week ending Aug 1

Fed Inadvertently Publishes Staff Forecast for 2015 Rate Hike - Staff economists at the Federal Reserve expect a quarter-point U.S. interest rate increase this year, according to forecasts the Fed mistakenly published on its website in a gaffe that drew criticism about its ability to keep secrets. Federal prosecutors are currently probing an alleged leak at the Fed of market-sensitive information to a private financial newsletter in 2012. "It regrettably appears once again that proper internal controls are not in place to safeguard confidential Federal Reserve information," said Representative Jeb Hensarling of Texas, a Republican who chairs the House Financial Services Committee and is pressing Fed Chair Janet Yellen for documents regarding the 2012 leak. The Fed said in a statement that the forecasts were "inadvertently" included in a computer file posted to its website on June 29.   Fed officials said the disclosure was due to procedural errors at a staff level and that the mistake was discovered on Tuesday this week. The matter has been referred to the Fed's inspector general.  "It is baffling that these leaks continue to occur," said Congressman Randy Neugebauer, a Texas Republican who chairs the House subcommittee on financial institutions and consumer credit.

What the leaked Fed forecasts tell us - Last week, the Federal Reserve was forced to admit that it had mistakenly released the forecasts made by the board of governors’ economic staff for the June meeting of the Federal Open Market Committee. . The rest of us therefore have more information than usual to work on. As this blog noted last weekend, the economic staff’s projections indicate a worryingly pessimistic view of the supply side of the US economy, with only a small output gap at present, and very low productivity growth in the future. If validated by future data, this pessimistic view will involve a much lower medium-term growth rate for the US economy than has generally been assumed by official and private economists, and eventually that might start to worry the equity markets. It also has implications for the likely path for interest rates. In the near term, a smaller margin of spare capacity in the economy might require higher policy rates in order to slow the economy and avoid inflation. In the longer term, however, a permanently lower gross domestic product growth rate is likely to involve lower equilibrium interest rates in the economy. The markets seem more convinced by this latter factor, which is why they are pricing a much lower path for policy (or short) rates than is implied in the FOMC’s dots charts. But have they now found an unexpected ally in the shape of the Fed’s own economics staff? The answer is yes — the staff expects a much lower path for equilibrium interest rates in the next few years than the FOMC, and this translates into a much slower path for monetary tightening, especially in the years up to 2017.

Fed Officials May Offer More Clarity on Rates - Federal Reserve officials are likely to emerge from their policy meeting Wednesday with short-term interest rates still pinned near zero, though they could send fresh hints that they’re getting closer to raising rates. Fed Chairwoman Janet Yellen emphasized in congressional testimony earlier this month she expects the central bank to start lifting its benchmark federal-funds rate at some point before year-end. Her comments and other recent public statements by Fed officials have made clear that July is too soon. Though the economy is growing moderately after contracting in the first quarter and employers are hiring at a solid pace, inflation remains stubbornly below the Fed’s 2% target and officials want to be more confident it is going to rise before acting.This week “might be a little early. I think we’ll use that meeting to assess the data,” James Bullard, president of the Federal Reserve Bank of St. Louis, said last week on Fox Business Network. He added, “I’d see September having more than a 50% probability right now.”Most private economists surveyed by the Journal think liftoff is likely at the Fed’s September meeting. Many market participants expect policy makers to wait until December. This leaves the Fed with a slight signaling challenge at the meeting this week. How aggressively should officials tip their hands about the timing of a rate increase later this year? Fed officials don’t want to take financial markets by surprise by raising the benchmark federal-funds rate for the first time since 2006 with no forewarning. At the same time, they want to keep their options open so they can adjust their stance as the economy evolves.

FOMC Statement: No Change in Policy, No Clues for September -- FOMC Statement:  To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

Read the Full Text of the Fed’s July Statement -- Here is the full statement from the Federal Reserve’s policy-making committee.

Parsing the Fed: How the July Statement Changed from June -- The Federal Reserve releases a statement at the conclusion of each of its policy-setting meetings, outlining the central bank’s economic outlook and the actions it plans to take. Much of the statement remains the same from meeting to meeting. Fed watchers closely parse changes between statements to see how the Fed’s views are evolving.  The following tool compares the latest statement with its immediate predecessor and highlights where policy makers have updated their language. This is the July statement compared with June.

Fed Watch: FOMC Recap -- The July FOMC meeting yielded the widely expected outcome of no policy change. Very little change in the statement either - pulling out any useful information is about as easy as reading tea leaves or chicken bones. But that won't stop me from trying! On net, I would count it was somewhat more hawkish as the Fed gears up to hike rates later this year. By no means, however, did the statement make any definitive signal about September. The Fed continues to hold true to its promise to make the next move about the data. The era of handholding fades further into memory. The first paragraph contained nearly all of the changes in the statement. Using the Wall Street Journal's handy-dandy Fed tracker: In my opinion, this represents a not trivial upgrade of their thoughts on the labor market. Job growth is "solid," unemployment continues to decline, and a much more forceful conclusion on underemployment. No longer has underutilization diminished by a wishy-washy "somewhat." It now conclusively "has" diminished. Hence, it seems like the Fed is closer to declaring victory over one impediment to hiking rates - Fed Chair Janet Yellen's concerns about the high degree of underemployment. I tend to regard the exclusion of the "energy prices appear to have stabilized" as the elimination of an artifact from the June statement. Energy prices are not in free-fall as the were at the end of last year, and have instead been tracking within a range since the beginning of the year. Hence the Fed can later repeat the inflation forecast as: "...the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate." Some may interpret it as a more dovish signal in light of the recent declines in oil prices. I am wary of that interpretation.

Fed Finishes 54th Consecutive Meeting With No Hike, Hints At Dovish Delay --With no press conference, expectations were muted going in (aside from the ubiquitous VIX-dip, equity market rip that happens at every FOMC meeting) but seemed to hint at delaying a September/December liftoff is on the cards - needing more job improvement... And so the confusion continues... the jobs market is telling the Fed one thing, while inflation (held down by a lackluster Chinese demand which has in turn exacerbated a global deflationary supply glut) is saying something different, and remember 25bps doesn't matter (just like subprime was "contained"). Full redline below.

Fed says economy improving; September rate hike in view - The U.S. economy and job market continue to strengthen, the Federal Reserve said on Wednesday, leaving the door open for a possible interest rate hike when central bank policymakers next meet in September. Following their latest two-day policy meeting, Fed officials said they felt the economy had overcome a first-quarter slowdown and was "expanding moderately" despite a downturn in the energy sector and headwinds from overseas. They nodded in particular to the "solid job gains" seen in recent months. "On balance, a range of labor market indicators suggest that underutilization of labor resources has diminished since early this year," the Fed said in a policy statement that kept rates unchanged. That language and other small changes in the statement mark an upgrade in the central bank's view of labor conditions since its last policy meeting in June, when it said labor slack had "diminished somewhat." The Fed also said it now only needs to see "some" more improvement in the labor market, a qualification that analysts said strongly suggested it believes the recent solid U.S. job gains will continue.

Labor Data is at the Top of The Fed’s Rate Hike Dashboard - One of the more important lines in the Federal Reserve’s policy statement Wednesday was its description of the inflation outlook: “The (Fed) expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate.” Fed officials want to be reasonably confident that inflation is on a path toward 2% when they start raising short-term interest rates. What will give them that reasonable confidence? It is implied in the above statement: Continued improvement in the jobs market and some stabilization of commodities and import prices. The line underscores the centrality of employment data in the Fed’s thinking. It doesn’t just inform officials on whether they are near meeting the full employment part of their mandate; it also informs their beliefs on getting inflation back to 2% after undershooting it for more than three years. A few more good jobs reports – with continued payroll gains registered at 200,000 or more and further declines in the jobless rate – could well get the Fed off the fence. Commodities and imports is a more complicated subject. Fed officials were prepared to look past earlier declines in commodities and import prices because they saw these declines as transitory. They gained some confidence that this judgment was correct earlier in the year when commodities prices stabilized. A recent downdraft in energy prices raises the question of whether they will look past it again should the drop continue. China’s stock market bust amplifies uncertainty about its growth outlook and raises the question of whether persistent downward pressure on global goods prices might be building. China is the world’s second largest economy and the shop-floor to the world – a large consumer of commodities and producer of manufactured goods which the U.S. imports. Import prices have dropped in 11 of the past 12 months.

"It Depends On What The Meaning Of The Word "Some" Is": Goldman Says Don'tt Read Too Much Into Fed Statement -- When even Jon Hilsenrath is clueless what the Fed is trying to say, we go with old faithful, the company that runs the NY Fed, Goldman Sachs. Here is Jan Hatzius' take. The statement following today's FOMC meeting made relatively few changes compared to June, and did not affect our view that the first rate hike is most likely to occur in December. The most notable change was the addition of the word "some" in the committee's description of desired progress in the labor market. Specifically, the June FOMC statement said that it will be appropriate to raise interest rates "when it has seen further improvement in the labor market" (and is reasonably confident that inflation will move back to two percent). Today's statement said that rate hikes would be appropriate after "some further improvement in the labor market". This change indicates that the committee requires a smaller cumulative improvement in labor market slack before liftoff. But the new language is a small tweak and does not suggest, in our view, that Fed officials are reading recent labor market developments in a wholly different way. So if your read of the word "some" is different from Goldman's read of the word "some", then surely drama is about to unfold like for example that of Jefferies economists which amusing said "Addition of word “some” into forward guidance section on further improvement in labor mkt raises question whether FOMC sees “light at the end of the tunnel” in terms of reaching full employment." So if you are currently unemployed, discuss what "some" means and you may soon have a job.

Global Liquidity and U.S. Monetary Policy -- The events in Greece and the Ukraine have only partially drawn attention away from the financial markets’ focus on changes in U.S. monetary policy. Federal Reserve officials seem to be split over when they will raise their Federal Funds rate target, and by how much. But while U.S. policymakers are closely monitoring domestic labor developments, the impact of their actions will have repercussions for foreign markets. The latest Annual Report of the Bank for International Settlements (BIS) also looks at financial flows across borders in its chapter on the international monetary and financial system.  These loans and securities have been growing rapidly since the global financial crisis. In particular, non-U.S. borrowers issued $1.8 trillion in bonds between 2009 and 2014. The authors of this chapter of the BIS Report attribute this growth to low lending rates and the reduction of the term premium for U.S. Treasury securities, which reflects the large scale purchase of these securities by the Federal Reserve in its Quantitative Easing (QE) programs. Changes in U.S. monetary policy, therefore, will influence global financial flows in both bank lending and bond issuance. If the end of QE results in higher term premiums in the U.S. as the rates on long-term securities rise, then cross-border flows could be negatively impacted. A rise in the Federal Fund Rate, on the other hand, could initially decrease the term premia, although other interest rates would likely follow. These changes take place, moreover, while the Eurozone and Japan are moving in opposite directions, which may intensify their effect. Mark Carney, Governor of the Bank of England, warned last January that the resiliency of the financial system will be tested by Federal Reserve tightening. Once again, policymakers may be forced to respond to fast-breaking developments as they occur. But this time they may not have as much flexibility to maneuver as they need. We may not know the consequences for financial stability until it is too late to avoid them.

A Split Decision Looms from Fed on Job and Inflation Goals - The Federal Reserve has framed its decision about raising interest rates around the progress it sees in achieving its dual mandate goals of maximum employment and 2% inflation. Officials could emerge from their policy meeting today with a split decision – progress on the employment side of their mandate and continued uncertainty on the inflation side. Fed Chairwoman Janet Yellen said in testimony to Congress earlier this month that the economy is “demonstrably closer” to reaching the Fed’s full employment goal. Since the Fed last met in June, the jobless rate has notched down further from 5.5% to 5.3%, its lowest level since April 2008, hiring appears to have returned to a path of steady gains in excess of 200,000 per month after stumbling in March and wages show tentative signs of moving higher. Fed officials will need to acknowledge these advances in their post-meeting policy statement, a sign that a rate increase is approaching. Still it is hard to see how officials derive great confidence that inflation is surely returning to their 2% goal. Oil prices and commodities more broadly have resumed their march down and the dollar its movement higher, factors that have weighed on inflation all year. The Fed has described these developments as transitory before, but slow growth in China could give them some pause about that conclusion. Broad measures of inflation show little sign of breaking out of the sub-2% trend which has been in place for more than three years. It potentially sets up the Fed and markets for a cliffhanger policy meeting in September. The jobs part of their mandate – so important to Ms. Yellen – is signaling a rate increase is due. But the inflation part of the mandate signals continued patience. Officials won’t want to lock themselves in until they see more data on the economy’s performance.

Strengthening US economy bolsters case for rate rise - FT.com: A strengthening economy and gathering momentum in the property market are bolstering arguments for higher interest rates in the second half of the year as Federal Reserve policymakers prepare to meet this week. The Federal Open Market Committee will convene on Tuesday and Wednesday after Janet Yellen, the Fed chairwoman, told Congress that the US economy needs higher short-term rates and that there were risks in waiting too long. While the newly resurgent dollar again poses risks to US exports and inflation, other international dangers have lessened — most notably from Greece, which is discussing a new bailout. No move is likely this week, but the Fed has made it clear it expects to lift interest rates in 2015, marking the first upward move in nearly a decade. The market is putting odds of under 50 per cent on a hike in September. A key question is whether the Fed will feel any compulsion to formally signal a looming move in this week’s statement. While investors are anxious for guidance, policymakers are reluctant to tie their own hands. “At Yellen’s congressional testimony she did not rule out a September hike, nor did she guide the market toward thinking September was a done deal. We think the upcoming FOMC statement will reflect this non-committal approach,”   In a June press conference Ms Yellen said the FOMC was looking for more “decisive” evidence of strength before pulling the trigger on a hike. She made no reference to that requirement in testimony to Congress this month, instead making an argument for the Fed to move a little earlier to permit a gradual pace of rate hikes.

Blankfein Warns Of "Jarring" Jolt From Fed Rate Hike - Lloyd Blankfein and Michael Bloomberg sat down for an interview with Bloomberg TV on Wednesday, and discussed a wide range of topics from Fed "liftoff" to China to US politics. There was quite a bit of aimless pontification, a bit of levity, plenty of hypocrisy, and some rather amusing commentary on democracy in America and the role of the Presidency. Most notable are Blankfein’s thoughts on the effects of a Fed rate hike and Bloomberg’s take on income inequality in America and Congressional paralysis. Here’s Blankfein on "liftoff": Well, I think it will be jarring when we see an interest rate hike because we have not had one for some time. And then I think people will get out the smelling salts, take a sniff, and recover because when we have that first hike, the Fed has already suggested that it will be very conservative, at the trajectory of future hikes. And so if we end up with interest rates at 0.5 percent, or even if we went, over time, in the near future to 1 percent against the growth rate, it will only be because the growth rate is at trend growth or maybe even higher. That will still be substantially easier financial conditions than we usually have. And the Fed would rather take a risk on having rates too soft for longer than run the risk of giving up all that they have accomplished and in getting the economy to where it is now. And so they will keep things easier for a long time.

Commodities Are Screaming Trouble But the Fed Isn’t Listening -  The commodities slump has accelerated this past month with gold now trading at five-year lows and the U.S. crude benchmark, West Texas Intermediate (WTI), down 19 percent in just the past month, 49 percent on the year, and 57 percent in the past two years. In early morning trade, WTI is at $47.82 versus $110 two years ago. Minutes of the Federal Reserve’s Open Market Committee meeting on December 16 and 17 reveal that the Fed was expecting an upturn in oil prices this year, writing: “…inflation was projected to reach the Committee’s objective over time, with longer-run inflation expectations assumed to remain stable, prices of energy and non-oil imports forecast to begin rising next year, and slack in labor and product markets anticipated to diminish slowly.”CNN Money is reporting this morning that major iron ore or metals exporting countries like Peru (copper), Chile (copper), South Africa (iron ore and gold), Australia (iron ore and gold), Brazil (iron ore), Zambia (copper), and Democratic Republic of the Congo (metals and crude oil) are experiencing a serious economic impact from the plunge in commodity prices over the past year. There are three major culprits behind the global glut and commensurate decline in the price of industrial commodities. The growing gap in income and wealth equality worldwide is aggravating the consumers’ inability to boost economic activity; China is the world’s largest importer of industrial commodities and it’s experiencing both an economic slowdown and a loss of investor confidence as a result of wild gyrations in its stock market and unprecedented government props to prevent a collapse; and, finally, Fed Chair Janet Yellen’s incessant chatter about an upcoming hike in U.S. interest rates has elevated the U.S. Dollar, putting more downward pressure on commodity prices. The rout in foreign currencies is now forcing some countries to raise interest rates to defend their currencies at one of the most inopportune times in terms of economic weakness. Bloomberg Business is out with the following disturbing news this morning: “All of the 24 most-widely-traded emerging-market currencies tracked by Bloomberg have weakened over the past month except for the Hungarian forint. An index of their exchange rates has dropped 8 percent this year to the lowest on record in data going back to 1993. The current pace of declines would make this the worst year since 2008.”

This is the GOP’s plan to strip the New York Fed of a crucial role in policymaking - Republicans on the House Financial Services Committee took their first step toward stripping the New York Federal Reserve bank of a key designation that could have an impact on how US monetary policy is set in the future.   Right now the New York Fed has a permanent seat on the Federal Open Market Committee, an internal monetary policymaking part of the Federal Reserve that will make the decision on when to increase interest rates.  But if GOP lawmakers have their way, the New York Fed's elevated influence will come to an end. They want to strip the New York central bank branch of its permanent FOMC status and reduce its standing on the committee. It is the latest in a series of contentious battles between the Federal Reserve, led by chair Janet Yellen, and Congressmen who have harshly criticized the central bank's management and policies. It would not be in the central bank's interest to have William Dudley, president of the New York Fed, excluded from key policy-making decisions because New York City is the East Coast's financial center, a source familiar with the Federal Reserve said. Few feel other central bank presidents would have up-to-the-moment understanding of policy decisions and their ramifications, the source said.  As Business Insider previously reported, lawmakers on the House Financial Services Committee Monetary Policy and Trade Subcommittee this week would hear a proposal that would strip the New York branch of the Federal Reserve of its elevated status on the FOMC. That proposal was, in fact, pitched by one Republican on July 22.

To Fix the Fed, Simplify It - In good times, few people care much about the Fed. Since the financial crisis of 2007-9, though, critics on the left and the right have savaged the Fed. Those on the left say the Fed is too cozy with the banks it regulates, too willing to surrender regulatory scrutiny in the name of financial stability. Those on the right complain that its postcrisis monetary policies — eight years of holding down interest rates to near zero, amassing huge portfolios of government and mortgage-backed securities to spur bank lending — are ad hoc and inflationary, and not grounded in good economic theory. Both critiques agree that the Fed wields too much power behind a veil of secrecy.Janet L. Yellen, the Fed’s chairwoman, says the criticism is misplaced. The Fed is already transparent, and subjecting it to ever-greater Congressional scrutiny will only interfere with the institution’s role as a neutral overseer of the economy.AdvertisementContinue reading the main story AdvertisementContinue reading the main story But critics and Fed officials are missing the bigger problem: the problem of governance. We should return to the unfinished business of the New Deal and simplify the Fed’s governance so that the public knows who is making the decisions at this singularly important institution.The focus should be on removing the quasi-autonomy of the 12 Federal Reserve Banks, also called the regional Feds. Their presidents, who are chosen through a complicated and byzantine process that reflects regional economic interests, should no longer serve on the Federal Open Market Committee.

Pushing on a String - There's a long-standing metaphor in monetary policy that the central bank "can't push on a string." It means that while a central bank can certainly slow down an economy or even drive an economy into recession with an ill-timed or too-large increase interest rates, the power of monetary policy is not symmetric.  When a central bank reduces interest rates in an attempt to stimulate the economy, it may not make much difference if banks don't think it's a good time to lend or firms and consumers don't think it's a good time to borrow. In other words, monetary policy is like a string with which a central bank can "pull" back the economy, but pushing on a string just crumples the string.   The "can't push on a string" metaphor appears in many  intro-level economics texts. It has also gotten a heavy work-out these last few years as people have sought to understand why either economic output or inflation wasn't stimulated more greatly by having the Federal Reserve's target interest rate (the "federal funds" rate) near zero percent for going on seven years now, especially when combined with "forward guidance" promises that this policy would continue into the future and a couple trillion dollars of direct Federal Reserve purchases of Treasury debt and mortgage-backed securities.

“Lowflation” forever in the US? -- Although inflation in the US has been low and stable for many years, it still tends to dominate policy discussions at the Federal Reserve. At Janet Yellen’s latest press conference, “inflation” was mentioned 40 times, while “unemployment” or “employment” were mentioned 28 times. Both sides of the dual mandate are obviously given great attention, but many observers think that the Fed is too conservative in its approach to inflation, while refusing to take any risks to stimulate employment or output growth.  This judgment about the balance of risks is coming to a head now that the FOMC seems fairly likely to announce lift off for US interest rates in September. The GDP growth rate, and the strengthening in the labour market, seem consistent with an early rate rise. But the inflation rate remains well below the Fed’s 2 per cent target for headline PCE inflation, and the FOMC says it needs to be “reasonably confident” that inflation will return to target over the medium term before they can raise rates.  Since its last meeting in June, reported inflation data have barely changed, but there has been a drop of about 19 per cent in the price of oil, and a rise of about 2 per cent in the dollar exchange rate. In the last 12 months, fluctuations in headline inflation have been driven almost entirely by the collapse in oil prices and the uptrend in the dollar. Core inflation has been less affected, but has not been entirely immune from these oil and dollar effects. My colleagues at Fulcrum have estimated a VAR model that tracks the effects of oil and the dollar on reported inflation, and we use this model to predict the future path for inflation, given the recent renewed decline in oil prices (which was not built into the Fed’s June forecast). Here are the results:

The Old Man and the CPI - Krugman - I don’t watch financial news, but CNBC was on in the gym, so I was treated to a long ad from Ron Paul, who wants you to buy his video explaining the coming crisis brought on by loose money. And I found myself thinking about the remarkable fact that there really are people who will buy that video.  After all, Ron Paul has been making the same prediction year after year — in fact, he’s been making this prediction at least since 1981! — and has been wrong year after year. It’s hard to think of a doctrine that has been as thoroughly refuted by events as goldbug economics. ...The basic mindset of the kind of people who pay Ron Paul for his economic advice is pretty clear: they’ve made some money over the course of their lives, they believe that all of it reflects their own virtue, and they think they know from that experience what it takes to create wealth. They hear that the Fed is printing money, and it sounds to them like a violation of both the laws of economics and morality — and they surely think of it as a plot to take away their completely earned gains and give them to Those People (hence the whiteness issue).You can try as hard as you like to tell such people that monetary policy is mainly a technical problem, that the Fed isn’t giving money away, and that predictions of runaway inflation have been utterly wrong; it will make no difference. You can point out that they would have done a much better job of investing if they had listened to the MIT gang; sorry, we’re just not their kind of people.

US Treasuries market faces liquidity concerns - FT.com: Investors are asking themselves a question that until recently had never been up for debate; how “liquid” are US Treasuries? With $12.6tn of debt outstanding and more than $500bn changing hands every day, US Treasuries are considered the bedrock of global finance, but concerns about liquidity — or the ability to buy and sell an asset in large size without affecting its price — are now widespread. For many, the wake up call came on October 15 last year, when the yield on the 10-year US Treasury bond, which moves inversely to price, plummeted 34 basis points in early morning trading. Banks pulled back from quoting prices, while other traders reduced their presence during the most extreme moments of turmoil, impairing the ability of investors to transact cash bonds. It did not last long. Yields rebounded sharply, finishing the day not far from where they started, but it was a sign of what can happen and sights have since turned to the potential for a repeat event, particularly as the Federal Reserve prepares to raise interest rates. “There will be discontinuous pricing,” says Richie Prager, head of trading and liquidity strategies at BlackRock, the largest asset manager in the world. “Anyone who doesn’t expect some sort of discontinuous pricing as interest rates normalise, as volatility returns, is really just not realistic.” Some fear that bond funds will be at the mercy of their clients, facing severe redemptions as rates increase, forcing them to liquidate portfolios to return clients’ cash. Most hold a float of liquid assets, such as US Treasury bills and other types of short-term debt, for this purpose. But a stampede for the exit could see many asset managers needing to sell at the same time, leading to volatile movements in prices. “You have a bucket of Treasuries that is presumed to be liquid and then suddenly it isn’t,” says Henry Peabody, portfolio manager at Eaton Vance. “That shakes the whole institution of Treasury trading and you have to start factoring that in.”

UPS fires warning shot across the bow of the stock market and the Fed - United Parcel Service Inc. has fired warning shots across the bow of the Federal Reserve and the stock market, by saying on Tuesday that U.S. economic growth appears to be slowing. The package-delivery giant’s cautious outlook runs counter to what Fed Chairwoman Janet Yellen said earlier this month, when she told Congress she expects the U.S. economy to keep strengthening enough for the central bank to raise interest rates “at some point this year.”  The Fed’s outlook could become clearer when it releases its latest monetary policy statement on Wednesday. It also suggests investors should take the relative weakness in UPS stock, as well as the Dow Jones Transportation Average, more seriously, as a warning that a much bigger selloff may be on the horizon for the broader market. “If you just look at in January, the GDP forecast we thought was going to be about 3.1%. Now the thinking in July is about 2.3%, so let’s say a pretty significant decrease,” said UPS Chief Executive David Abney in a conference call with analysts, according to a transcript provided by FactSet. “Retail has been uneven and we saw it soften a little bit in June. And so that’s the reason we’re cautious.”

GDP July 30, 2015: GDP came in on the lower end of expectations in the second quarter, up 2.3 percent vs the Econoday consensus for 2.9 percent. The latest data include new data additions as well as revisions with the first quarter now in the positive column, at plus 0.6 percent vs minus 0.2 percent in the prior reading. Final sales in the second quarter rose a respectable 2.4 vs minus 0.2 percent in the first quarter. Residential investment was very strong in the latest quarter at plus 6.6 percent while personal consumption, boosted by auto spending, rose 2.9 percent. On the minus side was business spending as nonresidential fixed investment fell 0.6 percent. Also on the minus side was federal spending which fell 1.1 percent reflecting a 1.5 percent decrease for defense. Net exports added slightly to the second quarter after pulling down the first quarter on the port strike. Inventory contribution was fractionally lower in the latest quarter. Price data show some pressure with the GDP price index at plus 2.0 percent and the core rate, at plus 1.8 percent, very near the Fed's general 2 percent target. Revisions had no effect on last year's GDP which is unchanged at plus 2.4 percent but it did shave 2013 to 1.5 percent from 2.2 percent. GDP for 2012 is revised down 1 tenth to 2.2 percent. The average from 2011 to 2014 is only 2.0 percent after revision, a fact that makes the latest quarter's 2.3 percent rate look even more respectable.A new quarterly aggregate, the average of GDP and GDI, is a supplemental measure of growth that tracks in part total income of the economy and which rose 2.2 percent in the second quarter, right at the 2.3 percent GDP print. A new monthly statistic is international trade in goods which, aimed at reducing the size of GDP revisions tied to trade estimates, fell $62.3 billion in June vs a deficit of $59.8 billion in May. The June widening reflects a dip in exports and a rise in imports.

Q2 GDP Advance Estimate at 2.3%, Close to Mainstream Forecasts -- The Advance Estimate for Q2 GDP, to one decimal, came in at 2.3 percent, a substantial increase from the 0.6 percent of Q1, which is an upward revision from -0.2 percent prior to today's annual revisions. Today's number came in a tad on the light side of most mainstream estimates. The WSJ survey of economists had median and mean forecasts of 2.6 and 2.7, respectively. Investing.com was looking for 2.6. The Atlanta Fed's GDPNow was closer with their forecast of 2.4. Here is an excerpt from the Bureau of Economic Analysis news release: Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.3 percent in the second quarter of 2015, according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.6 percent (revised). The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3 and "Comparisons of Revisions to GDP" on page 10). The "second" estimate for the second quarter, based on more complete data, will be released on August 27, 2015.The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), exports, state and local government spending, and residential fixed investment that were partly offset by negative contributions from federal government spending, private inventory investment, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. [Full Release] Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized percent change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.24% average (arithmetic mean) and the 10-year moving average, currently at 1.42 percent.

BEA: Real GDP increased at 2.3% Annualized Rate in Q2 - From the BEA: Gross Domestic Product: Second Quarter 2015 (Advance Estimate); Includes Historical Revisions Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.3 percent in the second quarter of 2015, according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.6 percent (revised)....The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), exports, state and local government spending, and residential fixed investment that were partly offset by negative contributions from federal government spending, private inventory investment, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. ...The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.4 percent in the second quarter, in contrast to a decrease of 1.6 percent in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 1.1 percent, compared with an increase of 0.2 percent. Real personal consumption expenditures increased 2.9 percent in the second quarter, compared with an increase of 1.8 percent in the first. The advance Q2 GDP report, with 2.3% annualized growth, was below expectations of a 2.9% increase, however Q1 was revised up to 0.6% annualized growth (from a 0.2% decline). Personal consumption expenditures (PCE) increased at a 2.9% annualized rate in Q2.

U.S. Economic Growth – The Numbers - WSJ: The U.S. economy expanded at a 2.3% seasonally adjusted annual pace in the second quarter. If the number sounds familiar, there’s a good reason. The economy has been growing at about that pace for six years. From the end of the recession in mid-2009 through the end of last year the economy grew at a 2.2% annual pace. Thursday’s report erased the previously reported contraction in the first quarter. The economy expanded at a 0.6% annual pace in the first quarter, a turnaround for the prior estimate of a 0.2% contraction. Business investment was positive during the quarter, it was previously seen as negative, and the economic boost from home building and inventory restocking was stronger than earlier estimates.  International trade was a net positive for the U.S. economy in the second quarter, contributing 0.13 percentage point to the 2.3% GDP advance for the quarter. Exports grew an annualized 5.3% during the quarter, outpacing the 3.5% growth in imports. The results are somewhat surprising. Many economists worried that a strong dollar and turmoil in overseas economies was holding back demand for U.S.-made goods. U.S. businesses pulled back on investments in the second quarter, spending less on construction projects and equipment. Nonresidential fixed investment fell at an annualized 0.6% during the quarter. It was the first negative reading for the category since the third quarter of 2012. It could be a sign that companies are acting more cautiously even while consumers stepped up spending and the housing market appears to be on more solid footing.  The economic expansion—already the worst on record since World War II—is weaker than previously thought, according to revised data. From 2012 through 2014, the economy grew at a rate of 2.0% annually. That’s a 0.3 percentage-point downgrade from prior estimates.

Advance Estimate 2Q2015 GDP Growth at 2.3%. First Quarter GDP Revised Upward.: For the first quarter of 2015, real GDP is now estimated to have increased 0.6 percent; in the previously published estimates, first-quarter GDP was estimated to have decreased 0.2 percent. The 0.8- percentage point upward revision to the percent change in first-quarter real GDP primarily reflected upward revisions to nonresidential fixed investment, to private inventory investment, to residential fixed investment, and to federal government spending that were partly offset by a downward revision to PCE. One must consider:

• This advance estimate released today is based on source data that are incomplete or subject to further revision. (See caveats below.) Please note that historically advance estimates have turned out to be little more than wild guesses.
• Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was relatively strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 2Q2015, the year-over-year growth is 2.3% - down from 1Q2015's 2.9% year-over-year growth. So one might say that GDP decelerated 0.6% from the previous quarter.
• Change in inventories insignificantly affected GDP this quarter.

