s assets, spokeswoman Susan Oliver said. WPX will now focus on developing its acreage in the oil and natural gas liquids fields of Colorado, North Dakota and New Mexico, she said. “The decision was made to divest of the Marcellus asset because we get a better return with drilling for oil and natural gas liquids than the dry gas here,” she said. Its decision came as no surprise to Lou D’Amico, president and director of the Pennsylvania Independent Oil and Gas Association.  “I think there are a number of companies that are looking at possibility of getting out of the dry gas portion of the Marcellus,” he said. “Right now with the current prices, there’s not a lot to justify additional drilling in the area.”

What It’s Like to Have Fracking Next Door (video) Ed Wade’s property straddles the Wetzel and Marsh county lines in rural West Virginia and it has a conventional gas well on it. “You could cover the whole [well] pad with three pickups,” said Wade. And West Virginia has lots of conventional wells — more than 50,000 at last count. West Virginians are so well acquainted with gas drilling that when companies began using high-volume horizontal hydraulic fracturing in 2006 to access areas of the Marcellus Shale that underlie the state, most residents and regulators were unprepared for the massive footprint of the operations and the impact on their communities. When it comes to a conventional well and a Marcellus well, “There is no comparison, none whatsoever,” said Wade, who works with the Wetzel County Action Group. “You live in the country for a reason and it just takes that and turns it upside down. You know how they preach all the time that natural gas burns cleaner than coal; well, it may burn cleaner than coal, but it’s a hell of a lot dirtier to extract.”

Legal Experts Say Pipeline Companies Cant Yet Claim Eminent Domain / Public News Service: - Pipeline companies who want to build lines through West Virginia and neighboring Virginia have told some landowners they can survey on their land without the landowners' permission. Legal experts, however, say those companies don't have that right - yet. Attorney Joe Lovett with with Appalachian Mountain Advocates says pipelines can only claim eminent domain, and the right to survey without permission, when they prove their projects serve a genuine public need. He says the pipeline companies in question haven't done that. "The power of eminent domain is an extraordinary power, only granted for public purposes," says Lovett. "It's improper for a company just to assert that its project is for public use, without actually having had that determined."  Three planned natural gas pipelines - including Dominion's huge Atlantic Coast Pipeline - would bring Marcellus Shale natural gas to eastern states, including Virginia and North Carolina. The companies say the pipelines are needed to bring natural gas, largely extracted by hydraulic fracturing, or "fracking," to market. Dominion has sent letters to West Virginia and Virginia landowners, indicating they may sue if denied permission to survey for the pipelines' routes. Lovett and other lawyers have described that as bullying. More importantly, Lovett says, the pipeline companies' threat to litigate might be a bluff. He says if a pipeline is coming through your land, get an attorney.

Marcellus Watch: LPG storage plan needs to stand trial - Crestwood’s plan is to turn a profit by stuffing natural gas and LPG from Marcellus Shale fracking operations in Pennsylvania into the cheapest, riskiest type of underground storage facility in the industry — salt caverns.  The Seneca caverns are deeply flawed, bounded by layers of salt and brittle shale rock. They are subject to collapse and leakage, and the residents who live next to them face the statistically significant prospect of a catastrophic accident or a forced evacuation.The company has repeatedly attempted to conceal that danger from the people it would put at risk. The DEC has enabled that irresponsible behavior out of fear that transparency invites controversy.In late 2011, the agency held two public hearings on the LPG project in a Watkins Glen school auditorium.But they were largely for show because the DEC was withholding key information from the hundreds who showed up. The DEC still keeps key parts of the company’s “reservoir suitability report” under lock and key. And while the state geologist must by law sign off on the integrity of caverns used for hydrocarbon storage, his reports — if they exist — aren’t public record.

Steingraber, Boland and Micklem Sentenced to 15 Days in Jail for Protesting Methane Gas Storage --  Renowned author, biologist and advocate Sandra Steingraber, PhD, U.S. Air Force veteran Colleen Boland (retired) and avid environmentalist Roland Micklem headed to the Chemung County jail Wednesday evening after pleading guilty and refusing to pay a fine in New York’s Reading Town Court. Judge Raymond Barry issued the maximum jail sentence of 15 days.  Steingraber, Boland and Micklem were arrested for blockading the gates of Texas-based Crestwood Midstream’s gas storage facility on the shore of New York’s Seneca Lake. They are part of the “We Are Seneca Lake” campaign working to stop the major expansion project at Crestwood’s methane gas storage facility where plans are underway to store highly pressurized, explosive gas in abandoned salt caverns on the west side of Seneca Lake. Micklem, who will not have to serve his full sentence, was released yesterday afternoon for health reasons. “I’m a die-hard environmentalist and I think that if we do not protect our environment, we are all history. A man’s got to do what a man’s got to do,” said the 86-year-old. Yesterday nine more people were arrested for trespassing while blockading the gates of Crestwood, including winery owners and local business leaders, which shut down the facility for more than seven hours. To date, there have been 61 arrests involving 56 individuals in the last four weeks. Today, 12 more people are blockading the gates at the Crestwood facility. More than 600 citizens have signed a pledge to resist the Seneca Lake fracked-gas infrastructure project.

“All My Pals Are in the Slammer”  - Sounds like a country and western song. But it describes what happened to my Upstate friends when nut cuttin’ time came on global warming. Most of the people arrested are friends of mine, including our dear friend Sara Hess, who sent me this: “Yesterday, I joined the growing ranks of people who have been arrested at Crestwood’s gates near Watkins Glen.  During the arrest, a man asked me why we were using this tactic.  He suggested that rather than paying fines ($375 each, if we chose to pay it), we could hire a lobbyist.  The obvious implication was that a lobbyist could make a difference, whereas, we were just wasting our time and money. I replied that we had already filled buses with hundreds of people, taking them to Albany to talk to the Governor and legislators to try to stop drilling and fossil fuel build-out in New York.  And that we had a legal team of excellent attorneys, working on legal angles. With more time and thought, I would have added that we have sent tens of thousands of comments to FERC and the DEC, and attended multiple hearings and meetings, at every opportunity we had.  That we had persuaded 3 of the 4 counties and 5 townships with shorelines on Seneca Lake to oppose the gas storage.  Personally, over the past 6 years, I joined with thousands of others who have devoted significant time and energy to the anti-fracking movement, which is now focused on stopping the gas industry from rapidly installing new pipelines, storage facilities, waste dumps, compressor stations, and more in New York.  I recently made a list of over 60 different tactics we’ve used, including everything from mass marches to show our strength, to installing solar panels on our roofs. But, until yesterday, I had not taken the step of civil resistance.  The man asked me yesterday, “Why this?”, but, given my years of looking intently for ways to influence public policy, the other question is “Why now?” All I can say is, I’ve tried everything else.  This is a last resort, certainly not the first one.

Sandra Steingraber: Why I am in Jail - I have come to believe that a successful civil disobedience campaign likewise depends on the willingness of at least some of us to gladly accept jail time over other kinds of sentences, such as paying fines. There are four reasons for this. First, it shows respect for the law. In my case, I was arrested for trespassing on the driveway of a Texas-based energy company that has the sole intention of turning the crumbling salt mines underneath the hillside into massive gas tanks for the highly-pressurized products of fracking: methane, propane and butane. I refuse to pay a fine to excuse my crime and so accepted the lawful consequences of my actions. Second, extending one’s civil disobedience testimony in jail shows seriousness of intent. By our willing separation from our families, by our sacrifice and consent to suffer, by our very absence, we are saying that we object in the strongest terms to the transformation of our beloved Finger Lakes community into a hub for fracking. . Third, by filling the jails with mothers, elders and veterans, we peacefully provoke a crisis that cannot be ignored by media or political leaders. Of course, civil disobedience is always a method of last recourse, deployed when all other methods of addressing a grievance have been exhausted. We have turned over all stones. We have submitted comments, written letters, offered testimony, filed Freedom of Information requests for secret documents—only to see our legitimate concerns brushed aside. And the fourth reason is this: spending time in jail is a time of personal transformation. Alone with a pencil, some inmate request forms for stationery, the Bible and your own thoughts, you discover that you are braver than you knew. You are doing time, and time offers the possibility of rededicating oneself to the necessary work ahead: dismantling the fossil fuel industry in the last 20 years left to us, before the climate crisis spins into unfixable, unending calamity.

Finger Lake Fracking --“These are just ordinary people who have exhausted every possible means of expressing their opposition and are at wits’ end,” says Yvonne Taylor, a co-founder of Gas Free Seneca. On Wednesday evening, Steingraber was taken away in handcuffs from the small town hall in Reading, New York, alongside 86-year-old Roland Micklem and Colleen Boland, a retired Air Force sergeant. All three had pled guilty to trespassing on the property of Crestwood Midstream, a Houston-based natural gas company that stores fracked methane in giant underground salt caverns along the western shore of Seneca Lake, the largest of the Finger Lakes.  Steingraber, Micklem and Boland, who each chose to spend 15 days in jail rather than pay the $250 fine, are among more than 50 people who have been arrested over the past four weeks during a series of blockades to protest Crestwood’s plans to expand its methane storage in the salt caverns by a third. (Micklem ended up being released Thursday due to health concerns.)  In addition to the methane expansion, the activists are also fighting a separate Crestwood project that would convert two caverns into a facility that could store 2.1 billion barrels of liquefied petroleum gas (LPG)—mostly propane and some butane. The projects, which were first proposed five years ago by Inergy, Crestwood’s predecessor company, have faced strong opposition from locals who see the potential for catastrophic accidents and environmental devastation, and fear the industrialization of a region whose economic condition depends heavily on its environmental integrity. So far, 13 municipalities have passed resolutions opposing the LPG project, including Watkins Glen, which lies two miles south of the Crestwood site and is home to 1,900 people.

Hundreds Rally Against Proposed Natural Gas Pipeline In Massachusetts -- Hundreds of residents from three Northeastern states rallied against a proposed natural gas pipeline Saturday, saying that the proposal isn’t worth the possible damage a pipeline could inflict on the environment. About 500 people attended the Stop The Pipeline Statewide Summit in Fitchburg, MA to learn more about the proposed pipeline and to speak out about their concerns of property and environmental damage that could come along with it. The proposal in question is Kinder Morgan’s Tennessee Gas Pipeline Northeast Energy Direct project, which proposes expanding an existing natural gas pipeline from Pennsylvania to Wright, NY and from Wright to Dracut, MA. The summit is just the latest example of the opposition that’s been building this year against Kinder Morgan’s proposed expansion in the Northeast. Critics say that the pipeline’s large capacity — it’s projected to carry 800 million to 2.2 billion cubic feet of natural gas per day — brings more gas into the Northeast than the region needs and heightens concerns about explosions. Many Northeast residents are refusing to let pipeline surveyors on their land, and 39 communities have passed non-binding resolutions against the pipeline. Sen. Ed Markey (D-MA) has also taken an interest in the pipeline, saying in October that he will make sure that Kinder Morgan and the Federal Energy Regulatory Commission (FERC) are “completely transparent about whether this pipeline will be used to export the natural gas to foreign markets and that the interests of the people are put before the interests of the oil and gas industry.”

Fracking Approved in Largest National Forest in Eastern U.S. -- Despite strong opposition from both elected officials in the affected areas and environmental groups, the U.S. Forest Service (USFS) has approved fracking in George Washington Forest. Objections to the plan came from members of Congress from Maryland, Virginia and Washington, D.C., Virginia Governor Terry McAuliffe and Washington D.C. city council, which passed a resolution opposing it in March.  The forest, located in Virginia and West Virginia, is the largest national forest on the east coast. It contains the headwaters of the Potomac River, which feed into the Chesapeake Bay and provide drinking water for millions of people the Washington D.C./Chesapeake region. The USFS had initially proposed  to ban fracking in the 1.1 million acre forest, the first outright ban of the practice in a national forest. But when the plan was released in 2011, energy companies complained and exerted pressure on the USFS. About 10,000 acres of the forest are already been leased to oil and gas companies, with private mineral rights existing under another 167,000 acres. The newly released plan will only allow fracking on that land, which is located in sparsely populated rural Highland County, Virginia.

Texas messes with Denton - A week after a historic vote to ban hydraulic fracturing (or fracking — the controversial drilling method that forces oil and gas from shale formations with pressurized water, sand and a host of chemicals), Denton, Texas, has been told the state will continue to issue drilling permits within the city limits. “It’s my job to give permits, not Denton’s,” said Christi Craddick, chairwoman of the Railroad Commission of Texas. “We’re going to continue permitting up there because that’s my job.”  Though other municipalities have tried to regulate local drilling, Denton, a town of 121,000 in the Dallas-Fort Worth metroplex, became the first in Texas to ban fracking outright when they approved the prohibition by 18 percentage points Tuesday. Denton already has more than 270 wells inside its borders, and area residents have complained of health problems they say are tied to hydrocarbon extraction. Concerned that a local law could set a precedent, oil and gas companies pumped nearly $700,000 into efforts to defeat the anti-fracking measure — outspending ban advocates 10 to 1. Within days of passage, industry representatives went to court, seeking an injunction against Denton’s law. But now it is the town that must lawyer up to defend its voters against the TRC. Denton spokeswoman Lindsey Baker told the AP that the town has a $4 million fund to fight the challenges, and Mayor Chris Watts has said his administration will “exercise the legal remedies that are available” to defend their ban.

Memo Proves Toxic Chemicals Released in the Eagle Ford Shale - Myra Cerny said her family and grandkids can't come to her home anymore "because of what's going on." What's going on, Cerny said, is a constant plume of toxic chemicals being blown over her home from nearby gas & oil drilling rigs, wells and storage sites.  Cerny said has occasionally gotten so bad that she and her family have had to evacuate the house. When they come back, she said it smells as if a bug bomb has gone off. According to Cerny, the environmental group Earthworks has done air sampling tests in her backyard and found high levels of Benzene, Toulene, H2s and other potentially deadly gases. The TCEQ sent investigators down to look at the facility after numerous complaints from a nearby homeowner. Several times during the three day investigation, the Mobile Response team had to put on respirators and documented instances where they both had "adverse health effects" including "moderate to severe skin irritation." When we began our investigation into this, we sent a Freedom of Information Act request to the Texas Commission on Environmental Quality and almost immediately ran into resistance. At one point, TCEQ sent a response telling us the information we requested would cost roughly $1300.As we pushed back, TCEQ relented and sent us almost everything we asked for. The most significant find in the information we requested was an inter-office memo on an investigation of a saltwater disposal facility in Karnes County. The report showed investigators found benzene levels at several locations around the facility as high as 88 ppbv (parts per billion) That doesn't sound like a high level, unless you consider the fact many experts say you should not breathe air containing just 5 ppbv.

Fracking emissions still high despite regulations: – Hydraulic fracturing, or fracking, once again hit the spotlight in Colorado on Thursday, with a report suggesting air-quality regulations are not keeping up with the industry’s rapid growth. The report, by researchers at the University of Colorado, follows a study released Wednesday that found chemicals used in fracking fluids are no more harmful than those found in common household cleaners. That report was also conducted by researchers at CU. Both reports came as Boulder County on Thursday extended a moratorium on gas and oil development. The continued suspension of activities again highlights the tension between local governments and the industry. The report concerning emissions was released by Chelsea Thompson, a researcher with the Institute of Arctic and Alpine Research at CU in Boulder. The study is expected to be published today by Elementa: Science of the Anthropocene, which focuses on scientific solutions to human impact. The report focused on emissions near gas and oil sites in the northern Front Range, which has seen expanded fracking, such as near Erie and Longmont. It took into account emissions regulations implemented in 2008 in Colorado that aim to capture 90 percent of energy development-caused emissions.

Water is the biggest output of U.S. oil and gas wells (Reuters) - The biggest product of the U.S. petroleum industry is not oil, gas or condensate but water -- billions and billions of gallons containing dissolved salts, grease and even naturally occurring radioactive materials. In 2007, when the shale revolution was still in its infant stages, the U.S. oil and gas industry was already producing more than 20 billion barrels of waste water per year, according to researchers at the Argonne National Laboratory (“Produced water volumes and management practices in the United States”, 2009). The industry’s daily output was 5 million barrels of oil, 67 billion cubic feet of natural gas, and 55 million barrels of water, according to federal government statistics. true Argonne estimated that more than 7.5 barrels of water were produced for every barrel of crude, and 260 barrels of water for every million cubic feet of natural gas, based on state and federal records for onshore oil and gas production. If offshore production is included, the figures drop slightly to 5.3 barrels for every barrel of crude and 182 barrels for every million cubic feet of natural gas. But all these numbers are likely to understate the water-to-oil and water-to-gas ratios, since some of the most important states, including Texas, did not report their production statistics in sufficient detail to compute ratios accurately.

'Monster' Fracking Wells Guzzled 3.3 Billion Gallons Of Water In Drought-Stricken Areas, Environmental Report Finds: Hundreds of massive oil and gas wells in the United States guzzled 10 million to 25 million gallons of water each through the hydraulic fracturing, or fracking, process, a study found. Many of those wells were drilled in Texas, where large swaths of the state are suffering exceptional or extreme drought.  More than 3.3 billion gallons of water was used to drill 261 “monster wells” in the 3 1/2-year period from April 2010 to December 2013, according to the Tuesday report by Environmental Working Group, a Washington research and advocacy group. About two-thirds of those fracking operations were in drought-stricken areas in Texas, Pennsylvania and Colorado.  “The amount of water used in these wells is staggering,” Bill Walker, a co-author of the report and EWG consultant, said in a statement. “The water used to frack a single monster well could meet the water needs of a drought-stricken county in Texas twice over.” The U.S. Environmental Protection Agency has estimated the largest fracking projects use as much as 5 million gallons of water on average for drilling. But the EWG report suggests that figure is too low.

3 Billion Gallons Of Fracking Wastewater Pumped Into Clean California Aquifiers: "Errors Were Made" State Admits -- Dear California readers: if you drank tapwater this morning (or at any point in the past few weeks/months), you may be in luck as you no longer need to buy oil to lubricate your engine: just use your blood, and think of the cost-savings. That's the good news.  Also, the bad news, because as the California’s Department of Conservation’s Chief Deputy Director, Jason Marshall, told NBC Bay Area, California state officials allowed oil and gas companies to pump up to 3 billion gallons (call it 70 million barrels) of oil fracking-contaminated waste water into formerly clean aquifiers, aquifiers which at least on paper are supposed to be off-limits to that kind of activity, and are protected by the government's EPA - an agency which, it appears, was richly compensated by the same oil and gas companies to look elsewhere.And the scariest words of admission one can ever hear from a government apparatchik: "In multiple different places of the permitting process an error could have been made." Because nothing short of a full-blown disaster prompts the use of the dreaded passive voice. And what was unsaid is that the "biggest error that was made" is that someone caught California regulators screwing over the taxpayers just so a few oil majors could save their shareholders a few billion dollars in overhead fees.  And now that one government agency has been caught flaunting the rules, the other government agencies, and certainly private citizens and businesses, start screaming: after all some faith in the well-greased, pardon the pun, government apparatus has to remain:

Thousands Of California Kids Attend School Near Fracking — And Most Of Them Are Minorities - More than 350,000 of California’s six million schoolchildren attend school within one mile of active oil and gas drilling, and most of those kids are minorities, according to a report scheduled to be released Tuesday by the non-profit FracTracker Alliance. FracTracker’s California program director Kyle Ferrar paired oil well data sets from the California Department of Conservation Division of Oil Gas and Geothermal Resources with state school district and enrollment demographic data, and found two key trends: One is that a large number of California children attend school within close proximity to oil and gas development, including fracking. And the second is that those schools closest to oil and gas operations are predominantly Hispanic and non-white.The findings are important, environmentalists say, because California has no specific laws that safeguard the health of children who attend school near industrial activities. The state has no limits on how close industry may place regular or fracked oil wells next to schools, and companies are not required to give notice to students, parents, teachers or school officials before oil extraction begins. California state regulators are not required to consider a well’s proximity to a school before issuing a permit.

Bought by Halliburton, future unclear for Baker Hughes’ fracking disclosure policy - The drilling industry awoke Monday morning to the news that two major oil field services firms would become one. Halliburton will buy Baker Hughes for $34.6 billion, a union that EnergyWire reports will “create a powerhouse in the hydraulic fracturing business.” Halliburton, Baker Hughes and Schlumberger are the three biggest suppliers of oil and gas development tools and technology, including the chemicals used to frack wells. That’s why it made headlines last spring when Baker Hughes announced it would adopt a new policy of disclosing “100 percent” of its fracking fluid recipes and phasing out the use of “trade secret” claims. Drillers that are Baker Hughes’ clients have begun posting the information to the website as of Oct. 1. However, it’s unclear whether Halliburton will follow suit when the merger is final.

Halliburton lobbies White House on fracking rules -- Officials from oil and gas drilling services giant Halliburton Co. lobbied White House officials this month on the Obama administration’s proposed hydraulic fracturing rules. The Halliburton representatives complained that the Interior Department’s proposed rules for fracking on federal land do not go far enough in allowing Halliburton to keep secret the chemicals it uses in fracking.Requiring certain disclosures of the chemicals that fracking companies use was one of the main focuses of Interior’s rules proposed in 2013.  “As currently drafted, the rule would require the holders of most trade secret information — the service companies and chemical suppliers — to disclose their trade secrets to operators and would allow only the operators to seek protection for trade secrets,” Halliburton said in an informational handout it gave to White House officials and others from the Obama administration.  The meeting took place Nov. 4, but it was only disclosed Tuesday.

Landowners tell proposed LNG export terminal in Coos Bay: 'Keep your pipeline off my property' | Bill Gow stands on a wooden platform perched high above a lush valley south of Roseburg, his Stetson tipped back as he surveys the 1,400-acre ranch where his family runs cows for a living. "This is why I worked 24-7 my whole life, so I could wake up and have this," he says. "This is all I ever wanted." It's not hard, then, to understand Gow's sense of violation, his creeping feeling of helplessness, with a Canadian energy company's plan to carve a swath the width of freeway through his land and bury a 36-inch-diameter, high-pressure gas pipeline. Calgary-based Veresen Inc. and its pipeline partner, Tulsa-based Williams Companies Inc., are not asking if Gow wants to host their gas line. They're telling him. If regulators approve Veresen's plan to build an export terminal for liquefied natural gas in Coos Bay, its Pacific Connector Pipeline is coming across his land. The only thing left to settle is the price. And he may not have much say in that either. It's called eminent domain.

Introducing "Natural Gas Exports: Washington's Revolving Door Fuels Climate Threat" -- DeSmogBlog's Steve Horn and Republic Report's Lee Fang have co-written an in-depth report on the influence the government-industry revolving door has had on Big Oil's ability to obtain four liquefied natural gas (LNG) export permits since 2012 from the Obama Administration.  Titled “Natural Gas Exports: Washington's Revolving Door Fuels Climate Threat,” the report published here on DeSmogBlog and on Republic Report serves as the launching pad of an ongoing investigation. It will act as the prelude of an extensive series of articles by both websites uncovering the LNG exports influence peddling machine.   The report not only exposes the lobbying apparatus that has successfully opened the door for LNG exports, but also the PR professionals paid to sell them to the U.S. public. It also exposes those who have gone through the “reverse revolving door,” moving from industry back to government and sometimes back again.  It reveals that many former Obama Administration officials now work as lobbyists or PR professionals on behalf of the LNG exports industry, as do many former Bush Administration officials. So too do those with ties to potential 2016 Democratic Party presidential nominee, Hillary Clinton.

Did Russia and China just sign a death warrant for U.S. LNG exports? --Russia and China have signed two large natural gas deals in the last six months as Russia turns its attention eastward in reaction to sanctions and souring relations with Europe, currently Russia's largest energy export market. But the move has implications beyond Europe. In the department of everything is connected, U.S. natural gas producers may be seeing their dream of substantial liquefied natural gas (LNG) exports suffer fatal injury because of Russian exports to the Chinese market, a market that was expected to be the largest and most profitable for LNG exporters. Petroleum geologist and consultant Art Berman--who has been consistently skeptical of the viability of U.S. LNG exports--communicated in an email that Russian supply will force the price of LNG delivered to Asia down to between $10 and $11, too low for American LNG exports to be profitable.Now, let's back up a little. U.S. natural gas producers have been trying to sell the story of an American energy renaissance based on growing domestically produced gas supplies from deep shale deposits--now being exploited through a new form of hydraulic fracturing called high-volume slick-water hydraulic fracturing. The problem has been that overproduction and low prices--now only a fraction of the $13 per thousand cubic feet (mcf) at the peak in 2008--have undermined the financial stability of the natural gas drillers. Here's why: Natural gas from shale, referred to as shale gas, is generally more expensive to produce than conventional natural gas and will require that natural gas prices go much higher than they are today--from around $4 per mcf almost certainly to over $6 per mcf and perhaps more to pay the costs of bringing that gas out profitably. But at that price, U.S. LNG is no longer competitive in Europe. And now, because of the Russian-Chinese natural gas pipeline deals, it may no longer be competitive in Asia. Those are the two largest markets for LNG. Without them it is doubtful that the United States will be exporting much LNG--except perhaps at a loss.

Energy in 25 years: Private equity bets on energy 'revolution'—in oil and gas: Private Equity funds have raised $157 billion since 2009 to invest in energy, according to data from intelligence firm Preqin. And they're in the middle of raising even more, with nearly $32 billion collected by 33 funds this year. Energy-focused PE funds that launched between 2002 and 2011 average net returns of nearly 14 percent annually, versus 9.5 percent for the industry generally, according to Preqin. Warburg Pincus, for example, announced in October that it raised $4 billion for a new energy fund, $1 billion more than it had originally sought. Energy Capital Partners said in April that it collected more than $5 billion for its latest offering, blowing by the original $3.5 billion target. And Carlyle Group is making "great progress" to its goal of gathering nearly $8 billion for two energy funds by 2015. "It's an unlimited opportunity set," Steenberg said of dramatic changes he anticipates in energy. "Three letters: L-N-G."  That's what David Foley, CEO of Blackstone Energy Partners, said when asked what investors are doing now that will shape the future of energy.  Indeed, natural gas appears to be private equity's biggest play (the L refers to "liquefied"). Thanks in large part to advances in drilling technology, the U.S. now dominates production of natural gas. Despite environmental concerns around fracking, production has surged because of the country's large shale reserves in places like North Dakota and Texas. BP projects that shale gas supply will continue to be dominated by North America: the continent produces 99 percent of it today; in 2035, it will still create 70 percent.  Foley said that the low cost of natural gas compared to crude oil represents a major arbitrage opportunity. "In commodity businesses where there's usually easy substitution, that's amazing to have that kind of difference in price per Btu,"

Drill, Baby, Drill! US Fracking Drives Down Saudi Oil Prices - Rush -- I mentioned the plummeting oil price, and there are a lot of people trying to figure out, why is this happening?  There are a lot of people that do not understand what it is that's driving down the crude oil price.  What explains it?  When it happens and it's a mystery, people look to traditional explanations, "Well, are people driving less?  Is the demand for gasoline down?  The economy bad?  What's going on?"  And in this case that's not the answer. The simple explanation for much, not at all, but for much of the drop in the price of oil is found in Saudi Arabia.  The Saudis are lowering their price because they are scared.  They are very worried about the amount of oil now available in the United States and North America via fracking.  Shale gas and oil.  And it's been reported in a number of official publications that the amount of oil, the reserves that are available in the United States and North America since fracking has become affordable, the reserves we have are greater than the reserves in Saudi Arabia.  Now, the Saudis have owned the notion that they have the world's greatest supply of oil.  And they are threatened gravely by this.  They are lowering the price that they are charging in order to strangle their competition, which is in this country, in the Dakotas, anywhere where there is shale gas and oil and fracking going on.  We got a Big Oil boom in this country, and they are doing everything they can in Saudi Arabia to strangle it.  They're trying to lower the price, get it to the point where it's no longer profitable or sensible for the companies in this country to continue to frack and produce the oil.  About $65 a barrel is that price, and the Saudis are doing what they can to get that price down there.

Shale Oil: Expensive, Over-Hyped, & Short-Lived - The mainstream press has faithfully repeated every press and PR statement made by the shale producers. And if you simply followed the headlines, you might even believe this about the US:

  • It is soon going to be energy independent,
  • Its oil production will surpass even Saudi Arabia putting it in the number one spot,and
  • The US will even be exporting oil again like the days of old.

The only problem with this story is that it is misleading in some very important ways. And entirely false in others.  Here are there are five main things to know about the shale plays.

  1. They deplete very quickly. The typical shale, or tight rock, well production declines by 80% to 90% within three years.
  2. They are expensive. All oil and gas coming form them is several times more expensive than what we got from conventional oil plays.
  3. They are environmentally damaging because the fracking fluid is highly toxic and much of it escapes during the blowback process and sometimes water wells are contaminated.
  4. Because each well has low flow and depletes quickly, massive numbers of wells must be drilled creating significant infrastructure damage to roads and bridges. Currently no state or municipal authorities are capturing anything close to the total cost of the infrastructure damage from the shale operators which means taxpayers are gong to be left paying those bills. 
  5. Not all shale plays are created equal – some are vastly superior to others.  And even within a given play there are sweet spots and dry holes which can only be determined by punching a well in and seeing what comes out.  Some call this the ‘mapping by braille’ approach.

When we put all of these together it adds up to a very expensive set of plays that will only last for a very short while.

Crude slide sparks oil-related debt fears - A huge chunk of the shale oil boom can be traced back to Wall Street, where years of low interest rates have encouraged energy companies to fuel their growth by tapping eager investors in the bond and loan markets. Now with the US oil price slipping from $102.90 a barrel to a low of $74.21 in little more than three months, many are left wondering what will become of such companies and the credit investors who bet on them. More than that, the worry is that a downturn in oil-related debt could spark wider turmoil in the market for bonds and loans. “We should be concerned,” says Oleg Melentyev, credit analyst at Deutsche Bank. “Oil dropped 25 per cent in a matter of three months and nobody was predicting it – it just happened. We don’t have a high degree of confidence to say this is the bottom, we don’t know.” Almost 2,000 miles away from Mr Melentyev’s Wall Street offices, memories of the oil bust that spurred a statewide recession in the 1980s still loom large in Odessa. Here city officials are already on alert for a potential turn of the commodities cycle. “Our oil and gas businesses in West Texas are accustomed to the cyclical nature of the business and because of that last big bust an important lesson was learnt to not over extend,” . “As far as their borrowing capacity goes, I feel like the banks and the businesses have been very prudent during this recent high level of activity.” Others are not so sure. Mr Melentyev and his colleagues at Deutsche worry that the tendency of oil and gas companies to borrow to finance their operations has left the sector highly leveraged and susceptible to further declines in the price of oil. The analysts say a drop in oil prices to $60 a barrel could cause energy companies that have built their business on prices closer to $90 a barrel to default on their debt – a development that could “push the whole US energy sector into distress”.

The Economic And Strategic Implications Of Low Oil Prices - If oil prices continue to spiral downward, what will be the economic and strategic results? Not too bad, says Gawdat Bahgat. Consumers will benefit at the expense of producers and, perhaps more controversially, the ‘oil for security’ bargain crafted between Western powers and Middle Eastern suppliers will remain intact. The rise in oil and gas production, the diversification of the energy mix, and the decline in consumption have fundamentally altered the global energy landscape. Almost all countries in the world have contributed to these new dynamics, albeit to different degrees. The potentially prolonged period of low oil and gas prices is likely to have significant and wide-spread implications. Consuming countries will benefit from cheap oil and gas while producing countries are likely to lose out (at least in the short term). Lower prices mean that the billions of dollars the United States and Europe would have transferred to producing countries will, instead, be spent and/or invested in their domestic economies. These ‘saved funds’ can be used to stimulate the economy and generate jobs. On the other hand, low prices might negatively impact (slow or even undermine) the shale revolution. Shale/tight oil and production from the North Sea are expensive. Production costs in the Middle East are the cheapest. Middle Eastern producers can make profits even at $70 per barrel. However, such a low price would not be enough to allow them to balance their budgets. In the last few decades most Middle Eastern producers have achieved very modest success in their efforts to reduce their heavy dependency on oil and gas revenues. They need high prices to maintain and support the high standard of living they enjoy. Several Middle Eastern producers have created sovereign wealth funds (oil funds) to invest their oil revenues. These funds such as the United Arab Emirates’ Mubadala, Qatar Investment Authority and Kuwait Fund are among the richest in the world. Their massive financial assets can help to overcome the declining oil revenues. Less wealthy oil producers such as Iran will have to be more aggressive in reforming their economies and creating other sources of revenue.

Why the oil rig count reversed despite the fall in crude price - Last week, Baker Hughes’ major basin oil rig count increased by ten—from 1,568 to 1,578. The main additions occurred in the Utica Shale and “Other” rigs. Rig counts increased my five and three rigs, respectively. Other rigs represents rigs in basins that are smaller or that don’t fall within a specific geographic basin. This week’s increase was a reversal from the 14 oil rig count decrease in the previous week. This week’s increase in oil rig count was the third addition in the past eight weeks. It was also the second highest addition in the past three months. Meanwhile, the current oil rig count isn’t far off its highest weekly count ever. On October 1, the rig count was 1,609. This is the highest it has been since January 2005. US oil price and rig count The oil rig count is slowly responding to falling oil prices in the US. By the end of last week, West Texas Intermediate’s (or WTI) oil price fell ~28% from its high in June. Despite the increase, this week’s count was the second lowest count in the past 11 weeks.  If oil prices continue to decline, drillers will have less incentive to drill. Oil prices below the break-even point would cause some upstream companies to stop operations. Oil producers working some of the unconventional shales, in particular, have a higher break-even point. These operations are usually more prone to oil price declines than conventional oilfields in the US.

Getting the word out -  A groundbreaking study traces toxins from Alberta's oilsands to northern Alberta's wildlife, vegetation and a cluster of cancer cases among First Nations in the region. Never heard of it? That's no surprise.Apart from a statement on the University of Manitoba website and an online link to years of research, there was no flashy announcement last July. No headlines warning of dire findings. No public response of note from government or industry. So activists determined to expose what they see as deadly spinoffs are reaching for the playbook of 1960s U.S. civil rights activists. And they're sticking with their high-profile advocates -- such as actor Leonaro di Caprio and Canadian rocker Neil Young. Stéphane McLachlan, the Winnipeg scientist who authored the study, was disappointed with the response. "The government responded by ignoring the whole thing. They had no choice. If they had recognized there was a problem, it would have been a slippery slope," the scientist shrugged. "The results are grounded in the environmental sciences but also in traditional knowledge. Unlike any of the other studies, it had been actively shaped and controlled by both the Athabasca Chipewyan First Nation and the Mikisew Cree First Nation from the outset," said McLachlan, co-ordinator for the U of M's Environmental Conservation Laboratory.

House votes to approve Keystone pipeline, showdown looms in Senate | Fox News: The House voted Friday to approve the Keystone XL Pipeline, sending the bill to the Senate for a showdown vote next week that could -- for the first time -- put the legislation on President Obama's desk. The measure passed Friday on a 252-161 vote, with 31 Democrats joining Republicans to approve it. An identical bill is expected to be voted on in the Senate on Tuesday. The legislation has re-emerged after Democratic Louisiana Sen. Mary Landrieu began championing it, in a bid to not only help the energy industry but also her struggling runoff Senate bid. In response, Republican Rep. Bill Cassidy, who is running against Landrieu in the runoff, sponsored the House bill that was approved on Friday. Though the Louisiana election battle is a driving force behind the latest Keystone push, the legislation nevertheless could land on Obama's desk if the Senate passes it next week. Senate supporters said they were confident they'd have the 60 votes needed for passage. This would force Obama to either sign it -- defying his environmentalist supporters -- or veto it.