US Economy Grew At 2.3% In Q2, Below Expectations, "Winter" Quarters Revised Higher After Double Seasonal Adjustments -- The much anticipated Q2 GDP number with prior revisions is out and, as expected, Atlanta Fed's 2.4% estimate was once again nearly spot on, with the advance release coming in at 2.3%, below the consensus estimate. But more importantly, as part of the annual revision to prior GDP data, one which as we observed would include the infamous "double seasonal adjustments", both Q1 2014 and 2015 GDP prints, the "winter" collapse, was revised well higher, with Q1 2014 increase from -2.1% to -0.9%, while last quarter's final GDP which had printed at -0.2% is now 0.6%.  From the report:The acceleration in real GDP growth in the second quarter reflected an upturn in exports, an acceleration in PCE, a deceleration in imports, and an upturn in state and local government spending that were partly offset by downturns in private inventory investment, in nonresidential fixed investment, and in federal government spending and a deceleration in residential fixed investment. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.4 percent in the second quarter, in contrast to a decrease of 1.6 percent in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 1.1 percent, compared with an increase of 0.2 percent. Real personal consumption expenditures increased 2.9 percent in the second quarter, compared with an increase of 1.8 percent in the first. Durable goods increased 7.3 percent, compared with an increase of 2.0 percent. Nondurable goods increased 3.6 percent, compared with an increase of 0.7 percent. Services increased 2.1 percent, the same increase as in the first quarter.Real nonresidential fixed investment decreased 0.6 percent in the second quarter, in contrast to an increase of 1.6 percent in the first. Investment in nonresidential structures decreased 1.6 percent, compared with a decrease of 7.4 percent. Investment in equipment decreased 4.1 percent, in contrast to an increase of 2.3 percent. Investment in intellectual property products increased 5.5 percent, compared with an increase of 7.4 percent. Real residential fixed investment increased 6.6 percent, compared with an increase of 10.1 percent. Real exports of goods and services increased 5.3 percent in the second quarter, in contrast to a decrease of 6.0 percent in the first. Real imports of goods and services increased 3.5 percent, compared with an increase of 7.1 percent.

Consumption Spending and Net Exports Spur Higher-Than-Expected Second Quarter Growth: Downward GDP revisions show economy falling further behind potential output from 2011–2014. The Commerce Department reported the economy grew at a 2.3 percent annual rate in the second quarter, a substantial improvement from the 0.6 percent rate in the first quarter. The latter number was an upward revision from a previously reported decline of -0.2 percent. The biggest factors were a turnaround in the trade balance and an uptick in the rate of consumption growth.  In the first quarter, exports fell at a 6.3 percent annual rate. This was partly the result of the rise in the value of the dollar in 2014, but also partly the result of slowdowns at West Coast ports due to a labor dispute. With the labor dispute now settled, exports rose at a 5.3 percent rate in the second quarter, still leaving them below their level from the fourth quarter of 2014. The improvement in the trade balance contributed 0.13 percentage points to growth after subtracting 1.92 percentage points in the first quarter. Consumption grew at a 2.9 percent annual rate in the second quarter, up from a weather-depressed 1.1 percent rate in the first quarter. The biggest change was in durable goods. People who put off buying cars in the harsh winter weather instead bought in the second quarter, leading to a 7.3 percent rate of increase in durable good sales compared to a 2.0 percent rate in the first quarter. Consumption contributed 1.99 percentage points to growth in the second quarter compared to 1.19 percentage points in the first quarter. The personal saving rate was 4.8 percent for the quarter, the same as the average of 2014. This should end speculation about why people are not spending their dividend from lower gas prices, since the data indicate they are. Consumption is at near-record highs as a share of GDP, which makes the frequent fretting over cautious consumers seem more than a bit peculiar.Investment was very weak in the quarter, shrinking at a 0.6 percent annual rate. Equipment spending fell at a 4.1 percent rate, and spending on structures fell at a 1.6 percent rate after dropping at a 7.4 percent rate in Q1. It is likely that overbuilding in some areas will lead to further weakening of structure investment in future quarters. Residential construction grew at a 6.6 percent rate, down from a 10.1 percent rate in the first quarter. Government spending rose at a 0.8 percent rate as a 2.0 percent rise in state and local spending more than offset a drop of 1.1 percent at the federal level. The revisions show the recovery to have been weaker than previously reported. Growth for the years 2012–14 averaged just 2.0 percent, down from a previously reported 2.3 percent.

Summing up Today’s GDP Data Release -- Today’s report on gross domestic product (GDP)—the widest measure of economic activity—does not paint an encouraging picture of America’s past or present economic health. First: the past. Today’s report provides revisions to GDP data going back three years. These revisions show slower growth over the past three years, meaning that the second half of the economic recovery following the Great Recession has been slower than previously thought. This slower growth was driven in part by government spending—federal, state, and local—that was even more austere than previously estimated. Additionally, the deceleration of key inflation measures (“core” personal consumption expenditure prices) over the past three years was more pronounced than previously thought. The revised data indicate that the recovery has been weaker than originally thought and, subsequently, that a fully healthy economy is farther away. Now: the present. Growth in the second quarter of 2015 proceeded at a 2.3 percent annualized rate, following growth of 0.6 percent in the first quarter. While it’s a relief that the first quarter growth disaster wasn’t repeated, nobody really thought that was a big danger. But today’s data does indicate that there has been a slowdown relative to even the past couple of years, and, unless growth in the second half of the year accelerates markedly, it’s likely that 2015 will struggle to post even 2.0 percent growth overall.

The Worst Expansion Since World War II Was Even Weaker - The economic expansion—already the worst on record since World War II—is weaker than previously thought, according to newly revised data. From 2012 through 2014, the economy grew at an all-too-familiar rate of 2% annually, according to three years of revised figures the Commerce Department released Thursday. That’s a 0.3 percentage point downgrade from prior estimates. The revisions were released concurrently with the government’s first estimate of second-quarter output. Since the recession ended in June 2009, the economy has advanced at a 2.2% annual pace through the end of last year. That’s more than a half-percentage point worse than the next-weakest expansion of the past 70 years, the one from 2001 through 2007. While there have been highs and lows in individual quarters, overall the economy has failed to break out of its roughly 2% pattern for six years.The latest revision, however, did significantly upgrade what was seen as a historically wretched winter of 2014. The output reading for the first quarter of last year was recast to a 0.9% contraction instead of a 2.1% annualized drop. The prior figure represented the worst contraction on record outside of a recession. The new number isn’t even the worst quarterly contraction of the expansion. GDP declined at a 1.5% annual pace in the first quarter of 2011. The upward revision to the first quarter of 2014 was largely due to revised data on construction spending, specifically on power structures. The revision reflected both new seasonal adjustments and newly available data. That 2011 figure, and other data, could be revised in future years. Commerce Department officials are undertaking a comprehensive review of GDP data with the intent of refining the seasonal adjustment process.

Q2 GDP: Investment The graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.  In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern - both into and out of recessions is - red, green, blue. The dashed gray line is the contribution from the change in private inventories. Note: This can't be used blindly.  Residential investment is so low as a percent of the economy that the small decline early last year was not  a concern. Residential investment (RI) increased at a 6.6% annual rate in Q2. Equipment investment decreased at a 4.1% annual rate, and investment in non-residential structures decreased at a 1.6% annual rate. On a 3 quarter trailing average basis, RI is positive (red), equipment is slightly negative (green), and nonresidential structures are also negative (blue). Note: Nonresidential investment in structures typically lags the recovery, however investment in energy and power provided a boost early in this recovery - and is now causing a decline. Other areas of nonresidential are now increasing significantly. I expect investment to be solid going forward (except for energy and power), and for the economy to grow at a decent pace for the remainder of 2015. The second graph shows residential investment as a percent of GDP. Residential Investment as a percent of GDP has been increasing, but it still below the levels of previous recessions - and I expect RI to continue to increase for the next few years.

This Is How The Much Anticipated "Second Seasonal Adjustment" Affected Q1 GDP -- Much more important than the Q2 GDP print, which as we noted previously, will be revised as the wind blow first in one month, and then again, at the end of September, just after the Fed does, or does not, hike rates, what everyone was focused on was just how the BEA's "double seasonal adjustment" will boost Q1 GDP, which because it was negative would clearly have to print at least positive in a year in which the Fed is desperate to show it is in control with a 25 bps hike. As expected, it rose: from -0.2% to 0.6%. However, a look at the internals reveals a major surprise - while many said that the Q1 economy does not expose the true strength of the US consumer (instead of shopping in stores, they shopped online which wasn't captured or comparable), what actually happened was that Personal Consumption Expenditures as a % of GDP actually declined from 1.4% to 1.2% when netting out the harsh winter impact. As in the real economic driver was even weaker and this time you can't blame it on the weather! So how did Q1 GDP rise by 0.8% in absolute terms if consumer spending, that 70% driver of the US economy, declined? Simple: BEA saw fit to boost Q1 CapEx (fixed investment) from a decline of -0.1% to 0.6%. And, the punchline, it used that traditional GDP plug, inventory, even more aggressively, with Change in private inventories rising 0.9% instead of the original 0.5% print.

Tepid GDP Growth Could Keep The Fed at Bay - Today’s GDP report reveals Q2 growth of 2.3% for the advance estimate. Overall, this tepid increase provides is not going to be an inducement to hike rates at the next meeting of the FOMC. First quarter GDP was revised upward to 0.8%, better than the initial estimate of  a  -0.2% decline.  But, as the above graph makes clear, the last three quarters do not show much evidence of robust growth.  From the BEA release:

• From 2011 to 2014, real GDP increased at an average annual rate of 2.0 percent; in the previously published estimates, real GDP had increased at an average annual rate of 2.3 percent. From the fourth quarter of 2011 to the first quarter of 2015, real GDP increased at an average annual rate of 2.0 percent; in the previously published estimates, real GDP had increased at an average annual rate of 2.2 percent during this period.
• The percent change in real GDP was revised down 0.1 percentage point for 2012, was revised down 0.7 percentage point for 2013, and was unrevised for 2014.

Since the “end” of the recession in 2009 growth has been lackluster, although investment has experienced faster growth, having declined more dramatically as is usual over the business cycle.The recent policy statement from the FOMC used the word “moderate” twice in the first two sentences when talking about economic activity and household spending. As can be seen in the graphs above, both GDP and PCE grew in lock step over that past several years, and grew 2.3% and 2.9%, respectively for Q2.  The GDP price index grew at 2.0% (1.4% for the core) and the PCE price index grew at 2.2% (1.8% for the core PCE price index), all of them right around the 2.0% FOMC target. And, while they mentioned the housing sector has shown additional improvement, “business fixed investment and net exports stayed soft.”  Evidently, the FOMC is putting more weight on what happens in the labor market: “The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”

Fed Watch: GDP Report -- The second quarter GDP report, while not a blockbuster by any measure, will nudge the Fed further in the direction of a September rate hike. At first blush this might seem preposterous - 2.3% growth is nothing to write home about in comparison to history. But history is deceiving in this case. It remains important to keep in mind that 2% is the new 4%. Year-over-year growth rates continue to hover around 2.5%: While the 2.3% quarterly rate of the second quarter was below consensus forecasts, the first quarter figure was revised up from -0.2% to 0.6%. That said, the annual revisions from 2012-2014 disappointed. Average annual growth from 2011 to 2014 dropped from a previsouly reported 2.3% to 2.0%. Sad, very sad.That was still enough growth, however, to sustain fairly solid job growth and sharp declines in the unemployment rate, suggesting that potential output growth is indeed fairly anemic. The Fed staff appear to agree; see their very low potential growth numbers in the accidentally released forecasts (and for more on the implications of those forecasts, see Gavin Davies). Note also the low end of the range of potential growth estimates from FOMC meeting participants is 1.8%. Furthermore, San Francisco Federal Reserve President John Williams wants the Fed to guide the economy to a 2.0% growth rate in 2016. Hence 2.3% growth when the economy is operating near full-employment is sufficient for many policymakers to pull the trigger on the first rate hike. A second implication of the revisions is that they provide no relief for those pondering low productivity growth. Indeed, it is quite the opposite, and they suggest downward revisions to productivity. Low productivity plus low labor force growth equals low potential output growth. 2% is the new 4%. And don't expect that all the data will fall into the same nice, consistent patterns we typically see in a business cycle. Some indicators will point up, others down, leading to many erroneous calls that a recession is soon upon us. 

Current economic conditions  - The Bureau of Economic Analysis announced today that U.S. real GDP grew at a 2.3% annual rate in the second quarter. You can’t describe the new data as favorable, but I’m still hopeful about what comes next. GDP growth since the end of the Great Recession in 2009:Q2 has averaged 2.1% per year, a full percentage point below the average over the entire 1947-2015 period. And that 3.1% includes both recessions and expansions. Moreover, the benchmark revision of the last three years of data that accompanied today’s report didn’t help. Although the new data revise the weak numbers for the first quarters of 2015 and 2014 up a bit, the BEA now estimates that annual GDP growth averaged 1.9% (logarithmically) over 2012:Q1-2015:Q1, down 0.3% from the 2.2% that had initially been reported for that period. Jason Furman attributes much of the downward revision to “a new methodology for calculating the price of financial services spending and revisions to source data on services.” In any case, the bottom line is that the post-2009 expansion, which we already knew was very weak by historical standards, now appears to have been even weaker.  The recent weakness has brought the Econbrowser Recession Indicator Index up to 13.3%. The index has now shown a modest spike up with each of the last three weak winters. The index uses today’s data release to form a picture of where the economy stood as of the end of 2015:Q1. In terms of the drivers of the 2.3% Q2 growth, there’s really only one story– consumer spending. While exports made a technical contribution to the change from Q1, this was only a partial rebound from the exceptionally low Q1 exports, which had been temporarily reduced as a result of Q1 work disruptions at west coast ports.  It’s interesting to speculate on the role of oil prices in the recent GDP numbers. The fall in oil prices since last summer was of course a boon for oil consumers and a bane for oil producers. Usually consumers respond pretty quickly to windfalls in spending power, whereas oil producers take significantly longer to cut back their investments. But this time the consumer response was more subdued, while the lead times for adjusting modern fracking drilling are much shorter than for conventional oil. Lower investment in the oil patch may be having an effect on the GDP aggregates.

Q2 GDP Per Capita at 1.7 for Advance Estimate - Earlier today we learned that the Advance Estimate for Q2 real GDP came in at 2.3 percent (rounded from 2.32 percent), up from the 0.6 percent of Q1, which is an upward revision from -0.2 percent prior to today's annual revisions. Here is a chart of real GDP per capita growth since 1960. For this analysis we've chained in today's dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence our 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data is available in the FRED series POPTHM.. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale. The chart includes an exponential regression through the data using the Excel GROWTH function to give us a sense of the historical trend. The regression illustrates the fact that the trend since the Great Recession has a visibly lower slope than long-term trend. In fact, the current GDP per-capita is 10.1% below the pre-recession trend and similarly in Q1 of last year. The standard measure of GDP in the US is expressed as the compounded annual rate of change from one quarter to the next. The current real GDP is 2.3 percent. But with a per-capita adjustment, the data series is currently at 1.7 percent (1.66 percent to two decimal places). The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

Blame Government Policies for Economic Slowdown - David Cay Johnston - Around the world, financial pages report that the global economy is slowing and might even contract.  Prices of commodities are falling, with copper, cotton, grains and oil all down by about half in the last five years — a strong signal of slowing growth.  Companies are tightening their belts, with fewer perks and fringe benefits. An inadvertently leaked report showed that staff economists at the Federal Reserve are more pessimistic about the near future than the official Fed positions. And big companies with nowhere else to put their piles of cash are buying back their stock or buying up competitors, which means fewer well-paying management jobs.  Yet hardly any of these reports citing official sources and economic data connect the dots to outline what’s behind this unwelcome trend in the U.S.: government policies.  Governments are helping big industries by diminishing competition, providing abundant cheap credit for speculation rather than investment and failing to rein in price gouging. In turn, these policies produce a growing concentration of income and wealth at the top while the vast majority struggle with falling wages, flat incomes, job insecurity and ashrinking slice of investment assets.  U.S. economic malaise has been clear for some time.  Net investment in privately owned U.S. businesses peaked in 2000 and has not returned.  Investment has slipped this year.  The personal savings rate, 5 percent in June, was less than half the average rate in the 1960s and 1970s. While America has enjoyed 56 straight months of job growth, it has slowed this year, and wage growth remains muted.  Everywhere you look, acquisitions, buyouts and mergers are happening, often with phenomenal profits. Warren Buffett turned $9 billion in two food industry deals into $25 billion in two years. Wall Street expects 2015 to set a new record for corporate mergers, with thousands of deals valued together at close to $2 trillion.

August 2015 Economic Forecast: Weakest Growth Since April 2010 - Econintersect's Economic Index declined to the lowest level since April 2010. The tracked sectors of the economy remain relatively soft with most expanding at the lower end of the range seen since the end of the Great Recession. Our economic index has been in a long term decline since late 2014.Our employment six month forecast discussed below continues to forecast relatively strong employment growth, but the current forecast is for a slower rate of growth..

• The consumer portion of the economy continues to outperform the business sector - but that is not saying much.
• The year-over-year rate of growth of income and expenditures is nearly the same. The consumer continues to spend a historically high percentage of income - and there seems to be little room for improvement in the rate of spending growth. Note that the quantitative analysis which builds our model does not include personal income or expenditures directly.
• Another data point - the correlation between retail sales and employment is in recessionary territory. Note that neither employment nor retail sales are part of our economic model.
• Econintersect checks its forecast using several alternate monetary based methods - and all the checked forecasts show moderate to weak economic growth.
• Note that all the graphics in this post auto-update. The words are fixed on the day of publishing, and therefore you might note a conflict between the words and the graphs due to backward data revisions and/or new data which occurs during the month.

The ways in which the economy never recovered from 2008: The headline economic numbers are far better now than in 2008-2009. Yet many areas of the economy have never recovered from the 2008, and some are even worse today.  What sort of recovery has Increasing numbers of children in poverty? There are nearly two million more children living in poverty in the U.S. today than during the 2008 recession, shocking new figures reveal. Nearly a quarter of youngsters (22 per cent, or around 18.7million children) - were classed as living below the poverty line in 2013. This has risen from 18 per cent in 2008 (16million youngsters), according to the Casey Foundation's 2015 Kids Count Data Book.  The rate for black children is a whopping 38%. The overall poverty rate is down from 2012, but still higher than 2008. Almost every month Wall Street is surprised by the fact that household incomes aren't bouncing back from the recession. This "new normal" has led to a decline in the middle class. In the late 1960s, more than half of the households in the United States were squarely in the middle, earning, in today’s dollars, $35,000 to $100,000 a year. Since 2008, the number of Americans who view themselves as middle class has dropped from 53% to 44%, with the largest drop between 2012 and 2014. There is a similar increase in the number of people who view themselves as lower class.  Much of this can be seen in the 50% growth of temporary workers. The subprime housing bubble burst years ago, but the homeownership crisis is still playing out.  The U.S. homeownership rate continued to decline in 2015, hitting its lowest level since 1989.Fewer and fewer Americans are starting small businesses. In fact, more are going out of business than starting businesses. What's more, this trend is especially pronounced in school-debt burdended millenials.  "Saddled with student loan debt, millennials can't afford to be entrepreneurs,"   Start-up rates among Americans ages 20 to 34 peaked at 35 percent in 1996 and has since declined to 23 percent in 2013, according to Kauffman. Lack of personal savings and difficulty at getting financing are the primary reasons. Many people have commented on the drop of people in the workforce;  not all of it is because of demographics; the participation rate of older workers has dramatically increased. Not surprisingly, wealth inequality just keeps getting worse. once the effect of government programs is included in the calculations, the United States emerges on top of the inequality heap. America's inequality problem has entrenched the lack of social mobility. This gets justified by the "Horatio Alger myth".

Prepare for the Return of Budget Battles, Debt Drama and Other Washington Uncertainty - For the last 18 months, investors have enjoyed a period of relative calm when it comes to fiscal policy. That could soon change. A budget impasse looms this fall as Republicans and Democrats remain at odds over how to fund the government next year, says Joel Prakken, chairman of economic forecasting firm Macroeconomic Advisers, in a new report. Congress will also need to raise the debt ceiling as soon as late October. “We’re moving back to the environment we had in 2011 and 2013 when we were passing these stopgap measures because we couldn’t decide what we were going to do,” he said. An index tracking fiscal-policy uncertainty fell last year to its lowest level since 2009. The lull largely reflected how lawmakers in late 2013, following a messy partial government shutdown, agreed to lift spending curbs for two years. The bipartisan agreement expires Oct. 1, when Congress will again be subject to the caps known as the sequester. Sure enough, the uncertainty index through June has climbed to its highest level since the 2013 shutdown as Congress nears this autumn’s deadlines. With time running out and Republicans struggling to pass spending bills, House Speaker John Boehner (R., Ohio) last week said Congress is likely to pass a stop-gap funding resolution to buy more time in September. Many analysts say a shutdown isn’t that likely. Upon retaking control of the Senate last fall, Majority Leader Mitch McConnell (R., Ky.) essentially ruled out another shutdown. Meanwhile, differences over the spending levels aren’t enormous.

Treasury Secretary says U.S. debt limit won't be hit before Oct. 30 - The U.S. is not at risk of breaching the debt ceiling before Oct. 30, Treasury Secretary Jacob Lew said Wednesday, in a new estimate sent to Congressional leaders. Treasury has been using so-called extraordinary measures since mid-March. Lew told the lawmakers that those measures will now last through the end of October. The Treasury Secretary urged Congress to raise the debt limit as soon as possible. The debt limit caps how much the government can borrow. It used to be raised routinely but has recently become the source of a bitter political tug-of-war.

U.S. Decides to Retaliate Against China’s Hacking - The Obama administration has determined that it must retaliate against China for the theft of the personal information of more than 20 million Americans from the databases of the Office of Personnel Management, but it is still struggling to decide what it can do without prompting an escalating cyberconflict.The decision came after the administration concluded that the hacking attack was so vast in scope and ambition that the usual practices for dealing with traditional espionage cases did not apply.But in a series of classified meetings, officials have struggled to choose among options that range from largely symbolic responses — for example, diplomatic protests or the ouster of known Chinese agents in the United States — to more significant actions that some officials fear could lead to an escalation of the hacking conflict between the two countries.  That does not mean a response will happen anytime soon — or be obvious when it does. The White House could determine that the downsides of any meaningful, yet proportionate, retaliation outweigh the benefits, or will lead to retaliation on American firms or individuals doing work in China. President Obama, clearly seeking leverage, has asked his staff to come up with a more creative set of responses.“One of the conclusions we’ve reached is that we need to be a bit more public about our responses, and one reason is deterrence,” said one senior administration official involved in the debate, who spoke on the condition of anonymity to discuss internal White House plans. “We need to disrupt and deter what our adversaries are doing in cyberspace, and that means you need a full range of tools to tailor a response.”

Eyes on Trade: CAFTA’s Decade of Empty Promises Haunts the TPP -- Ten years ago, after a flurry of backroom deal-making, Congress passed the Central America Free Trade Agreement (CAFTA).  In the dead of night.  By a single vote.   Exactly one decade later, today trade ministers are gathering in Hawaii to try to conclude deadline-missing negotiations on the Trans-Pacific Partnership (TPP) – a sweeping deal that would expand the CAFTA model of trade across the Pacific. Today in Central America, life-saving medicines are more expensive due to monopoly protections that CAFTA gave to pharmaceutical corporations – protections that are slated for expansion in the TPP.  And the headlines from several CAFTA countries do not report economic prosperity, but economic instability, drug violence and forced migration.  Meanwhile, CAFTA’s labor provisions have failed to halt the assassination of dozens of Central American union workers who were trying to end unmitigated labor abuses like wage theft.  In contrast, the pact’s foreign investor privileges, which the TPP would expand, have succeeded in empowering multinational corporations to challenge domestic laws, including consumer and environmental protections.Worse than repeating the mistakes of the past, the TPP would repeat the mistakes of CAFTA’s present. During the debate over CAFTA, health experts warned that by handing pharmaceutical firms greater monopoly protections, the deal would restrict Central Americans’ access to more affordable generic versions of life-saving drugs. Unfortunately, they were right.  Take, for example, Kaletra, a drug used to fight HIV/AIDS.  Under CAFTA rules, Kaletra has enjoyed monopoly protections in Guatemala, making generic versions unavailable, for the entire first decade of CAFTA.  Without a generic alternative, Guatemala’s public health system pays about $130 per bottle of Kaletra.  In contrast, the generic version of Kaletra costs less than $20 per bottle, according to the Pan American Health Organization reference price.  For Guatemala’s taxpayers, paying more than six times the generic price for Kaletra under CAFTA means less money to build schools or bridges.  For Guatemala’s HIV/AIDS patients, it can mean the difference between life and death.

U.S. Congress' egocentric strategem in the TPP talks - On June 24, the U.S. Congress cleared a legislative bill authorizing President Barack Obama to pursue negotiations for the Trans-Pacific Partnership free trade agreement, ending weeks and months of partisan bickering. To get a clear overall picture, it is essential to recognize two facts. One is that Obama is being punched from both sides and pushed into a corner like a losing boxer. The other is that regardless of the result of his fight with Congress, the United States will become increasingly self-centered in pursuit of its national interests in international trade negotiations. The U.S. Constitution gives power to negotiate trade-related matters to Congress. Unless Congress delegates the power to the administration, the Office of the U.S. Trade Representative, which is under immediate control of the president, does not have any more authority to negotiate trade deals than “an errand boy.” That is why Canada and Australia said they could not take part in Cabinet-level TPP trade talks unless Congress grants the negotiating authority to the executive branch of the U.S. government. In the past, a law called the Trade Promotion Authority Act gave the president the “fast-track negotiating authority.” This time, however, a new law named the Trade Priorities and Accountability Act was passed, clarifying negotiation priorities from the viewpoint of Congress and requiring the president to conduct trade negotiations with clear explanations. Obama signed the law on June 29.

Secret TPP Talks Continue at a Luxury Hotel in Hawaii as the Deal Grows More Controversial -- Trade ministers are meeting behind closed-doors at the Westin Resort and Spa in Maui this week to finalize the terms of the Trans-Pacific Partnership (TPP). This is the first formal round of talks since the U.S. passed the controversial Fast Track trade legislation in June, which has given U.S. negotiators a renewed sense of determination as they continue to push TPP's corporate-driven mandate on intellectual property and digital regulations. The U.S. Trade Representative (USTR) seeks to wrap up talks by the end of the week. According to recent reports, the U.S. is still pushing for copyright terms of life plus 70 years, excessive financial damages for infringements, and a host of other provisions that will undermine the public interest. Offcials claim that a final deal could emerge the next few days, but this round of talks has been steeped in controversy. A report from last week revealed how the amount of corporate lobbying money spent on influencing trade policy surged in the last few months. Health organizations have sounded the alarm over patent provisions that would make make medicines more expensive and inaccessible for millions of people. The USTR continues to demand those expansive patent provisions, but it can no longer do so quietly. At the same time, we worry that the TPP may be trumping concerns about human trafficking and slavery. The final Fast Track legislation included a provision prohibiting trade agreements with countries that have failed to take real action to prevent such practices. For years, the US has challenged Malaysia (among others) for failing to do just that.  But Malaysia is also a party to the TPP. We can't help but wonder whether the White House pressured the State Department to modify Malaysia's ranking and therefore clear the way for the TPP to go on the Fast Track to ratification.

Issues Mount as Negotiators Gather to Wrap Up Trans-Pacific Trade Pact - — The top trade negotiators of the United States and 11 other Pacific nations are gathering this week at a luxury resort in Maui for one last push to complete the largest regional trade accord in history, roping together 40 percent of the world’s economic output. But even though it is billed as the “final round” of Trans-Pacific Partnership negotiations, trade representatives from the United States, Japan and Pacific nations from Canada and Chile to Australia and Vietnam have high hurdles to clear.  Australia and New Zealand are resisting American rules on access for pharmaceutical companies to their national health systems. Vietnam, Mexico and Brunei have far to go to comply with international standards on labor organizing. Canada is so reluctant to open its agricultural market to competition that it might drop out of the talks altogether.And just Monday, the State Department’s decision to upgrade its rating of Malaysia’s efforts to combat human trafficking caused an uproar among labor and human rights activists, who accused the administration of a political maneuver to ease Malaysia’s inclusion in the Pacific accord at the expense of wage and sex slaves.Given the challenges, the prospect of concluding a deal by Friday — the goal of the Maui conference — is far from certain.

Protests Planned For TPP Trade Talks At Westin Maui Resort - A group of anti-corporate and pro-labor and environment organizations are planning a series of demonstrations against the Trans Pacific Partnership (TPP) trade talks taking place this week at the Westin Maui Resort & Spa in Ka`anapali, says Sierra Club Hawaii Director Marti Townshend in a July 27 news release. “TPP negotiators cannot escape public scrutiny in Hawaii,” said Kaytee Ray-Riek, the Campaigns Director of the environmental and labor activist group SumOfUs, in a July 27 news release from Sierra Club Hawaii. “These demonstrations in Lahaina are part of a global movement of millions demanding transparency and speaking out against corporate favoritism. Journalists, activists, and voters are among the hundreds of thousands urging politicians to not sign this trade pact.” “Highly secretive international agreements like the TPP will decimate our way of life in the islands by threatening Hawaiians’ rights to resources that allow for a subsistence lifestyle, crippling our local food economy, allowing higher levels of pesticides on crops and weakening the regulation of chemicals, lowering worker protections and opening the door for wider environmental and human rights abuses, and weakening food safety standards and food labeling requirements,” said Mary Lacques of Hawaii SEED in that same Sierra Club Hawaii news release.

How the TPP Will Protect the United States’ ‘Third Offset’ Strategy - One of the biggest ongoing arguments in the TPP negotiations (as far as we know, anyway) remains the question of how far the United States can push the other signatories to adopt its views on intellectual property law. The contentious points revolve around the ability to undertake criminal legal action against IP violators. The criminalization of IP infringement in a multilateral agreement would give the United States legal teeth for enforcing its preferred system of intellectual property protection across the world. The U.S. wants this for several reasons. First, U.S. corporate actors have long viewed intellectual property protection as a key element of their profit strategies, and believe that IP violations in many of the TPP’s candidate countries have severely cut into their margins. These firms helped build the existing architecture of the international intellectual property regime, and they clearly want to ensure that they have access to the most effective possible tools for maintaining control of their IP. Second, it appears that the Obama administration has come to the conclusion that strict IP regulation, including protection not only of U.S. copyrights and patents, but also of U.S. trade secrets, is the key to U.S. industrial and technological competitiveness in the coming decades. Because of changes associated with the digitization of knowledge and the advent of 3D printing, the United States has concluded that traditional methods for staying on the edge of the innovation curve will not suffice. The advanced nature of the U.S. economy means that an ever-greater percentage of its products (whether artistic, commercial, or industrial) consists of intellectual property, which loses its value if not properly protected. Expanding protection world-wide for U.S. intellectual property, by this logic, helps maintain the competitiveness of the U.S. economy.