South Dakota Native Americans describe House vote on Keystone XL pipeline as an ‘act of war’ --  Native Americans in South Dakota say they consider last week’s House vote to approve the pipeline “an act of war.” The proposed project, aimed at pumping tar sands crude oil from Canada to U.S. refineries, would completely cross South Dakota. Environmentalists oppose the pipeline because it represents continued reliance on fossil fuels. Most, if not all, of the oil would be exported to other countries, so the argument that it would somehow lower fuel prices rings hollow and false.Of course the U.S. government has hardly ever taken Native American concerns seriously, so it would be a surprise if that happened now, but Rosebud Sioux (Sicangu Lakota Oyate) Tribal President Scott said his nation has yet to be properly consulted on the project, which would cross through tribal land. Concerns brought to the Department of Interior and to the Department of State have yet to be addressed, he said in a statement. “The House has now signed our death warrants and the death warrants of our children and grandchildren,” Scott said. “We are outraged at the lack of intergovernmental cooperation. We are a sovereign nation and we are not being treated as such. We will close our reservation borders to Keystone XL. Authorizing Keystone XL is an act of war against our people,” he said. In February of this year, the Rosebud Sioux Tribe and other members of the Great Sioux Nation adopted tribal resolutions opposing the Keystone XL project. “The Lakota people have always been stewards of this land,” Scott said. “We feel it is imperative that we provide safe and responsible alternative energy resources not only to tribal members but to non-tribal members as well. We need to stop focusing and investing in risky fossil fuel projects like TransCanada’s Keystone XL pipeline. We need to start remembering that the earth is our mother and  stop polluting her and start taking steps to preserve the land, water, and our grandchildren’s future.”

American Indian Tribe Calls Keystone XL Pipeline Vote An ‘Act Of War’ - As the U.S. Senate prepares to vote this week on a bill to force approval of the controversial Keystone XL pipeline, which the House of Representatives already passed on Friday, American Indian groups who would be directly impacted by the tar sands project are converging on Washington D.C. to voice their opposition.  The Rosebud Sioux Tribe, whose territory in South Dakota lies along the proposed route of the pipeline, released a statement last week calling Congressional approval of the project an “act of war against our people.”  In a call with reporters on Monday, President Cyril Scott of the Rosebud Sioux Tribe vowed to fight back should the pipeline win government approval.  “Did I declare war on the Keystone XL pipeline? Hell yeah, I did,” said Scott. “I pledge my life to stop these people from harming our children and grandchildren and way of life. They will not cross our treaty lands. We have so much to lose here.”

CEO of TransCanada Concedes just 50 permanent jobs from Keystone XL Pipeline:  Seeming overlooked during yesterday's (11/16/14) interview on ABC's "ThisWeek", Russ Girling, current CEO of "TransCanada"... the company behind the Keystone XL Pipeline... conceded a claim by Reuters last year that, once constructed, the Keystone XL would produce as few as "FIFTY permanent jobs." But, he went on to argue, that the number did not take into account the nearly "9,000 temporary construction jobs" or the estimated "42,000 'indirect' jobs (from new businesses along the construction route)." Seriously? These are the “jobs, jobs, jobs” Republicans have been promising? The very thought that this country may risk certain environmental disaster to create fewer jobs over TWO years than it needs every TWO weeks just to keep up with population growth, is unfathomable. Tell me we’re not being ruled by people THAT dumb! Remember when supporters of the pipeline were claiming as many as "one MILLION new jobs?"

So, you want a pipe line? Jobs? - A very interesting article at Daily Kos has been posted.   Title: There’s been HOW many Pipeline spills in Alberta in the last Four Months? Seems the Canadian news system does not find oil, gas and toxic water spills from the mining of carbon fuels to be news worthy.   But, the native Indian sure find it news worthy.  Their news outlet, West Coast Native News has been tracking all the spills.   You know, it’s there yard getting contaminated. The Kos article quotes WCNN:  Over the past year WCNN has reported on many Crude oil and Toxic produced water spills all over Alberta, in fact we have reported over 600,000 Litres of toxic crap that has been spilled just last month and yet not one mainstream media outlet has picked up the incidents. So lets take a look back at just the last month (October) and see just what the mainstream is not telling you.  Of that 600,000 liters (165,107.5 gallons or 3931 barrels) 136,000 is crude oil.   That is, for us non metric thinkers, 35,927.4 gallons or 855.41 barrels of crude oil spilled in one month.  How long has there been mining in the area with pipeline transportation? You can go here to get the raw data from the regulatory agency, Alberta Energy Regulator.  The volumes are in cubic meters however.  In the month of October there are 46 spills reported, well or pipeline.  Twenty three (23) are pipeline spills.  There are at total of 10 crude oil spills including the 4 pipeline spills.   The other spills are some mixture of water (salt or fresh) with petroleum, or raw gas releases, contaminated water, etc.  NONE of them are listed as having an emergency status phase. So, we’ll be getting jobs alrighty.  They will be clean up and repair jobs involving environmental personnel and tech/science jobs for those trying to find ways to clean up this mess to that there are for real ” No reported impacts to any water body or wildlife.”  Jobs for those tech/science people figuring out how to transport the cleaned up toxic waste with out spilling it.    And jobs for those manning the toxic waste disposal facilities.  And jobs for those transporting the toxic waste.  Then we’ll have jobs for the lawyers sorting out the civil suites do to pollution and the lawyers lobbying congress to keep it all under wraps.  And jobs for the advertising agencies, those trying to make the public aware and those trying to blind the public (probably more of these later that the former).  Jobs for those trying to figure out how to get fresh water to the public. 

Naomi Klein: Debating Whether Keystone XL Has Climate Impact Is Absurd - Today on Democracy Now! journalist and best-selling author Naomi Klein joined Amy Goodman and Juan González to discuss the expected Senate vote this week to approve a pro-Keystone XL bill backed by Louisiana Democratic Sen. Mary Landrieu. Last week, House lawmakers passed similar legislation to approve the Keystone XL tar sands pipeline that will bring this carbon-intensive oil from Alberta, Canada, to the Texas Gulf Coast. On Friday, President Obama strongly suggested that the legislation, if passed by the Senate, won’t get past his desk. Watch as Klein shares with Goodman her thoughts on the pending vote, “The idea that it’s still up for some kind of debate whether or not building Keystone XL has a climate impact is absurd. Keystone is a pipeline that is intimately linked to plans by the oil and gas industry to dramatically expand production in the Alberta tar sands. They have pipeline capacity more or less to get the oil out that they are producing right now, but they have active plans to double and triple production in the Alberta tar sands digging up one of the highest carbon fuels on the planet with tremendous local health impacts to first nations people to indigenous people living in that region, violating their treaty rights.”

Economics no longer make Keystone pipeline viable - CNBC - What if they voted for a pipeline but nobody came? As Congress rushes to approve the long-delayed Keystone XL pipeline, it is questionable whether or not the project will make as much of a difference as proponents expect. Since June, crude oil has declined by 28 percent, pushing the price that oil from new wells in Canada may command below what the expected cost will be to produce it. The so-called "heavy oil" extracted from sand in Alberta, which the proposed pipeline would carry to Nebraska, en route to refineries on the Gulf Coast, will cost between $85 and $110 to produce, depending on which drilling technology is used, according to a report in July by the Canadian Energy Research Institute, a nonprofit whose work is often cited by Keystone proponents. West Texas Intermediate crude oil traded today at $76.67. "Anything not under construction [is] at risk of being delayed or canceled altogether," said Dinara Millington, vice president for research at Calgary-based CERI. Her cost estimates include the price of drilling new wells, meaning that existing wells that have already been paid for can continue to pump oil profitably, she said. CERI' s analysis squares with the views of other experts, who have pointed to low prices as a sign that economic facts, at least for now, don't match political rhetoric coming from Washington, where Keystone has been a goal for both Republicans and for Senate Democrats from oil-producing states.

Senate Defeats Bill on Keystone XL Pipeline in Narrow Vote - Senate Democrats, by a single vote, stopped legislation that would have approved construction of the Keystone XL pipeline, one of the most fractious and expensive battles of the Obama presidency.The vote represented a victory for the environmental movement, but the fight had taken on larger dimensions as a proxy war between Republicans, who argued that the project was vital for job creation, and President Obama, who had delayed a decision on building it.Senator Mary L. Landrieu, Democrat of Louisiana, who is facing a runoff election Dec. 6, had pleaded with her colleagues throughout the day to support the pipeline, leading to a rare suspense-filled roll call in the Senate. But she was ultimately rebuffed and fell short by one. The bill was defeated with 59 votes in favor and 41 against, and Ms. Landrieu needing 60 votes to proceed. The vote was also a reflection of how a once-obscure pipeline blew up into an expensive national political battle between environmentalists and the oil industry. Although the TransCanada company proposed the pipeline in 2005, it generated so little attention that Secretary of State Hillary Rodham Clinton was poised to approve it in 2011 with little fanfare.  But at that point, environmentalists looking to press Mr. Obama to act on climate change issues seized it as a potent symbol, leading to protests outside the White House and millions of dollars from environmentalists and the oil industry poured into political races on both sides. The political fallout, though, affected Ms. Landrieu more than the president, at least in the near term. She was able to persuade 14 Democrats to join all 45 Republicans to support the pipeline, but 40 Democrats and Senator Angus King, independent of Maine, combined to stop the legislation.

BREAKING: Senate Rejects Keystone XL Pipeline By One Vote -- The U.S. Senate has narrowly rejected a bill to approve construction of the Keystone XL pipeline, the controversial project that would carry tar sands oil from Alberta, Canada to refineries on the Gulf Coast of the United States.  Coming into the floor debate on Tuesday, there was not certainty as to what the outcome would be — a true rarity for the Senate. At the beginning of the debate on Tuesday afternoon, bill sponsor Sen. Mary Landrieu (D-LA) said the debate was “one of the first debates I’ve been in in 8 years where the outcome is uncertain … [but] I know in my heart we have 60 votes.”  As it turns out, Landrieu did not have the 60 votes to pass her bill. It failed by a final count of 59 to 41.   The vote represented the first time the Keystone XL pipeline had been heard by the Senate, mainly because Senate Majority Leader Harry Reid (D-NV) had historically refused to bring the issue to the floor. But the Senate Democratic leadership changed tactics and pushed Landrieu’s “Keystone XL Pipeline Approval Act” to the floor this week in large part because of Landrieu’s drive, and also to try and save her Senate seat. Landrieu is behind in the polls for her Dec. 6 runoff election against Rep. Bill Cassidy (R-LA), and some believed the pipeline’s passage would help win her some support in the oil and gas-centered state.

Native Americans Arrested Following Keystone XL Pipeline Vote » Anyone following the Keystone XL pipeline vote in the Senate yesterday heard what appeared to be chanting or singing in the background when the final tally of 41-59 was announced, signaling that approval of the pipeline had failed to clear the bar of 60 votes and that congressional approval of the pipeline was delayed for the time being.  That sound was coming from Native Americans in the gallery, singing a traditional tribal tune. Five of them were removed from the gallery and arrested.  According to Red Power Media, one of the protesters was Greg Grey Cloud of the Rosebud Sioux tribe. “Grey Cloud, who wore a headdress, continued singing as he was knocked to the floor and pulled to the wall of the hallway,” said Red Power Media. “Protesters were handcuffed with plastic zip-ties while standing shoulder to shoulder, facing the wall. They were then paraded down a corridor and one of the protesters began singing again. The group was arrested for ‘disrupting Congress.'”  The Rosebud Sioux tribe had already declared the House approval of the pipeline last Friday an “act of war” and said that it would close its tribal borders to pipeline construction.

Keystone Fails in Senate (for Now) -- More than six years after TransCanada first presented its plan for a pipeline to carry oil from Canada's tar-sands fields to Texas's Gulf Coast, an end may finally be in sight for the controversial, oft delayed, increasingly expensive, and perhaps increasingly irrelevant Keystone XL pipeline.  But that end didn't come Tuesday, Nov. 18, when the Senate, in a nail-biting, made-for-C-SPAN moment late in the afternoon, killed Keystone's chances of passing -- for at least two months. Congress will get another chance in January, when Republicans will have control of the Senate. But the biggest question may simply be: Does Keystone even matter anymore? When TransCanada first broached it in the fall of 2008, it was seen by both the Canadian oil industry and environmentalists as a make-or-break issue for the development of the landlocked Canadian tar sands since it would provide a straightforward and affordable way to get the crude to market. Without ready market access, Canadian crude traded -- and still trades -- at a discount to U.S. oil benchmarks.  Environmentalists, for their part, made opposition to Keystone one of their top priorities, arguing that the pipeline would open the doors to tar-sands development that otherwise wouldn't happen. Because tar-sands production emits more greenhouse gases than regular crude production, greenlighting Keystone would be tantamount to signing off on more greenhouse gas emissions for decades to come, they argue. James Hansen, a former NASA official and leading voice on climate change, famously called Keystone "game over" for the global climate.  But here's the thing: The energy world has changed a lot since 2008. Keystone has proved crucial neither to the development of Canada's tar sands nor to getting it to market. And this means that Keystone, though not environmentally friendly by definition, has also proved to be less of a concern in terms of future greenhouse gas emissions. In its last assessment of Keystone's impact on greenhouse gas emissions, the State Department determined that the pipeline by itself would not lead to increased emissions.

Gulf-Bound Tar Sands for Export? Follow the Oiltanking Trail -- The U.S. Senate failed to get the necessary 60 votes to approve the northern leg of TransCanada's Keystone XL pipeline, but incoming Senate Majority Leader Mitch McConnell (R-Ky.) already promised it will get another vote when the GOP-dominated Senate begins its new session in 2015.  Though the bill failed, one of the key narratives that arose during the congressional debate was the topic of whether or not the tar sands product that may flow through it will ultimately be exported to the global market. President Barack Obama, when queried by the press about the latest Keystone congressional action, suggested tar sands exports are the KXL line's raison d'etre.  Obama's comments struck a nerve. Bill sponsor U.S. Sen. Mary Landrieu (D-La.) and supporter U.S. Sen. John Hoeven (R-ND) both stood on the Senate floor and said Keystone XL is not an export pipeline in the minutes leading up to the bill's failure.  “Contrary to the ranting of some people that this is for export…Keystone is not for export,” said Landrieu, with Hoeven making similar remarks.  But a DeSmog probe into a recent merger of two major oil and gas industry logistics and marketing companies, Oiltanking Partners and Enterprise Products Partners, has demonstrated key pieces of the puzzle are already being put together by Big Oil to make tar sands exports a reality.    And both Keystone XL and Enbridge's “Keystone XL Clone” serve as key thoroughfares for making it happen.  On November 13, the day before the U.S. House of Representatives voted to approve Keystone XL North, Enterprise acquired Oiltanking. Both companies stand to gain from its prospective approval, as well as the recent approval of Keystone XL's Clone, and both companies have made big bets on fossil fuel exports at-large.   The Keystone XL clone — the Alberta to Freeport, Texas combination of Enbridge's Alberta Clipper, Flanagan South and Seaway Twin pipelines — has a key tie to Enterprise Products. That is, Enterprise co-owns the Cushing, Oklahoma to Freeport, Texas Seaway Twin pipeline with Enbridge.

The Fracking Revolving Door - There was much speculation about Louisiana Senator Mary Landrieu‘s motivation for pushing the first full Senate vote this week on approving the Keystone XL pipeline. Some revolved around her trying to improve her chances in the Dec. 6 Senate runoff against Republican Congressman Bill Cassidy (neither candidate got a majority on Nov. 4). Others say she’s likely to lose anyway and that her grandstanding was directed at oil and gas companies that might provide a lucrative landing spot for her after she leaves the Senate in January. That latter speculation isn’t idle, as a new report from DeSmogBlog and Republic Report indicates. Natural Gas Exports: Washington’s Revolving Door Fuels Climate Threat lays out how corporate lobbyists swap roles with politicians and government officials constantly, leading to excessive influence by corporations on lawmakers, the Obama administration and federal agencies. It describes how this revolving door eased the way for Big Oil to land four permits for liquified natural gas (LNG) export facilities from the Obama administration since 2012. And while the report, the first salvo in an ongoing investigation of what it calls “the LNG exports influence peddling machine,” looks specifically at LNG export facilities, its conclusions could be applied to the entire machinery of climate denier influence in Washington DC. Corporate lobbyists have helped to engineer a transformative shift with little scrutiny or meaningful debate: plans to extract U.S. natural gas and export the gas overseas to more lucrative markets. This shift—if fully realized—will continue to transition the U.S. into a resource colony, where our communities, homes, air and water are exploited and polluted so that large multinational corporations can pursue ever-higher profits by selling U.S. fossil fuels abroad.”Four permits for LNG export facilities have already been approved, with many more in the pipeline. To feed these facilities and as domestic gas prices rise as a result of export, there will likely be increased pressure to expandfracking dramatically.

Leaked Documents Reveal Shady Tactics Behind PR Push For Even Bigger Canadian Pipeline -  With the debate still raging over Keystone XL, the company behind the pipeline is already hard at work promoting a PR strategy for its larger and entirely Canadian pipeline, Energy East. New documents made public this week show that Transcanada is working with the world’s largest independently owned PR firm, Edelman, to help garner support for the literally trans-Canada pipeline that would bring heavy crude from the western tar sands to the eastern ports for export. With clients like the American Petroleum Institute (API) and the Koch-funded American Legislative Executive Council (ALEC), Edelman recently made unwanted news for refusing to commit to turning away clients that support climate-denying agendas.   The leaked documents first obtained by Greenpeace as prepared by Edelman for TransCanada in May and August reveal in great detail how Edelman recommends the Canadian company target opposition by building a grassroots network of some 35,000, including a large chunk of the company’s own employees. Edelman recommends putting pressure on opponents by “distracting them from their mission and causing them to redirect their resources.” It advises working with “supportive third parties who can in turn put the pressure on, particularly when TransCanada can’t” to achieve these aims.  This technique of creating artificial grassroots coalitions is referred to as ‘astroturfing’ in the industry, and it is an approach that Edelman is closely linked to, especially when it comes to an ill-begotten Walmart campaign in 2006 in which bloggers were used as PR hacks without the proper transparency.