Secret Trans-Pacific Partnership Agreement (TPP) Treaty: State-Owned Enterprises (SOE) Issues for Ministerial Guidance [Wikileaks]. -  Today, 29 July 2015, WikiLeaks releases a secret letter from the Trans-Pacific Partnership Agreement (TPP or TPPA) Ministerial Meeting in December 2013, along with a comprehensive expert analysis of the document.  Download the TPP SOE Ministerial Guidance in PDF or read below.  Download the expert analysis on TPP SOE Ministerial Guidance in PDF or read the HTML. The letter indicates a wide-ranging privatisation and globalisation strategy within the Agreement which aims to severely restrict "state-owned enterprises" (SOEs). Even an SOE that exists to fulfil a public function neglected by the market or which is a natural monopoly would nevertheless be forced to act "on the basis of commercial considerations" and would be prohibited from discriminating in favour of local businesses in purchases and sales. Foreign companies would be given standing to sue SOEs in domestic courts for perceived departures from the strictures of the TPP, and countries could even be sued by other TPP countries, or by private companies from those countries. Developing countries such as Vietnam, which employs a large number of SOEs as part of its economic infrastructure, would be affected most. SOEs continue to fulfil vital public functions in even the most privatised countries, such as Canada and Australia.

TPP negotiations threaten to forcibly commercialise state-owned bodies -- Leaked details of the controversial Trans-Pacific Partnership trade negotiations, published today by WikiLeaks, reveal that the futures of publicly owned enterprises such as Australia Post, the ABC, SBS and state power utilities may be on the negotiating table in secret talks under way in Hawaii this week. WikiLeaks has published previously unknown details of the Trans-Pacific Partnership (TPP) negotiations relating to the treatment of state-owned enterprises (SOEs) – publicly owned corporations that do not operate along strictly commercial lines and deliver benefits to the community as a whole. The confidential leaked text, titled "SOE Issues for Ministerial Guidance", reveals for the first time that TPP negotiators have been considering proposed rules, pushed strongly by the United States, that would impose “additional disciplines” on the commercial activities of SOEs and that these would “go beyond existing obligations” under World Trade Organisation rules and other free trade agreements. The text states that most TPP countries have supported such an approach, which would include new obligations to ensure state-owned enterprises act on the basis of commercial considerations, comply with the non-discriminatory provisions of the TPP, and are accorded no special regulatory treatment by governments while being subject to increased scrutiny from commercial competitors.

Secrecy around TPP trade deal fuels suspicions, worries | GulfNews.com: Higher costs for needed generic drugs. Longer copyright protections than the global standard. Foreign investors empowered to overrule governments. A more tightly-regulated internet. Those are just some of the potential pitfalls from any deal that could emerge from the Trans-Pacific Partnership, the 12-country free-trade and investment pact shrouded in secrecy as negotiations head into the final stage in Hawaii next week. A handful of draft chapters of the TPP, leaked via WikiLeaks, have highlighted the proposed treaty’s heavy emphasis on expanding protections for corporate rights and assets like intellectual property — patents, copyrights and databases — that are far more valuable to advanced economy corporations than traditional cargo trade. For critics, the proposals show a deal moving more toward protection than free trade, one more about corporate benefits than boosting economies and development. But backers say the modern global economy needs a new framework of rules to protect intellectual property-dependent 21st century industries that aren’t covered in traditional free trade pacts like the World Trade Organisation. The 12 countries involved — Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam — have agreed to deliberate in great secrecy, with the goal of producing a deal that can either be accepted or rejected as a whole. The leaked documents, too, show great disagreement on many issues still under negotiation. Nevertheless, what is known from the leaks has left a whole range of politicians, academics and civil society groups deeply worried.

The Copyright Term Red Herring - With a recent news brief from Japan’s NHK World News vaguely claiming copyrights under the Trans Pacific Partnership (TPP) are “to last for 70 years,” various critics of copyright have used the opportunity to recycle their baseless allegations that the TPP negotiation process is being corrupted by major entertainment companies. The Electronic Frontier Foundation called for the entire TPP—a broad free trade agreement that has been in development for almost 10 years—to be killed. Others have resurrected the term “Mickey Mouse Protection Act” in an attempt to revive a tired campaign of misinformation. The myth of how US copyright terms got to be life of the author plus seventy years is one of the most pervasive areas of historical revisionism in the copyright critic’s arsenal, as they argue that copyright terms will extend for as long as Mickey Mouse might enter the public domain. Instead of irresponsibly spreading a false narrative, it is much more beneficial to inform the public on how the copyright terms have evolved globally, and how this has affected US copyright terms, so that we can better understand the broader trend in copyright term length.  It is clear that US copyright terms have been extended since the Copyright Act of 1790. Yet while copyright critics continue to focus on this expansion, they ignore why the terms have expanded, and how they have expanded in relation to every other country.

Cables Show Hillary Clinton's State Department Deeply Involved in Trans-Pacific Partnership - Democratic presidential candidate Hillary Clinton on Thursday attempted to distance herself from the controversial 12-nation trade deal known as the Trans-Pacific Partnership. During her tenure as U.S. secretary of state, Clinton publicly promoted the pact 45 separate times -- but with her Democratic presidential rivals making opposition to the deal a centerpiece of their campaigns, Clinton now asserts she was never involved in the initiative. "I did not work on TPP," she said after a meeting with leaders of labor unions who oppose the pact. "I advocated for a multinational trade agreement that would 'be the gold standard.' But that was the responsibility of the United States Trade Representative." But at a congressional hearing in 2011, Clinton told lawmakers that "with respect to the TPP, although the State Department does not have the lead on this -- it is the United States Trade Representative -- we work closely with the USTR." Additionally, State Department cables reviewed by International Business Times show that her agency -- including her top aides -- were deeply involved in the diplomatic deliberations over the trade deal. The cables from 2009 and 2010, which were among a trove of documents disclosed by the website WikiLeaks, also show that the Clinton-run State Department advised the U.S. Trade Representative’s office on how to negotiate the deal with foreign government officials.

Left gathers forces for final push against TPP - Opponents of President Obama's trade agenda believe they can marshall their forces to defeat the Trans-Pacific Partnership (TPP), even as the finish line for the controversial agreement comes into view. After losing a battle to stop fast-track legislation, liberal Democrats in the House are teaming up with labor unions and other allies in an effort to thwart the TPP through social media campaigns, protests on and around Capitol Hill, and regular briefings with reporters. Trade ministers from the 12 nations negotiating the proposed accord are seeking to reach a final agreement in Maui, Hawaii by the end of the month, but are grappling with many unresolved questions. Among the topics at issue: Persistent concerns over labor practices in Peru; human trafficking in Malaysia; and workers’ rights in Vietnam and Mexico. But even a final deal that all the countries are willing to sign could struggle to gather support in the U.S. Congress. Rep. Rosa DeLauro (D-Conn.), who has led the charge in the House against the deal, said the Obama administration is pushing too hard to get an agreement next week. “It will be a tall order to get a deal finalized and signed by the end July,” she told reporters. “More importantly the agreement itself is riddled with problems,” she added. DeLauro ticked off a long list of reasons to oppose the agreement: the absence of effective measures to reduce currency manipulation and improve transparency; the lack of guarantees of market access; and question-marks over the enforcement of labor and environmental provisions. “The issues are serious and need to be addressed and they won’t be addressed by the end of this month,” DeLauro said.

Unlike Past Fracases, These Pacific Trade Talks Are Maui Mellow - Some of the bitterest foes of free trade agree with government officials on at least one thing: Hawaii is a place for relaxation, not bitter protest. In Seattle in 1999, global trade talk foes fought with police and smashed storefront windows amid clouds of tear gas. In Cancun four years later, violent skirmishes broke out along the beaches, and a Korean farmer killed himself in protest. On Maui this week, where ministers are trying to hammer out a trade deal joining 12 countries and 40% of the global economy, it’s a very different story. Led by environmentalists, a modest group of protesters took to the beach to blow conch shells. The next day, casually dressed trade ministers from the U.S., Canada, Japan, Mexico, Australia, Malaysia and five other countries received leis from traditionally dressed Hawaiians. President Barack Obama’s trade czar, Mike Froman, has sought to set an easygoing atmosphere for the final stages of negotiations for a sweeping trade agreement known as the Trans-Pacific Partnership, or TPP.Some criticized the decision to hold the talks on Maui, thousands of miles from the big cities where unions can organize large demonstrations. “They tried to pick a remote beach and a luxury hotel that’s closed to the public,” said Marti Townsend, who heads the Sierra Club’s Hawaii branch and helped organize the protest. Still, she vowed there is “nowhere trade negotiators can go where they won’t be confronted.”

Obama Won’t Let Some Mass Graves Stop the TPP | The Nation: When Congress finally passed fast-track trade authority last month, there was a major problem for President Obama and his trade negotiators: a provision of the bill forbid any fast-tracked trade deal from including countries on Tier 3 of the State Department’s human trafficking list.  That’s the worst classification the United States gives to countries in its Trafficking In Persons annual report, a status earned by countries like Zimbabwe, Syria, the Democratic Republic of Congo, and North Korea. Also on the list: Malaysia, one of the 12 potential signatories to the Trans-Pacific Partnership trade deal that is in the final round of negotiations this month. Malaysia is home to many “outsourcing companies” that are, in reality, professional slaving operations: foreign workers, often refugees fleeing desperate situations in nearby countries like Burma, are recruited to the country with the promise of legitimate work but then subjected to forced labor and sex trafficking. The State Department and international human rights groups have routinely concluded the Malaysian government does very little to inhibit the traffickers’ operation. Senator Robert Menendez inserted language into the Senate version of fast-track prohibiting the use of fast-track for a trade deal with a Tier 3 country, presumably with an eye on Malaysia. The Obama administration and Republican leaders in the House tried to have the language removed but were unable to excise it due to the complicated path the fast-track bill took through Congress. Instead, the Obama administration appears to have chosen another path that has shocked the human-rights community: It will simply reclassify Malaysia. Reuters has reported that when the Trafficking in Persons report comes out next week, Malaysia will no longer be a Tier 3 country.

Is report 'political tool' of US govt? - The Nation: A TOTAL of 188 countries are covered in the United States' 2015 report on "Trafficking in Persons", with Thailand down in Tier 3, the lowest level, along with the likes of North Korea, Yemen, Venezuela and Zimbabwe. Thai authorities said yesterday that the latest TIP report did not reflect the measures taken by the government over the past year in tackling cross-border human-trafficking cases, especially those involving Rohingya and other migrants. At Tier 3, the US president is empowered to slap penalties on Thailand within 90 days. Malaysia was upgraded to the Tier 2 watch-list in the 2015 TIP report, even though both Malaysia and Thailand were downgraded to Tier 3 last year for failing to tackle the human-trafficking issue. Critics have questioned whether the TIP report is being used as a "political tool" to achieve the United States' objectives in various parts of the world, with the upcoming Trans-Pacific Partnership (TPP) cited as an example. The TPP, a free-trade agreement on which 12 countries are currently negotiating, has been spearheaded by the US, with multiple rounds of talks taking place over the past several years. In this TPP framework, Singapore, Vietnam and Malaysia are already among the participating countries whose trade ministers are scheduled to join a meeting with the US and other counterparts in Hawaii this week. For Thailand, the bid to join the TPP started a few years ago. But it has been unsuccessful so far. Prinn Panichpakdi, head of CLSA Securities (Thailand), said the US TIP report could have been used to bring Thailand into the TPP negotiations, which he said might not serve Thailand's best national interests, especially in terms of a further opening up of the financial-services industry and the need to buy more expensive drugs.On the other hand, the Regional Comprehensive Economic Partnership, led by the Asean Plus Six group, is a more suitable framework for Thailand for trade and investment liberalisation than the US-led TPP, Prinn said.

Why the TPP is the linchpin of the Asia rebalance | Brookings Institution -- This week, twelve trade ministers meet in Hawaii to try to complete negotiations on the Trans-Pacific Partnership (TPP) agreement. If they succeed, there will be substantial benefits for their nations and a big diplomatic win for the Obama administration. If they fail, the accord risks getting bogged down in U.S. presidential politics and puts into question the rebalance to Asia. The Obama administration’s policy of “rebalance” toward Asia has been designed to achieve two objectives: to embed the United States more deeply in the world’s most dynamic economic region, and to prevent a regional vacuum to be filled predominantly by China as it continues its rise. The rebalance has rested on three pillars: political, security, and economic. The administration has tangible achievements to show in the political and security domains: strengthening of alliances with Japan, South Korea, Australia, and the Philippines; normalization of relations with Myanmar; joining of the East Asia Summit, which the U.S. president attends each year; annual presidential meetings with the leaders of the Association of Southeast Asian Nations (ASEAN) and the opening of an embassy accredited to ASEAN in Jakarta; relaxation of the arms embargo on Vietnam; expansion of counterterrorist cooperation with Indonesia; a Strategic and Economic Dialogue and frequent presidential summits with China; and heightened attention to the South China Sea.

Trade talks fail to break TPP deadlock - FT.com: US-led plans to seal a landmark Pacific Rim trade deal by the end of this year suffered a major blow on Friday as trade ministers from the 12 countries involved failed to break deadlocks on key issues, potentially complicating further the politics of an already controversial project. This week’s gathering in Hawaii of ministers from the US, Japan and the 10 other economies involved in the Trans-Pacific Partnership had been billed as a final negotiating round for what would be the biggest trade agreement sealed anywhere in the world in two decades.   But the efforts to close the TPP, which would cover 40 per cent of the global economy, were held up by disagreements over how much market access to give on sensitive products including dairy and sugar and a dispute over intellectual property rules for new generations of pharmaceuticals. Ministers insisted on Friday that they had made significant progress and were closer than they had ever been to closing the TPP, which has already been the subject of more than five years of intense negotiation. People close to the talks insisted that significant progress had been made this week on issues ranging from geographic appellations for products to the outlines of a new investment protection regime designed to address critics’ concerns and an environment chapter that would make the trade in endangered species more difficult. “We are more confident than ever that TPP is within reach,” Mike Froman, the US trade representative, told reporters.

TPP talks make progress but no deal on Pacific trade - BBC News: Negotiators from 12 Pacific nations have finished a week of talks without agreement on a regional trade deal. But the US trade representative Michael Froman said ministers were more confident than ever that a deal on the proposed Trans-Pacific Partnership was within reach. He said it would support jobs and economic growth. Among the sticking points were issues relating to the automobile sector and access to dairy markets. No date has been set for the next round of talks. Mr Froman said "significant progress" had been made in the discussions on the Hawaiian island of Maui. He said work "will continue on resolving a limited number of remaining issues". Australian Trade Minister Andrew Robb said "98% is concluded," blaming the "big four" economies in the group - the United States, Canada, Japan and Mexico - for the failure to reach a final deal. New Zealand Trade Minister Tim Groser was upbeat after the talks on the Hawaiian island of Maui. Japan and the US are two major players in the proposed partnership "The undergrowth has been cleared away in the course of this meeting in a manner that I would say is streets ahead of any of the other ministerial meetings that we have had," he said. New Zealand has said it will not agree to a deal unless it significantly opens up dairy markets. Japan's Economy Minister Akira Amari singled out intellectual property rights as an area on which agreement had proved impossible. Drug patents are another divisive issue, setting the US at odds with all the other countries, said one participant quoted by Reuters news agency.

What is TTIP? And reasons why the answer should scare you - The Transatlantic Trade and Investment Partnership is a series of trade negotiations being carried out mostly in secret between the EU and US. As a bi-lateral trade agreement, TTIP is about reducing the regulatory barriers to trade for big business, things like food safety law, environmental legislation, banking regulations and the sovereign powers of individual nations. It is, as John Hilary, Executive Director of campaign group War on Want, said: “An assault on European and US societies by transnational corporations.” Since before TTIP negotiations began last February, the process has been secretive and undemocratic. This secrecy is on-going, with nearly all information on negotiations coming from leaked documents and Freedom of Information requests. But worryingly, the covert nature of the talks may well be the least of our problems. Here are other reasons why we should be scared of TTIP, very scared indeed:  Public services, especially the NHS, are in the firing line. One of the main aims of TTIP is to open up Europe’s public health, education and water services to US companies. This could essentially mean the privatisation of the NHS. TTIP’s ‘regulatory convergence’ agenda will seek to bring EU standards on food safety and the environment closer to those of the US. But US regulations are much less strict, with 70 per cent of all processed foods sold in US supermarkets now containing genetically modified ingredients.  America’s financial rules are tougher than ours. They were put into place after the financial crisis to directly curb the powers of bankers and avoid a similar crisis happening again. TTIP, it is feared, will remove those restrictions, effectively handing all those powers back to the bankers.

The Details of Hillary Clinton’s Capital Gains Tax Proposal - Democratic presidential candidate Hillary Clinton has proposed a change in the top capital gains tax rates. Under current law, such capital gains have a two-tiered structure: short-term gains face a top rate of 43.4 percent (including the 39.6 percent statutory rate plus the 3.8 percent investment income surtax) and long-term gains, defined as those with a holding period of more than a year, face a reduced tax rate of 23.8 percent (20 percent statutory rate plus the 3.8 percent surtax).  Secretary Clinton’s proposal would stick to the general principles of the current system, but elongate the decline. Gains with a holding period of one to two years would also be subject to the 39.6 percent statutory rate. Gains of two to three years would be subject to a 36 percent statutory rate, and thereafter the statutory rate would decline by four percentage points per year until reaching the current long-term rate of 20 percent at six years. It is notable that the long-term rate remains the same as current law. In neither this campaign nor her previous campaign has Clinton expressed interest in raising the long term rate on capital gains. In a Democratic presidential primary debate in 2008, she was asked if she planned to raise the top capital gains rate, and she replied “I wouldn't raise it above the 20 percent if I raised it at all. I would not raise it above what it was during the Clinton administration.” That statement was made in an environment where the top rate was 15 percent under President George W. Bush’s tax cuts. Since then, the top rate has climbed to 23.8 percent under President Barack Obama. And furthermore, the President has proposed raising the rate to 28 percent. Secretary Clinton takes a different tack on the issue. It seems like she sees value in keeping a low long-term capital gains rate in order to encourage investment.

Introducing "Trickle-Out Oligarch Economics" - How Over $21 Trillion In Wealth Fled Offshore -Before I get into the meat of this post, I want to make it clear that just because I point out the following doesn’t mean I like tax and think we need more of it. Rather, there are two main points I want to get across.
1) Oligarchs create tax loopholes for themselves. Oligarchs control the politicians who write legislation to suit oligarch needs. Whenever you hear politicians talk about taxing the wealthy they mean the suckers in the top 10% who are not politically-connected oligarchs. The super rich will never be touched by such legislation. They will always have loopholes available to them. This is why the statement “we need higher taxes on the rich” is basically a bullshit political talking point.
2) You’ll notice much of the wealth that has been moved offshore originated from dictators who bled their home countries dry of resources as their populations starved. Many of these dictators had the full support of the U.S. government throughout their decades in power, during which time they plundered and destroyed entire nations.
Just remember that the next time you hear a super rich person call for more taxes. They never mean on themselves. Second, understand that the root of the problem is systemic. There are no easy fixes, the entire system needs a total reboot. From the Guardian: The world’s super-rich have taken advantage of lax tax rules to siphon off at least $21 trillion, and possibly as much as $32tn, from their home countries and hide it abroad – a sum larger than the entire American economy. James Henry, a former chief economist at consultancy McKinsey and an expert on tax havens, has conducted groundbreaking new research for the Tax Justice Network campaign group – sifting through data from the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and private sector analysts to construct an alarming picture that shows capital flooding out of countries across the world and disappearing into the cracks in the financial system.

The Yellen Subsidy: Fed Chair Pumps for Keeping Financiers Fat Over Filling Potholes -- Yves Smith - The last few years has witnessed a rising tide of academic studies that have concluded that financial systems in advanced economies like the US have become outsized and are a drag on growth. One of the most recent and particularly devastating pieces came out of the IMF. That study found that Poland’s banking system was at the optimal level of product sophistication and penetration. Since the financial services industry also so heavily subsidized that it should not properly be considered private enterprise, these articles are an indictment of how the sector operates. Banks should be regulated like utilities, or at least have their subsidies greatly reduced. Yet the Fed is firmly against taking even mild steps to rein in hypertrophied banks, and no less that Janet Yellen herself acting as subsidy-shill-in-chief. Budgeteers have woken up to the fact that banks get a difficult-to-justify perk from membership in the Federal Reserve system, that of getting 6% annual dividend on the preferred stock that they bought at the time they joined. A draft bill by Senate Majority leader Mitch McConnell includes a provision that would cut the dividends to member banks with more than $1 billion in assets from 6% to 1.5%. He’s proposing to use it to help shore up the highway trust fund.  The Wall Street Journal describes how the banks are really unhappy about this plan. Mind you, the sense of entitlement is on full display, as usual. Banks treat any potential encroachment on their “heads I win, tails you lose” arrangement they have with the general public as an outrage that must be beaten back. Mind you, the amount that this change would raise is all of $16 billion over three years. Do the math. This is hardly enough at any one bank to cover a single decent-sized fine. But rather than clean up their conduct, they’d rather fight to keep all the banking perks. Yet note the inability to identify a single institution that would suffer harm:

Private Equity Shills Resort to Ludicrous Arguments to Try to Deflect “Carry Fee” Reporting Scandal  -- Yves Smith - The scandal over CalPERS’ and CalSTRS’ failure to track private equity “carry fees” has the industry worried enough that it is offering up ludicrous rationalizations. Perversely, the fact that private equity mouthpieces have escalated so quickly to strained arguments, particularly over a new, nothingburger threat, is a good sign. It shows both how threatened private equity firms are by the prospect of having its economics exposed, and how utterly incapable they are of making any sort of credible case for their long-standing secrecy practices.  By way of background, we broke the story on CalPERS’ failure to monitor its “carry fees” in early June. A mere month later, CalPERS was in full retreat. It was contacting all of its private equity managers to have them give the giant pension fund all the historical data on the “carry fees” CalPERS had paid on funds the general partners managed. Yet the private equity funds seem so desperate to combat any discussion of greater disclosure, even blatantly self-serving efforts by elected officials that are destined to go nowhere, that they now feel compelled to trot out new arguments against more transparency via favored mouthpieces. The arguments made are so intellectually bankrupt that they make the case that the private equity industry has no valid defense for its secrecy regime.Yesterday, Private Equity Manager (PEM) published an editorial, Split the debate in half. It’s not available online but a private equity investor sent me the full text. Amusingly, it fails to mention that the “carry fee” disclosure brouhaha was kicked off by CalPERS board member JJ Jelincic asking whether CalPERS tracked “carry fees” in a public board session and getting the “dog ate my homework” that not only didn’t CalPERS do that, but it couldn’t. That falsehood kicked off an avalanche of bad press and a rapid volte face by CalPERS. But you hear nary a word of that from PEM; readers are inaccurately told that the pressure for disclosure resulted from industry bodies revising their reporting templates. Here are the key sections:

CEOs are the real victims, say former Texas Senator -- Alexis Goldstein - One need only look at recent headlines to see that bigotry is alive and well in the United States. Black college students are as likely to get hired as white high school drop-outs. Women are still paid less than men, even when their performance is equal or better. And the vast majority of people incarcerated for drug crimes are people of color, even though blacks and whites use drugs at roughly the same rate. But according to former Republican Senator from Texas Phil Gramm, the United States has already beaten bigotry, with one exception. “The one form of bigotry that is still allowed in this country,” according to Gramm, “is bigotry against the successful.” Gramm’s comments came in a House Financial Services Committee hearing on Tuesday. The hearing was meant to evaluate the Wall Street Reform and Consumer Protection Act, or Dodd-Frank for short, which passed in 2010. In the hearing, Gramm was asked a leading question by Rep. Bill Huizenga about the CEO pay ratio rule, a rule that would require publicly traded companies to disclose the ratio of their CEO’s pay to that of their median worker’s pay. In an answer that ran over the allotted time, he pointed to this rule proposed as evidence of “political demagoguery” and railed against the victimization of the wealthy in America:  (video)  Former Senator Gramm himself had a very significant role in the financial crisis. He and his wife Dr. Wendy Gramm, who was an Enron board member at the time, helped pass the Commodity Futures Modernization Act (CFMA). The CFMA exempted some of the riskiest kinds of derivatives from any sort of regulation, and included what came to be known as "the Enron loophole,” an exemption that President Obama blamed for allowing speculators to drive up the price of fuel.  Senator Gramm was also responsible for the Gramm-Leach-Bliley Act, which put the final nail in the coffin of Glass-Steagall, a Depression-era law that separated boring, commercial banking from the more casino-style investment banking. 

Still Too Big to Fail - Simon Johnson - Nearly seven years after the global financial crisis erupted, and more than five years after the passage of the Dodd-Frank financial-reform legislation in the United States, the cause of the crisis – the existence of banks that are “too big to fail” – has yet to be uprooted. As long as that remains the case, another disaster is only a matter of time. The term “too big to fail” dates back several decades, but it entered wide usage in the aftermath of the collapse of Lehman Brothers in September 2008. As problems spread throughout the financial system, the US authorities decided that some banks and other financial companies were so large relative to the economy that they were “systemically important” and could not be allowed to go bankrupt. Lehman failed, but AIG, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, and others were all rescued through various forms of massive – and unprecedented – government support. The official line at the time was “never again,” which made sense in political and economic terms. These large financial firms were provided a scale of assistance that was not generally available to the nonfinancial corporate sector – and certainly not to families who found that the value of their assets (their homes) was below the value of their liabilities (their mortgages). If large, complex financial institutions continue to have an implicit government guarantee, many people – on both the right and the left – would agree that this is both unfair to other parts of the private sector and an inducement for big banks to engage again in excessive risk-taking. In the jargon of economics, this is “moral hazard.” But no special training is needed to know that it is unwise and dangerous when bank executives get the upside (huge bonuses) when things go well and everyone else bears the downside risks (bailouts and recession).

FBI says hackers shake down big banks, threaten to shut sites if they don’t pay up - Financial companies are facing extortion threats from hackers who threaten to knock their websites offline unless firms pay tens of thousands of dollars, an FBI agent told MarketWatch Thursday. More than 100 companies, including targets from big banks to brokerages in the financial sector, have received distributed denial of service threats since about April, says Richard Jacobs, assistant special agency in charge of the cyber branch at the FBI’s New York office. With these types of attacks, known as DDoS, criminals jam websites by flooding them with useless traffic. The ransom requests typically run in the tens of thousands of dollars and in some cases, the companies have paid up, Jacobs said. If firms have already traced the ultimatums to identify likely culprits, they can determine whether those criminals have historically followed through with threats or backed off if a target doesn’t pay up. In some cases, when companies fork over cash, they end up facing further attacks because they proved they’re willing to engage. “There are some groups who typically will go away if you don’t pay them, but there’s no guarantee that’s going to happen,” Jacobs says. He says not all targets have experienced actual attacks. Also read: New ransom demand: Pay us in bitcoins A distributed denial of service outage could mean losses of more than $100,000 an hour for financial companies, according to Neustar, a Sterling, Va.-based information services and analytics company.

July 2015: Unofficial Problem Bank list declines to 290 Institutions -- This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for July 2015.  During the month, the list fell from 309 institutions to 290 after 20 removals and one addition. Assets dropped by $5.9 billion to an aggregate $83.9 billion. A year ago, the list held 452 institutions with assets of $146.1 billion. Actions have been terminated against Anderson Brothers Bank, Mullins, SC ($506 million); Pacific National Bank, Miami, FL ($379 million); Geauga Savings Bank, Newbury, OH ($357 million); The Peoples Bank, Chestertown, MD ($229 million); Home Loan Investment Bank, F.S.B., Warwick, RI ($216 million); Crown Bank, Edina, MN ($193 million); Farmers & Merchants Bank, Statesboro, GA ($170 million); Eagle Valley Bank, National Association, Saint Croix Falls, WI ($127 million); Evergreen National Bank, Evergreen, CO ($102 million); Surety Bank, DeLand, FL ($96 million); Peoples State Bank, Lake City, FL ($70 million); Liberty Savings Bank, FSB, Whiting, IN ($55 million); First Security Bank of Helena, Helena, MT ($40 million); Peoples Bank and Trust Company of Clinton County, Albany, KY ($33 million); and Hometown Community Bank, Cyrus, MN ($26 million). Premier Bank, Denver, CO ($32 million) failed. Finding merger partners were Bank of Manhattan, N.A., El Segundo, CA ($481 million Ticker: MNHN); American Bank of St. Paul, Saint Paul, MN ($312 million); Pacific Rim Bank, Honolulu, HI ($131 million); and ProBank, Tallahassee, FL ($45 million). The addition this month was Home Federal Savings and Loan Association of Nebraska, Lexington, NE ($56 million).

Freddie Mac: Mortgage Serious Delinquency rate declined in June, Lowest since November 2008 - Freddie Mac reported that the Single-Family serious delinquency rate declined in June to 1.53%, down from 1.58% in May. Freddie's rate is down from 2.07% in June 2014, and the rate in June was the lowest level since November 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.  These are mortgage loans that are "three monthly payments or more past due or in foreclosure".   Although the rate is declining, the "normal" serious delinquency rate is under 1%.   The serious delinquency rate has fallen 0.54 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until mid-2016.  So even though delinquencies and distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

Fannie Mae: Mortgage Serious Delinquency rate declined in June, Lowest since August 2008 -- Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in June to 1.66% from 1.70% in May. The serious delinquency rate is down from 2.05% in June 2014, and this is the lowest level since August 2008. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%. These are mortgage loans that are "three monthly payments or more past due or in foreclosure". The Fannie Mae serious delinquency rate has only fallen 0.39 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will not be below 1% until 2017. The "normal" serious delinquency rate is under 1%, so maybe serious delinquencies will be close to normal in 2017.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.

A Slack Lifeline for Drowning Homeowners -- Advertised in 2009 as a lifeline for as many as four million troubled borrowers, the program was one of the Obama administration’s signature efforts to help homeowners. But the report, by Christy L. Romero, the government official with authority to monitor the program, shows that six years later, just 887,001 borrowers are participating in loan modifications — deals that reduce the costs of mortgages. It appears that the program has allowed big banks to run roughshod over borrowers again and again. Instead of helping some four million borrowers get loan modifications, the report noted, banks participating in the program have rejected four million borrowers’ requests for help, or 72 percent of their applications, since the process began. From the outset, Treasury’s loan modification program had problems. Among them were two design flaws: making the program voluntary for the banks and letting those banks that participated run the process on their own. The data points in the new report are grim. CitiMortgage, a unit of Citibank, had the worst record, rejecting 87 percent of borrowers applying for a loan modification. JPMorgan Chase was almost as bad, with a denial rate of 84 percent. Bank of America turned down 80 percent, and Wells Fargo rejected 60 percent. The banks say they have good reasons for rejecting loan modification applicants. In 38 percent of cases, the banks blamed the borrower for either not completing the paperwork or failing to make the first payment under the program.

MBA: Mortgage Applications Increase in Latest Weekly Survey, Purchase Index up 18% YoY - From the MBA: Refinance Applications Increase in Latest MBA Weekly SurveyMortgage applications increased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 24, 2015. ... The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier. The unadjusted Purchase Index increased 0.2 percent compared with the previous week and was 18 percent higher than the same week one year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.17 percent, the lowest level since June 2015, from 4.23 percent, with points increasing to 0.36 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. With higher rates, refinance activity is very low. 2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 18% higher than a year ago.

Housing Bubble Means American Dream Withers at Record Pace - Wolf Richter --The current housing boom has Dallas solidly in its grip. As in many cities around the US, prices are soaring, buyers are going nuts, sellers run the show, realtors are laughing all the way to the bank, and the media are having a field day. Nationwide, the median price of existing homes, at $236,400, as the National Association of Realtors sees it, is now 2.7% higher than it was even in July 2006, the insane peak of the crazy housing bubble that blew up with such spectacular results. Housing Bubble 2 has bloomed into full magnificence: In many cities, the median price today is far higher, not just a little higher, than it was during the prior housing bubble, and excitement is once again palpable. Buy now, or miss out forever! A buying panic has set in. And so the July edition of D Magazine – “Making Dallas Even Better,” is its motto – had this enticing cover, titled, “The Great Dallas Land Rush”: That’s true for many cities, including San Francisco. The “Boom Town,” as it’s now called, is where the housing market has gone completely out of whack, with a median condo price at $1.13 million and the median house price at $1.35 million. This entails some consequences [read… The San Francisco “Housing Crisis” Gets Ugly]. The fact that Housing Bubble 2 is now even more magnificent than the prior housing bubble, even while real incomes have stagnated or declined for all but the top earners, is another sign that the Fed, in its infinite wisdom, has succeeded elegantly in pumping up nearly all asset prices to achieve its “wealth effect.” And it continues to do so, come heck or high water. It has in this ingenious manner “healed” the housing market. But despite the current “buying panic,” the soaring prices, and all the hoopla round them, there is a fly in the ointment: overall homeownership is plunging. The homeownership rate dropped to 63.4% in the second quarter, not seasonally adjusted, according to a new report by the Census Bureau, down 1.3 percentage points from a year ago. The lowest since 1967!

Black Knight: House Price Index up 1.1% in May, 5.1% year-over-year --  Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.  From Black Knight: U.S. Home Prices Up 1.1 percent for the Month; Up 5.1 Percent Year-Over-YearToday, the Data and Analytics division of Black Knight Financial Services, Inc. (NYSE: BKFS) released its latest Home Price Index (HPI​) report, based on May 2015 residential real estate transactions. The Black Knight HPI combines the company’s extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The Black Knight HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.For a more in-depth review of this month’s home price trends, including detailed looks at the 20 largest states and 40 largest metros, please download the full Black Knight HPI Report.  The Black Knight HPI increased 1.1% percent in May, and is off 6.5% from the peak in June 2006 (not adjusted for inflation). The year-over-year increase in the index has been about the same for the last eight months. The press release has data for the 20 largest states, and 40 MSAs.  Black Knight shows prices off 39.3% from the peak in Las Vegas, off 32.5% in Orlando, and 28.1% off from the peak in Riverside-San Bernardino, CA (Inland Empire). Prices are at new highs in New York, Tennessee and Texas, and several other cities around the country.

Case-Shiller: National House Price Index increased 4.4% year-over-year in May -- S&P/Case-Shiller released the monthly Home Price Indices for May ("May" is a 3 month average of March, April and May prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index. From S&P: Home Price Gains Lead Housing According to the S&P/Case-Shiller Home Price Indices The 10-City Composite and National indices showed slightly higher year-over-year gains while the 20-City Composite had marginally lower year-over-year gains when compared to last month. The 10-City Composite gained 4.7% year-over-year, while the 20-City Composite gained 4.9% year-over-year. The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 4.4% annual increase in May 2015 versus a 4.3% increase in April 2015...Before seasonal adjustment, in May the National index, 10-City Composite and 20-City Composite all posted a gain of 1.1% month-over-month. After seasonal adjustment, the National index was unchanged; the 10-City and 20-City Composites were both down 0.2% month-over-month. All 20 cities reported increases in May before seasonal adjustment; after seasonal adjustment, 10 were down, eight were up, and two were unchanged. ..“As home prices continue rising, they are sending more upbeat signals than other housing market indicators,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Nationally, single family home price increases have settled into a steady 4%-5% annual pace following the double-digit bubbly pattern of 2013. Over the next two years or so, the rate of home price increases is more likely to slow than to accelerate."  The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).  The National index is off 7.5% from the peak, and unchanged (SA) in May. The National index is up 24.9% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices. 

Case-Shiller Home Price Index May 2015 Shows Home Prices Rising But Pace Still Not Accelerating: The non-seasonally adjusted Case-Shiller home price index (20 cities) year-over-year rate of home price growth was unchanged from last month's 4.9%. The authors of the index say: "Over the next two years or so, the rate of home price increases is more likely to slow than to accelerate". 20 city unadjusted home price rate of growth accelerated 0.0% month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in rate of growth] CoreLogic currently shows the highest year-over-year growth of 6.3%.Comparing all the home price indices, it needs to be understood each of the indices uses a unique methodology in compiling their index - and no index is perfect. The National Association of Realtors normally shows exaggerated movements which likely is due to inclusion of more higher value homes. Case Shiller's David M. Blitzer, Chairman of the Index Committee at S&P Indices: As home prices continue rising, they are sending more upbeat signals than other housing market indicators. Nationally, single family home price increases have settled into a steady 4%-5% annual pace following the double-digit bubbly pattern of 2013. Over the next two years or so, the rate of home price increases is more likely to slow than to accelerate. Prices are increasing about twice as fast as inflation or wages. Moreover, other housing measures are less robust. Housing starts are only at about 1.2 million units annually, and only about half of total starts are single family homes. Sales of new homes are low compared to sales of existing homes. First time homebuyers are the weak spot in the market. First time buyers provide the demand and liquidity that supports trading up by current home owners. Without a boost in first timers, there is less housing market activity, fewer existing homes being put on the market, and more worry about inventory. The difference between a 5% and 20% down payment, particularly for people who currently rent, has a huge impact on buyers' willingness to buy a home. Mortgage rates are far less important to first time buyers than down payments."

Case-Shiller Indices Show Home Prices Clearly Outpace Inflation -- Robert Oak - The May 2015 S&P Case Shiller home price index shows a seasonally adjusted 4.9% price increase from a year ago for the 20 metropolitan housing markets and a 4.7% yearly price increase in the top 10 housing markets.  The year over year change is pretty much the same as April using the seasonally adjusted data.  Home prices are still climbing over double the rate of inflation.  The U.S. National Home Price Index increased 4.4% in May 2015.  Since the price low of March 2012, the 10-City composite index has increased 32.5% and the 20-City composite index has increased 33.5%.  From the housing bubble 2006 peaks, prices are now only down about 13-15%. Below are all of the composite-20 index cities yearly price percentage change, using the seasonally adjusted data. San Francisco home prices increased 9.7% from a year ago and Denver Colorado increased by 10.0%. No composite-10 or composite-20 annual price gains are negative using the seasonally adjusted data and tweleve were above 4% annual price increases. Clearly prices are not affordable and S&P notes how the first time home buyer is being squeezed out by 20% down payments. The press release also said the Case-Shiller price index is more upbeat than other housing indicators. S&P reports the not seasonally adjusted data for their headlines. Housing is highly cyclical. Spring and early Summer are when most sales occur. For the month, the not seasonally adjusted composite-20 percentage change was 1.1% whereas the seasonally adjusted change for the composite-20 was -0.2%. The not seasonally adjusted composite-10 saw a 1.1% increased from last month, whereas the seasonally adjusted composite-10 showed a -0.2% decrease. The below graph shows the seasonally adjusted monthly percentage change. We think this is much more valid and notice the (finally), a few monthly declines in prices when using the seasonally adjusted housing data.

Housing Recovery? Case Shiller Home Prices Tumble Most In 10 Months -- The 0.18% month-over-month decline in Case Shiller home price index is the biggest since July 2014 which confirms the David Blitzer's view that "over the next two years or so, the rate of home price increases is more likely to slow than to accelerate." His biggest fear is that "first time homebuyers are the weak spot in the market," adding thatprices are increasing about twice as fast as inflation or wages. Moreover, other housing measures are less robust - housing starts are only at about 1.2 million units annually, and only about half of total starts are single family homes. Sales of new homes are low compared to sales of existing homes. As David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices explains... The 10-City Composite and National indices showed slightly higher year-over-year gains while the 20-City Composite had marginally lower year-over-year gains when compared to last month. The 10-City Composite gained 4.7% year-over-year, while the 20-City Composite gained 4.9% year-over-year. The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 4.4% annual increase in May 2015 versus a 4.3% increase in April 2015. Denver, San Francisco, and Dallas reported the highest year-over-year gains among the 20 cities with price increases of 10.0%, 9.7% and 8.4%, respectively. Ten cities reported greater price increases in the year ended May 2015 over the year ended April 2015. New York and Phoenix reported six consecutive months of increases in their year-over-year returns since November 2014. Year-over-year returns in New York increased from 1.3% in November 2014 to 3.0% in May 2015, and Phoenix climbed from 2.0% to 3.8% in the same period.

Are Home Prices Again Breaking Records? Not Really - The National Association of Realtors‘ monthly home sales report made a big splash last week with news that median home prices in June had broken the record set in 2006 at the peak of the housing bubble, reaching a nominal high of $236,400. Does this mean we have another problem on our hands? Not really. Median home prices—that is, the midpoint of sales, where half of homes sell above and half sell below the given price—can be a very clumsy gauge for comparing prices over time. First, median prices aren’t typically adjusted for inflation. All else equal, median home prices should set “new records” every summer as long as there is inflation. Even after adjusting for inflation, median prices aren’t a great barometer because they can be distorted by the “mix” of what’s selling. In 2009, for example, median prices plunged in part because an unusually large share of homes were selling out of foreclosure. Bank-owned homes tended to cluster at lower price points both because they weren’t as well maintained and mortgage companies were motivated to sell quickly to cut any losses. Prices were already falling, of course, but looking at changes in median prices probably overstated the rate of decline.  The same thing has happened more recently in the other direction for the new-home market. Median prices of new homes have hit records, both in real and nominal terms. This also reflects the mix of sales: Home builders are selling fewer than half as many homes as they were in 2006, when the old records were reached. Instead, they are selling a much larger share of luxury homes with bigger floor plans than before, which has pushed the median price higher and higher.

Real Prices and Price-to-Rent Ratio in May - A great discussion from Nick Timiraos at the WSJ: Are Home Prices Again Breaking Records? Not Really There may be other reasons to worry about housing affordability by comparing prices with incomes or prices with rents for a given market. But crude comparisons of nominal home prices with their 2006 and 2007 levels shouldn’t be used to make cavalier claims about a new bubble. The price-to-rent does seem a little high (last graph below), but the speculation associated with a bubble isn't present. No worries. The year-over-year increase in prices is mostly moving sideways now at a little over 4%. In October 2013, the National index was up 10.9% year-over-year (YoY). In May 2015, the index was up 4.4% YoY. Here is the YoY change since last May for the National Index:Most of the slowdown on a YoY basis is now behind us (I don't expect price to go negative this year). This slowdown in price increases was expected by several key analysts, and I think it was good news for housing and the economy. In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $276,000 today adjusted for inflation (38%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation). It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.6% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak.

Zillow Forecast: Expect Case-Shiller National House Price Index up 4.3% year-over-year change in June --The Case-Shiller house price indexes for May were released on Tuesday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.From Zillow: Case-Shiller Expected to Maintain Holding Pattern in June The May S&P/Case-Shiller (SPCS) data published today showed home prices continuing to rise at an annual rate of five percent for the 20-city composite and 4.7 percent for the 10-city composite (seasonally adjusted). The national index has risen 4.4 percent since May 2014.The non-seasonally adjusted (NSA) 10-City Index was up one percent month-over-month, while the 20-City index rose 0.8 percent (NSA) from April to May. We expect the change from May to June to show increases of 1 percent (NSA) for the 10-city index and 0.8 percent for both the 20-city and national indices. All Case-Shiller forecasts are shown in the table below. These forecasts are based on today’s May SPCS data release and the June 2015 Zillow Home Value Index (ZHVI).The SPCS Composite Home Price Indices for June will not be officially released until Tuesday, August 25. This suggests the year-over-year change for the June Case-Shiller National index will be about the same as in the May report.

U.S. Homeownership Rate Hits 48-Year Low - The homeownership rate continued to decline in the second quarter of 2015, hitting a 48-year low. The seasonally adjusted homeownership rate declined to 63.5%, down from 64.7% in the second quarter of 2014, according to estimates published by the Commerce Department on Tuesday. (The homeownership rate, not seasonally adjusted, hit 63.4%.) That is the country’s lowest homeownership rate since 1967. In the first quarter of 2015 the homeownership rate hit its lowest level since 1989. In part, the decline in homeownership reflects a positive trend: The number of rental households is growing. That likely reflects the fact that younger people are leaving their parents’ homes and striking out as renters on their own. Total households in the United States grew to 117 million in the second quarter of 2015, up from 115 million in the second quarter of 2014. The number of owner households decreased by 400,000, while the number of renter households increased by 2 million. While that is a good sign for the rental market, overall economists said that a lack of home buyers is likely a bad sign that incomes aren’t keeping pace with rising home prices, keeping young buyers out of the housing market. “In general, I think rising homeownership is a plus for the economy and it signals a strong economy. The fact that it is falling is generally not a good thing,” said Mark Zandi, chief economist at Moody’s Analytics Inc.

HVS: Q2 2015 Homeownership and Vacancy Rates -  The Census Bureau released the Residential Vacancies and Homeownership report for Q2 2015.  This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey. This survey might show the trend, but I wouldn't rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend. The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate decreased to 63.4% in Q2, from 63.7% in Q1. I'd put more weight on the decennial Census numbers - and given changing demographics, the homeownership rate is probably close to a bottom. The HVS homeowner vacancy declined to 1.8% in Q1. Are these homes becoming rentals? Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers. The rental vacancy rate decreased in Q2 to 6.8% from 7.1% in Q1. I think the Reis quarterly survey (large apartment owners only in selected cities) is a much better measure of the rental vacancy rate, but this does suggest the rental vacancy rate is the lowest in decades.

US Homeownership Drops To 48 Year Low As Median Asking Rent Soars To All Time High -- Three months ago, just as the last Census Homeownership and residential vacancy report hit,Gallup released its latest survey which confirmed just how dead the American Dream has become for tens if not hundreds of millions of Americans. According to the poll, the number of Americans who did not currently own a home and say they do not think they will buy a home in "the foreseeable future," had risen by one third to 41%, vs. "only" 31% two years ago. Non-homeowners' expectations of buying a house in the next year or five years were unchanged, suggesting little change in the short-term housing market. As Gallup wryly puts it, "what may have been a longer-term goal for many may now not be a goal at all, and this could have an effect on the longer-term housing market." Earlier today, the US Census released its latest homeownership data, which confirmed that for what is left of America's middle class, owning a home has become virtually impossible, with the homeownership rate plunging from the lowest level since 1986, or 63.7%, to just 63.4% the lowest reading since the first quarter of 1967.

Why Millennials Are Better Off Waiting 10 Years to Buy a Home -- In a report sure to make the real estate industry cringe, researchers at the St. Louis Federal Reserve suggest most young adults postpone home ownership for years, if not a decade or longer. This comes as the housing market is beginning to boom again and older Millennials, a group that generally has eschewed homeownership, shows signs of wanting to take the plunge.Can this be sound advice? Home ownership has been a reliable long-term wealth builder for generations. Often home equity is retirees’ largest asset and, along with Social Security, enough for them to live out their days financially secure. The housing bust changed the calculus. Flipping and other short-term strategies, and risky nothing-down and no-documentation mortgages, contributed mightily to the bust. Yet short-term moves have always been dicey.  Over time, real estate keeps pace with inflation and a stable, affordable mortgage provides a valuable tax deduction.The Fed study does not dispute that. It is an examination of age and wealth, and finds that younger families are on track for a lower net worth than all previous living generations. Adjusted for inflation, the median wealth of families headed by someone at least age 62 rose 40% between 1989 and 2013—to $210,000 from $150,000. Meanwhile, median wealth of households headed by someone age 40 to 61 fell 31% to $106,000 and median wealth for younger families fell 28% to $14,000. Researchers conclude that younger families would be better served by maintaining a personal asset mix that more closely resembles the asset mix of older families—less debt and less real estate relative to their other assets. In other words, stretching for that first home when you have no other savings and little ability to save going forward is a huge mistake.

Here Are The Facts That Show New Homes Sales Are Actually a Bust And ZIRP A Failure - The seasonally adjusted (SA) headline number for the monthly-error-times-12-annualized version of new home sales in June was 482,000. Wall Street analysts had guessed that the number would be 550,000. The Wall Street Journal went into apoplectic excuse-making mode, almost foaming at the mouth to try to find pundits to explain away the bad number. The whole spectacle was silly and pointless since we have actual data and we can readily see whether sales remain on trend or not. We don’t need no stinkin’ Wall Street pundits to tell us what to think. We can see for ourselves. Actual June sales were estimated by the Census Bureau to be 45,000 units, based on their small sample of builders nationally. This number and the headline number are subject to big revisions in subsequent months because the margin of error on the initial release is huge. But let’s assume that the 45,000 figure is in the ballpark. That number was 7,000 units or 18.4% higher than June of last year. 2014 was a down year, but the current figure is also 4.7% above the June 2013 peak level. So new house sales are still trending higher, at least a little bit. They are a whopping 60.7% higher than the June 2010 low in the cycle. Sounds great, right? Consider this. The current rate of sales is exactly the same as in June 2008, the next to last year in the housing collapse. It is 54% below the level of June 2006 and 61% below the June 2005 level (when I sold my house in Florida). While sales haven’t bounced much, the “recovery” in prices has been remarkable. If 2006 was the peak bubble year, with the median sale price in June hitting $243,200, what does that make the current median of $281,800, 16% higher? Not a bubble? I’ll let you be the judge.

NAR: Pending Home Sales Index decreased 1.8% in June, up 8% year-over-year  -- From the NAR: Pending Home Sales Dip in June After five consecutive months of increases, pending home sales slipped in June but remained near May's level, which was the highest in over nine years, according to the National Association of Realtors®. Modest gains in the Northeast and West were offset by larger declines in the Midwest and South. The Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 1.8 percent to 110.3 in June but is still 8.2 percent above June 2014 (101.9). Despite last month's decline, the index is the third highest reading of 2015 and has now increased year-over-year for ten consecutive months. This was below expectations of a 1.0% increase.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in July and August.

Pending Home Sales Decline 1.8% in June - The National Association of Realtors Pending Home Sales declined by -1.8% in June 2015.  Pending home sales are still up 8.2% from a year ago and had previously increased for five months in a row.  This is the third highest amount of pending home sales for 2015 but sales have increased year over year for ten months now.  The above graph shows pending home sales have recovered to 2006 bubble year levels.  The NAR notes first time home buyers are really not the cause for the overall recovery but people who are no longer underwater in their mortgages finally and want to trade in and up are.  From the NAR:Existing-home sales are up considerably compared to a year ago despite the share of first-time buyers only modestly improving. The reason is that the boost in sales is mostly coming from pent-up sellers realizing their equity gains from recent years. Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers' comfort level. The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows. The PHSI are contracts which have not yet closed and why pending home sales are considered a future housing indicator. The PHSI represents future actual sales, about 45 to 60 days from signing. From the NAR: The index measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. A signed contract is not counted as a sale until the transaction closes. Modeling for the PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years.

Pending Home Sales Plunge Most Since 2013, Holdout Buyers Blamed -- Following new home sales disappointment, pending home sales dropped 1.8% in June (missing expectations of a 0.9% rise) for the biggest drop sicne Dec 2013. After 5 months of gains, and with median prices at record highs, it appears affordability is crushing hopes of any sustained 'recovery' once again. Modest gains in the Northeast and West were offset by larger declines in the Midwest and South, but Larry Yun has an explanation, hold-out buyers are waiting for a better entry point (in other words - pent up demand is there).Lawrence Yun, NAR chief economist, says although pending sales decreased in June, the overall trend in recent months supports a solid pace of home sales this summer."Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers' comfort level," he said. "The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows."

This Year’s Busiest Home-Building Markets Favor Apartments - The busiest and fastest-growing large metro areas in the U.S. in the first half of this year have something in common: an affinity for apartments and condominiums. Commerce Department data released this week show that, of the 10 busiest U.S. markets for home construction, those that grew the fastest in this year’s first half from the same period a year ago generated more than half of their construction as multifamily complexes rather than detached, single-family homes. So what does it mean? Well, it’s further proof that the increase in construction of multifamily rental properties is handily outpacing that of single-family, for-sale properties in the U.S. That explains how the U.S. can post gains in household formation and yet still see declines in its homeownership rates to a multidecade low. “Multifamily construction is the main force behind the improvement in home building,” said Michelle Meyer, deputy head of U.S. economics for Bank of America Corp. “It reflects that rental rates continue to move up, and there is demand for rentals, particularly close to city centers.”

The apartment boom continues: record low vacancies, record high rents: Tuesday the Census Bureau released its quarterly report on homeownership. While the bulk of the commentary focused on the homeownership rate, and price of housing, I would like to focus on apartment rentals. The share of apartment building compared to single family home construction has jumped since the last recession, partly due to the swelling demographic of Millennials entering the market, and partly due to nearly-stagnant wages. Here is the rental vacancy rate compared with the homeowner vacancy rate: Rental vaca ncies were at a new record low in the 2nd quarter of 2015. This is the flip side of the 20-year low in homeownership rates Unsurprisingly, in nominal terms, the median asking rent has been rising to new records in the last several years: But that doesn't tell us what has been going on in real terms. To do that, we should adjust for inflation, or alternatively by wages. That is what I have done in the chart below. It shows nominal asking rents vs. median weekly wages as compiled by the BLS. It shows that real rents declined in the 1990s as wages increased, soared in the 2000 - 2009 period, and had remained below that peak ever since -- until the first quarter of this year: /this year, for the first time in history, the median asking rent equaled the entire weekly earnings of the median worker. Even worse, the median wage of all workers does not quite accurately capture the median wage of renters, since they tend to be from lower income groups.  And as the graph below compiled by the Employment Law Project from last August shows, the median real wage of the 4th and 5th quintile as of then had declined more than the median real wage of workers overall compared with their 2009 peak:

Where Rents Are Eating Up a Bigger Share of Income - Rents are growing faster than incomes in many parts of the U.S., squeezing household budgets. While some of the rise is attributable to a boom in the luxury market, costs also are climbing for the poor and working class. Unfortunately, wages haven’t been able to keep up. “While long a condition of low-income households, cost burdens are spreading rapidly among moderate-income households,” a recent report by Harvard University’s Joint Center for Housing Studies said. “Much to their detriment, cost-burdened households are forced to cut back on food, healthcare, and other critical expenses.” Renters on the West Coast are feeling some of the greatest pressure, led by Los Angeles and San Francisco. But some mid-tier cities also are experiencing steep rent increases. Denver, Austin, Texas and Portland, Ore., for example, long had relatively affordable housing. But now rents are pushing well above 30% of median income. Other cities, such as Charlotte, N.C., remain affordable despite rapid price increases. Economists generally consider a household cost-burdened when it is paying at least 30% of its income for rent.  “Strong rental demand, coupled with limited new rental supply and still-underwhelming wage growth, has only exacerbated the problem in recent years,” Ms. Gudell said. “Meaningful growth in wages and a healthy dose of new rental units coming on line will help ease the crunch, but neither will happen overnight.”

Are we overestimating inflation (again?): Twenty years ago, a group of experts – the “Boskin Commission” – concluded that the U.S. consumer price index (CPI) systematically overstated inflation by 0.8 to 1.6 percentage points each year. Taking these findings to heart, the Bureau of Labor Statistics (BLS) got to work reducing this bias, so that by the mid-2000s, experts felt it had fallen by as much as half a percentage point. We bring this up because there is a concern that as a consequence of the way in which we measure information technology (IT), health care, digital content and the like, the degree to which conventional indices overestimate inflation may have risen. ... When indices like the consumer price index (CPI) or the personal consumption expenditure price index (PCE) persistently overstate inflation, there are important consequences. So long as the upward bias is constant, central bankers can (and do) modify their inflation targets. Yet, these price indexes also are used to adjust entitlement benefits without correcting for any persistent bias. And, they can have an important impact on public discourse. In particular, upward bias means that the median real wage may have risen substantially over past decades, in contrast to reported stagnation. If the overstatement of inflation has increased during the past decade, this also has profound consequences. For one thing, the reported slowdown in annual productivity growth – from something like 2½% in the decade prior to the crisis to about 1% today – could be more apparent than real. For another, true inflation may be even further below the Federal Reserve’s long-run objective of 2% on the PCE than current readings imply. There is good reason to think that the price mismeasurement problem has gotten worse, but quantifying that deterioration is another thing. The impact on inflation may turn out to be small – perhaps an extra ¼% annually – leaving it well within the range of uncertainty that the Boskin Commission highlighted 20 years ago.

Lower Oil Prices Boost Pressure on Consumers to Drive Economic Gains - U.S. consumers stepped up their spending this spring, a welcome sign for the economy as businesses largely went the other way. Consumer spending advanced at a 2.9% annual pace in the second quarter, the Commerce Department said Thursday. That was a nice bounce back from the winter’s lackluster increase in household outlays and a major driver of the 2.3% advance in overall gross domestic product last quarter. Meanwhile, a measure of business investment declined for the first time since the third quarter of 2012. Nonresidential fixed investment fell 0.6%. Why are businesses pulling back at the same time as consumers are spending more? The answer could lie in oil. Oil prices, which have plummeted by 50% from a year ago, have dissuaded businesses from investing in drilling equipment, wells, ports and other infrastructure needed to support a burgeoning domestic oil and gas industry. But cheaper oil means cheaper gasoline, and consumers may finally be confident enough in the economy—and their own job prospects—that they’re willing to spend that savings elsewhere. “The composition of growth is changing, at least in part because of the drop in oil prices,” said Scott Hoyt, economist at Moody’s Analytics. “This is beginning to support consumer spending, but is undermining net exports and investment, at least in select industries.” Mr. Hoyt said the net impact of changes in oil prices and the value of the dollar will be positive for U.S. growth, “but underlying strong fundamentals will be the primary driver.”

US Economic & Consumer Confidence Plunges To 10-Month Lows As "Hope" Crashes -- The Conference Board just reported that US Consumer Confidence, having bounced in June, has collapsed in July (and saw the bounce revised drastically lower). At 90.9, this is the lowest since September 2014 and is below the lowest economist estimate. More worrying is the crash in "hope" - as consumer expectations plunge from 92.8 to 79.9 (lowest since Feb 2014). This should not be a surprise since Gallup has been indicating fading confidence in its weekly survey for a while. 57% of Americans believe the US economy is "getting worse,"which has left Gallup's Economic Confidence Index tumbling to its lowest in 10 months. Confidence plunges... Driven by a collapse in Hope... Gallup's Economic Confidence Index continued its gradual, downward slide, reaching -14 for the week ending July 26. This represents a 10-month low for the index.

Americans’ Economic Confidence Gets Mauled - This is one of those things that at first gets ascribed to sampling error or a statistical fluke or the weather or something, but then it wobbles lower month after month, in crass defiance of all rosy scenarios that had been so carefully laid out, and confirmations are hailing down from other directions, and suddenly it’s serious. In early January, the economic confidence of Americans had reached the highest level in the Economic Confidence Index since Gallup started tracking the data in 2008. At +5 in January, the index wasn’t particularly high. But most Americans don’t live in the glorious Fed-goosed Wall-Street economy. They live in the real economy. And there, things have been tough. Crummy as it was, January was practically glorious compared to the low of the Financial Crisis, when the Economic Confidence Index hit -65. That must have been at about the time when Treasury Secretary Hank Paulson told Congress that the world would end unless he got unlimited means and power to bail out certain big financial outfits, such as his former employer Goldman Sachs. But in February, economic confidence began to zigzag lower. The index for the week ending July 26, released today, dropped another 2 points from last week, to -14, the worst level since September. This is what “gradually” (as Gallup called it) swooning economic confidence looks like:

Americans’ Sour Turn Puts Economic Worries Back in Spotlight - It’s the economy, again. After upticks in good economic feelings in recent months, surveys this week suggest Americans are growing increasingly edgy about the country’s economic future headed into the election season. On Wednesday, the Conference Board announced that consumer confidence dropped sharply in July. And second-quarter data from Gallup supplied to The Wall Street Journal show a similar drop. Those numbers showed 55% of Americans believe the national economy is getting worse, while 40% believe it’s getting better – a 15-point gap. In the first quarter, 49% believed it was getting worse, while 46% believed it was getting better – a gap of only three points. That’s a pretty dramatic 12-point swing, and the chart above shows the significance. The growth in negative feelings in the Gallup numbers seems to signal a return to an unsettled norm that has largely followed the Great Recession. The fourth quarter of 2014 and the first quarter of 2015, where good feelings were rising and came close to overtaking bad feelings, look like aberrations. That may mean, heading into 2016, the economy will again be the dominant issue of the campaign, much like the last two presidential elections. The Gallup data come from the firm’s daily tracking poll, aggregated into quarters. It’s a very big sample, drawn from about 45,000 people. And it’s worth noting the outlook has grown more negative in different places all across the country.

Michigan Consumer Sentiment: Small Decline but Still Positive Trend - The University of Michigan Final Consumer Sentiment for July came in at 93.1, a decrease from the 96.1 June final reading. Investing.com had forecast 94.0 for the July Final. The Index is at its highest eight month average since 2004. Surveys of Consumers chief economist, Richard Curtin makes the following comments: Consumer confidence slipped a bit in the July 2015 survey. A disappointing pace of economic growth was the main reason for the small decline in consumer confidence. Nonetheless, the data provide no indication of a break in the prevailing positive trend. Indeed, the Sentiment Index has averaged 94.5 since December 2014, the highest eight month average since 2004. Although one-in-ten consumers, when asked to identify any recent economic developments they had heard, referred negatively to Greece, the Chinese economy, and the Trans-Pacific Partnership on trade, it had virtually no impact on the Sentiment Index. The maintenance of confidence at high levels during the past eight months has been mainly due to modestly positive news on jobs and wages. [More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

Restaurant Performance Index declined in June  --Here is a minor indicator I follow from the National Restaurant Association: Dampened Outlook Causes Restaurant Performance Index Decline in June As a result of a somewhat dampened outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) declined in June for the second consecutive month. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.0 in June, down 0.4 percent from May and its lowest level in nine months. Despite the decline, June represented the 28th consecutive month in which the RPI stood above 100, which signifies continued expansion in the index of key industry indicators. “Although same-store sales and customer traffic levels remained positive in June, the overall RPI declined as a result of dampened optimism among restaurant operators,” said Hudson Riehle, Senior Vice President of the Research and Knowledge Group for the Association. “The proportion of restaurant operators expecting sales growth fell to its lowest level in nine months, while operators’ outlook for the economy turned negative for the first time in nearly two years.”

Why 15% of Americans Still Don’t Have the Internet -- For many of us Internet service is a fact of modern life. While we may not like the monthly bills, like our phones and electricity, we can’t imagine living without it.But, according to a new Pew Research Center survey, there is a small minority of Americans—about 15%—who still aren’t online. While that’s down from roughly half in 2000, the rate has changed little in the past three years, according to Pew.Just who are the holdouts? As you might expect they skew older. About 40% of people 65 and older aren’t online, compared to just 3% in their 20s, according to another recent Pew survey.But cost is a big factor too. About 14% of people who earned $30,000 to $50,000 weren’t online, and that’s three times the rate for those making $75,000 or more. And when Pew asked non-Internet users why they weren’t logging on, about a fifth cited costs.While lots of the technology people use to get on the Internet has been getting cheaper, consumers pay an average of $50 a month for broadband, which is $10 more than they did a decade ago, according to Reuters.