TransCanada Plots Dirty PR Campaign to Push New Pipeline -- Greenpeace has leaked documents which reveal the company’s secret strategy, much of which hinges on the same astroturf and dirty tricks tactics used by Rick Berman, whose smear campaign against environmentalists was exposed a few weeks ago  by the New York Times. And the firm that prepared the strategy was Edelman, the world’s largest public relations company, which earned itself a blizzard of unfavorable publicity last summer, both for its work for big-time climate deniers and its inept damage control. Edelman’s clients included the American Petroleum Institute and the American Legislative Exchange Counsel (ALEC) and its previous work included an ad campaign for Keystone XL. The documents, written between May and August 2014, don’t merely suggest promoting the benefits of shipping tar sands oil from Alberta to eastern Canada for export to other countries. They also advocate for the company to “Add layers of difficulty for our opponents, distracting them from their mission and causing them to redirect their resources.” More than 50 Edelman and TransCanada staff would be devoted to the Washington D.C.-based campaign, some of which—primarily the positive PR part—has already been launched.

Chinese oil patch investors crying foul on immigration laws - The Chinese consul general in Calgary told the Globe and Mail that Chinese companies struggle to turn a profit on Canadian investments.  He said hiring Albertans "is so expensive" and that it "adds to the financial burden" of the Chinese companies operating in the oilsands. In the face of falling oil prices, pricier Canadian workers are only getting more burdensome for Chinese firms invested in Canadian resources.  This is the latest controversy over Chinese foreign workers in Canada. In one high-profile case, two Canadian labour unions brought a court challenge against HD Mining over the use of Chinese workers in a B.C. coal mine. The unions claim the company turned away qualified Canadian job applicants in favour of cheaper, Chinese labour.  That case was dismissed by a federal court. But more recently, an executive from Chinese state-owned firm Sinopec warned Chinese investments in Canadian projects were at risk unless Canada loosened restrictions on temporary foreign workers.

More on Nigeria’s fuel problems - A quick follow-up to our Nigerian fuel scarcity story from Monday, which highlighted the country’s growing exposure to potential fuel shortages if and when oil prices continue to descend, and as the national currency weakens. As already noted, Nigeria may be a net oil exporter, but the country remains dependent on product imports to keep its economy ticking over. Those products are imported by local companies from international oil trading intermediaries, and distributed at prices which are further subsidised by the government. The problem Nigeria faces now, however, is two-fold. First, it still owes international intermediaries substantial arrears and has already had to resort to so-called oil-for-product swaps to ensure imports keep flowing, albeit on terms which look increasingly unfavourable. Second, while Nigeria has in the past favoured domestic importers and marketers in favour of international parties when it comes to payments, these domestic entities are also complaining about delayed or non-existent payments. This in turn has prompted local distributors and retailers to suspend services in an effort to get the Ministry of Finance to pay up the sums it owes them in subsidies. As the deadlock grows, however, so do reports from Nigerian media about fuel shortages on the ground.

Oil Dispute Takes a Page From Congo’s Bloody Past - — The trouble started when a British company suddenly appeared in this iconic and spectacularly beautiful national park, prospecting for oil.Villagers who opposed the project were beaten by government soldiers. A park warden, who tried to block the oil company, SOCO International, from building a cellphone tower in the park, was kidnapped and tortured. Virunga’s director, a Belgian prince, was shot and nearly killed hours after he delivered a secret report on the oil company’s activities.Much like the fight over drilling on federal lands in the United States, the struggle over oil exploration in Africa’s national parks is a classic quandary, pitting economic development against environmental preservation.But out here, the quest for oil seems to be more volatile, and the stakes are arguably higher — on both sides.While West Africa has been a major hydrocarbon producer for decades, new technology like deeper drilling has led to a bonanza of new energy discoveries here on the continent’s east side.Oil companies are now circling several African parks like this one, home to critically endangered wildlife, such as colossal silverback mountain gorillas, among the last of their kind.But development is far more than just a buzzword here. The people in the Democratic Republic of Congo, Tanzania, northern Kenya, Uganda and Mozambique — all places of recent hydrocarbon finds — are among the poorest in the world, many without electricity or clean water, their children often facing relentless illness and few prospects.African governments say they have a moral obligation to pursue anything that might lift their countries out of grinding poverty, including drilling for oil in pristine natural environments.

Saudi Arabia at the G20: Is it waging Econ War on Iran, Russia and N. Dakota? -- Saudi Arabia maintained to journalists that Riyadh is not behind the recent fall in gasoline prices. The suspicion has arisen that Riyadh is “flooding the market,” a technique it has used in the past, of pumping a lot of oil even in the face of weakening market demand, thus driving the price down. Saudi Arabia is annoyed at Russia over Moscow’s support for the Bashar al-Assad regime in Damascus. SA will support the US in the latter’s annoyance with Russia over Ukraine. Saudi is perpetually annoyed with Iran, its Shiite rival that also supports al-Assad and the civilian nuclear enrichment program of which it fears for its dual-use, weapons potential. And Saudi Arabia is threatened by the rise of hydraulic fracturing as a way to produce petroleum, which detracts from the centrality of the vast Saudi reserves. Saudi Arabia is not hurt as much by falling oil prices as many other OPEC countries. In part, it has larger reserves than most such countries, and so can afford to be patient until prices recover. In part, it has relatively low extraction costs, so it keeps much more of the current $80 a barrel than many countries. Some proposed drilling projects in Norway and Britain don’t make any economic sense at $80 a barrel or less.  Saudi Arabia, however, says it is no longer the world swing producer. It produces 9.5 million barrels a day or so, about ten percent of the world production of 90 million barrels a day. While it used to matter a lot whether Saudi did 8 mn barrels a day or 9.5 mn barrels a day, nowadays a small difference like that, Saudi Arabia says, would likely be made up by other suppliers, including new fields drilled via hydraulic fracking. The fact is that demand is soft, which is what is driving prices down despite substantial decreases in Libyan, Iranian, Syrian, Iraqi and South Sudanese exports. The softness in demand, in other words, is so great that prices have come down despite significant production shortfalls in some former producing countries. Saudi Arabia may be happy about idling some proposed North Dakota or Norwegian fields, reducing competition. But it denies responsibility.

This “Putin Isolated” Nonsense Is Dangerous -- These headlines are silly:

Even more silly then those headlines was the German prime news Tagesschau which used a picture of Putin seemingly sitting alone at a lunch table to prove his "isolation". But news service pictures show that he is sitting with the Brazilian president Dilma Rousseff waiting for the other lunch guests to sit down next to them. These were simply not visible in the frame Tagesschau selectively used. And do these headline writers, TV correspondents and politicians know what the 20 in G-20 means? The people who publicly miffed Putin in Brisbane were Obama, Cameron, Harper, Abbott and Abe. I count five out of twenty.  Now all this silly isolation talk would be funny if the people in power would recognize it for the bullshit it is. Unfortunately a lot of stupid people in Washington DC, politicians as well as media folks, believe in their own propaganda bullshit and therefore tend to miscalculate in their assessments of global policies. This is dangerous as it often has bloody consequences.

Russia May Want to Upend Dollar ‘Diktat,’ But Greenback’s Still King -  Russia may be trying to upend the dollar “diktat” by denominating a major oil deal with China in yuan, but Beijing’s currency is still a ways off from dethroning the greenback.  Central banks around the world, including Russia’s, still far prefer U.S. currency over any other. To be sure, Beijing is strategically increasing the amount of international trade settled in yuan and allowing more of its currency to flow into financial markets around the world. Deutsche Bank expects cross-border trade settled in yuan to grow by around 50% this year to around 6 trillion yuan ($1 trillion). That’s 20% of the Asia giant’s trade. Beijing wants to internationalize the yuan in part for economic reasons. It helps the economy adjust to integration with the global economy. It’s also a political goal: China wants the yuan to be one of the core currencies held by central banks around the world as part of their emergency reserves. The yuan as a “reserve currency” would be a symbol of the country’s international power. There’s no doubt the dollar is still king, however. International investors are buying record amounts of U.S. debt, pushing the dollar to a five-year high earlier this month. Foreign holdings of U.S. treasury securities topped a record $6 trillion in August as Europe flirts with another recession, emerging markets slow down and Japan faces a tough battle to revive long-stagnant growth.

Dive Contest: Russian Ruble v Ukrainian Hryvnia -- In the Summer Olympics, they have a popular and quite watchable event called "synchronized diving." I am reminded of the sport when I observe the situation of two of the fastest-falling currencies worldwide, the Russian ruble and the Ukrainian hryvnia. Synchronized by geography, conflict and tragedy, both these countries' currencies are in dire straits. Russia's economy is a one-trick pony dependent on high global prices for energy to sustain itself. Ukraine's economy, meanwhile, lurches from one crisis to another without any end in sight. Fighting each other has further drained resources from both. There are no "winners" here to speak of. Recently, both countries have tempted fate by allowing their currencies to more or less float freely. The results are informative.  Despite all Putin's showboating, the truth is that Russia could not maintain a burn rate of $2 billion or so a day defending the currency. So, it decided to allow the ruble to more or less float to find its real market value absent such large-scale market intervention. Once more, falling energy prices are impacting foreign exchange market participants' expectations about Russia going forward. For now, speculators are unwilling to push the currency past 40 ruble to the dollar. 30-some percent depreciation may have to do for 2014:  Falling oil prices, which started late July, fanned downside pressure on the ruble, battered by Russia’s flagging economic growth and Western sanctions. The country is now preparing to withstand a “catastrophic decline” in oil prices, President Vladimir Putin said in an interview to the state-run news agency TASS on Friday.

Russia's Weak Ruble Puts China's Moscow Development Projects On Hold -- Moscow Times: At least two Chinese construction and development projects in Moscow were reportedly postponed last week as the depreciation of the ruble, which has fallen over 30 percent to the dollar since the beginning of the year, hit the firms' cost estimates. On Wednesday, City Hall said Chinese companies that had earlier planned to build one of the Moscow metro lines were putting the project on hold due to the ruble's extremely volatile exchange rate. In May city authorities signed an agreement with China Railway Construction Corporation and China International Fund to build a line of the Moscow metro in the city's southwestern region, a would-be segment of the gigantic second metro ring to become operational by 2020. The line's estimated cost was set at $2 billion. In addition to building the metro, the Chinese firms would have the option to develop the estimated 2 million square meters around the six-future metro stations. But the project so far has been postponed due to "the strengthening dollar," Marat Khusnullin, deputy Moscow mayor in charge of construction and development, said Saturday. "Our preliminary agreement with Chinese investors was that the payment for the metro construction would be in dollars, but that currency has strengthened and we are now re-calculating the costs and have so far agreed to pay out in yuan," Khusnullin said. Other Chinese investors last week had more salt rubbed in the wound by deciding against investment in one more large project: the redevelopment of the vast territory of the historic ZiL auto factory, news reports said.

China and Russia vow to build alliance - China and Russia have vowed to strengthen bilateral military co-operation and hold joint naval exercises to counter US influence in the Asia-Pacific region as a growing chorus of voices warns of a looming “new cold war”. During a visit to Beijing where he met his Chinese counterpart and Premier Li Keqiang, Russian defence minister Sergei Shoigu said the two sides “expressed our concern with the US attempts to reinforce its military political influence in the Asia-Pacific region”, Chinese and Russian state media reported.  “Our co-operation in the military spheres has great potential and the Russian side is ready to develop it across the broadest possible spectrum of areas,” Mr Shoigu added. “We see the formation of a collective regional security system as the primary objective of our joint efforts.” The Russian delegation also drew a parallel between the current pro-democracy demonstrations in Hong Kong and the so-called “colour revolutions” in former Soviet states, including Ukraine, which China and Russia blame on instigation from the US and its allies. Anatoly Antonov, Russia’s deputy defence minister, even seemed to suggest Moscow would be willing to help Beijing tackle the peaceful protests in Hong Kong. “We have taken note of the events that recently took place in Hong Kong and the two ministers acknowledged that not a single country can feel insured against colour revolutions,” Mr Antonov said, according to Russian state media. “We believe that Russia and China should work together to oppose this new challenge to our states’ security.”

Michael Hudson, Other Experts Discuss America, China and Russia Jockeying in G20 and APEC Summits - Yves Smith -Yves here. This is an intriguing exchange among Michael Hudson, John Weeks, professor emeritus of development economics at the University of Long and Colin Bradford of Brookings. The points of difference between Hudson and Bradford are sharp, with Bradford admitting to giving a Washington point of view that Obama scored important gains at the APEC summit, with Hudson contending that both confabs exposed America's declining role and lack of foreign buy-in for its neoliberal economic policies.

Russia Can Survive An Oil Price War --  Russia has proven before – the 2008 financial crisis for example– that it can ride its resource rents through a prolonged economic slump. Higher oil price volatility and sanctions separate the current downturn from that of 2008, but Russia’s economic fundamentals remain the same – bolstered by low government debt and a large amount of foreign reserves. Moreover, Western involvement in Russian oil and gas plays is more pronounced than ever.Economic diversification has not come easy for Russia, arguably for a simple, but effective reason; oil and gas are a source of tremendous wealth for the country. However, the dire straits of the 2008 global crisis illustrated the importance of financial diversification. Since then, Russian state-owned oil and gas giants Rosneft and Gazprom have increasingly allowed Western majors like BP, Eni, Exxon, Shell, Statoil, and Total access to some of Russia’s underdeveloped, but prized projects. Western companies have an estimated $35 billion tied up in Russian oil with hundreds of billions more planned and service providers Halliburton and Schlumberger each derive approximately five percent of their global sales from the Russian market. The Western majors remain committed to their extra-national ventures and these powerful relationships ultimately limit the sanctions’ scope. Still, with their cooperation put on hold, Russia has been forced to look elsewhere, and increasingly within. Rosneft is set to announce new Arctic partners by the end of the year, a role formerly dominated by Exxon. China appears a likely suitor as the two countries have already embarked on a promising oil partnership in Russia’s Far East in addition to the highly publicized long-term gas deals. Domestically, Rosneft and Gazprom have strengthened their alliance and Putin has approved the creation of a state-owned oil services company.

And The Biggest Winner From The Oil Price Plunge Is... -- "The Chinese, among others, seem to be responding to the lower oil price with additional demand," notes one tanker executive as Bloomberg reports the number of supertankers sailing toward China’s ports matched a record on Oct. 17 and is still close to that level now. The plunge in price has enabled China to add 35 million barrels to its inventories in the past three months as the nation fills its strategic petroleum reserves, OPEC said yesterday. Furthermore, though the oil slide is hurting nations from Venezuela to Iran - that depend on energy for revenues - ship owners serving the industry’s benchmark Middle East-to-Asia trade routes are reaping the best returns from charters in years as the slump drives down the industry’s single biggest expense. As one analyst notes, "we've seen the Chinese buying a lot from the Middle East and that’s really let rates cook." So it appears the Chinese, in the face of the worst growth and economy in years, are rational enough to buy more at lower prices (as opposed to the buy-more-because-stocks-are-at-all-time-highs Western investors).

China Shale Boom Fizzles as Clean Energy, Imports Take Lead -  China has sharply cut its output target for shale, signaling the country’s drilling boom is fizzling out before it even gets going. The nation has reduced its goal for the end of the decade to a third of an earlier estimate, as difficult geology, lack of infrastructure and limited exploration rights conspire against shale-gas ambitions. Big gas import deals, a lower oil price and China’s commitment to clean energy are also weighing on shale’s promise. “It’s a reality check for policy makers who’ve finally realized the shale gas boom may not come as easily as many thought,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. “Progress has been made in many areas, but none of them are big enough to trigger a shale revolution.” China, which has the world’s largest shale gas reserves, awarded 18 companies exploration rights in two auctions in 2011 and 2012, in an attempt to replicate the U.S. shale boom and cut its reliance on imports. Only one of these, state-owned energy giant China Petroleum & Chemical Corp, has started to commercially produce the fuel. It’s bigger rival, PetroChina Co., is also producing shale gas from its own reserves.

Crashing Steel Prices Lead To Largest Chinese Bankruptcy, "Will Be Followed By Others" -- With growth rates for steel products at or near record lows and prices for end-product having plunged to record lows, it is little surprise that the Steel industry would provide the largest Chinese bankruptcy yet in this cycle. As Bloomberg reports, unlisted Haixin Iron & Steel - which halted production and defaulted on CNY3 bn in March - has started bankruptcy proceedings. Having spent 8 months hoping for the government bailout that every Western onlooker believes is every firm's god-given right, a reorganization application for the Wenxi, Shanxi province-based company (with $1.7 billion of total debt) was accepted by the Yuncheng City Intermediate People’s Court. This is just the start as "Haixin Group’s bankruptcy will be followed by others," warns one analyst, adding that the major flaw of producers of iron ore, the most traded commodity after oil, is they tend to be “over-bullish.”

Iron Ore Completes Fifth Weekly Loss as ‘Worst Is Yet to Come’ - Iron ore capped a fifth straight weekly drop with prices trading near the lowest since 2009 on concern that slowing growth in China will hurt demand just as rising low-cost supplies spur a global surplus. Ore with 62 percent content delivered to Qingdao lost 6.8 percent this week, dropping to $70.20 on Nov. 19, the lowest level since June 2009, data from Metal Bulletin Ltd. showed. The price retreated 0.9 percent to $70.31 a dry ton today. Iron ore collapsed this year as surging low-cost output from Rio Tinto Group (RIO) in Australia and Vale SA in Brazil spurred the glut. Data from Asia’s largest economy this week showed a drop in new-home prices and rising bad loans. The slump bears out a September forecast from Tom Albanese, former head of Rio Tinto, who said prices would remain weak for a sustained period as supply exceeded demand and China’s economy was slowing. “The worst is yet to come,” Liang Ruian, a fund manager at Shanghai-based Jianfeng Asset Management Co., said in an interview today. “Not only will we see increased supply from Brazil and Australia, also there’s an element of collapsing demand which hasn’t been reflected in the price yet.”

China Bad Loans Jump Most Since 2005 as Economy Cools - China’s bad loans jumped by the most since 2005 in the third quarter, fueling concern that a cooling economy will be further weakened as banks limit lending to avoid credit risks. Nonperforming loans rose by 72.5 billion yuan ($11.8 billion) from the previous quarter to 766.9 billion yuan, the China Banking Regulatory Commission said in a statement on Nov. 15. Soured credit accounted for 1.16 percent of lending, up from 1.08 percent three months earlier. As China heads for the weakest economic expansion since 1990, Communist Party leaders have discussed lowering the nation’s growth target for 2015, according to a person with knowledge of their talks. Bankers’ low appetite for risk and their rising concerns about asset quality are leading to a “sluggish” expansion in credit, according to UBS AG. “We are still suffering from the aftermath of the credit binge and massive stimulus measures put in place in 2008,” “Banks have accelerated recognition of their bad loans in the last two quarters so that they could start the clean-up process.”