Aging Infrastructure Plagues Nation’s Busiest Rail Corridor - In Maryland, a century-old rail tunnel needed emergency repairs this winter because of soil erosion from leaks, causing widespread train delays.In Connecticut, an aging swing bridge failed to close twice last summer, stopping train service and stranding passengers.And last week, New Jersey Transit riders had a truly torturous experience. There were major delays on four days because of problems with overhead electrical wires and a power substation, leaving thousands of commuters stalled for hours. One frustrated rider, responding to yet another New Jersey Transit Twitter post announcing a problem, replied: “Just easier to alert us when there aren’t delays.” These troubles have become all too common on the Northeast Corridor, the nation’s busiest rail sector, which stretches from Washington to Boston and carries about 750,000 riders each day on Amtrak and several commuter rail lines. The corridor’s ridership has doubled in the last 30 years even as its old and overloaded infrastructure of tracks, power lines, bridges and tunnels has begun to wear out. And with Amtrak and local transit agencies struggling for funding, many fear the disruptions will continue to worsen in the years ahead.

Rail Week Ending 25 July 2015: Rail Data Still Soft But Marginally Better Than Previous Week: Week 29 of 2015 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. Intermodal traffic expanded year-over-year, which accounts for approximately half of movements - but weekly railcar counts continued in contraction. This analysis is looking for clues in the rail data to show the direction of economic activity - and is not necessarily looking for clues of profitability of the railroads. The weekly data is fairly noisy, and the best way to view it is to look at the rolling averages which are in contraction for over three months. The following chart is for railcar counts (not including intermodal). For this week, total U.S. weekly rail traffic was 557,612 carloads and intermodal units, down 2.5 percent compared with the same week last year.Total carloads for the week ending July 25, 2015 were 286,660 carloads, down 6.7 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 270,952 containers and trailers, up 2.3 percent compared to 2014.One of the 10 carload commodity groups posted an increase compared with the same week in 2014. It was grain, up 10.9 percent to 22,091 carloads. Commodity groups that posted decreases compared with the same week in 2014 included: metallic ores and metals, down 14.9 percent to 24,609 carloads; miscellaneous carloads, down 13.9 percent to 8,512 carloads and coal, down 10.9 percent to 103,588 carloads.For the first 29 weeks of 2015, U.S. railroads reported cumulative volume of 8,017,322 carloads, down 4.2 percent from the same point last year; and 7,667,449 intermodal units, up 2.6 percent from last year. Total combined U.S. traffic for the first 29 weeks of 2015 was 15,684,771 carloads and intermodal units, a decrease of 1 percent compared to last year

ATA Trucking Index decreased 0.5% in June -- Here is an indicator that I follow on trucking, from the ATA: ATA Truck Tonnage Index Fell 0.5% in June American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index decreased 0.5% in June, following a revised gain of 0.8% during May. In June, the index equaled 131.1 (2000=100). The all-time high of 135.8 was reached in January 2015. Compared with June 2014, the SA index increased 1.8%, which was above the 1.5% gain in May. Year-to-date through June, compared with the same period last year, tonnage was up 3.4%. ...With flat factory output and falling retail sales, I’m not surprised tonnage was soft in June,” said ATA Chief Economist Bob Costello. “I also remain concerned over the elevated inventory-to-sales ratio for retailers, wholesalers, and manufacturers, which suggests soft tonnage in the months ahead until the ratio falls. Here is a long term graph that shows ATA's For-Hire Truck Tonnage index. The dashed line is the current level of the index. The index is now up only 1.8% year-over-year.

The manufactured trucker shortage - Have you been reading about the shortage of workers in the trucking industry? Have you wondered why, in this crappy economy, they haven’t been able to find more workers? Here’s an excerpt from recent Wall Street Journal’s coverage of this worker shortage crisis: Operators across the country are short 30,000 long-distance drivers, the American Trucking Associations estimates. The group projects the shortage could top 200,000 in the next decade. Average annual pay for long-distance drivers was $49,540 in 2013, according to ATA estimates. Hiring and wages in truck transportation have inched up this year, according to the Labor Department. I’ve got a theory. Here’s what it is: they trucking companies aren’t paying enough. Funny how demand and supply and efficient markets go out the window when there’s a political point being served, though: Congress is considering passing a law that would allow 18-year-olds to be long-haul truckers. A terrible idea considering how younger drivers are much more dangerous. Of course, $50K isn’t nothing. But on the other hand, truckers have to be trained, competent, and regularly spend many days on the road. Moreover, the current surveillance technology has severely degraded their quality of life, which I learned by reading about Karen Levy’s work on the industry. Also, new truckers probably make substantially less than $50K when they start.

Weekly Gasoline Price Update: Largest Weekly Drop Since January -- It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium dropped six and five cents respectively from last week. According to GasBuddy.com, California has the highest average price for Regular at $3.83 with Los Angeles averaging $4.15. South Carolina has the cheapest at $2.31.

Vehicle Sales Forecasts for July: Over 17 Million Annual Rate Again, Best July in a Decade -- The automakers will report July vehicle sales on Monday, August 3rd. Sales in June were at 17.1 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in July will be over 17 million SAAR again. There were 26 selling days in July, the same as in July 2014.  Here are a few forecasts: From J.D. Power: New-Vehicle Retail Sales SAAR in July to Hit 14 Million, Highest Level for the Month in a DecadeThe forecast for new-vehicle retail sales in July 2015 is 1,260,200 units, a 2.5 percent increase compared with July 2014 and the highest retail sales volume for the month since July 2006, when sales hit 1,294,085. Retail transactions are the most accurate measure of consumer demand for new vehicles. [Total forecast 17.2 million SAAR] From Kelley Blue Book: New-Car Sales To Increase Nearly 3 Percent In July 2015, According To Kelley Blue Book New-vehicle sales are expected to increase 2.6 percent year-over-year to a total of 1.47 million units in July 2015, resulting in an estimated 17.1 million seasonally adjusted annual rate (SAAR), according to Kelley Blue Book www.kbb.com ...From WardsAuto: 17 Million SAAR Streak Should Continue in July If the projected 17.3 million-unit seasonally adjusted annual rate is reached, it will mark the first time since 2000 that the monthly LV SAAR has exceeded 17 million units in three consecutive months, and would represent the highest July SAAR since 2005.Another strong month for auto sales.

Gov't: Fiat Chrysler Must Offer to Buy Back 500,000 Pickups - ABC News: Fiat Chrysler must offer to buy back from customers more than 500,000 Ram pickup trucks and other vehicles in the biggest such action in U.S. history as part of a costly deal with safety regulators to settle legal problems in about two dozen recalls. The Italian-American automaker also faces a record civil fine of up to $105 million. In addition, owners of more than a million older Jeeps with vulnerable rear-mounted gas tanks will be able to trade them in or be paid by Chrysler to have the vehicles repaired. The settlement is the latest sign that auto safety regulators are taking a more aggressive approach toward companies that fail to disclose defects or don't properly conduct a recall. The Ram pickups, which are the company's top-selling vehicle, have defective steering parts that can cause drivers to lose control. Some previous repairs have been unsuccessful, so Fiat Chrysler agreed to the buyback, according to the National Highway Traffic Safety Administration. Owners also have the option of getting them repaired, the agency said in documents released Sunday. The older Jeeps have fuel tanks located behind the rear axle, with little to shield them in a rear crash. They can rupture and spill gasoline, causing a fire. At least 75 people have died in crash-related fires, although Fiat Chrysler maintains they are as safe as comparable vehicles from the same era.

Researchers hack GM’s OnStar app, open vehicle, start engine: A researcher is advising drivers to halt the use of a mobile app for General Motors Co’s OnStar vehicle communications system, saying hackers can exploit a security flaw in the product to remotely unlock cars and start engines. “White-hat” hacker Samy Kamkar posted a video on Thursday saying he had figured out a way to “locate, unlock and remote-start” vehicles by intercepting communications between the OnStar RemoteLink mobile app and the OnStar service.Kamkar said he plans to provide technical details on the hack next week in Las Vegas at the Def Con conference, where tens of thousands of hacking aficionados will gather to learn about new cybersecurity vulnerabilities. Kamkar released the video a week after Fiat Chrysler Automobiles recalled some 1.4 million vehicles after hacking experts demonstrated a more serious vulnerability in the Jeep Cherokee. That bug allowed them to gain remote control of a Jeep traveling at 70 miles per hour on a public highway.

Durable Goods Orders July 27, 2015: June was a strong month for durable goods orders which rose a slightly higher-than-expected 3.4 percent. Excluding transportation, which is where aircraft orders are tracked, new orders rose 0.8 percent which is near top-end expectations. Core capital goods orders, which also exclude aircraft, rose a very solid 0.9 percent. These readings are some of the highest of the last year and offer welcome evidence of a long awaited pop higher for what is, however, a still depressed factory sector. Turning briefly to civilian aircraft, orders surged 103 percent after falling 46 percent in May. Swings in aircraft are common in this report and reflect monthly swings in Boeing orders. Other industries include a small gain for motor vehicles and for computers & electronics as well as large gains for machinery and fabricated metals. In a hint of strength for the construction sector, electrical equipment jumped an especially sharp 2.8 percent in the month. Turning back to totals, shipments inched 0.1 percent higher with shipments of core capital goods edging 0.1 percent lower and including downward revisions to both May and April. The shipment readings for capital goods will not be lifting second-quarter GDP estimates for business investment. Unfilled orders ended two months of contraction with a 0.1 percent gain while inventories rose 0.4 percent, a modest build that keeps the stock-to-sales ratio unchanged at 1.68. This is only the third monthly gain for durable goods orders going all the way back to July, which was before of course the drop in oil prices and rise in the value of the dollar, the former having torpedoed the energy sector and the second having flattened the nation's exports. Today's report will confirm for many expectations that the negative effects of the strong dollar on exports are beginning to ease.

U.S. Durable Goods Orders Rebound 3.4% In June: After reporting a sharp drop in new orders for U.S. manufactured durable goods in the previous month, the Commerce Department released a report on Monday showing that orders rebounded strongly in the month of June. The report said durable goods orders jumped by 3.4 percent in June following a revised 2.1 percent decrease in May. Economists had expected orders to increase by 3.1 percent compared to the 2.2 percent drop that had been reported for the previous month. The bigger than expected increase in durable goods orders primarily reflected a rebound in orders for transportation equipment, which surged up by 8.9 percent in June after tumbling by 6.1 percent in May. Orders for non-defense aircraft and parts showed a particularly strong increase, soaring by 66.1 percent in June after plunging by 31.6 percent in the previous month.   "This big jump in aircraft orders was not a big surprise, as we already knew Boeing received orders for an unusually high 161 planes last month (up from only 11 in May) due to the biennial Paris air show." "Given that GDP measures output rather than orders, the surge in aircraft orders will not show up in the national accounts data until much later since the lead times between orders and production for aircraft are long," he added. "And as a result, this tells us nothing about the current strength of the economy."

June Durable Goods: A Bit of a Bounce - The Advance Report on Durable Goods released today by the Census Bureau was a bit better than expected. Here is the Bureau's summary on new orders: New orders for manufactured durable goods in June increased $7.7 billion or 3.4 percent to $235.3 billion, the U.S. Census Bureau announced today. This increase, up following two consecutive monthly decreases, followed a 2.1 percent May decrease. Excluding transportation, new orders increased 0.8 percent. Excluding defense, new orders increased 3.8 percent. Download full PDF.  The latest new orders headline number at 3.4% percent was above the Investing.com estimate of 3.0% percent. This series is down -2.8 percent year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 0.8 percent month-over-month (MoM), a bit above the Investing.com estimate of 0.5 percent. However, the core measure is down -4.5 percent YoY. If we exclude both transportation and defense for an even more fundamental "core", the latest number was up 1.1 percent MoM, but down -3.0 percent YoY.Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It posted a 0.9 percent monthly gain, However, it is down -6.6 percent YoY. For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We've also included a dotted line to show the relative size of Core Capex.

Durable Goods New Orders Improved in June 2015. Rolling Averages Declined.: The headlines say the durable goods new orders improved. This series has been in a general downtrend since seen since November 2014. The three month rolling average is continuing to decline and is in contraction. Note that the headline "improvement" is on the back of a downwardly revised previous month data. Econintersect Analysis:

• unadjusted new orders growth accelerated 5.3% (after decelerating a downwardly revised 3.2 % the previous month) month-over-month , and is down 0.6 % year-over-year.
• the three month rolling average for unadjusted new orders decelerated 0.4% month-over-month, and down 3.1% year-over-year.
• Inflation adjusted but otherwise unadjusted new orders are down 1.9% year-over-year.
• The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth decelerated 0.3% month-over-month, up 1.7% year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, and has been decelerating for a year..
• unadjusted backlog (unfilled orders) growth decelerated 0.9% month-over-month, up 4.7% year-over-year.
• according to the seasonally adjusted data, it was civilian aircraft which accounted for the strength this month.
• note this is labelled as an advance report - however, backward revisions historically are relatively slight.

Dallas Fed: "Texas Manufacturing Slump Moderates"  --- From the Dallas Fed: Texas Manufacturing Slump Moderates, Outlooks Improve Texas factory activity declined slightly in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained negative but rose for a second month in a row to -1.9, suggesting further moderation in the decline in manufacturing output....Perceptions of broader business conditions were mixed. The general business activity index remained negative, but it rose for a second month in a row and reached -4.6 in July. Manufacturers expect improved conditions ahead. The company outlook index surged nearly nine points and posted its first positive reading in seven months, coming in at 1.2. Labor market indicators reflected slight employment declines and shorter workweeks. The July employment index was negative for a third month in a row and edged down to -3.3.  The Dallas region has been especially hard hit by the decline in oil prices. This survey might be more negative in August since oil prices have declined again.

Dallas Fed Manufacturing Outlook Rose for a Second Month but Still in Negative Territory -  This indicator measures manufacturing activity in Texas. Here is an excerpt from the latest report:mTexas factory activity declined slightly in July, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained negative but rose for a second month in a row to -1.9, suggesting further moderation in the decline in manufacturing output. Perceptions of broader business conditions were mixed. The general business activity index remained negative, but it rose for a second month in a row and reached -4.6 in July. Manufacturers expect improved conditions ahead. The company outlook index surged nearly nine points and posted its first positive reading in seven months, coming in at 1.2. Monthly data for this indicator only dates back to 2004, so it is difficult to see the full potential of this indicator without several business cycles of data. Nevertheless, it is an interesting and important regional manufacturing indicator. The Dallas Fed on its importance: Texas produced $159 billion in manufactured goods in 2008, roughly 9.5 percent of the country’s manufacturing output. Texas ranks second behind California in factory production and first as an exporter of manufactured goods. Texas turns out a large share of the country’s production of petroleum and coal products, reflecting the significance of the region’s refining industry. Texas also produces over 10 percent of the nation’s computer and electronics products and nonmetallic mineral products, such as brick, glass and cement. Here is a snapshot of the complete TMOS.  The next chart is an overlay of the General Index and the Future Outlook Index — the outlook six months ahead. Let's compare all five Regional Manufacturing indicators. Here is a three-month moving average overlay of each since 2001.

Dallas Fed Misses Expectations After June's "Miracle" Bounce; Jobs, Wages Decline --After bouncing dramatically in June (the biggest surprise beat in over 3 years) - on the back of 'hope' surgiung to 6-month highs - July data continued to improve marginally but missed expectations -4.6 vs -3.5 exp). On the bright side New Orders inched into positive territory (although inventories are surging) but prices received tumbled, wages dropped, and employment fell (as hours worked rose). The biggest driver, once again, of the headline rise was 'hope' as the outlook rose to 18.8 - the highest since August.

Richmond Fed Manufacturing Survey Improves in July 2015 - Above Expectations.: Of the five regional Federal Reserve surveys released to date, three show manufacturing expanding and two are in slight contraction. The market expected values (from Bloomberg) from 5.0 to 12.0 (consensus 7.5) with the actual survey value at 13 [note that values above zero represent expansion]. Fifth District manufacturing activity increased moderately in July, according to the most recent survey by the Federal Reserve Bank of Richmond.* Shipments and new orders picked up this month, and order backlogs also strengthened. Manufacturing employment softened this month, and average wages continued to increase at a moderate pace. Prices of raw materials rose more quickly in July compared to last month, while prices of finished goods grew about on pace. Manufacturers remained optimistic about future business conditions. Survey participants expected faster growth in shipments and in the volume of new orders in the six months ahead. Producers looked for increased capacity utilization and anticipated rising backlogs. Expectations were for longer vendor lead times. Survey participants anticipated an increase in hiring and solid growth in wages during the next six months. However, they expected modest growth in the average workweek. For the six months ahead, manufacturers expected little change in prices paid, although they looked for faster growth in prices received.  Overall, manufacturing conditions strengthened in July. The composite index moved to a reading of 13 from last month's reading of 7. Shipments advanced 11 points to end at 16, while the index for new orders added seven points to finish at a reading of 17. Manufacturing employment softened this month; the index settled at 1.

Chicago PMI increases, Final July Consumer Sentiment at 93.1 -- Chicago PMI July 2015: July Chicago Business Barometer Up 5.3 Points to 54.7 The Chicago Business Barometer increased 5.3 points to 54.7 in July led by a double digit gain in Production and accompanied by gains in New Orders and the other three components....Companies reported a strong revival in output in July after five months of relatively weak business activity. Production rose sharply by 12.0 points to 61.8 amid a bounceback in inventory growth to the highest since April underpinned by a solid gain in New Orders...Chief Economist of MNI Indicators Philip Uglow said, “The recent weakness in the Chicago Business Barometer had sounded a few alarm bells over the resilience of the US economic recovery. The positive start to the third quarter, however, suggests that activity bounced back firmly as firms saw orders and output increase sharply.“ This was well above the consensus forecast of 50.0. The final University of Michigan consumer sentiment index for July was at 93.1, down from the preliminary reading of 93.3, and down from 96.1 in June. This was below the consensus forecast of 94.1.

Chicago PMI Jumps To 6-Month Highs As UMich Consumer "Hope" Tumbles To 2015 Lows -- It appears Chicago businesses are immune to the vaguaries of the worst quarterly wage growth in US history. Following significant weakness earlier in the year, Chicago PMI surged to 54.7, the second highest in 2015, smashing expectations of a 50.8 print. Having flashed its recessionary warning lights, while 7 underlying factors improved led by increased production and new orders (and prices paid), employment continued to fall (though at a slower pace). After missing in July's preliminary print (93.3 vs 94.0), UMich consumer sentiment final print for July dropped even further to 93.1, heading back towards the lows of the year as hope plunged from 87.8 to 84.1 - the lowest since Nov 2014.

Why Americans Are Nostalgic About Manufacturing - Brad DeLong - Last month the sharp and hard-working Jeff Spross wrote: Why Americans Are so nostalgic About the Manufacturing Industry: “The U.S. still manufactures a lot of stuff, but most of it isn’t stuff average American consumers buy… …These days, we mostly make heavy industrial equipment, circuitry, aircraft, and other big and expensive goods and high-end products…. A lot of manufacturing went overseas… so we get imports for a lower cost, which improves our standard of living. People in other, less developed nations get new jobs, which… improves theirs. A win-win, theoretically speaking. Same goes for rising automation…. But the 1950s economy was also a delicately balanced ecosystem… where wages were good, health and pension benefits… plentiful… job security was high…. Globalization gave certain interests and centers of power in our society the wedge and hammer…. Unions became far weaker, business owners and management got much freer hands, and worker bargaining power collapsed. The economic benefits… weren’t broadly shared…. Other Western countries also endured globalization, but managed to keep their levels of inequality lower…. If we’d found some sort of alternative economic strategy for producing those same results, it’s unlikely voters or politicians would be nostalgically lamenting any [manufacturing] decline. Moving our workers and our capital out of manufacturing could have been a good idea. It would have been beneficial if it were to take advantage of supply from people in other countries who could make things more cheaply. It would have been benevolent to make space for other countries to engage in successful economic development. Those both would have been good things. But there is an “if”. Those would have been good things if and as long as the industries that we were moving people and capital out of manufacturing into were genuinely the industries of the future.

How Cheap Oil Is Fueling a Surge In New Factories - America's energy rebirth is the gift that keeps on giving for the economy. But this year, it's more about construction than drilling holes in the ground. While the collapse in oil and gas prices since the middle of last year caused energy companies to slash investment in oil wells, Thursday's report on second-quarter GDP showed an interesting dynamic taking shape — investment in factories has been running full bore. It may be surprising on the surface, given that manufacturing has simmered down this year on the heels of a weaker global economy, but spending on all types of production facilities increased at a 65 percent annualized pace in the second quarter. That was almost enough to offset a 68 percent plunge in investment in wells and mines that marked the biggest drop in 29 years. Outlays for factory-related structures jumped even more from January through March -- surging at a 95 percent pace. Over the last four quarters, investment in plants increased an average 64 percent, the strongest since records began in 1958. "There's a manufacturing boom underway tied to the chemical industry" building new plants that refine oil and natural gas into other products, Spending on chemical plant construction in the private sector stood at a seasonally adjusted annual rate of $48.4 billion in May, up almost 10 percent from a month earlier, according to the latest data from the Census Bureau. During the first five months of this year, an unadjusted $15.9 billion was spent on chemical plants, more than double the $7 billion for the same period in 2014.

The Profit-Sharing Economy - Laura Tyson -  Over the last 35 years, real wages in the United States failed to keep pace with productivity gains; for the typical non-farm worker, the latter grew twice as fast as the former. Instead, an increasing share of the gains went to a tiny fraction of workers at the very top – typically high-level managers and CEOs – and to shareholders and other capital owners. In fact, while real wages fell by about 6% for the bottom 10% of the income distribution and grew by a paltry 5-6% for the median worker, they soared by more than 150% for the top 1%. How can this troubling trend be ameliorated?  One potential solution is broad-based profit-sharing programs. Together with job training and opportunities for workers to participate in problem-solving and decision-making, such programs have been shown to foster employee engagement and loyalty, reduce turnover, and boost productivity and profitability. Profit sharing also benefits workers. Indeed, workers in companies with inclusive profit-sharing and employee-ownership programs typically receive significantly higher wages than workers in comparable companies without such arrangements. About half of Fortune’s list of the 100 best companies to work for have some kind of profit-sharing or stock-ownership program that extends beyond executives to include regular workers. Despite the demonstrated benefits of broad-based profit-sharing programs, only about one-third of US private-sector workers participate in them, and about 20% own stock in their companies. If these programs work so well, why are they not more widespread?

Is trade zero-sum between workers in different countries? -- Vox.com had a long, interesting interview with Senator Bernie Sanders covering a large number of political and economic issues. In this post, I want to focus on just one issue he raised: Whether rising incomes for Chinese workers have to come at the expense of U.S. workers. Here is what Sanders told Vox’s Ezra Klein: I want to see the people in China live in a democratic society with a higher standard of living. I want to see that, but I don’t think that has to take place at the expense of the American worker. I don’t think decent-paying jobs in this country have got to be lost as companies shut down here and move to China. What Sanders doesn’t mention is that the market, left to itself, will indeed force a tradeoff between U.S. and Chinese workers. . The reason is that abundant factors of production (relative to the rest of the world, of course) will find new markets abroad as trade increases, while scarce factors of production will face increased import competition. Since China is a labor-abundant country and the United States a labor-scarce one, the theorem implies that real wages will rise in China and fall in the United States as they increase trade (all trade, not just with each other). And this effect can be sped up if U.S. companies close factories in the United States and open them in China, just as we have seen happen. To disable the tradeoff requires political intervention in the market. If you want to preserve gains from trade that are predicted by the theory of comparative advantage, and you want to not worsen income inequality in the United States, you need to find a way for the winners to compensate the losers from trade. This isn’t easy:  the winners increase their clout in the political system while the losers see their influence decrease (look at the long-declining influence of unions here). As I’ve discussed before, the increased mobility of capital exacerbates this problem in the U.S., since capital is much more mobile than workers. And so we have seen a steady decrease in the tax burden paid by corporations and the rich, more trade agreements signed, and a constant drumbeat to cut Social Security (despite the coming retirement crisis) and “phase out” Medicare.

What’s (not) up with productivity growth, part 1: Why this key variable is slowing across advanced economies -- Off the top of my head, I’d say we’ve got five big economic problems:
1. High levels of income inequality and low economic mobility;
2. Large swaths of households/neighborhoods/countries facing stagnant or eroding living standards and severely constrained opportunities;
3. Persistently slack job markets;
4. Some really bad policy responses to the above;
5. Slowing productivity growth.
I don’t mean to be that guy — the downer economist — and am fully capable of coming up with positive attributes as well, especially for the U.S. economy. As someone who has worked for politicians, I learned that you “don’t bring problems unless you’ve got solutions.” My book, The Reconnection Agenda, purports to go at bullets 1-4 above.But today, I’d like to begin to talk about the fifth problem — slowing productivity growth. I say “begin” because a) this stuff is dense and I don’t want to try your patience, and b) there’s a lot to say about it. More accurately, while it’s true that economists say a lot about what drives productivity growth, it’s also true that our understanding is limited. So I’ll open this series with a compelling, albeit disconcerting, picture.

Weekly Initial Unemployment Claims increased to 267,000 - The DOL reported: In the week ending July 25, the advance figure for seasonally adjusted initial claims was 267,000, an increase of 12,000 from the previous week's unrevised level of 255,000. The 4-week moving average was 274,750, a decrease of 3,750 from the previous week's unrevised average of 278,500.  There were no special factors impacting this week's initial claims.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971

Measuring unemployment - New claims for unemployment insurance this week came in at the lowest level in over 40 years. How much slack can there be left in the labor market?  The most common measure of unemployment (known as U3) counts the number of people who are not currently working and are actively looking for a job. You’re put in that category by the BLS if you report taking active measures over the last month to find work. In June U3 amounted to 5.3% of the labor force, where the labor force is defined as the sum of U3 plus people who are currently employed. That’s well below the average rate of 6.5% seen over the last 40 years. But if you simply count the number of people who are working as a percent of the population 16 years and over, you come up with only 59%. That’s up a little from the lows reached during the Great Recession, but significantly below what it had been over the last several decades. The difference between the last two graphs is explained by people who are not working but also are not counted as unemployed by the BLS. Most of these people don’t want a job because they are retired, disabled, in school, or other reasons. But there are a number of people who aren’t working, say they want a job, are available for work, and have taken measures within the past year to try to find work. But because they did not do anything active within the last month, they aren’t counted as “unemployed” or “in the labor force”. Instead they are designated by the BLS as “marginally attached to the labor force”. When these individuals are added to those counted as unemployed by the conventional designation, we get a measure of unemployment known as U5. The “marginally attached” are sometimes further broken down into those who say they didn’t search within the last month because they were discouraged about finding a job, and those who give some other reason.  And there are a number of people who say they’re employed, but only part-time, and are hoping to get a full-time position. When we add these to the U5 count, we get the broader unemployment measure known as U6. Last month the U.S. unemployment rate as measured by U3 was 5.3%, but when measured by U6, it came in at 10.5%.

Surveys in Crisis - Large, nationally representative household surveys are the source of official rates of unemployment, poverty, and health insurance coverage, and are used to allocate government funds. But the quality of survey data is declining on at least three counts.  The first and most commonly studied problem is the rise in unit nonresponse, meaning fewer people are willing to take a survey when asked. Two other growing problems are item nonresponse-- when someone agrees to take the survey but refuses to answer particular questions-- and inaccurate responses. Of course, the three problems can be related. For example, attempts to reduce unit nonresponse by persuading reluctant households to take a survey could raise item nonresponse and inaccurate responses if these reluctant participants rush through a survey they didn't really want to take in the first place. Unit nonresponse, item nonresponse, and inaccurate responses would not be too troublesome if they were random enough that survey statistics were unbiased, but that is unlikely to be the case. Nonresponse and misreporting may be systematically correlated with relevant characteristics such as income or receipt of government funds. Meyer, Mok, and Sullivan look at survey data about government transfer programs for which corresponding administrative data is also available, so they can compare survey results to presumably more accurate administrative data. In this case, the survey data understates incomes at the bottom of the distribution, understates the rate of program receipt and the poverty reducing effects of government programs, and overstates measures of poverty and of inequality. For other surveys that cannot be linked to administrative data, it is difficult to say which direction biases will go.

Energy-Rich Metro Areas Lose Jobs in June --  The unemployment rate has surged in all but one of West Virginia’s metropolitan areas, a sign of the hardship that the drop in the price of coal is having on mining regions. The state’s unemployment rate grew to 7.2% last month from 6.5% in June of last year, the Labor Department reported Wednesday. All but the Huntington-Ashland area—which lies outside the state’s coalfields—recorded a higher unemployment rate in June than a year ago, the department said. Other energy-dependent metro areas have suffered as well, the department said. The unemployment rate rose from 3.2% to 3.4% in Midland, Texas, and from 3.8% to 4.4% in neighboring Odessa. North and South Dakota also posted higher unemployment rates in June 2015 than the previous year. And Casper, Wyo., which lies near the state’s Powder River Basin coalfields, has also seen its unemployment rate rise from 4.2% to 4.7% over the year. Demand for coal has tumbled in recent years, driven down by a cheaper natural gas, new environmental regulations and the economic slowdown in China. In some ways, the downturn in the coal industry has been longer-lasting and steeper than that in the oil and gas industry. Overall employment in oil and gas has fallen 0.4% since the industry’s employment peak in October 2014. Coal, by contrast, has lost 23.1% of its jobs since December 2011, according to separate Labor Department data. Besides energy-producing areas, the department found a generally improving employment picture in the country’s states and metropolitan areas. Unemployment rates were lower in June this year than a year earlier in 351 of 387 metropolitan areas. Local area unemployment rates can be deceptive, however, because they can drop precipitously when unemployed people move away. Looking instead at the total number of jobs in the country’s cities and towns shows the overall number of jobs grew in 317 of 387 metropolitan areas.

Why Do So Many Working Age Americans Choose Not To Enter The Workforce? -- You could call it the “Mystery of the Missing Worker” – why do so many people of working age chose not to enter the workforce?  Here are the numbers, as of the most recent Employment Situation report:

• 250 million: the total number of people of working age in the United States. 
• 149 million: the total number of people in that population that have a job.
• 8 million: the number of people who want a job but do not have one.
• 93 million: the number of people who don’t work, and don’t want work.

To put some context around that last number, it is 30% of the entire U.S. population.  This is the same as the current population of the entire West Coast (CA, OR, and WA) AND New York State AND Florida.  Plus another 10 million people.  Economists measure this with the Labor Force Participation rate, and it has been in decline since February 2000, when it peaked at 67.3%.  It is now 62.6% and last month was a new low back to the 1970s. People of working age increasingly do not consider themselves part of the labor force.  Most economists chalk this up to the demographics of an aging workforce even though virtually all the literature on the topic in the early 2000 predicted participation would continue to increase.  We recently took a long look at a dataset that doesn’t often see the light of day but does provide some useful takes on how workers view their jobs.  It comes from the Gallup organization and is an annual survey of +1,000 employees since 1989 on their perceptions of job satisfaction in all its forms, from health and safety concerns to compensation to job security.  The complete data set can be found here, and the charts below highlight the trends...

Uber and the New Liberal Consensus - Paul Krugman  You might not have thought that a taxi service would move onto center stage in our great political debates. But Uber actually is looking like a surprisingly important political issue. Why?  Well, Uber actually brings two things to the taxi market. One is the smartphone revolution, letting you tap a screen instead of standing out in the rain waving your arm, and cursing the guy who darts out half a block from you and snags the cab you were trying to hail. The other is the company whose workers supposedly are free contractors, not employees, exempting the company from most of the regulations designed to protect employee interests. And it’s the second aspect that brings us into divisive politics.On one side, Republicans are eager to dismantle as many worker protections as they can. So from their point of view Uber’s not-our-problem approach to workers would be desirable independent of the technology. On the other side, we’re recently seen the emergence of the “new liberal consensus“, which argues (based on a lot of evidence) that wages are much less rigidly determined by supply and demand than previously thought, and that public policy can and should nudge employers into paying more. If that’s your policy plan, you really don’t want to see employers undermine it by declaring that they aren’t really employers. It’s surely possible to separate these two issues, to promote the use of new technology without prejudicing the interests of workers. But progressives need to work on doing that, and not let themselves get painted as enemies of innovation.

Proof of a ‘Gig Economy’ Revolution Is Hard to Find - Politicians and Silicon Valley prospectuses are all atwitter over the perils and promise of the next big thing, the gig economy. Hillary Clinton warned of the downsides of this informal workforce in a recent economic speech, including the potential erosion of workplace protections. Eyeing an opening, Jeb Bush used the ride-hailing app Uber to get to a meeting with Thumbtack, a company that helps people hire everyone from handymen to DJs. Companies like these have been portrayed as the “race-to-the-bottom economy” and “the industrial revolution of our time.” Harder to find so far is proof of the revolution. Far from turning into a nation of gig workers, Americans are becoming slightly less likely to be self-employed, and less prone to hold multiple jobs. Official government data shows around 95% of those who report having jobs are accounted for on the formal payroll of U.S. employers, little changed from a decade ago. If Uber and its ilk were fundamentally undermining the relationship workers have with employers, that shift would be showing up in at least some of the key economic indicators. Hundreds of thousands of Americans, or even a few million, may have dabbled in the gig economy, but in the context of the 157 million-strong U.S. labor force, the trend remains marginal.

Is the ‘Gig Economy’ a Thing? Ask Women -- Whether or not the “gig economy” is set to steamroll the workplace as we know it remains to be determined. As Josh Zumbrun and I report today, economists seem to agree that the phenomenon of people working multiple “gigs” to stay afloat has not materialized in the data collected by the U.S. government. Whether that’s a problem with our ways of measuring it, or a sign it’s not yet big enough to make an impact at the national level, is anyone’s guess. Take, for instance, the proportion of multiple-job holders, which one imagines would correlate with an economy in which an increasing number of people cobble together a livelihood through several part-time or one-off jobs. It’s been steadily declining since the 1990s, and is near a historic low. But look a little closer and an interesting pattern emerges. At all age groups, women are more likely to hold multiple jobs than their male peers. Valerie Wilson, director of the left-leaning Economic Policy Institute’s Program on Race, Ethnicity, and the Economy, found that young women—ages 20 to 24—are especially likely to have multiple jobs relative to the rest of the population. In 2015, 6.7 percent of these young women held multiple jobs, compared with 4.6 percent of their male peers. Two decades ago, the two groups were slightly more in line: In 1994, 7.6 percent of women aged 20 to 24 had multiple jobs, compared with 6.3 percent of men the same age. Why has the proportion of male multiple-job holders shrunk more than twice as quickly as the share of women? One explanation is the tenacious gender pay gap, Ms. Wilson said, although she notes that it is impossible to tell simply from the numbers whether the higher share of women juggling multiple jobs stems from economic necessity or a preference for part-time work.  Women are more likely to hold part-time jobs: 24 percent of working women had part-time jobs in 2013, compared with 13 percent of men, according to the Labor Department, a pattern that holds true in pretty much the rest of the world, too. And they’re more likely to work in low-paying industries, such as retail and fast food, points out Ms. Wilson, meaning they could need several in order to make ends meet. Less than half of retail workers, for example, a workforce that’s 62 percent female, have full-time jobs.

White House Warns States On Job-Licensing Requirements -- Economic policy makers at the White House spent much of the last six years putting out fires sparked by the financial crisis and recession. Now, they are turning to seemingly mundane matters that are part of a bigger problem: How to fix American labor markets that have grown less dynamic. A White House report released this week offers a good example. Economists and other policy hands are concerned over the patchwork of job licensing requirements they say could be hazardous for the labor market. Around one in four workers are now required to have a license to do their jobs, up from one in 20 in the 1950s. The report attributes about two-thirds of the growth to an increase in the number of professions that require licenses—not just barbers and hairdressers, but auctioneers, florists and scrap-metal recyclers. The other third comes from the changing composition of the workforce. The report suggests licensing requirements could contribute to a labor market that is less dynamic because workers face greater challenges in relocating across state lines. It cites estimates that more than 1,100 occupations are regulated in at least one state, even though fewer than 60 jobs are regulated in all 50 states.  . To be sure, the White House says occupational licenses offer important health, safety and labor protections when designed and implemented appropriately. But the report flags previously documented concerns about a patchwork licensing system that “just doesn’t make sense,” Landscapers, for example, need licenses in 10 states, some of which require years of experience and education. “The job is the same across the country but getting the job is a very different process,”  “Discrepancies like these make it harder to go where the jobs are.”

The New American Slavery: Invited To The U.S., Foreign Workers Find A Nightmare -- Each year, more than 100,000 people from countries such as Mexico, Guatemala, the Philippines, and South Africa come to America on what is known as an H-2 visa to perform all kinds of menial labor across a wide spectrum of industries: cleaning rooms at luxury resorts and national parks, picking fruit, cutting lawns and manicuring golf courses, setting up carnival rides, trimming and planting trees, herding sheep, or, in the case of Valdez, Gonzalez, and about 20 other Mexican women in 2011, peeling crawfish at L.T. West Inc. A BuzzFeed News investigation — based on government databases and investigative files obtained through the Freedom of Information Act, thousands of court documents, as well as more than 80 interviews with workers and employers — shows that the program condemns thousands of employees each year to exploitation and mistreatment, often in plain view of government officials charged with protecting them. All across America, H-2 guest workers complain that they have been cheated out of their wages, threatened with guns, beaten, raped, starved, and imprisoned. Some have even died on the job. Yet employers rarely face any significant consequences.  Many of those employers have since been approved to bring in more guest workers. Some have even been rewarded with lucrative government contracts. Almost none have ever been charged with a crime. In interview after interview, current and former guest workers — often on the verge of tears — used the same word to describe their experiences: slavery.

Bernie Sanders explodes a right-wing myth: ‘Open borders? No, that’s a Koch brothers proposal’ --  Sen. Bernie Sanders (I-VT) said the immigration debate is framed exactly wrong. Republicans vilify President Barack Obama for supposedly opening the border to ever-increasing multitudes of immigrants, legally or otherwise, but the Democratic presidential candidate said blame is cast in the wrong direction, reported Vox. “Open borders? No, that’s a Koch brothers proposal,” Sanders said in a wide-ranging interview with the website. “That’s a right-wing proposal, which says essentially there is no United States.” Sanders frequently targets the libertarian industrialists Charles and David Koch as unhealthy influences on American democracy — but he’s not the first to notice their support for an open borders policy.. The conservative Breitbart and the white supremacist VDARE website each blasted the Koch brothers for sponsoring a “pro-amnesty Buzzfeed event” in 2013, and two writers for the Koch-sponsored Reason — former contributing editor David Weigel and current editor-in-chief Nick Gillespie — have always been supportive of immigration reform. That’s at odds with what many Republicans believe, and Sanders told Vox that an open border would be disastrous to the American economy.

Gap Widening as Top Workers Reap the Raises -  For the first time since the economic recovery began six years ago, white-collar professionals with specialized skills in fields like technology, finance, engineering and software find themselves in the catbird seat.  But despite the steady addition of more than 200,000 jobs a month and a decline in the official jobless rate to a postrecession low of 5.3 percent, most American workers, including many college graduates, still face lukewarm wage growth at best and very limited bargaining power with bosses.Strikingly, this feast-or-famine pattern does not simply pit people with less than a college degree against their more highly educated peers. It is also pronounced even within the 32 percent of American workers who are college graduates.Since the beginning of 2014, median wages for all holders of a bachelor’s degree or more have risen 2.7 percent, compared with about 2 percent for all workers. Among the top 10 percent of earners holding college degrees, however, wages are up more than 6 percent.

Should Overtime Salary Threshold Keep Up With Costs–or the Joneses? - The contentious fight over the Labor Department’s plan to update its overtime rule has spun off a sidebar debate: Just how should the government adjust the salary that generally determines who’s eligible for extra pay? The answer might depend on whether it’s more important for workers to keep up with the Joneses or with their own costs. Under the existing federal rule, workers who are paid by the hour or earn an annual salary of less than $23,660 are eligible for overtime pay, while those with salaries of at least that amount who work in white-collar jobs generally aren’t. Administration officials said this threshold, which hasn’t been updated since 2004, has eroded and left too few workers eligible for overtime pay as they work more than 40 hours a week. The Labor Department in June proposed to more than double the threshold to $50,440, or $970 a week, which would qualify nearly five million more Americans for overtime pay. A key provision would address the erosion by automatically changing the threshold annually, without the need for a new, and time-consuming, round of rulemaking. Labor Secretary Thomas Perez called indexing the threshold “a critical linchpin” of the new rule. The department is contemplating using one of two methods: Pegging the salary threshold to inflation, as measured by the Consumer Price Index, or to the 40th percentile of earnings for full-time salaried workers. The latter method would ensure overtime-eligible workers keep pace with other workers whose salaries rise, while the former would ensure workers earn enough to keep up with the costs of goods and services in the metropolitan U.S.

US wages increase at slowest rate since 1982 - FT.com: Expectations of a Federal Reserve rate rise in September took a knock on Friday when data showed quarterly US wage growth at its lowest level for more than three decades. Wages and salaries for US workers rose by the smallest amount for a quarter since 1982, potentially clouding hopes of policymakers that the recovery is set to shift into a higher gear. The numbers from the Department of Labor, which showed a 0.2 per cent rise in employment costs against the 0.6 per cent expected by Wall Street, come as the debate about income inequality intensifies ahead of the presidential election next year. The figures sent the dollar and US government bond yields down sharply and put a dampener on expectations for a Federal Reserve rate rise following the Federal Open Market Committee’s carefully crafted statement on Wednesday. Instead of raising rates only when it had seen “further improvement” in jobs, the FOMC said on Wednesday it would do so when it had seen “some further improvement”. Joshua Shapiro, chief US economist with MFR, characterised the data as “not lift-off friendly”. “The dovish wing of the FOMC will look at this as another reason to be ultra cautious with the timing of lift-off,” he said. “It raises the bar in what kind of growth numbers that need to be seen between now and mid-September for the Fed to pull the trigger.”

What Wage Growth? Employment Cost Index Growth Plunges To Record Low -- The quarterly increase in US wages was just 0.2% - a third of the 0.6% rise expected - dashes the "wage growth is looming" meme and crushed the 0.7% rise in Q1 that had so many hopeful of escape velocity any day now. Because the ECI tracks the same job over time, it removes shifts in the mix of workers across industries, which is a shortcoming of the hourly earnings figures, which makes this number even more of a diaster. This is the weakest US wage growth since records begain in 1982... and half as slow as the weakest of 57 economist estimates. As Bloomberg notes, Fed officials are “still looking at a lot of slack remaining in the job market,” Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida, said before the report. “If the numbers sort of fall back a bit, that might push the Fed toward a later rate increase than September.” The median forecast of 57 economists surveyed projected a 0.6 percent increase for the total ECI index. Last quarter’s reading was lower than all estimates, which ranged from increases of 0.4 percent to 0.8 percent. The gauge measures employer-paid taxes such as Social Security and Medicare in addition to the costs of wages and benefits. Lower than the lowest economist estimates...

US wage growth falls to record-slow pace in 2nd quarter -  (AP) -- U.S. wages and benefits grew in the spring at the slowest pace in 33 years, stark evidence that stronger hiring isn't lifting paychecks much for most Americans. The slowdown also likely reflects a sharp drop-off in bonus and incentive pay for some workers. The employment cost index rose just 0.2 percent in the April-June quarter after a 0.7 increase in the first quarter, the Labor Department said Friday. The index tracks wages, salaries and benefits. Wages and salaries alone also rose just 0.2 percent. Both measures recorded the smallest quarterly gains since the second quarter of 1982. Salaries and benefits for private sector workers were unchanged, the weakest showing since the government began tracking the data in 1980. The disappointing figures come after the index had been pointing to a pickup in wage growth after nearly two years of steady hiring. The index rose just 2 percent in the second quarter compared with a year earlier. That is down from a 2.6 percent increase in the first quarter, which was the biggest in nearly seven years. In some occupations where bonuses are common, compensation fell sharply after spiking in the first quarter, including sales, professional services such as law and accounting, and management. The employment cost index figures now match the sluggish pace of growth reported in the average hourly pay data that's part of the monthly jobs report. Average hourly wages were up just 2 percent in June from a year earlier, the Labor Department said earlier this month.

'U.S. Paychecks Grow at Record-Slow Pace' -- Martin Feldstein says that when it comes to income inequality, you're all a bunch of whiners:...we should not lose sight of how well middle-income families have actually done over the past few decades. Unfortunately, the political debate is distorted by misleading statistics that grossly understate these gains..., the US middle class has been doing much better than the statistical pessimists assert. ...So it's yet another another round of "inequality has not grown as much as Democrats claim." Thought we had gotten beyond that. Today's news: U.S. wages and benefits grew in the spring at the slowest pace in 33 years, stark evidence that stronger hiring isn't lifting paychecks much for most Americans. The slowdown also likely reflects a sharp drop-off in bonus and incentive pay for some workers.The employment cost index rose just 0.2 percent in the April-June quarter after a 0.7 increase in the first quarter, the Labor Department said Friday. The index tracks wages, salaries and benefits. Wages and salaries alone also rose 0.2 percent.Both measures recorded the smallest quarterly gains since the second quarter of 1982.Salaries and benefits for private sector workers were unchanged, the weakest showing since the government began tracking the data in 1980. ... The employment cost index figures now match the sluggish pace of growth reported in the average hourly pay data that's part of the monthly jobs report. ...

Inequality is Central to the Productivity-Pay Gap  --Matt Yglesias is an insightful writer, but his recent article, “Hillary Clinton’s favorite chart is pretty misleading” is itself very misleading. Since the Clinton campaign’s “favorite chart” is an EPI chart, which Jared Bernstein and I originally came up with twenty years ago, I think it’s important to set the record straight. The main problem is that Yglesias does not actually engage with the chart he says he’s criticizing. “That bargain has eroded. Our job is to make it strong again.” pic.twitter.com/T3ARkHJRsz The chart compares the growth of average productivity since 1948 with the growth of the hourly compensation (all wages and benefits) of production/nonsupervisory workers, a group comprising 82 percent of payroll employment (blue collar workers in manufacturing and non-managers in services). The point is to show that the pay of a typical worker has not grown along with productivity in recent decades, even though it did just that in the early post-war period. That is, it shows a substantial disconnect between workers’ pay and overall productivity—a disconnect that has not always existed. We use data on production/nonsupervisory workers because there is no other data series on the pay of a typical worker that goes back to the early post-war period. The point of the chart is to show not only the current divergence but also that it was not always present—also, these data tend to move with the economy-wide median wage.

US income inequality rises up political agenda - FT.com: As the race for the presidency in 2016 enters another phase, with the first Republican debate set for early next month, there is a surprising early consensus among both Democratic and Republican candidates that middle class families are being held back by stagnant wage growth, amid a profound transformation of the American economy. With median household incomes at similar levels to the 1990s and the top 10 per cent of the population controlling three-quarters of the country’s wealth, the issue has become too dominant in public discourse for politicians to avoid. But the solutions they have put forward for dealing with the problem point to entrenched ideological fractures, and many fail to address one of the root causes of America’s income stagnation — dismal productivity growth. Some analysts question whether the solutions that are now being put forward will have more than a limited impact. “The problems are pretty clear; the solutions are all over the map,” said Robert Litan of the Brookings Institution. Raise the minimum wage While moves to raise the Federal minimum wage are stalled in Congress amid Republican opposition, many states have been pushing ahead with their own increases, and Democrats have been jumping on board. The Federal minimum is $7.25 cents an hour, which is below the inflation-adjusted peak of $8.54 it reached in 1968, according to Pew Research, and since the last increase in 2009 it has lost 8 per cent of its purchasing power.

Why Conservatives Are So Desperate to Debunk One Chart - David Dayen -- In 1994, economists Larry Mishel and Jared Bernstein of the liberal Economic Policy Institute (EPI) met with the head of President Clinton’s National Economic Council, Robert Rubin. Mishel told that they asked Rubin how the administration planned to increase median wages, a critical failing in the Reagan/Bush years. Rubin replied, “deficit reduction.” He explained how this would reduce interest rates and boost productivity, and that wages would naturally follow. Mishel and Bernstein pulled out a chart. It showed that, for the prior two decades, increases in productivity had not translated into wage gains for the typical worker. This productivity/wage gap showed that something had changed within the economy, with the benefits of growth concentrating in fewer hands. Rubin looked at the chart and said, “I didn’t know that.”  The updated chart grants perhaps the best visual depiction of rapidly rising inequality, with productivity gains failing to reach the everyday worker and instead funneling into corporate profits and the bank accounts of the wealthy. Hillary Clinton, in fact, has used the above version of the chart extensively in her presidential campaign, making increasing wages central to her economic program. Perhaps for this reason, the wage/productivity chart has been under attack, with economists and pundits trying to explain away the gap as something not fundamental to our economic story. But Mishel, the originator of the chart, is pushing back, arguing that critics “are denying reality through technical arguments and sleight of hand.” The key point, Mishel says, is that “economic policy cannot be reduced to being about more growth or productivity… they also have to be accompanied by policies that reconnect them to rising wages and benefits for the vast majority.”

Map: How geography affects the value of the minimum wage -- Labor advocates scored a major victory on Tuesday: Los Angeles County, the nation’s most populous, took a step toward raising to its hourly minimum wage to $15. A national movement has formed around raising the minimum wage to that level, but its value depends a lot on where a worker lives. While minimum wages range from the federal floor of $7.25 in 20 states to $9.47 in Washington state, they are only as valuable as what they can buy, which also varies by geography, according to an analysis of purchasing power by state. New York ranks among the top 10 states for its minimum wage, but factor in the cost of living, and it falls to the bottom 10. West Virginia’s middle-of-the-pack minimum wage, on the other hand, is actually fairly valuable compared with other states, when considering prices. “Even in some states that have enacted higher minimum wages most recently, the relative value of those is still quite low when you’ve made this adjustment,” said David Cooper, an analyst with the Economic Policy Institute, which often advocates for pro-labor policies. Take Hawaii, New Jersey, New York and Maryland, all of which recently raised the minimum wage. All but Hawaii rank among the top third of states. But each falls to the bottom 10 when that minimum wage is adjusted for its purchasing power.

Proposed Raise for Fast-Food Employees Divides Low-Wage Workers - It was Thursday, one day after a state panel recommended that the minimum wage for fast-food workers be raised to $15 an hour, and Ms. Cornick was savoring congratulations from some regulars and the knowledge that soon, very soon, she would have more money to pay her bills.But her jubilation dimmed after her shift, as soon as she stepped onto the street. On her stretch of Pennsylvania Avenue, the low-wage workers outside the fast-food industry will remain untouched by the pay increase. That includes her 24-year-old granddaughter, who earns minimum wage — $8.75 an hour — at a day care center two blocks from Wendy’s. “It’s heartbreaking,” Ms. Cornick, 61, said. “So many people are desperate.”Advocates for workers across the country cheered last week when New York became the first state to recommend a $15-an-hour minimum wage specifically for fast-food workers. But in New York City, the decision has created a stark new divide between low-wage workers who will receive the boost in their paychecks and those who will not.About 50,000 fast-food workers in New York City are expected to benefit from the wage increase, according to James Parrott, the chief economist at the Fiscal Policy Institute, a nonprofit research group. But about 1.25 million workers who earn less than $15 an hour do not work for fast-food chains and will not benefit, he said. In opposing the raise, fast-food companies also point to that gap, arguing that they will be unfairly required to increase wages while other businesses will not.

Dunkin' CEO: $15 min wage is 'outrageous' - Dunkin' Donuts' top executive says a $15 minimum wage for fast food workers is "absolutely outrageous." On Thursday, New York state's wage board recommended fast food workers make at least $15 per hour. The board said it should happen by the end of 2018 in New York City. Dunkin' Brand (DNKN) CEO Nigel Travis says the plan will do more harm than good. Travis said he supports governments making "reasonable increases" to the minimum wage, but a hike to $15 per hour represents a 71% increase over the current state minimum. "It's going to affect small businesses and franchises," Travis said in an interview with CNN's Poppy Harlow. He said it would prevent his multi-billion dollar company from hiring new people. "I don't want to sound threatening about that," he added, saying it probably wouldn't force Dunkin' to lay off workers. He said he does support a "living wage," or the concept that pay should be tied to an employee's cost of living.  Fast food workers making about $12 per hour sounds more reasonable to Travis. He said that would be the living wage for a worker with family at home.  MIT's Living Wage Calculator, however, indicates New York state's living wage is currently $12.75 for a single adult. For a household with two working parents and two kids, it estimates each worker would need to make $18.30 an hour. The current minimum wage in New York State is $8.75 and hour.

What Liberals Get Right About Poverty - A common debate between conservatives and liberals revolves around the role of behavior in poverty. Spurred by Ta-Nehisi Coates’ new book, you can see two examples of this debate with Rich Lowry taking the conservative side and Dylan Matthews taking the liberal side. I think both sides of the broad debate have good points that individuals should be able to hold simultaneously. In this post, I’m going to talk about some things I think liberals get right about poverty. In a follow-up, I’ll talk about some things I think conservatives get right. One thing liberals get right (and to be fair many non-liberals agree with this) is that however important norms and behaviors are for economic outcomes, recessions impose a lot of economic suffering on people that is outside of their control. In addition, structural economic shocks can shatter what seemed like a responsible life path. The 7 million lost manufacturing jobs since the  by seven million jobs since the late 70s have surely pushed many from a self-supporting life into an economic tailspin. Both cyclical and structural shocks justify a substantial safety net even if all the other arguments for the safety net fell apart.Second, as Matt Bruenig often points out, a significant percentage of the people in poverty are children, the elderly, and the disabled. For the elderly and disabled, working more is often not an option. While children may be in a household that could be improved by different adult behaviors, for those who place weight on merit or desert it’s important not to forget innocent bystanders. Another point, again something Bruenig often argues, is that many episodes of poverty are temporary. While there are certainly a significant number of people with long-term issues supporting themselves, and multigenerational poverty obviously is a real phenomenon, many poverty spells represent a temporary stumble. These individuals don’t need to change behaviors to be self-supporting, they will in fact be self-supporting soon enough. They just need a temporary hand.

Commodities Carnage Will Hurt These 10 States The Most -- As we’ve seen in Louisiana and West Virginia, the commodities downturn has had a real impact on state budgets.   The commodities rout can be at least partly explained by a combination of two factors. Slumping demand from China (i.e. a cessation of the bid which, in the pre-crisis world, producers assumed would exist in perpetuity) and easy access to capital markets (thanks to ZIRP) have helped create a global deflationary supply glut which will likely put continued pressure on prices for the foreseeable future. Underscoring the depth of the downturn is the following table from Morgan Stanley: Amid the carnage, Bloomberg is out with a look at which US states will be hurt the most by the commodities "meltdown." The following map shows what percentage of each state’s GDP is derived from energy, mining, and agriculture: Here’s more color from Bloomberg: In the brutal commodities meltdown, all U.S. states are not created equal. In fact, the impact has been vastly different. The Bloomberg Commodity Index last week reached a 13-year low and has plunged 61 percent since its peak in 2008. That matters a lot in, say, Wyoming, Louisiana, Texas and Nebraska. Not so much in New Jersey or Massachusetts, for example.  Wyoming is home to most of the top producing coal mines in the U.S. Its mining and agriculture industries generated 36 percent of its economic output in 2014, more than any other state, according to Moody's Analytics's calculations using Commerce Department data.  The top nine states on the map got  at least 10 percent of their gross state product from energy, mining and agriculture last year: Wyoming, Alaska, North Dakota, West Virginia, Oklahoma, Texas, New Mexico, Louisiana and South Dakota. Another six got more than 7 percent, compared to just 3.9 percent for the U.S. as a whole.

Gov. Walker and Dems Dance: Shady Politics and the Milwaukee Bucks Arena -- The history of the push for new sports stadiums in the United States is a well-documented and oft-repeated tale of corporate welfare, bilked taxpayers, gentrification and dedicated fans held hostage by powerful and politically connected owners.  Some may assume the quest for a new arena for the Milwaukee Bucks, then, amounts to new wine in an old bottle. Start the chorus now: The owners want a new facility for their National Basketball Association (NBA) team, and they want state politicians on board. They also want about $250 million in public funding, the same amount cut from the University of Wisconsin system in the 2015 budget, approved July 15 by the Wisconsin Senate in a 21-10 vote on SB 209 during a full-floor session lasting just 45 minutes. The arena deal bill awaits a final vote in the Assembly, expected to take place Tuesday.  But in Wisconsin, the political and economic chicanery seems even more ridiculous than usual because it involves a sophisticated public relations and lobbying campaign and some of the most powerful political figures in both the state and the country. Truthdig has learned many details about the operation based on an investigation of hundreds of documents obtained via Wisconsin’s Public Records Law.

Law Enforcement Seizures Misspent, Missing -- Funds and property seized by Oklahoma law enforcement agencies have gone missing or have been used for personal or other improper purposes, state audit records reveal. Among the violations were using seized money to pay on a prosecutor's student loans and allowing a prosecutor to live rent-free in a confiscated house for years, records show.  The cases were cited in a state commission hearing Tuesday in which authorities objected to new legislation aimed at curbing abuses of civil asset forfeiture by state and local law enforcement agencies. The bill, sponsored by Sen. Kyle Loveless, R-Oklahoma City, has spurred heated opposition from district attorneys and sheriffs. Forfeiture involves law enforcement agencies seizing private property and money believed to have been used in drug trafficking or other crimes. After the assets are forfeited in court, authorities can keep the money or property even when the suspect is never convicted or charged.

Wall St. Money Meets Social Policy at Rikers Island - First, the control group fell apart. Wardens at Rikers Island, the New York City jail, could not separate teenagers who were to participate in a course of cognitive behavioral therapy from those who were not supposed to attend.Then the city’s Education Department, which had offered to put teachers on Rikers to assist the intervention, pulled out. And the budget of the Osborne Association, which had been enlisted to carry out the therapeutic program, was cut when Rikers’s teenage population unexpectedly fell below the level written into its contract.“We needed two facilitators in each class instead of one, and we were serving twice as many kids because we couldn’t separate the groups,” said Elizabeth Gaynes, chief executive of Osborne.“We hoped to have people in the community to continue the M.R.T. outside after kids left, but we had to take outside staff and put it back in the jail,” she said, referring to the therapy by its formal name, Moral Reconation Therapy.  Can something that fails prove to be a success? That’s the question surrounding a bold experiment in putting Wall Street techniques to work in shaping government policy. Aimed at reducing teenage recidivism by at least 10 percent, the Adolescent Behavioral Learning Experience was found, in a careful evaluation by the Vera Institute of Justice, not to keep teenagers from being sent back to Rikers at all. But what happened next set this experiment apart from pretty much anything tried before in the nation’s correctional system: The city pulled the plug and walked away without losing a dime of taxpayer money. The experiment, financed by the nation’s first social impact bond, offers a glimpse of a potential future for delivering government services. It is a future that promises more rigor in identifying failure and success in settings from prisons and homeless shelters to public hospitals and schools.

Police Shootings Won't Stop Unless We Also Stop Shaking Down Black People -- In April, several days after North Charleston, South Carolina, police officer Michael Slager stopped Walter Scott for a busted taillight and then fatally shot him, the usual cable-news transmogrification of victim into superpredator ran into problems. The dash cam showed Scott being pulled over while traveling at a nerdy rate of speed, using his left turn signal to pull into a parking lot and having an amiable conversation with Slager until he realized he'd probably get popped for nonpayment of child support. At which point he bolted out of the car and hobbled off. Slager then shot him. Why didn't the cop just jog up and grab him? Calling what the obese 50-year-old Scott was doing "running" really stretches the bounds of literary license. But maybe the question to ask is: Why did Scott run? The answer came when the New York Times revealed Scott to be a man of modest means trapped in an exhausting hamster wheel: He would get a low-paying job, make some child support payments, fall behind on them, get fined, miss a payment, get jailed for a few weeks, lose that job due to absence, and then start over at a lower-paying job. From all apparent evidence, he was a decent schlub trying to make things work in a system engineered to make his life miserable and recast his best efforts as criminal behavior.

The System Isn't Broken, It Was Designed That Way: A Critical Analysis of Historical Racial Disadvantage in the Criminal Justice System Contemporary ideologies concerning the structure of the criminal justice system often purports that the system is somehow broken and in dire need of repair from the institutionalized racism that continues to permeate the system. However, to make this assertion of "brokenness" is to also make the assumption that the system was void of any racialized erroneous features at its genesis. This resounding fallacy concerning the structural makeup of the criminal justice system is exasperating because historical trends in justice administration have shown that the criminal justice system is not broken, it was designed that way. The criminal justice system was created in such a way to disadvantage, subdue, and control certain minority groups, namely African Americans. Trends in every facet of criminal justice research concerning police, courts and corrections, provide evidence that the criminal justice system is doing exactly what it was designed to do - marginalize and control minority populations. Although African Americans comprise 13% of the U.S. population, they account for 29% of arrests, 38% of prisoners in state and federal facilities, 42% of death penalty cases, and 37% of executions (Snell, 2011). Research continues to highlight the racial disparities that infiltrate the criminal justice system. While often the recipient of differential treatment, subjective laws, and more punitive sentences, African Americans experience the wrath of the criminal justice system when they are the offenders of crimes. However, when African Americans are victimized by crimes, their victimization is often disregarded and/or addressed with futile effort. Higginbotham (1996) noted these racialized differences in the administration of justice after an extensive review of punishment for crimes committed by both White Americans and African Americans from 1630 to 1865. He found that White Americans tend to ascribe little justice to African Americans while White Americans were indifferent to their own criminality (Higginbotham, 1996). Hawkins (1996) used the phrase "black life is cheap" to describe the devaluation of African American life and their inability to be afforded justice when victimized.

The state of tax progressivity across the United States - A group of Massachusetts advocates are working to get a ballot measure up for a vote that would create a new income tax bracket specifically for millionaires within the state. Despite the images of “Taxachusetts” that might dance in some people’s heads, the Massachusetts state government isn’t particularly tax happy when it comes to the high earners in the state. Massachusetts currently has a flat income tax where every resident pays 5.15 percent of their income. Adding a millionaire’s tax would make the state income tax system progressive. The income tax is also flat in Illinois, which considered and rejected a millionaire tax in May. (Six other states also have flat income taxes.) These flat income taxes is one of a multitude of factors which make the overall tax systems in Massachusetts and Illinois regressive, with low-income taxpayers paying a higher percentage of their income than high-income taxpayers. The two states aren’t outliers—there isn’t a single state where residents face a progressive overall tax structure. This is because flat sales, property, and excise taxes often make the overall tax system regressive, even if there are progressive tax rates on personal income. Regressive tax systems are not unique to Illinois and Massachusetts. The non-partisan Institute for Taxation and Economic Policy releases an annual analysis that looks at the income-distribution impact of state-and-local taxation in the 50 states and the District of Columbia. The 2015 report finds that (as in years past) the combined impact of state and local taxes in every state and the District of Columbia is quite regressive. Take the example of California, another state with a reputation for high taxes. According to the institute’s analysis, the bottom 20 percent of families pay an average of 10.5 percent of their income in state-and-local taxes. The top 1 percent, in contrast pays 8.7 percent.