China's Shadow Banking Grinds To A Halt As Bad Debt Surges Most In A Decade -- What is the main culprit for the contraction in China's all important credit formation? In two words: shadow banking. As Bank of America summarizes "shadow banking is being tamed" because "the changing structure of TSF suggests that Beijing’s efforts in controlling some types of shadow banking have made some achievements. Two major drivers for the steep decline of TSF from Sept to Oct were the falling of non-discounted bills (down RMB241bn) and falling trust loans (down RMB22bn). By contrast, new corporate bonds were at RMB242bn, a sharp rise from RMB151bn in Sept." In other words, China's shadow banking not only ground to a halt, it actually continued moving in reverse!

Distressed Debt in China? Ain’t Seen Nothing Yet, Buyers Say - Bad debts in China are well underestimated because authorities persist in propping up weak companies and bailing out local investors, according to DAC Management LLC. The Chicago-based asset management and advisory firm, which focuses on distressed credit and special situations in China, says the worst is yet to come, and that means lots of opportunities for the world’s biggest distressed debt traders. Nonperforming loans at Chinese banks jumped by the most since 2005 in the third quarter to 766.9 billion yuan ($125.3 billion), official statistics released earlier this month showed. The People’s Bank of China has injected 769.5 billion yuan into its banking system over the past two months to support an economy growing at the slowest pace in more than a decade.

China Manufacturing PMI and Output Back in Contraction  - Chinese manufacturing has been wavering in and out of contraction since about mid-2011. Following a 5-month stint in positive territory, the HSBC Flash China Manufacturing PMI shows Output contracts for the first time in six months. Key points:

  • Flash China Manufacturing PMI™ at 50.0 in November (50.4 in October). Six-month low.
  • Flash China Manufacturing Output Index at 49.5 in November (50.7 in October ). Seven-month low.

“The HSBC China Manufacturing PMI moderated to a six-month low of 50.0 in the flash reading for November, down from the October final reading of 50.4. New export order growth continued to ease and led to a below-50 reading for the output sub-index for the first time since May. Disinflationary pressures remain strong and the labour market showed further signs of weakening. Weak price pressures and low capacity utilization point to insufficient demand in the economy. Furthermore, we still see uncertainties in the months ahead from the property market and on the export front. We think growth still faces significant downward pressures, and more monetary and fiscal easing measures should be deployed.

China Manufacturing PMI Misses, Slides To 6 Month Lows - For the 13th month in a row, according to Bloomberg data, China Manufacturing PMI missed expectations. Printing at a 6-month low of 50.0 (against expectations of 50.2), the most notable individual component was the slump in output to a contractionary 49.5 reading for the first time since May. New export orders (umm US decoupling?) also dropped. It seems after last month's idiocy (take a look at these charts for a good laugh), that Japan's Manufacturing PMI is also catching down to reality having missed expectations and dropped to 52.1. Chinese and Japanese stocks are tumbling after this data (with Nikkei 225 200 points off US day session closing levels).

China cuts interest rates to revive slowing economy: The People's Bank of China is cutting its one year deposit rate to 2.75% from 3.0% to try to revive the flagging economy. The cut, which took the markets by surprise, was the first since 2012, and comes into effect on Saturday. The one-year lending rate will also be reduced from 6% to 5.6%. On Thursday figures showed China's factory output contracting for the first time in six months. Economic growth slowed to a five-year low of 7.3% last quarter. Many economists had expected China to stimulate economic growth through fiscal spending rather than lowering rates. To offset the effect of lower rates on savers the bank said it would give banks the flexibility to offer higher deposit rates, up to 1.2 times the benchmark level, rather than 1.1 times. Shares in mining companies jumped by 3-4% after the cut on the hope that better growth would help sales of raw materials to China. The Australian and New Zealand currencies also strengthened reflecting their dependence on trade with China.President Xi Jinping told chief executives at the Asia Pacific Economic Cooperation Summit this month that the risks faced by China's economy were "not that scary" He said the government was confident it could head off the dangers. He said even if China's economy were to grow just 7%, that would still be at the forefront of the world's economies.

China blinks as economic downturn deepens - China has abandoned its policy of monetary tightening, cutting interest rates for the first time in over two years to head off a corporate crunch and mounting dangers of deflation. The move set off an instant spike in the price of crude oil and other key commodities as traders bet on a fundamental pivot by the Chinese authorities and a return to the bad old ways of credit-driven growth. The People’s Bank of China caught markets off guard, cutting the benchmark lending rate by 40 basis points to 5.6pc and the deposit rate by 25 basis points to 2.75pc. It also liberalised bank rates in a free market tilt. “Every time the economy slows, they blink,” said Patrick Chovanec from Silvercrest Asset Management. “The danger is that they will keeping trying to shore up a growth model that is past its sell-by date.” The central bank denied that it is changing tack, insisting that the cuts target a specific problem of high-financing costs for firms. “It does not signal that the direction of policy has changed. There is no need for strong stimulus," it said in a rare statement.

Hong Kong Moves to Clear Out Occupy Protesters -- Police in Hong Kong have begun to clear out pro-democracy protest camps occupying key stretches of road outside government headquarters in Admiralty and in the busy shopping district of Mong Kok. The effort comes after Hong Kong courts extended injunctions against blocking roads at the sites. See real-time updates from our reporters on the scene below: Protesters give a helping hand to the bailiffs who arrived Tuesday morning to clear one portion of the main protest zone in Admiralty on Tuesday. Student protesters leading the demonstration have urged followers not to fight the clearing, which was concentrated on the area outside a major commercial tower that has been blocked for weeks by tents and barricades. Hong Kong’s chief executive Leung Chun-ying says that there is no point for protesters to resist the court order. “I think it is abundantly clear by now that the occupiers are and have been breaching the law of Hong Kong,” Mr. Leung said at a media session this morning. “Hong Kong is a law-abiding society and the rest of Hong Kong expect the occupiers, like everyone else in Hong Kong, to follow the law.”

Thousands of police called up to help clear Mong Kok roads - South China Morning Post: At least 3,000 officers - more than a tenth of the 28,000-strong police force - will be sent to Mong Kok as soon as tomorrow to assist bailiffs in executing injunctions to reopen occupied roads, a police source says. This emerged yesterday after smooth clearance of the occupied area around Citic Tower in Admiralty by bailiffs and legal representatives of the building's owners - for which 1,000 police were on standby. "We will need at least three times more to handle Mong Kok," the source said, adding that at least 100 to 200 protesters in the rowdiest of the three protest sites were expected to resist bailiffs."Those who are well-behaved will leave on their own of course, but those who are not will put up a fight," the source said. Police will discuss the operation today after a review of the bailiffs' actions in Admiralty. The occupied zone in Mong Kok may not be cleared in one go. Protesters on Argyle Street may be cleared tomorrow, before the greater number on Nathan Road are tackled, the source said.

BRICS countries should raise their voice in global economic governance: Chinese president (Xinhua) -- The BRICS countries should actively participate in international multilateral cooperation and raise their voice in global economic governance, Chinese President Xi Jinping said here Saturday. Xi made the remarks while meeting with other leaders of the BRICS countries on the sidelines of the Group of Twenty (G20) summit. Economic cooperation serves as the lasting power house for the development of the BRICS countries, Xi said when meeting with Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, South African President Jacob Zuma and Brazilian President Dilma Rousseff. The BRICS countries should remain committed to drafting long-term blueprint for economic cooperation and forging a closer economic partnership by facilitating market inter-linkages, financial integration, infrastructure connectivity as well as people-to-people contacts, he said. All sides should step up efforts to the establishment of a new development bank and a contingency reserve arrangement since both are of great significance, he added. The cooperation between the BRICS countries should be driven by the two "wheels" of economy and politics so that the BRICS can act as not only the world's economic engine, but also a shield for world peace, said the Chinese president. The BRICS countries should further their cooperation and coordination in world's politics and security to safeguard the world's fairness and justice, Xi said. All sides should also strengthen coordination and cooperation at the G20 summit to help achieve positive results, he said.

Chinese, French presidents agree to propel comprehensive strategic partnership - (Xinhua) -- Chinese President Xi Jinping and his French counterpart Francois Hollande agreed here Sunday to continuously deepen their countries' comprehensive strategic partnership. Meeting with Hollande on the sidelines of the Group of Twenty (G20) Summit, Xi said that during his state visit to France in March, he and President Hollande jointly decided to bring the Sino-French comprehensive strategic partnership into a new era. Over the past half year since then, a series of consensuses reached between the two sides have been implemented actively and effectively, and bilateral ties have been upgraded and accelerated in an all-round way, said Xi. The two sides have witnessed positive progress in their cooperation on nuclear energy, finance and trade as well as over 800 celebration events marking the 50th anniversary of the establishment of their diplomatic ties, said Xi. Both sides should maintain such positive momentum, make good use of the strategic, financial and people-to-people dialogue and cooperation mechanisms and endeavor to make greater progress in pragmatic cooperation and people-to-people exchanges, said Xi. He added that China stands ready to work with France to help African countries fight the Ebola epidemic and supports France to gain positive results in hosting the Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in 2015. For his part, Hollande said President Xi's visit to France has opened a new chapter for the French-Chinese relationship, thanking China for adopting a lot of important measures to promote bilateral ties.

China, the new indispensable nation? - Maybe there are two indispensable nations. “Indispensable” is a word most often reserved for the United States. Discussing the possibility of using force against Iraq in February 1998, then-Secretary of State Madeleine Albright said, “If we have to use force, it is because we are America; we are the indispensable nation.” Now, however, while America still possesses unparalleled military superiority and bears a unique burden in intervening in foreign conflicts or humanitarian crises, China has grown into an indispensable nation on issues such as climate change, trade, and peace and stability in the Asian Pacific. Nothing displays that better than the climate pacts announced this past week after the Asia-Pacific Economic Cooperation forum and bilateral meetings between China’s President Xi Jinping and President Obama. To save the world from catastrophic climate change or to press ahead with broad trade agreements, China — the biggest emitter of greenhouse gases, and the world’s largest or second-largest economy, depending on the method of measurement — must play an active part. But how will China play that role? No matter how much the United States urges China to take on new responsibilities, Washington still views China’s leadership with some unease. And China returns the favor.

South Korean Debt Expands at 7-Year High - Household debt in South Korea is rising at its fastest pace in seven years, driven by government efforts to help prop up the economy. Outstanding household debt grew between 7% and 10% year-on-year in recent months, according to a South Korean government official. That’s the quickest clip since the end of 2007, when debt grew at close to 10%. South Korea’s central bank, which has cut interest rates twice recently amid slower growth, may do so again early in 2014, economists say. That could risk pushing up debt further, although South Korea can use measures restricting banks’ lending if they deem debt is getting too high, the official said. Debt also has risen following  a decision by President Park Geun-hye’s administration in the summer to increase the maximum amount that South Koreans can borrow to buy a house. Household debt is a thorny issue in South Korea. At the end of 2012, total household borrowings were 136% of disposable income, about the same level as in the U.S. in 2007, before its financial crisis. Debt has more than doubled over the past decade to over 1,000 trillion won ($897 billion) at the end of June, which was up 6.2% on year, and has increased further since then. South Korea’s government says the situation is under control. The delinquency ratio on household loans was only 0.65% at the end of June, a reflection of strict mortgage-lending regulations.

South Korea-China Trade Deal: Less Than Meets The Eye -  When Chinese President Xi Jinping and his South Korean counterpart Park Geun-hye last week announced a preliminary free trade deal, negotiators described the agreement as marking a high level of market access.  A closer look shows the pact is far less comprehensive than Seoul’s plethora of other FTAs, both in the items it covers and the speed of tariff reductions.  Under the deal, the two sides will continue to impose fixed tariffs on goods worth about $20 billion, nearly one tenth of total trade between Asia’s largest and fourth largest economies. Two-way trade totaled $230 billion last year. China is Korea’s largest trading partner and takes in a quarter of Seoul’s total exports. The trade ministry in Seoul says the FTA excludes a total of 852 Chinese import items–mostly agricultural goods–or 7% of the total number of products shipped from China in 2013. In turn, the deal omits 637 Korean items, largely industrial products like cars and steel, or 8% of all Korean goods exported to China last year. The ratios compare with FTA exclusions averaging around 1% of items imported into Korea in Seoul’s other trade pacts. The ratio is 1.7% in a trade deal with New Zealand struck during the weekend and just 0.1% in Seoul’s FTA with the U.S. and 0.4% in its pact with the E.U., each signed in recent years. The Korean-Chinese trade deal also lags far behind Seoul’s others in the pace of lifting tariffs on goods. Under the agreed timetable, Korea will have as long as two decades to gradually remove about 90% of tariffs on goods imported from China. In the deals with the U.S. and the E.U., Korea settled on five years to lift around 90% of import tariffs.

What Makes Japan Bother With the TransPacific Partnership?  - Yves here. We've been giving regular updates, with the considerable help of our man in Japan Clive, on how the the prospects for Japan signing up for the TransPacific Partnership look extremely slim. Mind you, "extremely slim" is not impossible, but the reason we deem the probability to be that low is that the Administration appears unwilling to bargain at all, let alone offer Japan some critical and large concessions that it requires to sign up. And since Japan is a linchpin to the entire deal, if Japan is a no-go, you can kiss the TransPacific Partnership goodbye. These TransPacific Partnership discussions have also given yours truly, and even more so our real expert Clive, the opportunity to do some cross-cultural translating, which I personally enjoy. The Japanese are a sufficiently alien culture that you are forced to suspend or retrain your assumptions about how things work. So to watch the US Trade Representative, which along with the State Department, ought to be a US agency particularly attuned to how Japan needs special handling, instead do the equivalent of repeatedly step on a rake and get smacked in the face, is entertaining in a perverse way. How can they NOT know that what they are doing is counterproductive? And how can they NOT course correct when it should be obvious that what they are doing isn't working? However, even though, as we have discussed, the USTR has acted in a way almost guaranteed to offend the Japanese, the government has reasons for being cool on the TransPacific Partnership yet having to feign otherwise. And they aren't terribly mysterious either, even though they do vary with US baseline assumptions.

Japan Sinks Into Recession (Again) -- If anyone is still holding out hope that Abenomics — the unorthodox slate of economic policies named after their inspiration, Japanese Prime Minister Shinzo Abe — could rescue Japan from its two-decade slump, the news on Monday should dash it. The troubled economy surprised analysts by (once again) tumbling into recession. GDP in the quarter ended September shrank by an annualized 1.6% — far, far worse than the consensus forecasts. That followed a disastrous 7.3% contraction in the previous quarter. Speculation in Japan is that the bad results will push Abe to call a snap election only two years after taking office. What’s going on in Japan is important for all of us. Since the economy is still the world’s third largest (after the U.S. and China), a healthy Japan could provide a much needed pillar to growth in a struggling global economy.The current downturn is being blamed on a hike in the consumption tax, implemented in April to try to stabilize the government’s feeble finances, which slammed consumer spending. It is now expected that Abe will delay a further increase in that tax scheduled for next October. But the real causes lie much deeper — in the failings of Abe’s economic agenda.The idea behind Abenomics was to boost the economy with massive stimulus from the Bank of Japan (BOJ) and the government combined with structural reform of the economy, or what has been called the third arrow. The problem is that we got the first two arrows, but not the third. While the BOJ kept its printing presses rolling, dramatically weakening the value of the yen, badly needed deregulation and market-opening has come extremely slowly. Some critical changes, like a loosening of labor laws, seem to be off the menu entirely. The result is that the actual potential of the economy has not been enhanced.

Dismal quarter pushes Japan into recession - The Japanese economy slipped into recession in the third quarter, a surprisingly poor performance that could delay a planned sales tax hike and trigger new elections. Gross domestic product shrank by an annualized 1.6% in the three months ended September, Japan's Cabinet Office said Monday. The result was much worse than the 2.2% expansion expected by economists. On a quarterly basis, Japan's GDP declined by 0.4% as business investment slipped. Economies are commonly described as being in a technical recession after two straight quarterly contractions. The disappointing result comes as Japan faces a full slate of questions over tax policy and the country's plan for economic revival -- dubbed "Abenomics." Japan's consumption tax was increased to 8% in April in a bid to improve the country's fiscal position, and the government is now agonizing over whether it should implement an additional bump to 10%. The first increase set off a boom and bust cycle that wiped out growth in the second quarter, as consumers drastically changed their spending patterns.

Five Takeaways on Japan’s GDP Numbers -- Japan’s economy unexpectedly shrank at a 1.6% annualized pace in the third quarter of 2014. Here are five takeaways from the news:

  • 1. Japan is in a recession, by one definition A common definition of recession is two consecutive quarters of economic contraction. The third-quarter fall follows a 7.3% contraction in the second quarter (revised slightly downward from earlier estimates).
  • 2. Get ready for a delay in the sales-tax increase Current law calls for the sale tax to rise to 10% in October 2015. Prime Minister Shinzo Abe had already been leaning toward postponing the rise given recent economic weakness, according to advisers, and Monday’s poor numbers make a postponement a near certainty.
  • 3. Consumers are still struggling to cope with higher taxes Private consumption grew an annualized 1.5%, after a drop of 18.6% in the second quarter. Weaker demand for consumer durables, such as automobiles and appliances, were behind the slow growth, indicating that consumers are still struggling to cope with the tax increase. Real incomes are falling because wages aren’t keeping up with the slight rise in prices stoked by Bank of Japan Gov. Haruhiko Kuroda’s aggressive monetary easing.
  • 4. Exports are growing but not enough to drive the economy Exports grew modestly–1.3% quarter-on-quarter–but it was hardly enough to make up for weak domestic demand. Meanwhile, imports also increased, offsetting the positive impact of the export rise.
  • 5. Inventory reduction contributes to weak quarter The biggest factor contributing to the GDP fall was a reduction in business inventories. In the face of weak private demand, businesses started reducing production to rein in growth in inventories. But this fall could actually be a good sign for the future, suggesting that if demand picks up again, businesses might have to ramp up production quickly.