Big U.S. Cities Lead the Way in Economic Recovery - Bigger is better for American cities these days. That is one of the findings in a new report from the National League of Cities that looks at the economic health of cities across the country. Overall, cities have seen marked improvement in their economic well-being from a couple of years ago. Forty percent of mid-sized cities with a population of 100,000 to 299,999 reported that local economic conditions had greatly improved during the past year. That is compared with just 20% of cities with fewer than 50,000 residents. No big cities with populations over 300,000 reported that economic conditions had worsened over the last year and 23% said they had improved greatly. Meanwhile, 5% of cities with populations under 50,000 said that they had worsened slightly or greatly. That underscores a story that has played out throughout the recovery, as large urban areas from New York City to Seattle have seen an influx of young workers in search of jobs and affluent older residents seeking a more walkable lifestyle. Meanwhile, smaller cities that had often relied on a particular industry and a heavy number of manufacturing jobs have struggled to take the same leap forward. The results were significantly more upbeat than the last time the National League of Cities took the survey in 2013. Overall, 28% of cities surveyed in 2015 said that economic conditions had improved greatly, compared with just 8% in 2013.

Chicago mayor proposes slew of bond sales amid shaky finances | Reuters: Chicago Mayor Rahm Emanuel on Wednesday proposed more than $2.5 billion of bond sales even as the city faces big budget deficits and the possibility that its already-low credit ratings could fall further. Under ordinances proposed to the city council, Chicago would sell up to $2 billion of senior lien general airport revenue bonds with $1.7 billion allocated to refunding outstanding debt and $300 million for new projects at O'Hare International Airport. The airport bonds have largely avoided rating downgrades, while the city's general obligation ratings have taken a hit, including a cut to the junk level of Ba1 by Moody's Investors Service in May. That downgrade triggered $2.2 billion in accelerated debt payments and fees by Chicago to banks that forced the city to undertake a restructuring of its outstanding bonds. Earlier this month, Chicago sold $1.08 billion of GO bonds at hefty yields as part of the restructuring. The mayor proposed the sale of other GO bonds of up to $500 million less than a week after a state judge voided a 2014 law aimed at shoring up two of the city's financially shaky retirement systems. Chicago had warned investors that such a ruling could lead to more rating downgrades. Emanuel also asked the council to approve up to $125 million of second lien sewer revenue bonds with the proceeds earmarked for converting existing variable-rate bonds to a fixed-rate mode and terminating swaps used to hedge interest-rate risk.

Puerto Rico can fix debt problems without default: economists - Puerto Rico can crawl out of its $72 billion debt hole without defaulting on its government debt, says a report commissioned by holders of $5.2 billion of the U.S. commonwealth’s government-backed bonds. By cutting expenses, including on education, and improving tax collection, Puerto Rico could erase its deficit by 2017, according to a report by Jose Fajgenbaum, Jorge Guzman and Claudio Loser, former International Monetary Fund economists and now consultants at Centennial Group. Puerto Rico Gov. Alejandro Garcia Padilla's office criticized the report on Sunday. The governor's chief of staff, Victor Suarez, responded in a statement that the island has "already enacted significant fiscal reforms," including pension concessions. Centennial was retained by a group of holders of so-called general obligation Puerto Rican bonds, including Fir Tree Partners, Brigade Capital Management and Monarch Capital Group. Trying to right its ship after a decade of stagnation and a shrinking population, Puerto Rico wants to negotiate concessions from creditors keen on protecting their investments. With analysts expecting a default, the island could wind up in messy litigation with creditors. A month ago, a report by former IMF official Anne Krueger, commissioned by Puerto Rico’s government, said the island’s woes must be solved through concessions from bondholders combined with fiscal and economic adjustments.

Puerto Rico looks set to default on $58 million payment this weekend - Investors are bracing for Puerto Rico to miss about $58 million in bond payments in coming days, as the U.S. commonwealth attempts to restructure $72 billion of debt. Saturday’s deadline could mark the first skipped payment to bondholders since Gov. Alejandro Garcia Padilla last month said that the island’s debts were unsustainable and urged negotiations with creditors. Because Saturday is a weekend, payment can be made Monday, a spokeswoman for Puerto Rico said. Public Finance Corp., a financing unit for Puerto Rico’s government, this month notified holders of appropriation bonds, typically those backed by funds set aside by the legislature, that it hadn’t transferred money to a trustee to pay the debt due at the beginning of August. The corporation said the legislature never actually appropriated the funds. The missed transfer led some ratings firms to say the island was highly likely to default. Some bonds from Public Finance Corp. maturing in 2031 touched a record low below 12 cents on the dollar this week, according to the Electronic Municipal Market Access website. Investors have braced for a cascade of defaults since last month, when Garcia Padilla called for talks with bondholders to delay some payments.

Here It Comes: Puerto Rico Is Headed for a Debt Default - So it looks like Puerto Rico has some fun weekend plans. After months of staggering under its $72 billion debt load, the island is expected to miss a bond payment due Saturday, which—despite what some government officials have claimed—means the island is probably heading for default. (We won't know for sure whether it happens until Monday, according to Reuters, since the cash isn't due until the next business day). Think of this as a gentle warmup for a much bigger confrontation over Puerto Rico's debt that's still to come. The government is set to skip a relatively small $58 million payment on a set of bonds largely owned by Puerto Rican credit union members, who—unlike the many hedge funds among the island's creditors—aren't especially likely to sue for their money. Even if they did, not much would come of it, since the debts in question are "moral obligation" bonds—so-called because issuers only have a moral (ha), but not legal, obligation to pay them back.   Still, as Bloomberg puts it, this is basically Puerto Rico's "warning shot to investors that officials aren’t afraid to default." The island says it simply doesn't have the cash flow to cover its obligations (which may well be true), and is working on a debt-restructuring plan it should have done by Sept. 1. But by skipping this weekend's payment, it's signaling to creditors that they should really consider making a deal or risk getting stiffed. Whether the act of defaulting on a group of credit-union members who lack much in the way of legal recourse will intimidate some steely hedge funders remains to be seen.

Hedge Funds Want Puerto Rico to Lay Off Teachers to Fix Debt Crisis - Puerto Rico can avoid a costly default by upping taxes, cutting teacher jobs and closing schools, a group of hedge fund economists proposed in a report released on Monday, offering a controversial solution to the island’s“unpayable” $72 billion debt crisis. The report, , commissioned by hedge funds holding several billion dollars of Puerto Rico’s bonds, highlights the island’s rising education expenditures against the backdrop of countless school closings and waves of poor families fleeing to mainland America. According to government figures, education spending rose 39% to $4.8 billion over the last decade, while enrollment fell 25% to about 570,000. Puerto Rico still spends just $8,400 per student, compared to the U.S. national average of $10,667, according to the Guardian. “The real expense per student has increased enormously without increasing the quality of education,” Jose Fajgenbaum, director of Centennial Group Latin America and one of three former IMF economists who authored the report, told the Guardian. The hedge fund-backed report arrives in response to the Krueger report, a government-commissioned study released June 29 that proposed a significant debt restructuring with which bondholders were unlikely to agree.

Lessons from Sesame Street about preschool education - Should preschool programs be available to all children no matter their socioeconomic status? Should America invest in programs such as Head Start or Perry Preschool so that all children can attend? Does any evidence show these programs work? Another issue, which may at first appear unrelated to universal preschool initiatives, is the rising cost of higher education and the problem of educational access for low-income students. As educational costs climb, how do we ensure that people growing up in less affluent households have access to first-rate higher-ed programs? Are massive open online courses -- MOOCS -- the answer? Interestingly, one of the first MOOCs that attempted to address the educational needs of preschoolers has hardly been studied. As economists Melissa Kearney and Phillip Levine noted in recent research at the National Bureau of Economic Research: "In essence, Sesame Street was the first MOOC.  Both Sesame Street and MOOCs provide educational interventions at a fraction of the cost of more traditional classroom settings." Their research attempts to do two things: examine whether MOOCs can improve educational outcomes, and assess the degree to which early intervention programs can promote student success later in life. When Sesame Street was first introduced more than 40 years ago, it was broadcast on PBS stations using UHF technology. This type of transmission doesn't produce a very strong signal. As a result, reception was poor for some households, and about a third of them couldn't get the signal at all. The hypothesis is that children who grew up further from transmission towers and unable to watch Sesame Street wouldn't do as well in subsequent grades, and would do worse in the job market once they finally graduated.The results are encouraging. The researchers found a significant impact of the Sesame Street MOOC on educational attainment in the early school years. "This effect is particularly pronounced for boys and black, non-Hispanic children and those living in economically disadvantaged areas."

Fracking: Dumbing Down America  -- That burst of employment generated by fracking in the past decade may not have been all good news for the U.S.Jobs offering low-skilled American teenagers a chance to earn big bucks in the shale oil and gas industry also made it less attractive to finish high school, causing a jump in dropout rates, a new study showed. It was published this month by the National Bureau of Economic Research. The sobering takeaway: fracking raises the risk that some workers at the bottom of the skills and education ladder may end up being stuck there, because they made bad schooling choices in a rush to be part of the industry, For every 0.1 percentage point rise in the oil and gas industry’s local male employment rate due to fracking, the dropout rate of male teens climbed by around 0.3 to 0.35 percentage point, the study covering 2000 to 2013 showed. So that means this group took a step back compared to female teens.“By increasing the relative demand for low-skilled labor, fracking thus has the potential to slow growth in educational attainment,” Cascio and Narayan wrote. “Such a phenomenon would work against broader economic trends both at the local level – where incomes may be rising due to fracking, especially among families whose children are more at risk of dropping out – and nationally – where technological change in other industries continues to favor the highly educated.”The study found that in the absence of fracking, the male-female gap in high school dropout rates among 17- to 18-year-olds would have narrowed between 2000 and 2013. Instead, it was unchanged at 1.4 percentage points at the end of the period, with males posting a 5.4 percent dropout rate versus 4 percent for females.Forgoing education can seem more attractive in two ways, the paper showed. First, by increasing the opportunity cost of remaining in high school (the teenager sees he could obtain a job in the oil fields right now) and second, by lifting expectations of a dropout’s lifetime earnings. Indeed, in commuting zones with a relatively high reserve of shale oil and gas, the wages of teen males rose faster than their female counterparts or males who had higher education levels.

Western PA school districts brought down by pension debt: A frank assessment from Moody’s rating agency this week has given several Pennsylvania school districts sour financial notes, and western PA’s schools top the list. Schools in Allegheny, Washington, and Fayette County have all been downgraded to junk status, according to the rating service’s latest report, deemed “unlikely to recover” and it seems exploding pension costs may be to blame. Allegheny County alone has four separate school districts that have been downgraded since March, including McKeesport Area, East Allegheny, West Mifflin Area and Penn Hills school districts. They, along with the other school districts mentioned in Moody’s report, have a particular problem with mounting costs mandated by law. The Pennsylvania Association of School Administrators and the Pennsylvania Association of School Business Officials put out a report last month detailing costs for the state’s school districts. They took special note of the costs that are mandated, including charter payments, health benefits, special education and costs related to retirement plans of school district employees. According to school districts surveyed, pension costs account for 22 percent of all mandatory spending increases. Charter school spending, the next highest category, is set to increase by 11 percent on average.

Teacher pension liabilities driving up school costs, cutting take home pay -- Rising teacher pensions costs are complicating salary negotiations and weighing down higher budget forecasts from an improved state fiscal outlook. Contributions start a steep climb this year to offset the anticipated $70.4 billion future shortfall of the California State Teachers’ Retirement System. Last year school districts paid 8.9 percent of teacher salaries into CalSTRS. That rises to 10.7 percent this year, 12.6 percent for 2016-17, stair-stepping up to 19.1 percent in 2020-21, advises School Services of California, a financial consulting firm. Teacher contributions will be capped at 9.2 or 10.3 percent, depending on hire date. Negotiations on salary increases, still unresolved for this school year in Modesto and many other districts, must factor in the additional 1.9 percent districts will have to give and the 1 percent more teachers will lose to CalSTRS contributions.In budget numbers, medium-sized Modesto City Schools will pay $2.9 million more this year than last for its teachers based on 2014-15 salary levels. By 2021, Modesto schools would pay $15.3 million more to CalSTRS even if they gave no raises, and the average Modesto teacher would pay $1,675 more out of pocket. Even with all that additional money, it will still take until 2046 to comfortably predict CalSTRS can cover its obligations.

Nevada’s New Voucher Plan Is Designed to Bankrupt Public Schools - Nevada is one of our nation’s 24 one-party, all Republican states. Writing for the Washington Post, Lyndsey Layton and Emma Brown note that, “In January, Republicans took control of the Nevada legislature and the governor’s mansion for the first time since 1929, generating the political momentum to enact the country’s most expansive voucher plan. ...Starting next school year, any parent in Nevada can pull a child from the state’s public schools and take tax dollars with them, giving families the option to use public money to pay for private or parochial school or even for home schooling… Nevada’s law is singular because all of the state’s 450,000 K-12 public school children—regardless of income—are eligible to take the money to whatever school they choose.” A child must be enrolled in a public school for at least 100 days in order to qualify. Layton and Brown report that the new Nevada voucher bill was developed with the assistance of the Foundation for Excellence in Education, the foundation Jeb Bush launched in 2008, but from which he resigned at the end of 2014 to prepare for his presidential run. The Foundation’s chief executive Patricia Levesque describes Nevada’s new voucher bill: “This is the wave of the future.  In all aspects of our life, we look for ways to customize and give individuals more control over their path and destiny…. This is a fundamental shift in how we make decisions about education.”

How Big Corporations Are Starving Public Schools of Billions of Dollars  - Corporations have reaped trillion-dollar benefits from 60 years of public education in the U.S., but they’re skipping out on the taxes meant to sustain the educational system. Children suffer from repeated school cutbacks. And parents subsidize the deadbeat corporations through increases in property taxes and sales taxes. Big Companies Pay about a Third of their Required State Taxes.  An earlier report noted that 25 of our nation’s largest corporations paid combined 2013 state taxes at a rate of 2.4%, a little over a third of the average required tax. Many of these companies play one state against another, holding their home states hostage for tax breaks under the threat of bolting to other states. Without Corporate Taxes, K-12 Public Education Keeps Getting Cut.  Overall spending on K-12 public school students fell in 2011 for the first time since the Census Bureau began keeping records over three decades ago. The cuts have  to the present day, with the majority of states spending less per student than before the 2008 recession. Total corporate profits were about $1.8 trillion in 2013 (with other estimates somewhat higher or lower). The $46 billion in total corporate state income tax in 2013, as reported by both Ernst & Young (Table 3-A) and the Census Bureau, amounts to just 2.55% of the $1.8 trillion in corporate profits, a drop from the 3% paid in the five years ending in 2012. The most recent Pay Up Now analysis for 2014 shows some of the biggest and the worst offenders among U.S. corporations in 2014. Twenty companies with total U.S. profits of over $150 billion paid just 1.4% in state taxes. Some of the lowlights:

Bloomberg, Out of Office, Still Has Influence Over Schools - Former Mayor Michael R. Bloomberg has been out of office for a year and a half, but his influence over New York schools is practically as strong as ever. A group devoted to continuing his education agenda and founded in part by his longtime schools chancellor, has become one of the most powerful forces in Albany by pouring millions into lobbying and adroitly exploiting rivalries in state politics. The organization, StudentsFirstNY, and another group with a similar focus called Families for Excellent Schools have formed a counterweight to teachers’ unions, long among the top spenders in the state capital. This year alone, the groups saw major elements of their platforms come to pass, such as tying teacher evaluations more closely to test scores, adding hurdles to earning tenure and increasing the number of charter schools, measures all unpopular with the unions. Among the backers of StudentsFirstNY are major donors to Gov. Andrew M. Cuomo, a Democrat, and to the Republican majority in the State Senate, two of the three parties to all negotiations. Emails and interviews show that StudentsFirstNY has been in regular contact with the governor’s office since his re-election. At the same time, the two groups have become a major nuisance to Mr. Bloomberg’s successor as mayor, Bill de Blasio, a Democrat, who campaigned on reversing some of his predecessor’s policies and is friendly with the city teachers’ union. The groups have delivered a drumbeat of attacks on Mr. de Blasio’s education policies, in television advertisements, rallies where parents upbraid the mayor for not confronting what they call an education crisis, and weekly, or at times daily, emails to reporters. Amid this onslaught, Mr. Cuomo and the Senate delivered a rebuke to the mayor this year by agreeing to only a one-year extension of mayoral control of city schools.

The new era of the $400 college textbook, which is part of the unsustainable higher education bubble - A new milestone must have been established recently – we’re now officially in a new era of the $400 new college textbook and the $300 used college textbook, see graphic above showing the top 15 most expensive textbooks at the University of Michigan-Flint based on a new unpublished report by Matthew Wolverton, an electronic resource management librarian at the Thompson Library (UM-Flint’s library). The graphic below shows the most expensive college textbooks by discipline at UM-Flint, based on the average price of new textbooks for each discipline in winter 2015 semester. For business students taking five classes per semester and paying an average of $250 per textbook, their textbook bill would be $2,500 per year and $10,000 over four years! Of course, those students would be taking courses in non-business disciplines where the average textbook price is lower, but even at an average price of $200 per new textbook, students could be facing costs as high as $8,000 over four years. And even though renting textbooks is a less expensive option compared to purchasing books, rental costs per semester are running above $200 per new book and well above $100 per used textbook (and as high as $180), see top graphic above. Even if students could rent used textbooks for all of their college classes at $100 per course (which is probably on the low side), that would still amount to $1,000 per year (for ten classes) and $4,000 over four years (for 40 classes). The graph below shows the historical increase in college textbooks (981%) between 1978 and 2014 in comparison to increases in the overall CPI (262%), the CPI for medical care (604%), and the median sales price for new homes (408%) over that 37-year period. Textbook prices seem like they are clearly on an unsustainable trajectory, especially in the face of new low-cost alternatives as discussed below.

Obama poised to give financial aid to federal, state prisoners - More prisoners may soon have access to federal subsidies to pay for college under a new Obama administration initiative, ending a 20-year ban on Pell grants for state and federal prisoners. The move could come as soon as this week. Education Secretary Arne Duncan and Attorney General Loretta Lynch are scheduled to visit Goucher College’s Prison Education Partnership at the Maryland Correctional Institution in Jessup on Friday, to make “an important announcement related to federal aid.” On Monday, Duncan said that restoring Pell eligibility for those potential students is one way his agency hopes to increase college affordability.“We’ll have more information soon,” Duncan said. His agency could circumvent the federal ban, doing an end-run around Congress, through its experimental sites program, which gives some colleges limited exemptions to federal financial aid rules.

One In Eight Americans Burdened By Student Loan Debt, Including 700,000 Seniors - It will not be news to 41 million Americans that this nation is in the middle of a student debt crisis. That's the number of people burdened by student loan payments. But many people, including many student debt holders, may be surprised to learn that people can be pursued for student debt even into their elder years. In fact, the government is withholding Social Security payments for some retirees, because their student loans have not been fully repaid.  This is a growing problem which Sens. Elizabeth Warren and Claire McCaskill have asked the government to study in greater depth."Garnishing Social Security benefits defeats the entire point of the program -- that's why we don't allow banks or credit card companies to do it," said Sen. McCaskill. "Social Security is the sole means of retirement income for tens of millions of Americans, and allowing those benefits to be garnished to collect student loan debt cuts a dangerous hole in our safety net." That is one problem with this practice. But, as we will see, there are others. Many people will be surprised to learn that any seniors are still paying off their student debt. They are. 706,000 households headed by someone 65 or older are still paying off their student debts, according to a report by the GAO. Collectively these households owed $18.2 billion in 2013. That's 6 and a half times as much as they owed in 2005, when these senior households' total debt obligation was "only" $2.8 billion. 191,000 of those households -- more than one in four -- are in default. The government can take up to 15 percent of a Social Security check to pay back a student loan, as long as the monthly check amount does not drop below $750 a month.

3 pension funds sue New Jersey for billions in damages - Three public workers' pension funds are suing New Jersey for billions in damages, claiming the state government breached contracts when it contributed less than planned.  The filing Friday is the latest volley in a more than yearlong dispute over pension contributions. They stem from Gov. Chris Christie's decision last year amid a budget shortfall to veer from a pension funding plan he signed into law in 2011. The following is a look at the saga, which is a major political and financial issue in New Jersey for Christie, who is seeking the 2016 Republican presidential nomination.  One of Christie's major accomplishments in his early years as governor was agreeing to a plan to put public employees' pension on more solid ground. The funds were in bad shape mostly because governors from both parties had made smaller payments than required — or skipped them entirely — for two decades. Under the plan signed by Christie, workers would have to contribute more and would see some benefits trimmed while the state would make up the funding shortfall over seven years of increasing payments.  Last year, New Jersey had a surprise revenue shortfall and Christie balanced the books almost entirely by reducing pension contributions. Unions sued, arguing the state had a contract with them to pay up. In June, the state Supreme Court ruled on the issue. It found that it could not order the administration to make the full pension payments, largely because doing so would violate a provision of the state constitution that blocks the current Legislature from saddling future ones with debt. The court made it clear, however, that the state is still responsible for fulfilling its pension promises to workers.

Americans Left $24 Billion in Retirement Money on the Table Last Year - Personal savings rose last year, as conscientious workers reined in their spending. But a smaller portion of those savings were stashed in employer-sponsored retirement plans, new research shows. This and other recent findings suggest that the much-vaunted 401(k) match may not be the silver bullet for retirement savings that is widely presumed.Personal savings jumped to 5.5% last year from 4.6% in 2013, according to data from Hearts and Wallets, a financial research firm. In the same period, average household savings allotted to employer-sponsored retirement plans fell to 22% from 29%. Among households eligible for a plan, only 56% participated, down from 60% the previous year.Partly due to such behavior, Americans leave a staggering $24 billionon the table every year simply by not contributing enough to get their full employer match, according to a study by Financial Engines, a 401(k) advisory firm. Last year about a quarter of employees failed to collect their full match, which added up to $24 billion in lost savings. The average worker missed out on $1,336 a year in free money—over 20 years, that can add up to $43,000.The matching contribution is so ineffective at boosting savings that one third of eligible workers past the age of 59 ½ fail to take full advantage, research out of Yale and Harvard shows. That’s an especially dismal showing because these older workers can make penalty-free withdrawals from their plans.If a 401(k) plan match is free money, why don’t more people take advantage? Inertia explains a lot. That’s why so many employers are switching their plans to automatically enroll new workers and automatically escalate their contribution rate. Another issue is that some workers don’t believe they can get by on less than their full take-home salary, and so they do not enroll or opt out of the plan if they have been automatically enrolled.

Dean Baker on the 2015 SocSec Report and Real Wage -- Dean Baker and colleague Mark Weisbrot have been making a steady case since their publication of the aptly named Social Security: the Phony Crisis back in 1999. In short Social Security does not face a structural demographic problem, instead it has encountered a contingent economic one, marked mostly by a failure of wages to grow with productivity in the ways it did in past decades. The ‘Phony Crisis’ link goes to the Introduction to the book, if you haven’t read it you should. And equally worth reading is the Press Release linked above published last Wednesday. I just want to isolate and emphasize two paragraphs from the Press Release. Wage growth is the key to the program’s solvency for two reasons. The first is that the upward redistribution of wage income over the last three decades has played a large role in the projected shortfall. As income has been transferred from ordinary workers to those at the top of the wage distribution, a larger share of wage income has escaped taxation. When the Greenspan Commission set the cap for taxable wages in 1983, it covered 90 percent of wage income. Currently the cap only covers around 82 percent of wage income. If the cap had continued to cover 90 percent of wage income, the projected shortfall would be roughly 40 percent less than it is now.  “The other reason why broadly based wage growth is key to the program’s continuing solvency is that the burden of possible future tax increases would be much less consequential if most workers will share in the gains of economic growth. The Social Security trustees project that real wages will rise by more than 34 percent over the next two decades. (They are projected to rise by another 30 percent over the following two decades.) Even if the payroll tax is increased by three percentage points, it would take back less than one-tenth of the projected rise in before-tax wages if wage growth is evenly shared. On the other hand, if most of the gains from growth continue to go to those at the top end of the distribution, any tax increase will be a major burden.

Scientology Group Urged Veto of Mental Health Bill - After a Church of Scientology-backed group helped organize a campaign against it, Gov. Greg Abbott vetoed legislation that would have given Texas doctors more power to detain mentally ill and potentially dangerous patients, according to records obtained by The Texas Tribune. The governor's early June veto of Senate Bill 359 caught many of the measure’s proponents off-guard. The legislation had sailed through the House and Senate with little debate and only a handful of negative votes — and during committee hearings in both chambers, a range of mental health advocates, medical groups and law enforcement officials showed up to testify in its favor. Intended to provide a window of protection for doctors who sometimes find themselves choosing between illegally holding mentally ill patients and letting them leave with the real possibility they might be a danger to themselves or the community, the legislation would have allowed hospitals to retain patients for up to four hours, allowing law enforcement to arrive and evaluate the situation. “This bill applies to a very small group of patients — those who voluntarily seek services at a hospital or emergency department, decide to leave the facility, but the physician has determined he or she poses a potential imminent danger to self or others. This is a high bar. Very few patients will meet it,” said a letter jointly signed by Texas Medical Association President Tom Garcia and Texas Society of Psychiatric Physicians President Daniel Pearson. But after the bill passed, a coalition quickly mobilized to work behind the scenes urging Abbott to kill it.

A Note on Medicare Costs - Paul Krugman -- Medicare is about to turn 50, and while it has brought immense benefits, it has also cost a lot of money. Why? Is it the general rise in health care spending, or some specific government-related inability to limit outlays?  Well, there’s a simple answer from the Centers for Medicare and Medicaid historical expenditure data, which among other things offers a comparison between Medicare spending per beneficiary and premiums on private health insurance. Medicare has expanded the range of things it covers, so what you want is the “common benefits” comparison that adjusts for this. And what it shows is that except during a brief period in the 1990s, as HMOs spread, cost growth has consistently been slower in Medicare than in the private sector.

Zombies Against Medicare - Krugman - The real reason conservatives want to do away with Medicare has always been political: It’s the very idea of the government providing a universal safety net that they hate, and they hate it even more when such programs are successful. But when they make their case to the public they usually shy away from making their real case, and have even, incredibly, sometimes posed as the program’s defenders against liberals and their death panels.What Medicare’s would-be killers usually argue, instead, is that the program as we know it is unaffordable — that we must destroy the system in order to save it, that, as Mr. Bush put it, we must “move to a new system that allows [seniors] to have something — because they’re not going to have anything.” And the new system they usually advocate is, as I said, vouchers that can be applied to the purchase of private insurance.The underlying premise here is that Medicare as we know it is incapable of controlling costs, that only the only way to keep health care affordable going forward is to rely on the magic of privatization. Now, this was always a dubious claim. It’s true that for most of Medicare’s history its spending has grown faster than the economy as a whole — but this is true of health spending in general. In fact, Medicare costs per beneficiary have consistently grown more slowly than private insurance premiums, suggesting that Medicare is, if anything, better than private insurers at cost control. Furthermore, other wealthy countries with government-provided health insurance spend much less than we do, again suggesting that Medicare-type programs can indeed control costs.

Raising the Medicare retirement age would not save money; it would cost money. -- Paul K starts us out this week with a compelling defense of Medicare, age 50 this week, against mindless right-wing attacks. In passing, Paul points out that raising the Medicare eligibility age would “hardly save any money.” He’s talking about the federal budget here, but if one broadens the scope, as I think you should, to the whole economy, increasing the Medicare retirement age will increase, not lower, the all-in (private + public) cost of health care. Why? Very simple: because you’re taking the youngest and healthiest people (65 and 66 year-olds) out of the lower cost, more efficient system (that would be Mcare which controls costs better than the private side; see Krugman’s numbers on this), and putting them into the less efficient, private side of the system. That is, some current Mcare beneficiaries would remain on their employers’ plans, where they are relatively costly compared to the rest of the employer-side risk pool, instead of moving over to the Mcare, where they are relatively cheap. BTW, that’s one reason for the result Paul cites: they don’t save much because they’re less costly. Of course, some of these folks would lose coverage, which is also a cost relative to the current system both in terms of their own insecurity and the costs of uncompensated care to the system when they show up in ER’s without coverage.

Senate Republicans Plan to Repeal Obamacare With 51 Votes - Senate Majority Leader Mitch McConnell championed a renewed push to bypass a filibuster and repeal Obamacare with 51 votes on Tuesday, he announced in a joint statement with Utah Senator Mike Lee, one of the most conservative Republicans in the chamber. "Republicans are united in working to repeal the broken promises of Obamacare," McConnell said in the statement, adding that the Senate will "continue our effort to use reconciliation ... to fulfill the promise we made to our constituents." Lee, who has often been at odds with McConnell, has long advocated using Senate procedures to try and kill the president's health care law. "A Senate vote to repeal Obamacare on a simple majority basis through reconciliation is the best way to pursue that goal," Lee said in the statement. "The Majority Leader and I are committed to using reconciliation to repeal Obamacare in the 114th Congress." The gambit is unlikely to succeed due to procedural roadblocks in the Senate, and even if Congress were to pass a full repeal bill President Barack Obama is guaranteed to veto it. But the issue is a flashpoint in the Republican presidential race, where candidates are facing questions about how far they'd go to repeal the health care law.

U.S. health care spending hit $3.1 trillion in 2014 -- Health care expenditures surged in 2014, fueled by expanded coverage and soaring prescription drug costs, according to government research released Tuesday. In 2014, total U.S. health care spending hit $3.080 trillion, up from $2.919 trillion in 2013, according to statistics compiled by researchers at the U.S. Centers for Medicare and Medicaid Services and published Tuesday in the journal Health Affairs. That 5.5% increase compares to a 3.6% rise in 2013, which was the lowest in the 55 years that government researchers have been tracking and compiling such information. Last year's acceleration in health care spending was driven by several factors. Those factors include health care reform law provisions that went into effect in 2014 that expanded eligibility for Medicaid coverage and authorized federal premium subsidies for the lower-income uninsured, as well as big spending increases for prescription drugs, where expenditures leaped by 12.6% in 2014. That prescription drug cost spending increase was “fueled largely by new high-cost specialty drugs for treatment of hepatitis C and, to a lesser extent, new treatments for cancer and multiple sclerosis,” a report summary said. Health care expenditures are expected to rise in 2015 to a record 18% of the gross domestic product, up from 17.7% in 2014 and 17.4% in 2013, according to the report.

U.S. Health-Spending Growth Jumped to 5.5% in 2014 - WSJ: —Growth in national health spending, which had dropped to historic lows in recent years, has snapped back and is set to continue at a faster pace over the next decade, federal actuaries said Tuesday. The return to bigger growth is a result of expanded insurance coverage under the 2010 health law, a revived economy and crunchtime as Medicare’s baby-boom beneficiaries enter their 70s. American spending on all health care grew 5.5% in 2014 from the previous year and will grow 5.3% this year, according to a report from actuaries at the Centers for Medicare and Medicaid Services published in the journal Health Affairs. In the years through 2024, spending growth is expected to average 5.8%, peaking at 6.3% in 2020. The jump comes after five consecutive years of average spending growth of less than 4% annually—a rate touted by the Obama administration as the lowest since the government began tracking health spending in the 1960s and a sign that the health law’s Medicare provisions were helping rein in health costs.  But the sharper increase had been foreseen last year by the actuaries at the Centers for Medicare and Medicaid Services, who warned of a 5.6% increase in 2014, 4.9% growth in 2015, and average 5.7% growth through 2024. The actuaries again Tuesday pointed to the stronger economy and aging population as the main factors in shaping Medicare’s future spending.

Report: Health care costs hit $3.1T — almost $10K a person - Just when you think health care costs can’t get any higher, the projections warn otherwise. The Centers for Medicare and Medicaid Services published its annual national health expenditure data Tuesday, showing that in 2014, health spending reached an estimated $3.1 trillion. That averages out to $9,695 a person. The $3.1 trillion represents a 5.5 percent increase from 2013. The report also predicts that health care could generate almost 20 percent of U.S. gross domestic product by 2024. Year-to-year growth ahead of 2024 is expected to average 5.8 percent, the CMS reports. Although costs are climbing, the report notes that the growth rate is “substantially lower” than the 9 percent average growth average from the three decades before 2008. “Growth in overall health spending remains modest even as more Americans are covered, many for the first time. Per-capita spending and medical inflation are all at historically very modest levels,” CMS acting administrator Andy Slavitt said in a news release. A few other takeaways from the CMS report:

• Health care costs accounted for 17.4 percent of the GDP as of 2013.
• Prescription drug spending increased 12.6 percent in 2014, the highest growth in 12 years.
• Per-enrollee expenditure in 2014 for private health insurance, Medicare and Medicaid were historically slow at 5.4 percent, 2.7 percent and -0.8 percent, respectively, in growth.

$1 of every $5 spent in US will be on health care -- Nearly $1 in every $5 spent in the United States by 2024 will be on health care, according to a government projection released Tuesday, forecasting a quickening of the health inflation rate. Nonetheless, that rate still falls well short of the sharply upward trend seen prior to the Great Recession. Annual health spending is expected to grow an average of 5.8 percent during the period of 2014 through 2024, mainly because of the expansion in the number of people with health insurance due to Obamacare, stronger economic growth and an older population transitioning into the Medicare system, the Office of the Actuary at the Centers for Medicare and Medicaid Services said.  Other factors driving the inflation include expected substantial increases in prescription drug spending, fueled primarily by new high-cost specialty drugs for hepatitis C, and new treatments for cancer and multiple sclerosis. By 2024, national health expenditures are forecast to be $5.43 trillion annually. Nearly half of that spending—47 percent—will be paid for by federal, state or local governments, primarily through the Medicare and Medicaid health coverage programs. That is up from 43 percent last year.  The rate of health spending growth being forecast represents a marked upswing from the historically low rate of health spending inflation of 4 percent annually seen between 2008—the first year of the worldwide economic downturn, and 2013, the year before the Affordable Care Act's coverage provisions began taking full effect.

Who’s Right on Health-Care Cost Projections? – WSJ - The sustainability of the U.S. fiscal outlook depends on the path of health costs, particularly Medicare, the health insurance program for the elderly and disabled. The recent slowdown in Medicare spending has been touted as evidence that the health cost curve has finally “bent” and that the Medicare financing problem can be managed with modest changes in policy.  The Medicare Trustees report, released last week, basically confirms this view.  Under the trustees’ baseline projection, Medicare spending increases from 3.5% of GDP today to 5.5% by 2050 and 6% by 2080. In contrast, the Congressional Budget Office, in June, projected much larger increases in Medicare spending over time, with spending reaching 7% of GDP by 2050 and over 11% by 2080. How can projections by the government’s best experts be so different? And which should we believe? Both the trustees and the CBO assume that the growth both of public and private health spending will slow over time, as the incremental benefit from additional health care becomes less valuable.  Where they differ is in what is assumed about Medicare spending growth relative to growth other health spending.The trustees assume that per capita Medicare spending will rise more slowly than other health spending; CBO assumes that Medicare spending will rise more rapidly. The trustees look at the provisions of the Affordable Care Act governing provider reimbursements and conclude that Medicare payments under the Affordable Care Act are increasingly likely to fall below reimbursement by private insurers and Medicaid (the state-federal program for the poor) over time.  Thus, they expect Medicare spending to rise more slowly than other health spending. Which of these should be believed? Neither. Health spending is almost impossible to predict. Assuming that past trends continue indefinitely produces nonsensical results, as it implies that health spending will eventually consume all of GDP.  But forecasting how the future will be different from the past is not something we know how to do.  The large wedge between these two arguably sensible projections of Medicare should be taken as evidence that we really don’t know how big a fiscal problem health spending will be 25 or 50 years in the future.

AMA Prepares Gag Order for Medical Dissenters -- The American Medical Association’s latest attempt to shore up their medical monopoly could have stiff consequences for practitioners who don’t toe the line. Action Alert! Angered by what they call “quack MDs,” the AMA recently decided to “actively defend the profession.” In particular, it plans to create ethical guidelines for physicians in the media, write a report on how doctors may be disciplined for violating medical ethics through their press involvement, and release a public statement denouncing the dissemination of dubious medical information through the radio, TV, newspapers, or websites. Dr. Mehmet Oz of The Dr. Oz Show was specifically mentioned as being responsible for the type of behavior and “pseudoscience” that the AMA would like to curtail. One of the people who helped craft the AMA resolution to tighten control of doctors in the media is not, in fact, a physician himself, but only a medical student. He told Vox in an interview that “Dr. Oz has something like 4 million viewers a day. The average physician doesn’t see a million patients in their [sic] lifetime. That’s why organized medicine should be taking action.” In point of fact, Dr. Oz reaches only half that number—but let’s not let a little thing like accuracy stand in the way of an agenda.

Changing economic factors and the rise in obesity -- The dramatic increase in obesity has raised the question of whether economic incentives can explain this trend. Previous studies have examined the roles of cheaper and more readily available food, variables related to physical activity, and a variety of other factors.¹ However, most of this research has focused on only one or a few factors at a time, ignoring correlations with other variables that may have contributed to the trend. As a result, the previous literature likely overstates the contribution of some factors, and it is difficult to infer the combined effects of economic incentives without substantial double-counting. Chou et al. (2004) provide the first attempt at a comprehensive economic model of obesity that includes several economic factors. They use the 1984-1999 Behavioral Risk Factor Surveillance System combined with state-level prices of grocery food, restaurant meals, cigarettes, and alcohol as well as restaurant density and clean indoor air laws. In models that control for individual demographic characteristics and state fixed effects, these state-level economic factors explain essentially all of the growth in body mass index and obesity during the period. However, Chou et al. (2004) do not control for time in any way, which likely introduces bias due to the strong upward trend in weight. In a recent paper, we combine the various economic factors alleged to have influenced the rise in obesity in a single model (Courtemanche et al. 2015). We match state-level information on 27 economic factors to data on 2.9 million individuals from the 1990 through 2010 waves of the Centers for Disease Control’s Behavioral Risk Factor Surveillance System. We then estimate the effects of these economic factors on body mass, controlling for the effects of demographic characteristics, state, and year. The analysis is essentially a ‘statistical horse race’ to examine how much of the trend in obesity can be explained by each variable when all of the variables are considered simultaneously.

Americans Are Finally Eating Less - After decades of worsening diets and sharp increases in obesity, Americans’ eating habits have begun changing for the better. Calories consumed daily by the typical American adult, which peaked around 2003, are in the midst of their first sustained decline since federal statistics began to track the subject, more than 40 years ago. The number of calories that the average American child takes in daily has fallen even more — by at least 9 percent. The declines cut across most major demographic groups — including higher- and lower-income families, and blacks and whites — though they vary somewhat by group. In the most striking shift, the amount of full-calorie soda drunk by the average American has dropped 25 percent since the late 1990s.As calorie consumption has declined, obesity rates appear to have stopped rising for adults and school-aged children and have come down for the youngest children, suggesting the calorie reductions are making a difference. The reversal appears to stem from people’s growing realization that they were harming their health by eating and drinking too much. The awareness began to build in the late 1990s, thanks to a burst of scientific research about the costs of obesity, and to public health campaigns in recent years.

Wal-Mart Warns Its Suppliers Over Labeling Laws - WSJ: The world’s largest retailer has put suppliers on notice: Pay attention to the little things before they become big problems. Wal-Mart Stores Inc. WMT -0.10 % last week sent out a memo to hundreds of suppliers from Kraft Heinz Co. KHC 1.67 % to Nestlé SA NSRGY -0.13 % warning them to comply with labeling laws, emphasizing that the amount inside a package matches what is printed on the outside. The memo, reviewed by The Wall Street Journal, is a direct response to some retailers, like Whole Foods Market Inc., WFM -11.61 % being accused of overcharging customers by overstating how much of a product they are selling, a person familiar with the matter said. It also comes as corporations and district attorneys are closely monitoring that suppliers are obeying all labeling and packaging rules, and are quick to file suit if they’re not. “This is a reminder to our suppliers to make sure their labeling matches what’s in the product,” Wal-Mart spokesman Brian Nick said. “We want our customers to know they can have faith in the products they buy at Wal-Mart.”

Placebos can work even when patients know the treatment is fake -- The placebo effect is real – even if you know the treatment you’ve been given has no medical value, research has concluded.   Scientists found patients given a fake painkiller continued to feel benefits from it after they were told it was not genuine.   But there was a catch. In order to feel these effects, the subjects had to be conditioned into thinking that the treatment was real – and needed enough time for this belief to become ingrained.   Those told it was fake after just one session did not continue to experience pain relief, the US study found, but those told after four sessions still felt the benefits.  Senior author Tor Wager, of the University of Colorado Boulder, said: ‘We’re still learning a lot about the critical ingredients of placebo effects. 'What we think now is that they require both belief in the power of the treatment and experiences that are consistent with those beliefs.‘Those experiences make the brain learn to respond to the treatment as a real event.‘  After the learning has occurred, your brain can still respond to the placebo even if you no longer believe in it.’

Picked Out a Coffin Yet? Take Ibuprofen and Die -  In case you missed it: The FDA has just issued a warning on various prescription and non-prescription drugs that Americans ingest by the boatload. As it happens, these seemingly benign pain relievers can kill you even if you scrupulously follow the recommended dosage. But don’t take my word for it. Here’s a blurb from the FDA website:“FDA is strengthening an existing warning in prescription drug labels and over-the-counter (OTC) Drug Facts labels to indicate that nonsteroidal anti-inflammatory drugs (NSAIDs) can increase the chance of a heart attack or stroke, either of which can lead to death. Those serious side effects can occur as early as the first few weeks of using an NSAID, and the risk might rise the longer people take NSAIDs. (FDA Strengthens Warning of Heart Attack and Stroke Risk for Non-Steroidal Anti-Inflammatory Drugs, FDA website) Notice how the FDA refers to “death” as “a serious side effect.” How’s that for an understatement? Why isn’t this headline news? People take tons of these chemicals everyday thinking they’ve been thoroughly tested and are totally safe. Now we find out that’s not the case. Now we discover that you can get a heart attack or stroke “as early as the first few weeks of using” them. Doesn’t that come as a bit of a shock to you, dear reader? Doesn’t that make you suspect that the FDA is not telling the whole truth here, but is simply covering up for a profit-obsessed industry that doesn’t give a rip about its customers health?

Global Anti-Tobacco Policy - Tobacco use could lead to 1 billion premature deaths in the 21st century. That's the estimate of Prabhat Jha and Richard Peto in their 2014 review article in the New England Journal of Medicine, "Global Effects of Smoking, of Quitting,and of Taxing Tobacco" (January 2, 2014, 370: pp. 60-68).  They write (footnotes omitted):   "On the basis of current smoking patterns, with a global average of about 50% of young men and 10% of young women becoming smokers and relatively few stopping, annual tobacco-attributable deaths will rise from about 5 million in 2010 to more than 10 million a few decades hence, as the young smokers of today reach middle and old age. ...There were about 100 million deaths from tobacco in the 20th century, most in developed countries. If current smoking patterns persist, tobacco will kill about 1 billion people this century, mostly in low- and middle-income countries. About half of these deaths will occur before 70 years of age."  What might be done about it? The World Health Organization offers an overview of policy choices in "WHO REPORT ON THEGLOBAL TOBACCO EPIDEMIC, 2015: Raising taxes on tobacco." Here's a figure from the report showing prevalence of smoking around the world. The obvious concern is that rates of smoking will rise as the economies of low-income and middle-income countries grow.

Common chemicals may act together to increase cancer risk, study finds  -- Common environmental chemicals assumed to be safe at low doses may act separately or together to disrupt human tissues in ways that eventually lead to cancer, according to a task force of nearly 200 scientists from 28 countries, including one from Oregon State University. In a nearly three-year investigation of the state of knowledge about environmentally influenced cancers, the scientists studied low-dose effects of 85 common chemicals not considered to be carcinogenic to humans. The researchers reviewed the actions of these chemicals against a long list of mechanisms that are important for cancer development. Drawing on hundreds of laboratory studies, large databases of cancer information, and models that predict cancer development, they compared the chemicals' biological activity patterns to 11 known cancer "hallmarks" - distinctive patterns of cellular and genetic disruption associated with early development of tumors. The chemicals included bisphenol A (BPA), used in plastic food and beverage containers; rotenone, a broad-spectrum insecticide; paraquat, an agricultural herbicide; and triclosan, an antibacterial agent used in soaps and cosmetics. In their survey, the researchers learned that 50 of the 85 chemicals had been shown to disrupt functioning of cells in ways that correlated with known early patterns of cancer, even at the low, presumably benign levels at which most people are exposed. For 13 of them, the researchers found evidence of a dose-response threshold - a level of exposure at which a chemical is considered toxic by regulators. For 22, there was no toxicity information at all. "Our findings also suggest these molecules may be acting in synergy to increase cancer activity,"  "For example, EDTA, a metal-ion-binding compound used in manufacturing and medicine, interferes with the body's repair of damaged genes. "EDTA doesn't cause genetic mutations itself," said Bisson, "but if you're exposed to it along with some substance that is mutagenic, it enhances the effect because it disrupts DNA repair, a key layer of cancer defense."

Gilead's Greed That Kills - Jeffrey Sachs -- Gilead Sciences is an American pharmaceutical company driven by unquenchable greed. The company is causing hundreds of thousands of Americans with Hepatitis C to suffer unnecessarily and many of them to die as the result of its monopolistic practices, while public health programs face bankruptcy. Gilead CEO John C. Martin took home a reported $19 million last year in compensation -- the spoils of untrammeled greed.  Hepatitis C is a global public health crisis, called a "viral time bomb" by the World Health Organization. 150 million people or more worldwide are estimated to be living with the disease. Untreated Hepatitis C can progress to cirrhosis, liver failure, and liver cancer. Every year, at least 700,000 people die from these complications -- although HCV can be easily cured with just 12 weeks of medicines being sold by Gilead. Gilead insists it is saving lives. It claims that it is a hero of innovation, bringing new wonder drugs to the market to cure Hepatitis C, an often-lethal disease that infects almost three million Americans and perhaps 80 million or more people worldwide. The company certainly could be a hero, but is the opposite today. Gilead is the main obstacle between tens of millions of very sick individuals and the medicine that could end their suffering and save their lives.  Gilead owns the monopoly patents on two life-saving Hepatitis C drugs, Solvadi and Harvoni. Gilead did not discover or develop these drugs, except for a brief and modest role at the end of the drug-approval process. Gilead bought these drugs from their discoverers and developers in 2011, after a decade-long discovery and development process, and just before the FDA licensed the drugs in 2013. It bought them with the knowledge that it would use its greed and lobbying power to rip off the American people and deprive people around the world of the benefits of these wonder drugs.

Ebola created a public health emergency—and we weren’t ready for it -- Could the international community have done a better job when confronted with the outbreak of Ebola in West Africa? Although the virus appears to be largely contained now, this comes after at least 27,000 people were infected, with 11,000 of them dying. The virus also had the opportunity to spread within the human population for over a year, providing it a potentially dangerous opportunity to adapt to us as hosts. To find out whether we could have managed the outbreak better, the World Health Organization (WHO) recently convened an Ebola Interim Assessment Panel, which analyzed various aspects of the organization’s response. This panel, commissioned by the WHO Director-General, included the Dean of the Harvard School of Public Health, the founding Director of the UK's national Health Service, and other international public health leaders. It recently released its final report on the crisis.

Another Northern White Rhino Died, Leaving Only 4 Left on Earth  - After the deaths of a male Northern White Rhino at the San Diego Zoo last year and now a female, Nabiré, at a Czech Republic zoo Monday, the Northern White Rhinos are truly on the brink of extinction. Nabiré was 31 when she died from complications of a ruptured cyst, according to a statement from the zoo. “It is a terrible loss. Nabiré was the kindest rhino ever bred in our zoo. It is not just that we were very fond of her. Her death is a symbol of the catastrophic decline of rhinos due to a senseless human greed. Her species is on the very brink of extinction,” said Přemysl Rabas, the director of the zoo. Nabiré was one of the only four Northern White Rhinos bred in captivity. The species is now extinct in the wild due to poaching and conflicts in their native home in Africa.  “The four remaining rhinos include Nola, an elderly female living at a zoo in San Diego, and Sudan, an elderly male living with two females—Najin and her daughter Fatu—on the Ol Pejeta reserve in Kenya,” reports The Guardian. The Czech zoo still hopes to be able to breed the remaining Northern White Rhinos. Nabiré could not conceive naturally due to a large amount of cysts in her utero. But the zoo staff saved Nabiré’s one healthy ovary as “it was hoped she might become a donor of eggs for in vitro fertilization which could result in an artificially made embryo,” says the zoo. “It is our moral obligation to try to save them,” said Rabas. “We are the only ones, perhaps with San Diego Zoo, who have enough of collected biological material to do so. We are aware that our chances are slim, but the hopes are still alive.”

Dentist From Minnesota Pays $50,000 to Kill Cecil the African Lion -- More sad news on the wildlife front. Yesterday, a Northern White Rhino in a Czech zoo died, bringing the grand total of Northern Whites Rhinos on Earth to four (and they are all in captivity). Now, it has come to light that Walter Palmer, a man from a small town near Minneapolis killed Cecil the Lion, one of Africa’s most famous lions and the star attraction at the Hwange national park in Zimbabwe, according to The Guardian.  The Zimbabwe Conservation Task Force said Palmer is the culprit and he was abetted by two Zimbabwean men who will appear in court for allegedly helping lure the lion outside of its protected area to kill it, reports the AP. The lion was found skinned and headless on the outskirts of the park. Walter and the two Zimbabweans said they didn’t know the lion they killed was protected. “I had no idea that the lion I took was a known, local favorite, was collared and part of a study until the end of the hunt,” Palmer told the AP, maintaining that to his knowledge, everything about the hunt had been legal. Today, “the Facebook page of his dental clinic was flooded with angry comments and threats. An online petition demanding justice for Cecil had gathered more than 12,000 signatures,” reports The Guardian.

The United States Is The Biggest Importer Of Trophy Lions Like Cecil - When lions are hunted for trophies, whether they are known and beloved like Cecil the lion or nameless, they’re likely to wind up in the United States, the world’s largest importer of lion trophies. From 1981 to 2012, three-quarters of all lion trophy exports were sent to only five countries — France, Germany, South Africa, Spain and the United States — according to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), an international body that tracks the effect of trade on the survival of species.1 And, according to CITES, 52 percent of all lion trophy exports end up in the U.S., and its share of the trophy trade has been growing. (Trophies can include anything from lion claws to complete lion bodies that are suitable for taxidermy and mounting.)

‘Sea Slaves’: The Human Misery That Feeds Pets and Livestock - It was his chance to start over. But when he arrived, Mr. Long was kept for days by armed men in a room near the port at Samut Prakan, more than a dozen miles southeast of Bangkok. He was then herded with six other migrants up a gangway onto a shoddy wooden ship. It was the start of three brutal years in captivity at sea. After repeated escape attempts, one captain shackled him by the neck whenever other boats neared. Mr. Long’s crews trawled primarily for forage fish, which are small and cheaply priced. Much of this catch comes from the waters off Thailand, where Mr. Long was held, and is sold to the United States, typically for canned cat and dog food or feed for poultry, pigs and farm-raised fish that Americans consume. The misery endured by Mr. Long, who was eventually rescued by an aid group, is not uncommon in the maritime world. Labor abuse at sea can be so severe that the boys and men who are its victims might as well be captives from a bygone era. In interviews, those who fled recounted horrific violence: the sick cast overboard, the defiant beheaded, the insubordinate sealed for days below deck in a dark, fetid fishing hold. The harsh practices have intensified in recent years, a review of hundreds of accounts from escaped deckhands provided to police, immigration and human rights workers shows. That is because of lax maritime labor laws and an insatiable global demand for seafood even as fishing stocks are depleted.

A Politico investigation could change the way you look at food safety - Columbia Journalism Review -- For anyone who eats food, Politico food policy reporter Helena Bottemiller Evich’s recent investigation, “Why President Obama and Congress turned their backs on food safety,” is a must-read. Evich takes readers on a ride through the maze of the country’s food safety system, a ride scary enough to make anyone who takes a bite of a peanut butter cracker or a lick of an ice cream cone think twice. The piece is the second in a series, “Broken By Design,” which Politico bills as an investigation into “little-known federal agencies where big policy challenges meet political realities.” The clash is not a pretty one for the public, as Evich shows. The series, which debuted in April with a piece on pipeline safety, is a commitment from Politico to take a hard look at the under-covered regulatory agencies where most of the nation’s health and safety regulations are thrashed out with the public knowing next to nothing about decisions that sometimes bring deadly consequences. The focus of Evich’s narrative is the Food Safety Modernization Act (FSMA) passed in 2010, after major outbreaks of illness caused by contaminated food killed several Americans and sickened thousands more. But, as Evich reported, almost five years after the law passed with the help of the food industry and a coalition of consumer and food safety advocates, “not one of the sweeping new rules has been implemented and funding is more than $276 million behind where it needs to be.” She writes, “a law that could have been legacy-defining for President Barack Obama instead represents a startling example of a broad bipartisan policy initiative stymied by politics and the neglect of some of its strongest proponents.” When it came to going to bat for money needed to fund more inspectors and tougher anti-contamination standards on everything from peaches to imported pesto, the coalition fell apart and walked away. Imports were a special target. As Evich reported, two decades ago, the FDA oversaw 200,000 imports. Last year there were 12 million, accounting for about 15 percent of the nation’s food supply. But without rules, there can be no new standards. Without money, there can be no more inspectors. So far, the law’s promise, articulated by former Iowa Sen. Tom Harkin—“parents who tell their kids to eat spinach can be assured it won’t make them sick” —has not materialized. There’s no prospect that it will any time soon.

Dried oregano in 'latest food fraud' says Which? - BBC News: Dried oregano is the focus of "the latest in a long line of food frauds", with a quarter of samples containing other ingredients, suggests a study. Of 78 samples of the herb, 19 contained ingredients like olive or myrtle leaves, researchers found. The study, for consumer group Which? revealed that in some cases, less than a third was oregano. "Much better controls are needed," said lead author Prof Chris Elliott of the Global Institute of Food Security. Prof Elliott examined dried oregano sold at a range of shops in the UK and Ireland and from online retailers.  The team used a technique called mass spectrometry to identify the make-up of the samples. Some contained between 30% and 70% of other ingredients. "Clearly we have identified a major problem and it may well reflect issues with other herbs and spices that enter the British Isles through complex supply chains," said Prof Elliott.

80 percent of crops dead, 150 billion MNT buried in the ground -- Approximately 80 percent of Mongolia’s crops have died this summer due to extreme drought across the country, according to board member of the Mongolian Plantation Union B.Erdenebat. Though the situation has reached a critical level, the Ministry of Industry and Agriculture has yet to take action, let alone announce to the public what is happening. According to B.Erdenebat, who is more commonly known as a member of the famous Mongolian pop group Camerton, crop fields remain productive in only in the regions of the Khalkh River in Bulgan and Selenge provinces. Not counting equipment purchase costs, B.Erdenebat said the damages amount to 150 billion MNT so far. Some soums have started preparing soil for next year, as it is evident that no yield can be expected this year. According to B.Erdenebat, crop farmers and provinces have been urging the ministry to prepare for cloud seeding to force rain, without much success, since winter. “Crop farmers and union members have been telling the ministry [about drought conditions] all winter. We asked them to allocate a budget and prepare cloud seeding equipment and cartridges. We reminded them that plantation yield is cyclical and that since the last few years gave a good harvest, this year will be difficult. But the ministry did not take any measures. They have been very irresponsible in this regard. They kept reciting bad financial standings and didn’t heed our words,” B.Erdenebat told Udriin Sonin. “Almost 80 percent of the cloud seeding cartridges were used to put out the wildfire in Dornod Province this spring… China and Russia have lost 20 to 25 percent of their crops, but we lost 80 percent,” he added. Although cloud seeding has been effective in bringing about rain in the past, the union said that the state’s cloud seeding personnel had been changed entirely and the new staff haven’t been able to produce rain effectively.

Iowa Governor: Des Moines Water Utility Should ‘Tone Down’ Criticism of Agricultural Pollution -- Iowa Governor Terry Branstad told reporters Tuesday that Des Moines Water Works — a private utility that provides water to some 500,000 residents in the Des Moines area — should “just tone it down” when it comes to monitoring water pollution from agriculture. “The Des Moines Water Works ought to just tone it down and start cooperating and working with others, like Cedar Rapids is doing, and other communities in the state of Iowa,” Branstad reportedly said when asked if the state government would work to help Des Moines Water Works customers impacted by the utility’s expected 10 percent rate increase. Water Works claims that the rate hikes are necessary to cover the increased costs of water treatment due to nitrate pollution, which comes from largely unregulated fertilizer runoff from surrounding farmland. According to the Des Moines Register, Water Works has spent $1.5 million for nitrate removal since December of 2014, and plans to spend up to $183 million more for new nitrate removal equipment built to keep up with high levels of pollution.The EPA allows up to 10 milligrams of nitrates per liter in public drinking water — anything higher than that is considered a threat to public health. The Des Moines and Raccoon rivers, from which the Des Moines Water Works pulls its water, both have exhibited levels in excess of federal standards, a trend that’s mirrored in major rivers across the state. According to an April report by the Des Moines Register, nitrate levels across Iowa’s major rivers have more than tripled, increasing from about 2 milligrams per liter on average in 1954 to more than 7 milligrams per liter between 1954 and 2010.

Agriculture Might Be Emitting 40 Percent More Of One Greenhouse Gas Than Previously Thought -- Synthetic fertilizers are used throughout agriculture — and especially in the United States’ Corn Belt — to help plants grow. But the fertilizers also emit a greenhouse gas known as nitrous oxide (N2O) that is almost 300 times more potent, pound for pound, than carbon dioxide. Now, a recent study out of the University of Minnesota suggests that emissions from nitrous oxide have been severely underestimated, by as much as 40 percent in some places.  Nitrous oxide emissions have historically been calculated in two ways: either by adding up the amount of nitrogen used as fertilizer (known as the bottom-up method) or by taking measurements from the air (known as the top-down approach). But these two techniques haven’t always yielded compatible results, and regional measurements taken with a top-down approach showed more nitrous oxide emissions than in the bottom-up models used by the Intergovernmental Panel on Climate Change, leading researchers to speculate that the IPCC was likely underestimating global nitrous oxide emissions.  Researchers at University of Minnesota wondered where the discrepancy in the two models came from — what was the top-down model measuring that the bottom-up models were missing?  The answer, published Monday in the Proceedings of the National Academy of Sciences, came from looking at N2O emissions across Minnesota not just from the soil, but also from streams and rivers, where nitrogen fertilizers can often end up due to drainage and runoff.  The researchers found that when these river and stream systems are taken into account, estimates of nitrous oxide emissions tended to increase. The researchers also noticed a strong relationship between the size of the stream or river and its emissions, finding that small streams close to land had the highest emissions.

Greenhouse gas source underestimated from the US Corn Belt, study shows -- Estimates of how much nitrous oxide, a significant greenhouse gas and stratospheric ozone-depleting substance, is being emitted in the central United States have been too low by as much as 40 percent, a new study led by University of Minnesota scientists shows. The study, published in the journal Proceedings of the National Academy of Sciences, measured how much nitrous oxide is emitted from streams in an agriculturally dense area in southern Minnesota. Agriculture, and specifically nitrogen fertilizers used in row-crop farming, is a major contributor to nitrous oxide emissions from streams, the paper notes. Nitrous oxide emissions are measured at the University of Minnesota Tall Tower Trace Gas Observatory -providing a top-down constraint on the regional emissions. Estimates of nitrous oxide emissions also are calculated by combining on-the-ground (bottom-up) measurements within the region. These measurements are used to keep track of emissions and help inform strategies for reducing nitrous oxide loss from agricultural lands. However, very large differences have been observed between these top-down and bottom-up approaches, indicating large uncertainties, and undermining the development and assessment of mitigation practices. The researchers found that some of the discrepancies between bottom-up emission measurements and those taken from the air can be attributed to variations in the size and flow of streams and rivers; by taking the impact of stream networks into account, scientists can more accurately estimate and mitigate increased concentrations of nitrous oxide.

Rice revolution? New rice could help feed world, fight climate change. - A new strain of rice produces more and larger grains and reduces methane emissions from rice farming, perhaps the largest human-based source of the greenhouse gas. But it's genetically modified, which could lead to a backlash.Researchers have developed a new strain of rice with the potential to feed a burgeoning global population while reducing the greenhouse-gas emissions rice paddies generate. They have coaxed the rice into growing more and larger grains. At the same time, the genetic change cut methane emissions from paddies growing the rice by more than 90 percent compared with paddies growing unaltered plants. By some estimates, rice farming may be the single largest source of methane emissions humans deliver to the atmosphere, though estimates vary widely. Scientists have been working to develop rice with higher-nutrition, low-emissions traits for years, given that the crop that plays such a significant role in the diets of some 3 billion people."The new rice sounds like a win-win for good yields and reduced climate impact," writes Paul West, lead scientist for the Global Landscapes Initiative at the University of Minnesota's Institute on the Environment, in an e-mail. But the nature of the new rice could trigger push-back from groups opposed to genetically modified organisms, suggests Dr. West, who did not take part in the study. It was created by adding a gene taken from barley to the genome of a widely used type of rice, known as Nipponbare.

Pesticide drift threatens organic farms - Chert Hollow Farm sits nestled between rows of tall trees and a nearby stream in central Missouri. Eric and Joanna Reuter have been running the organic farm since 2006. Their neighbors grow acres of corn and soybeans and they mostly got along. That is until one July evening in 2014.  They spotted a crop duster passing unusually close to their property. Shortly after experiencing headaches and irritation, they knew the wind had blown something chemical onto their land. Without knowing what it was, they were left in the lurch with a big asterisk on the authenticity of their organic crops. They’ve opted not to sell their produce this year and hope the contaminated soil will rebound for next year. It’s a big hit for their small business. In the U.S., farmers use nearly 900 million pounds of pesticides every year to protect their crops from weeds and insects. But sometimes those chemicals drift to neighboring property, which can ruin crops on organic farms. Although conventional farms can also get