Japan’s Game-Changing Recession Shocker --Virtually no forecaster expected the news Monday that the Japanese economy contracted over the summer, pushing the country into its third recession in four years. As the grim report’s implications sink in, the data is likely to reframe Japan’s economic debate, in a few ways. If there was any doubt before Monday that Prime Minister Shinzo Abe would delay the sales tax hike scheduled for next year, the awful data removed that uncertainty. But that’s just the start. Beyond simply scrapping a growth-damping fiscal policy, politicians are likely to push hard for more fiscal stimulus, in the form of big new spending and tax cuts. “It is absolutely necessary to take countermeasures,” Abe economic advisor Etsuro Honda told The Wall Street Journal Monday. He wants a Y3 trillion ($260 billion) package of income relief measures. The third quarter jolt also leaves uncertain what remnants, if any, will remain of Japan’s strategy to curb its mammoth outsized sovereign debt, even over the medium-to-long term. As it became increasingly apparent in recent days that next year’s tax was imperiled, advocates at the finance ministry have been lobbying to keep some kind of fiscal discipline framework in place — perhaps a hard guarantee that the delayed tax increase would go into effect in 2017, no matter what. It’s hard to see politicians tying their hands to any further sales tax hike in the future. It’s also hard to see Japan sticking to its pledge to balance its budget, excluding interest, by 2020 — or even a few years after that. Mr. Kuroda’s model for hitting his 2% inflation target by next year assumes he can push Japanese growth above its “potential,” estimated at about 0.5% per year. At that pace, factories are operating beyond normal capacity and unemployment is falling — conditions that tend to push up wages and prices. But a shrinking economy means the “output gap” is swelling again, instead reviving the old deflationary pressures Mr. Kuroda has been trying to quell. By the BOJ’s own models, that could require even more central bank liquidity.

Japan’s latest recession spells trouble for Abe - Japan, it seems, is still stuck between a rock and a hard place. The rather shocking gross domestic product figures just published for the third quarter show that the economy has fallen into yet another technical recession since the sales tax was increased in April. On this evidence, it will be hard to achieve fiscal sustainability without abandoning the economic recovery. Abenomics, which was supposed to resolve this longstanding dilemma, is in trouble.Although Japanese GDP data are notoriously volatile from quarter to quarter, and this batch was depressed by a temporary burst of inventory shedding, underlying consumer and corporate spending is very weak. Aggressive monetary easing and a huge devaluation have not been enough, as yet anyway, to overcome the effects of even a modest fiscal tightening. In the next few days, Prime Minister Shinzo Abe is widely expected to react to the GDP figures by announcing that the second leg of a sales tax increase, scheduled for October 2015, has been postponed until 2017. Since this delay would be supported by two-thirds of the Japanese electorate, it may be the prelude to a snap general election in December. In itself, the postponement of the sales tax increase will have a negligible effect on fiscal sustainability, and it will help restore the economic recovery next year. But the fact that it needs to be considered at all raises wider questions about the longer term success of Abenomics.

Abe Adviser Says Another Sales Tax Increase “Out Of Question” - Japan’s surprisingly weak third-quarter growth data means that raising the national sales tax again is “out of the question,” a close adviser to Prime Minister Shinzo Abe said Monday, adding that the government should compile a stimulus package worth Y3 trillion or more to support the economy. The remarks made by Etsuro Honda in an interview with The Wall Street Journal followed the release of data showing that Japan’s economy unexpectedly shrank for a second straight quarter in the July-September quarter, slipping into a recession. The annualized 1.6% rate of contraction in the third-quarter was “shocking” and “all too terrible,” said Mr. Honda, a Shizuoka University professor. “Any further tax increases are out of the question. It’s impossible.” Mr. Honda, one of the main architects of Mr. Abe’s pro-growth measures, known as Abenomics, has been calling on the government to delay a planned increase in the consumption tax rate to 10% from 8% in October 2015 by a year and a half. The world’s third-largest economy has weakened sharply since the government raised the sales tax rate to 8% from 5% on April 1, giving back most of the gains made by the initial success of Abenomics over 2013. Signs are growing that poor data has persuaded Mr. Abe to put off a further tax increase and instead push for emergency stimulus steps. Mr. Abe is expected to call a snap election to gain the mandate to press ahead with his economic plan. “It is absolutely necessary to take countermeasures,” said Mr. Honda, who was a leading opponent to the tax change in past April. Mr. Honda said the government needs to put together a fiscal package made of the “three pillars” which include reducing the income tax, lowering social security premiums for the Japanese, and giving out cash handouts.

Japan's slip into surprise recession paves way for tax delay, snap poll (Reuters) - Japan's economy unexpectedly slipped into recession in the third quarter, setting the stage for Prime Minister Shinzo Abe to delay an unpopular sales tax hike and call a snap election two years before he has to go to the polls. The recession comes nearly two years after Abe returned to power promising to revive the economy with his "Abenomics" mix of massive monetary stimulus, spending and reforms, and is unwelcome news for an already shaky global economy. Gross domestic product (GDP) shrank by an annualised 1.6 percent in July-September, after plunging 7.3 percent in the second quarter following a rise in the national sales tax, which clobbered consumer spending. true The world's third-largest economy had been forecast to rebound by 2.1 percent, but consumption and exports remained weak, saddling companies with huge inventories to work off. Abe had said he would look at the data when deciding whether to press ahead with a second increase in the sales tax to 10 percent in October next year, as part of a plan to curb Japan's huge public debt, the worst among advanced nations.

The Japanese GDP Release: The Bad and the Not so Bad - Menzie Chinn - Instead of a 0.2% q/q increase as in the WSJ survey, GDP declined 0.4% [0] [1] It’s pretty bad news, but here are a couple of observations, following up on my previous post on Japan. First, the drop is in output is definitely not a positive development. However, the good news is that the negative news should certainly solidify support for delaying the second part of the consumption tax increase. It should also rein in resistance to the expansionary monetary policy pushed by BoJ Governor Kuroda (well, I’m guessing — I’m not an expert on the intricacies of the BoJ). What I find interesting is that exports, while not increasing much in the third quarter, have risen since the end of 2012. Assertions that the yen’s depreciation has not had a big impact on exports seem overdone to me (although it might be that one expected more growth in exports). Export of goods and services in real terms have risen about 13.8% (log terms) since 2012Q4, while the yen has depreciated by 23.2%, on a trade-weighted, real terms, basis. That’s a ratio in changes of about 60%, not too far off my estimate of 0.66 long run elasticity of goods exports (see this working paper). Whether export behavior is in line with my estimates is not clear, since I have not factored in growth in Japan’s trading partners, which should have also pulled along exports. Amiti, Itskhoki and Konings argue that the failure of goods exports to respond fully (at least through 2013) is because, based on their empirical work on Belgian firms, large exporters tend to be large importers, so that the yen depreciation has increased exporter marginal costs, thereby offsetting to a substantial degree the expansionary effects. I’m not sure how much that argument applies, as exports have grown measurably with the addition of 3 quarters of data. One thing working in favor of future trade balance improvement is the recent decline in oil prices (particularly if combined with the restarting of nuclear power plants early next year [2]). A final observation. Advance estimates of GDP are more than other releases “estimates”, so one might wonder how likely a positive re-assessment is. Unfortunately, Japanese GDP estimates have tended to be revised downwards over time (2 years out) [3] (Figure I.4). Thus, with the addition of more information, the drop might be larger in the end. That makes the case for expansionary monetary policy that much stronger.

The bad economic news out of Japan: what does it mean? -- Here is one version of the latest report, here is another.  People, don’t be surprised by this bad news.  Unemployment in Japan already had fallen to about three and a half percent.  So how much of a miracle could Abenomics accomplish in the first place?  Not much, not even for committed Keynesians.  Commentators have grown to expect so much of the Phillips curve these days, but still a mechanism for the output boost is required and the Phillips curve (at best) holds only in some contexts.  Japan simply hasn’t had that many laborers to put back to work.  Getting more women in the workforce, as Abe has tried to do, is a positive development, but that is not mainly about macro policy nor is it mainly about the short run.Some of you might be thinking “well, won’t inflation cause some kind of output rise, if only by stimulating demand?”  People, there is still no mechanism specified in that sentence.  And you may recall, the 1970s and early 80s saw the rise of a bunch of “monetary misperceptions” theories, often stemming from the work of Bob Lucas, postulating something to that effect.  It was the Keynesians who slapped them down on both empirical and theoretical grounds, as intertemporal elasticities of substitution are simply not high enough to support this as a major channel of output determination.  There has been no reason since then to think those theories deserve to make a major comeback.  Here is Scott Sumner on Japan, here is Megan McArdle on Japan, and here is Edward Hugh on Japan. I noticed a comment by Alen Mattich on Twitter:  If a mere 3 percentage point increase in taxes kills Japan’s economy, got to wonder about how that 230% of GDP debt will ever be resolved.

Contractionary Policies Are Contractionary - Paul Krugman -- Terrible numbers from Japan. Probably the drop was overstated — I don’t have any special knowledge here, but other indicators didn’t look quite this bad. But still, no question that the ill-considered sales tax hike of the spring is still doing major damage. Fairly clear now that Abe won’t go through with round two, which is good news. So contractionary policy is contractionary. I could have told you that, and in fact have told you that again and again. But some people still don’t get the message. In Germany, the Bundesbank president opposes expansionary monetary policy because it might reduce the pressure for fiscal austerity: “Such purchases might create new incentives to run up debt, besides adding to the reform fatigue in a number of countries,” he cautioned. Translation: if EB purchases of debt keep interest rates down (as the implied promise to do “whatever it takes” has already been doing), deeply depressed economies might not feel the need to keep slashing spending to eliminate budget deficits. That’s actually quite an awesome concern to express at this moment. European recovery has stalled, largely thanks to fiscal contraction; inflation is far below target, and outright deflation looms; and the political basis for the European project is coming apart at the seams. And Weidmann worries that monetary expansion might make life too easy for debtors.

Japan Through the Looking Glass - Paul Krugman -- There are indications that Shinzo Abe may indeed do the right thing and postpone the planned rise in Japan’s consumption tax. Let’s hope so. But many people are still treating this as an agonizing choice. For example, Gavyn Davies frames it as a choice between recovery and fiscal sustainability, although he sort of acknowledges that this may be a false dilemma. Several points here. First, unless Japan breaks out of deflation, and the artificially high real interest rates this causes, there is no way to achieve fiscal sustainability. Success for Abenomics is as crucial for fiscal matters as everything else.Second, everyone acknowledges that the impact of a delayed sales tax increase on Japan’s debt would be trivial — less than one percent of GDP. So why is this supposed to be something to worry about? Supposedly, Japan would lose credibility. Actually, that’s unlikely — I see no prospect that Japan will put off the tax hike forever. But even if it were true, this is credibility Japan wants to lose.  After all, suppose investors conclude that Japan will never raise taxes enough to service its debt. What would they think would happen instead? Not default — Japan doesn’t have to default, because its debts are in its own currency. No, what they might fear is monetization: Japan will print lots of yen to cover deficits. And this will lead to inflation. So a loss of fiscal credibility would lead to expectations of future inflation, which is a problem for Abe’s efforts to, um, get people to expect inflation rather than deflation, because … what?

Japan PM Shinzo Abe calls snap election in December: Japan's Prime Minister Shinzo Abe has called an early election, two years ahead of schedule. At a news briefing, he said he would dissolve parliament later this week and was also delaying a planned but unpopular increase in sales tax. Mr Abe was elected two years ago with an ambitious plan to revive the economy, but has struggled to do so. His popularity has fallen but he is expected to win the election, which will take place in mid-December. "I will dissolve the lower house on 21 [November]," Mr Abe said. Mr Abe's party, the Liberal Democrats, already have a majority in the lower house, but analysts said Mr Abe hoped to consolidate power over an opposition party which is in disarray. He also wants public support to continue to press ahead with "Abenomics", his ambitious plan to kick-start Japan's stagnant economic growth using heavy government spending and economic reforms. "I need to hear the voice of the people," Mr Abe said. "I will step down if we fail to keep our majority because that would mean our Abenomics is rejected." One of his senior advisers told the BBC instability was the last thing voters want.

Japan PM Abe calls snap election over delay to sales-tax hike - — Japanese Prime Minister Shinzo Abe on Tuesday called a snap election to seek a mandate for his decision to delay by 18 months a further sales-tax increase that had been planned for next year. He said he would dissolve the lower house of parliament on Nov. 21 in preparation for an election in December, without specifying a date. “To ensure the success of Abenomics, I’ve concluded that it shouldn’t be carried out next October and instead be postponed by 18 months,” the prime minister told a nationally televised news conference, stressing that the additional tax burden would risk putting the economy back into deflation. “I will seek the people’s judgment over our economic policy,” he said. The widely expected announcement comes a day after data showed that the world’s third-largest economy contracted for two successive quarters, dragged down by a rise in the consumption tax in April. Abe also said he had instructed his ministers to compile a spending package to support the economy, which shrank at an annual rate of 1.6% in the third quarter, after a 7.3% contraction in the second quarter.

Bank Of Japan Warns Abe Over "Fiscal Responsibility" While Monetizing All Its Debt -- If one were to look up the definition of hypocrisy, the image of BoJ head Kuroda should be front-and-center. Having tripled-down on his money-printing and ETF-buying largesse just last week, he came out swinging last night at the government's fiscal irresponsibility blasting Abe's policies by saying Japan's fiscal health "is the responsibility of parliament and the government, not an issue for the central bank to be held responsible for." Aside from the fact that he is directly monetizing all JGB issuance - thus enabling Abe's arrogant fiscal stimulus plan (by issuing 30Y and 40Y debt), Bloomberg notes that "Kuroda is making it crystal clear the government has to tackle the debt problem and if fiscal trust is lost that’s not going to be on the BOJ." The world has truly gone mad.

Fiscal Responsibility Claims Another Victim - Krugman - A few more thoughts on Japan. The bad growth news shows, pretty clearly, that the consumption tax hike was a big mistake. It also shows, by the way, how weak the market monetarist argument — which is that fiscal policy doesn’t matter, because central banks can always achieve the nominal GDP they want — really is; do you seriously want to contend that Kuroda likes what he sees, that he isn’t trying as hard as he can to boost Japan out of deflation? Beyond that, the Japanese story is another example of the damage wrought by the rhetoric of fiscal responsibility in a depressed economy. Leave on one side the expansionary austerity nonsense. Even among relatively sensible people, you often encounter calls for a strategy that couples loose fiscal policy, maybe even stimulus, in the short run with measures to address long-run sustainability. ... But ... the urgency of the stimulus part gets lost, and in fact the practical result is generally austerity even in depression. So it was with Japan... — the country that has offered many useful lessons to the West, none of which our policymakers have been willing to learn.

Japan Is Dying And We Still Don’t Get It -- What is it with us? Don’t we WANT to understand? Japan announced on Monday that its economy is in hopeless trouble and back in recession (as if it was ever out). And what do we see? ‘Experts’ and reporters clamoring for more stimulus. But if Japan has shown us anything over the past years, and you’re free to pick any number between 2 and 20 years, it’s that the QE-based kind of stimulus doesn’t work. Not for the real economy, that is. The land of the setting sun has during that time thrown so much stimulus into its financial system that Krugman-esque calls for even more of the same look even more ludicrous today than they did all along. Abenomics is a depressing failure, just as we knew it would be since it started almost two years ago. It’s not complicated, and it never was. Japan’s stimulus has achieved the following: banks get to pretend they’re healthy and stocks rise to heights that are fundamentally disconnected from underlying real values. On the flipside of that, citizens are being increasingly squeezed and ‘decide’ not to spend (not much of a decision if you have nothing to spend). Since Japan’s ‘consumer’ spending makes up about 60% of GDP, things can only possibly get worse as time passes. If ‘consumers’ don’t spend, deflation is the inevitable result – and that has nothing to do with the much discussed sales tax, it’s been going on for decades -. Therefore, the sole thing QE stimulus has achieved is a wealth transfer from poorer to rich.

Japanese Trade Deficit Streak Hits Record 44 Months, Yen & Stocks Decoupling -- While hopes of the J-Curve recovery in the deficit are long forgotten in the annals of Goldman Sachs history, silver-lining-seekers will proclaim the very modest beat in tonight's Japanese trade deficit a moral victory for a nation whose economic data has been nothing but abysmal for months. However, the near $1 trillion Yen deficit is the 44th month in a row as exports to US and Europe rose modestly in Yen terms but dropped to China and US in volume terms. USDJPY continues its march higher (now 118.25) but, unfoirtunately for Abe's approval ratings, Japanese stocks continue to languish an implied 1000 points behind - unable to break back above pre-GDP levels... as faith in Kuroda's omnipotence falters.

Japan Exports Rise Likely A False Dawn - An almost 10% year-on-year increase in Japanese exports in October, to their highest level since 2008, has raised hopes that Japan’s cheap-yen policy may finally be starting to lift economic activity. But there’s reason to read the figures with caution. Exports on a value basis, at 6.69 trillion yen in October, were boosted by the weak yen, which makes overseas sales look higher in local-currency terms. The Japanese yen is down almost 10% against the U.S. dollar since the start of the year, a drop engineered by Prime Minister Shinzo Abe as he attempts to help local companies by making their products cheaper overseas and boosting export revenues in yen terms. But October’s numbers also showed that volumes grew by 4.7% on year, a surprising bump. Volumes of shipping vessel and auto exports picked up in the period.Japan’s export volumes have not responded strongly to “Abenomics,” even as they have increased on a value basis. That’s due to a number of reasons. One is that Japanese companies have steadily shifted production overseas in recent years, especially to China. Japanese-based companies also largely have declined to cut prices in dollar terms to build larger global market share, preferring instead to book bigger yen profits. And some say Japan’s products, especially electronics, have become less competitive on a world stage.

Japan CDS at 1-yr high after tax delay raises fiscal concerns (Reuters) - The cost of insuring Japanese government debt has risen to a one-year high after Japanese Prime Minister Shinzo Abe's decision to postpone a tax hike sparked worries about the country's weak fiscal position. The spread on Japan's credit default swaps (CDS) widened to 59.5 basis points over U.S. Treasuries on Friday. The spread crept above those of France and South Korea a week ago. Japan's CDS has widened by 20 basis points in the last two months, and even after the Bank of Japan surprised markets with a huge increase in its asset buying targets on Oct.31. That move in credit default swaps, which investors use to hedge against risks of debt default, accelerated after Abe surprised markets by postponing the second of a two-step sales tax hike planned for next year to 2017, in order to support the flagging economy which slipped into recession after an initial tax hike in April.

Why is Anyone Surprised that Abenomics Failed? - Yves Smith - In case you managed to miss it, there’s been a fair bit of hand-wringing over the fact that Japan has fallen back into a recession despite the supposedly heroic intervention called Abenomics, whose central feature was QE on steroids.  But Japan of all places should know that relying on the wealth effect to spur growth has always bombed in the long term. They were the first to try that approach of a large scale. That idea was the basis for the Bank of Japan keeping monetary policy super loose in the later 1980s. They explicitly wanted to increase stock market and real estate prices to stimulate more consumer spending. We know how that movie ended.  As Marshall Auerback, who in a previous incarnation was an analyst of the Japanese economy, pointed out by e-mail: Japan has fallen back into recession because the government has repeated the mistake of 1996 by hiking the consumption tax.  Now Abe says he’s not going to increase it again.  Given that QE has never “worked” anywhere I never could understand why Japan’s version should work now. Wolf Richter provides more granular detail: Here is what this fiasco of Abenomics looks like, annotated: The chart shows how the hype of Abenomics initially created a lot of excitement. Then reality set in. This was followed by the brief but thrilling era before the consumption tax hike that triggered a vast bout of front-loading, much like the prior consumption tax hike 17 years ago had triggered. This was not a surprise, not to readers of WOLF STREET. But Abenomics apologists were claiming at the time that Abenomics was performing miracles. Then the hangover set in as the tax hike took effect on April 1. The prior tax hike had been followed by a steep and long recession. This one appears to follow the same procedure. Again, no surprise.  In fairness, Abenomics did include a burst of fiscal spending, but a short-term jolt followed by a tax increase was not going to work.

Top-Down approach is not working… Go Bottom-Up: Economics is full of ideas for fiscal & monetary policies. But these policies are Top-down approaches. They work through investment and the financial system. Yes, China lowers its benchmark rate from 6.0% to 5.6%, but China is supporting a failing policy of over-investment. Debt rises… and non-performing loans are increasing. Yes, Draghi wants to do whatever stimulus is necessary to battle super weak inflation in Europe, but he is not getting to the root of the problem. Real wages are being cut in an effort to increase competitiveness for Euro-zone exports. Yes, Japan has decided to raise the stimulus of Abenomics as consumers react to the increased sales tax. However, unless real wages rise (not just “for show” bonuses), Abenomics is doomed to failure. And in the US, M2 velocity is still falling. Graph below is “Percent change from year ago” updated to 3rd quarter 2014. Falling M2 puts downward pressure on inflation, against which aggressive monetary policy has to fight. People are not receiving enough income. Consumer credit from the financial industry is not strong like before the last 2 recessions. People are spending cautiously. If Main Street has more money in their hands, M2 velocity will rise. The answer is to raise real wages across advanced countries. The approach must be Bottom-up.

India's central bank talking to govt about more gold import curbs (Reuters) - India's central bank is in talks with the government to increase curbs on gold imports, Deputy Governor S.S. Mundra said on Monday, reflecting policymakers concerns that a jump in inbound shipments will worsen the country's trade deficit. true Mundra's comments come on the same day that trade data showed India's gold imports in October surged nearly four-fold to $4.18 billion from a year ago. India is the world's No. 2 gold consumer behind China. Officials from the Reserve Bank of India and the finance ministry met on Thursday to review the country's gold import policy but no decision was taken. Struggling with high current account and trade deficits, India last year raised the import duty on gold to a record 10 percent and unveiled some restrictions. But it relaxed part of these curbs in May. "With the surge in gold imports which has been witnessed, it warranted a relook," Reserve Bank of India Deputy Governor S.S. Mundra told reporters on Monday, referring to gold import curbs. Although India's trade deficit has so far been kept in check by lower oil imports, analysts warn that is unlikely to last if inbound gold shipments continue to surge.

India Rebounding? - India has a population of more than 1.2 billion, more than one-sixth of world population. A coupole of decades ago, economic growth started surging in India. For example, the share of the population that was essentially destitute, below the Indian government's poverty line fell from 45% in 1994 to 37% by 2005 and 22% by 2012.  But in 2012 and 2013, this growth rate stumbled. Can India's growth rebound?  Forsome analysis of the issue, the OECD has published its Economic Survey of India 2014. The 55-page overview chapter can be downloaded for free on-line; thematic chapters on manufacturing, the economic status of women, and health care can be read online. In addition, the World Bank has published its Indian Development Update for October 2014. Here's a figure showing that while India's GDP growth in the last couple of decades hasn't quite been at Chinese levels, it has exceeded emerging-market countries like Brazil and Indonesia, and been streets ahead of the high-income OECD countries.  Here's an overview of India's economic situation from the OECD:

The Most Aggressive Tax Authorities in the World? -- Earlier this week there was a court ruling in India related to transfer pricing. As reported by Business Standard: The Bombay High Court on Tuesday ruled in favour of Shell in a transfer-pricing order that sought to tax the energy giant’s 2009 investment in its Indian subsidiary. The order will have an impact on other multinationals fighting the tax department on similar grounds. The income-tax department had sought to add Rs 15,220 crore to Shell India’s taxable income after Shell Gas invested in its local arm at Rs 10 a share. The tax department valued Shell India’s shares at Rs 180 apiece in January 2013 and charged it with undervaluing those to evade tax… The court rejected the tax department’s argument that the Shell case was distinguishable from Vodafone’s case, which won a similar reprieve in October. In a narrow technical sense this verdict matters simply because it means that the tax authorities in India can no longer try to apply Indian transfer pricing regulations to capital transactions such as the issuance of new shares. This will make life a bit simpler for many companies in India (including some of my clients) that have recently felt obliged to prepare transfer pricing documentation to support balance sheet transactions. But the broader implications are more interesting. To my knowledge, India was the only country in the world that even attempted to apply transfer pricing rules to capital transactions. And that is just one of many ways in which the Indian tax authorities have very aggressively interpreted and applied transfer pricing rules to multinationals doing business in India. In transfer pricing circles, India has a reputation. This ruling is the latest in a string of court decisions that indicate that the Indian judicial system thinks that the Indian tax authorities have been overstepping their bounds.

World Toilet Day - The reason that the United Nations voted last year to designate November 19 as World Toilet Day is because the first World Toilet Summit began on that day in 2001, and that day is also the start of the World Toilet Organization. Out of the global population of 7 billion, about 1 billion people defecate in the open, with about 600 million of those people living in India. According to the World Health Organization and UNICEF, there are 19 countries in the world where more than half the rural population still practices open defecation. Especially in areas with relatively dense populations, this practice has health consequences. It's difficult to separate the effects of lacking toilets from other issues of unsafe water supplies. But the World Toilet Organization says that the lack of toilets causes an average of 1,000 child deaths each day due to diarrhea, and other estimates refer to stunted growth and prevalence of infections like typhoid from fecal-borne diseases. There is also an issue of violence against women and girls perpetrated when they lack a private and secure place to defecate.

Almost 36m people live in modern slavery - report: Nearly 36 million people worldwide, or 0.5% of the world's population, live as slaves, a survey by anti-slavery campaign group Walk Free says. The group's Global Slavery Index says India has the most slaves overall and Mauritania has the highest percentage. The total is 20% higher than for 2013 because of better methodology. The report defines slaves as people subject to forced labour, debt bondage, trafficking, sexual exploitation for money and forced or servile marriage. It uses slavery in a modern sense of the term, rather than as a reference to the broadly outlawed traditional practice where people were held in bondage and treated as another person's property. The Global Slavery Index's estimate is higher than other attempts to quantify modern slavery. In 2012, the International Labour Organisation estimated that almost 21 million people were victims of forced labour. Call for action Walk Free says it found evidence of slavery in all 167 countries it surveyed. The report says Africa and Asia face the biggest challenges in eradicating slavery, while the practice is least prevalent in Europe. According to the report, more than 14 million people live as slaves in India. Next in the index comes China, with more than 3 million slaves, followed by Pakistan and Uzbekistan.   Russia is ranked fifth. The country's economy is said to rely on enslaved migrant workers in the construction and agricultural sectors.

Rich hoard cash as their wealth reaches record high: The amount of individuals that hold more than $30 million in assets has climbed to a new record in 2014, according to a global survey on Wednesday, which also warned that a lack of diversification meant that this wealth is not protected from shocks to the financial system. 12,040 of these new ultra high net worth (UHNW) individuals were minted in the year ending June 2014, said the Wealth-X and UBS World Ultra Wealth Report released on Wednesday. This meant a 6 percent increase from last year which pushed the global population of these millionaires to a record 211,275. With the annual gross domestic product of the U.S. closing in on the $17 trillion mark, according to the World Bank, this means that the ultra-rich now have almost twice the wealth of the world's largest economy. "This report finds that UHNW individuals hold nearly 25 percent -- an extremely high proportion – of their net worth in cash," he said in Wednesday's accompanying press release.  Fearing that their millions are being eroded away with inflation, Smiles also said that holding government bonds from Germany and the U.S. is no longer safe. The return outlook for these fixed income assets is highly and negatively "asymmetric," he added.

Tanzania accused of backtracking over sale of Masai’s ancestral land | World news | The Guardian: Tanzania has been accused of reneging on its promise to 40,000 Masai pastoralists by going ahead with plans to evict them and turn their ancestral land into aa reserve for the royal family of Dubai to hunt big game. Activists celebrated last year when the government said it had backed down over a proposed 1,500 sq km “wildlife corridor” bordering the Serengeti national park that would serve a commercial hunting and safari company based in the United Arab Emirates. Now the deal appears to be back on and the Masai have been ordered to quit their traditional lands by the end of the year. Masai representatives will meet the prime minister, Mizengo Pinda, in Dodoma on Tuesday to express their anger. They insist the sale of the land would rob them of their heritage and directly or indirectly affect the livelihoods of 80,000 people. The area is crucial for grazing livestock on which the nomadic Masai depend.

Tanzania evicting 40,000 people from homeland to make room for Dubai royal family - 40,000 Masai people will be evicted from their homeland in Tanzania, because the Dubai royal family has bought it with the intention of using it as a reserve to hunt big game. Last year, the Tanzanian government had resisted the purchase, proposing instead a “wildlife corridor” dedicated to hunting near the Serengeti national park. However, the deal will still reportedly go through, and the Masai will have to leave by the end of the year. The deal was brokered by the Ortelo Business Corporation (OBC), a luxury safari company with a number of elite clients.  Samwel Nangiria, the coordinator for the local Ngonett civil society group told Smith that he never thought the government had considered canceling the deal, rather, they just wanted to fool the international press into believing they might. “I feel betrayed,” he said. “One billion is very little and you cannot compare that with land. It’s inherited. Their mothers and grandmothers are buried in that land. There’s nothing you can compare with it.” Nangiria also said that those who opposed the hunting ground were in danger– many were killed by police and Nangiria had received personal threats.

Interest rates may stay low for years: RBA: Reserve Bank of Australia governor Glenn Stevens indicated that interest rates may need to stay low for years because of the weak economy but warned this would only be possible if property prices are kept in check. In a speech that suggests the central bank is moderating its outlook for 2015, Mr Stevens suggested faltering jobs and wages growth meant it would be “a couple of years” before inflation triggered rate hikes. That meant it was likely monetary policy would stay stimulatory “for some time yet”, he said. The remarks coincide with fresh signs the high currency is creating major headaches for the central bank, which said in the minutes of its November board meeting, published Tuesday, that the dollar was still too high given collapsing commodity prices. While Mr Stevens indicated it was unlikely Australia was in a “bubble”, he said the global financial crisis meant it would be “surely imprudent not to question the comfortable assumption that it is all entirely benign”.

Construction Time: The Shopping Mall-ization of Mecca? --Our Muslim brethren are obliged to go on the Hajj or pilgrimage to Mecca if their health and finances permit at least once during their lifetimes. There being over one and a half billion Muslims worldwide, think of the numbers of people Mecca must accommodate as this important religion continues to expand. It is not easy to cater to hundreds of millions." making literally a journey of a lifetime who expect much of their visit.  Having done some research into tourism, I am conscious of the tradeoff between authenticity and commerce. Nowhere is this tradeoff more evident in terms of accommodating religious pilgrimages to Mecca. Hence, Saudi Arabian authorities have the difficult task of dealing with ever-larger volumes of pilgrims while simultaneously maintaining the sanctity of the site. Is this balance being achieved? The British Independent reports that some traditionalists are saying "not so" with all the construction going on:  The site in Mecca where the Prophet Mohamed is said to have been born is about to be “buried under marble” and replaced by a huge royal palace. The work is part of a multibillion-pound construction project in the holy city which has already resulted in the destruction of hundreds of historic monuments.  The project, which began several years ago, aims to expand the al-Masjid al-Haram, or the Grand Mosque, to cater for the millions of pilgrims who make their way to the holy city each year for the Hajj, the pilgrimage to Mecca that all Muslims are obliged to make at least once. Mecca is the holiest city in Islam because of its link to the birth of the Prophet, and because it is the site of the Kaaba, a cube-shaped building made from black granite and said to have been built by Abraham. The Grand Mosque is built around it, and Muslims face towards it when they pray.

Dollar drop in oil costs Venezuela US$ 700M -  — Six months ago, Venezuelan President Nicolás Maduro faced bloody protests demanding his resignation. The streets were clogged with flaming barricades. By the time the smoke cleared, dozens of protesters and national guardsmen were dead, and Maduro’s government was widely assailed for rights abuses. Those were the good old days. Venezuelan oil, the lifeblood of the leftist revolution entrusted to Maduro by the late Hugo Chávez, was worth US$97 a barrel then. Now it’s middling around US$70, and with every dollar it dips, Venezuela’s export-dependent, popularity-challenged government loses US$700 million a year. With the money pot shrinking, Maduro’s approval rating has slumped to 30 percent, according to recent surveys, down from 55 percent in April 2013. The supermarket scarcities and unchecked crime that fuelled the protests earlier this year are as bad as ever. Loath to adopt austerity measures that would hit his softening support base, Maduro has been borrowing money from Wall Street at usurious rates, with the country’s plunging benchmark bonds hitting a six-year low last week. All of this has left friends and enemies alike wondering how long the government can go on until something snaps, especially if oil prices slip further. Venezuela’s desperate attempts to get fellow OPEC states to cut production have failed to sway the mighty Saudis. The cliff seems closer than ever.

G20 leaders back drive to unmask shell companies - World leaders have backed a transparency drive against the use of anonymous shell companies and trusts, giving new political momentum to longstanding promises to tackle the secrecy behind corruption, tax evasion and money laundering. Following talks on Sunday, the Group of 20 leading nations published a set of principles for governments that aims to make it easier to find out who is the beneficial owner of shell companies. Experts say these entities facilitate hundreds of billions of dollars in illicit financial flows. “We endorse the 2015-16 G20 anti-corruption action plan,” said leaders in the final communiqué. “We commit to improve the transparency principles of the public and private sectors, and of beneficial ownership, by implementing the G20 high-level principles on beneficial ownership transparency,” it added. The commitment by world leaders will intensify pressure on them to address the issue of corporate secrecy. The subject has moved up the political agenda in the wake of a crackdown on tax evasion and illicit financial flows that followed the financial crisis. The campaign group One estimates that up to $1tn is being taken out of developing countries every year through a web of corrupt activities involving anonymous shell companies that typically hide the identity of their true owners. A World Bank report in 2011 found that 70 per cent of the biggest corruption cases between 1980 and 2010 involved anonymous shell companies. The US and the UK were among the jurisdictions most frequently used to incorporate legal entities that hold proceeds of corruption.

Japan recession, Europe stagnation cast pall over global economic outlook - A sharp slowdown in Asia and stagnation in Europe are putting the global economy at risk of a prolonged slump, economists say, marked in places by sky-high ­unemployment, sluggish wage growth and some of the worst economic conditions in decades. On Monday, Japan said it had entered its fourth recession in six years — this one despite aggressive efforts by Prime Minister Shinzo Abe to boost growth. Meanwhile, British Prime Minister David Cameron warned that the world’s economy could be headed toward another disaster. “Six years on from the financial crash that brought the world to its knees, red warning lights are once again flashing on the dashboard of the global economy,” Cameron wrote Monday in Britain’s Guardian newspaper. Two of the world’s economic powerhouses — Europe and Japan — are failing to bolster global growth, and their economies appear to be getting worse. With an unemployment rate of 11.5 percent, the euro zone is experiencing conditions that some economists say echo the Great Depression. Emerging markets, which helped lift the world out of the ugly downturn that followed the 2008 financial crisis, are also lagging. Russia and Brazil have been dogged by recession, and China’s double-digit growth has slowed rapidly as the country has matured and a speculative real estate bubble has let out air.

TTIP is about regulatory coherence - The TransAtlantic Trade and Investment Partnership (TTIP) has become a full-blown political issue as the two largest economic entities in the world are negotiating a deep integration agreement, going beyond what has been done previously in any agreement except the EU’s Single Market. This column estimates that a phasing-out of tariffs accompanied by a 25% cut in the trade restrictiveness of non-tariff measures would increase trade in goods and services between the two regions by 50%.

​Frankfurt begins first European direct settlements in Chinese yuan — RT Business: European companies now have the opportunity to settle trading accounts in Chinese yuan. The Bank of China in Frankfurt has become the first to operate European yuan clearing. Trading costs will be cut as there will be no dollar exchange first. More than 10 German regional and international banks including Deutsche Bank, Commerzbank, DZ Bank AG, and Landesbank Hessen-Thueringen Girozentrale, have opened accounts at Bank of China in Frankfurt. In June the People’s Bank of China chose Bank of China Ltd. to clear payments in the eurozone. The last five months were spent building the settlement infrastructure before the official start of clearing Monday. Yuan clearing in Frankfurt “will increase the share of German SMEs using the renminbi for their trade with China to well over the current 10 percent,” Frank-Oliver Wolf, divisional head of cash management and international business at Commerzbank told  Bloomberg. Frankfurt is the first European financial center to conduct transactions in yuan. Germany and China agreed to establish a settlement center for the yuan in March. The agreement was concluded by the Bundesbank and the People's Bank of China during the state visit of Chinese leader Xi Jinping to Germany. The yuan is “gaining traction as a trade currency and has in my opinion already reached the level of an investment currency,” Joachim Nagel, a board member at the Bundesbank, said Monday in a speech in Frankfurt. “It is only a matter of time before the renminbi [yuan-Ed] becomes an international reserve currency,” he added.

Global Slowdown Confirmed By PMIs Missing From Japan To China To Europe; USDJPY Nears 119 Then Slides -- The continuation of the two major themes witnessed over the past month continued overnight: i) the USDJPY rout accelerated, with the Yen running to within 2 pips of 119 against the dollar as Albert Edwards' revised USDJPY target of 145 now appears just a matter of weeks not months (even though subsequent newsflow halted today's currency decimation and the Yen has since risen 100 pips , and ii) the global economic slowdown was once again validated by global PMIs missing expectations from Japan to China (as noted earlier) and as of this morning, to Europe, where the Manufacturing, Services and Composite PMI all missed across the board, driven by a particular weakness in France (Mfg PMI down from 48.5 to 47.6, below the 48.8 expected), but mostly Germany, after Europe's growth dynamo, which disappointed everyone after yesterday's rebound in the Zew sentiment print, printed a PMI of only 50.0, down from 51.4 a month ago, down from 52.7 a year ago, and below the 51.5 expected. And just as bad, Europe's composite PMI just tumbled to 51.4, the lowest print in 16 months!

Soon, there won’t be a Europe to be part of - Forget the arrest warrant row, free movement of labour, budget surcharges and all the other invasions that come with membership of the European Union. There is a much bigger menace hovering above what my colleague Peter Oborne has called the “dreary parochialism” of the British debate on Europe than erosion of national sovereignty. Set against Europe’s abject failure to solve its economic problems – now fast transmogrifying into a degree of political instability not seen since the Second World War – Britain’s obsession with the relative merits of being in or out seems not just parochial, but almost wholly irrelevant. Economically and politically, Europe is sinking fast, and it seems powerless to save itself. Our island nation cannot indefinitely escape these destructive dynamics. At this week’s CBI annual conference, there was much talk of the damage that uncertainty over British membership of the EU was doing to business confidence. Really? There is absolutely no evidence of it in the data, which continue to point to above trend UK growth in both business and inward investment. It is not Britain’s quarrels with Brussels that are the real danger to business, but Europe’s growing economic and political malaise. Indeed, the way things are going, there soon won’t be a Europe to be part of. The greater threat to our future is not loss of European markets and investment, but a continent paralysed by political crisis and economically crippled by malfunctioning monetary union. Europe pretends to be a single nation, but is incapable of acting like one.

Deutsche Bank: "People Are Talking About Helicopter Money And Debt Cancellation Being The End Game" -- "I had a few meetings yesterday and one of the biggest surprises I had was that for the first time in a long time people were talking about helicopter money and debt cancellation being the end game. This was a major theme of our 2013 long-term study but one that we've struggled to get much traction with over the last year. Perhaps there's an increasing weariness that more QE globally whilst inevitable, is a blunt growth tool and that stopping it will be extremely difficult (let alone reversing it) without a positive growth shock. Maybe Japan's move this week in delaying the further sales tax increase and the economy's adverse reaction to the first increase reminds the market how difficult it might be to actually pay the bills with real money. As we said earlier this week it could be that the last few days marks the first steps towards monetization. Anyway, this is not something for today or tomorrow but the fact that different clients brought it up independently of each other makes me think that's its starting to get into people's thoughts." -

Greece’s recession is over, but its depression will be the worst in history - It only took six years, but Greece's recession is finally over. Just don't call it a recovery just yet.  Indeed, according to the latest gross domestic product numbers, Greece's economy actually stopped shrinking at the start of the year. We didn't realize that before, because it just switched over from reporting GDP on a year-on-year to a quarter-on-quarter basis. So it turns out that it grew at a 3.2 percent annual pace in the first quarter, 1.2 percent in the second, and 2.8 percent in the most recent one. It's been enough to  send unemployment all the way down to ... 25.9 percent. Greece's depression, in other words, is still nowhere near done. You can see that easily enough in the chart above, which I've modified from The Economist. It compares Greece the past few years with what used to be the gold standard of economic catastrophe: the U.S. during the Great Depression. Now, Greece's economy fell marginally less than America's did back then — around 27 percent at its worst — but the biggest difference between the two is the slope of the recovery. The U.S., as you can see, rocketed back once FDR devalued the dollar and started spending more. Only the double whammy of premature fiscal and monetary tightening knocked it off track in 1937.

France′s flailing economy endangering the eurozone -  Criticism of France's economic policies is mounting. Katharina Pijnenburg of the German Institute for Economic Research (DIW) told DW that the French government has yet to grasp the seriousness of the economic situation. A great deal of uncertainty currently plagues the eurozone, driven by geopolitical crises such as that in Ukraine. But, as the second-biggest economic power in the area, France's deficit hasn't helped the debt crisis. The risk that it could spiral out of control remains, said Pijnenburg, an expert on macroeconomics. The fact is that France has not had any economic growth in two years. And yet despite this, President Francois Hollande is overseeing an expansive fiscal policy. The French government believes that more state intervention could help get the crisis under control. But Pijnenburg is skeptical, arguing that France can only get past the crisis by implementing structural reforms of its social systems and labor markets while at the same time strengthening companies and markets.  Paris has not demonstrated any willingness to reform. There is too much opposition within Hollande's Socialist Party (PS), and a restructuring of the national budget is stalled. Since 2008, the budget deficit has grown steadily and now lies above the three-percent ceiling stipulated by the EU. In 2013, the deficit rate was significantly above that level, at 4.3 percent of GDP.

Construction drags on eurozone with 1.8% fall - Construction across the 18 countries that share the euro fell in September and the third quarter as a whole, an indication that a reluctance to invest continues to retard the eurozone economy. The European Union's statistics agency said Friday that the eurozone economy grew at an annualized pace of 0.6% in the third quarter, a slight acceleration from the second, with France and Germany returning to growth. Figures released by Eurostat Wednesday suggested construction was a drag on the economy during that period, recording a 1.8% decline in September from August, and a 0.5% drop between the second quarter and the third. Construction fell at a steeper, 1.0% pace, during the three months to June. The decline in construction was spread across the eurozone, although Italy recorded the steepest decline of the major economies, down 1.7% on the quarter. Continued weakness in construction indicates that households and businesses across the currency remain wary of undertaking new projects, a lack of confidence that worries policy makers.

ECB’s Stress Test Failed to Restore Trust in Banks, Poll Shows - Europe still hasn’t regained investor confidence in its banks. The European Central Bank’s stress tests of the region’s lenders failed to provide an accurate gauge of their financial stability, according to 51 percent of respondents to the latest quarterly poll of investors, traders and analysts who are Bloomberg subscribers. The results were viewed as accurate by 32 percent of the people who responded, while 17 percent said they weren’t sure. The tests followed three previous efforts by another European regulator that were deemed unreliable after some banks that passed collapsed a few months later. Investors expected the ECB to take a tougher approach before it took over as the single supervisor of euro-zone banks this month. While 25 of the 130 institutions failed the ECB’s test, an even smaller subset was asked to raise $8 billion of capital.

ECB inflation target fails credibility test -  Is the European Central Bank’s inflation target of close-to-but-below 2 per cent credible? That is not so clear. Mario Draghi (pictured), ECB president, is right to highlight the decline in longer-term inflation expectations in the eurozone as a worrying development that demands action. To the extent that the eurozone has a growth strategy, it is to hope for external demand to propel exports. But Asian demand has weakened. The Ukraine-Russia crisis will affect eurozone growth. Eurozone domestic demand growth is depressed. Fiscal policy is less of a drag, but countries with room for fiscal expansion are reluctant to use it. While the eurozone may avoid a third technical recession, in practical terms it has not emerged from the recession that started in 2008. If you apply the same criteria to the eurozone that the US National Bureau of Economic Research uses for judging US business cycles, then this realisation is very clear. In this context, it should be no surprise that the eurozone is so close to deflation. In the year to October, eurozone headline inflation came in at 0.4 per cent. In December, the ECB is going to have to revise down its inflation forecasts again – something that has become a quarterly ritual. It will be interesting to see if the ECB has enough confidence to forecast inflation at 2 per cent in 2017, when it adds the third year to its forecast.

European Consumer Confidence Tumbles To 9 Month Lows - Despite record low bond yields and all the promises one can bear from politicians and central bankers, the people of Europe are the least confident since February. At -11.6, missing expectations of a slight improvement from -11.1 to -10.7, this is the biggest miss since August 2011. It's perhaps not surprising given the near-record highs in unemployment but oddly, confidence seems highly correlated to EUR strength (or weakness)... the opposite of what the market hopes for.

Euro zone business growth slower than thought as orders fall: PMI (Reuters) - - Euro zone business growth has been weaker than any forecaster expected this month and new orders have fallen for the first time in more than a year despite further price-cutting, a survey showed on Thursday. Markit's Composite Flash Purchasing Managers' Index, based on surveys of thousands of companies and seen as a good growth indicator, fell to 51.4, missing even the lowest forecast in a Reuters poll. "This is going to be a huge disappointment for the European Central Bank. This is the euro zone more or less just continuing to stagnate, a renewed downturn is an increasing likelihood," said Chris Williamson, survey compiler Markit's chief economist. true A PMI covering the dominant service industry also missed all predictions in the poll by falling to 51.3, while the factory PMI's dip to 50.4 missed the median forecast. However, they did hold above the 50 mark that separates growth from contraction. Williamson said the PMI pointed to 0.1-0.2 percent GDP growth in the current quarter, compared with the 0.2 percent

Eurozone PMIs slow, raising pressure on ECB - Activity in the eurozone's private sector slowed in November, according to surveys of purchasing managers, an indication the currency area's economy will continue to grow weakly, if at all, in the final quarter of the year. The surveys also found that businesses again cut their prices in the face of weak demand, a development that will concern the European Central Bank, which is struggling to raise the currency area's inflation rate from the very low level it has settled at for more than a year. Data firm Markit on Thursday said its composite purchasing managers index--a measure of activity in the manufacturing and services sectors in the currency bloc--fell to 51.4 from 52.1 in October, reaching a 16-month low. A reading below 50.0 indicates activity is declining, while a reading above that level indicates it is increasing. Preliminary results from Markit's survey of 5,000 manufacturers and service providers also showed that a significant pickup in activity is unlikely in the coming months, with new orders falling for the first time since July 2013, while employment was unchanged. The surveys also found that businesses continued to cut their prices, although at a slightly less aggressive pace.

France Private Sector Output Drops 7th Consecutive Month, Orders Stagnate in Germany, Eurozone Flirts With Contraction -  Let's take a look at weaker than expected reports from the Eurozone in aggregate, and France and Germany in particular.  The Markit Flash France PMI shows French private sector output falls for seventh successive month.  Key points:

  • Flash France Composite Output Index rises to 48.4 (48.2 in October), 2-month high
  • Flash France Services Activity Index climbs to 48.8 (48.3 in October), 3-month high
  • Flash France Manufacturing Output Index falls to 46.5 (48.0 in October ), 3-month low
  • Flash France Manufacturing PMI drops to 47.6 (48.5 in October ), 3-month low
While service providers reported the slowest fall in activity of the current three-month period of decline, manufacturers indicated the sharpest reduction in output since August. Lower output at French private sector companies reflected a further decrease in new business. November marked the third consecutive month in which new work has fallen, with the rate of decline accelerating to the sharpest since June 2013. Employment in the French private sector continued to fall in the latest survey period, in line with the trend observed since November 2013.
The Markit Flash Germany PMI show Activity at 16-month low as new orders stagnate. Key points:
  • Flash Germany Composite Output Index at 52.1 (53.9 in October), 16-month low.
  • Flash Germany Services Activity Index at 52.1 (54.4 in October), 16-month low.
  • Flash Germany Manufacturing PMI at 50.0 (51.4 in October), 2-month low.
  • Flash Germany Manufacturing Output Index at 52.0 (52.8 in October), 2-month low.

Draghi throws ECB door open to money printing as global prospects dim (Reuters) - European Central Bank President Mario Draghi threw the door wide open on Friday for more drastic measures to prevent the euro zone from sliding into deflation, promising to use whatever means necessary as China also acted to boost its sagging economic growth. With many fearing the euro zone could be heading for a Japanese-style lost decade of deflation and recession, Draghi's remarks were reminiscent of when he pulled the bloc back from possible disintegration in 2012 by promising to do "whatever it takes" to back the common currency. Painting a bleak picture of the state of the 18 countries in the euro bloc, Draghi stressed that "excessively low" inflation had to be raised quickly. true In a blunt message, he said there was now no sign of improvement in the months ahead and the ECB would pump more money into the euro bloc if its current measures fell short. "We will do what we must to raise inflation and inflation expectations as fast as possible," he told an audience of bankers in Frankfurt.

John Major Sees 50% Chance UK Leaves EU, Sides With Cameron on Need for Immigration Reform - Former UK Prime Minister John Major warns of Split Between UK and European UnionThe case for leaving the European Union will be fuelled further if EU countries do not help the UK limit immigration, Sir John Major has said.The former prime minister said there was a "very real risk of separation" that would damage Britain and Europe. David Cameron wants to renegotiate the UK's membership of the EU and hold an in/out referendum by 2017.In a speech in Germany, Sir John said the UK had a "compelling" case to change the free movement of people. Addressing German Chancellor Angela Merkel's Christian Democrats in Berlin, Sir John - whose Conservative government was dogged by rows over Europe - put the chance of a British exit from the European Union at "just under 50%". But he said the probability would rise if Mr Cameron, who has promised the referendum if he is prime minister after the general election, could not secure reforms beforehand.British governments were always willing to work with Europe on "the big issues", Sir John said, but added: "Our people deeply resent interference in the day to day activities that have been part of the British way of life for generations."

GDP is a mirror on the markets. It must not rule our lives - Next month the Office for National Statistics will issue data for the first time on the UK’s wellbeing. In the exercise, the ONS is recognising that GDP, which now includes estimates for the market value of illegal drugs and prostitution, is at best only a partial measure of our economic health. Not that one would draw this conclusion from the political tub-thumping that improved GDP figures bring. GDP is a measure of economic activity in the market and in the moment. So its key shortcoming is that it collapses time and makes us short-term in focus. It counts investment and consumption in the same way – an extra £100 spent on education is equivalent to the same amount spent on fizzy drinks. Studies have repeatedly shown that the time horizon of the financial markets in particular is ever more short-term. Shaving about 0.006 seconds off the time it takes computer orders to travel from Chicago to the New Jersey data centre which houses the Nasdaq servers made it worth investing several hundred million dollars in tunnelling through a mountain range to lay the fibre optic cable in a straighter line. More than two-thirds of trades in US equity markets are high-frequency automated orders. How has the search for profit so foreshortened our vision?

Retail Rapture: UK Grocery Sales Drop 1st Time In 20 Years, Dollar General To Shut 4000 Stores -- For the first time since it began collecting data in 1994, Kantar Worldpanel, the market researcher, reported a decline in UK grocery sales by value, as The FT reports the biggest UK grocers were "losing market share hand over fist," as analysts warn "there are phoney price wars, and there are real price wars. This is a real price war." This comes on the heels of Goldman report claiming 20% of British grocers are surplus to requirements. But it's not just Britain... in the the cleanest dirty shirt world-economic-growth supporting decoupled economy of the USA, Reuters reports Dollar General may need to divest more than 4,000 stores to win approval from the U.S. Federal Trade Commission for its acquisition of Family Dollar.

Bank of England to probe whether staff helped rig money auctions - The Bank of England has opened a formal investigation into whether its officials knew of – and even facilitated – the possible manipulation of auctions designed to inject money into the credit markets to alleviate the financial crisis. The probe, which started in the summer, has been revealed just a week after the UK central bank published a report that criticised its own response to the foreign exchange rigging scandal. The investigation is focused on the firefighting era at the start of the financial crisis when the BoE ran a series of auctions as a way of keeping interbank lending markets functioning. It lent money for various time periods against low and even negative interest rates in exchange for a wide range of collateral such as asset-backed securities. The Bank declined to comment on specifics. “If the bank were conducting an investigation or review of any of its activities, as it does from time to time, it would be wholly inappropriate to provide a running commentary via the press,” said a spokesman. “No actions have been taken or are currently being contemplated against any employee of the Bank.”

Icelandic bankers jailed for reckless loans made before crash - Two of Iceland's most senior former bankers have been jailed for making reckless business loans, following investigations stemming from the collapse of the country's banks in 2008.Larus Welding, the former chief executive officer of failed Icelandic bank Glitnir, and Gudmundur Hjaltason, a former director at the bank, have each been sentenced to nine months in jail for fraud, a court ruled. They were sentenced by the Reykjavik District Court after the two men were indicted a year ago on charges that they had "misused their position and grossly endangered the bank's funds" by lending €102m to a company called Milestone ehf without guarantees or collateral, the prosecutor said. At the time Milestone was a shareholder in the bank. Collapse They are the first bankers from Iceland's three largest lenders to be sentenced to jail for activities linked to the country's financial and economic collapse in 2008. In 2008 Glitnir became the first of Iceland's big banks to fail, an event that triggered the biggest recession in six decades and led to an 80pc collapse in the value of the Icelandic currency (Krona) against the euro. The scale of the country's banking collapse made it impossible to prevent. The domestic parts of the country's three biggest banks were saved, while their international arms were liquidated. Bondholders who had lent money to Iceland were "burned" with significant losses, but given control of the remains of the banks.

No comments: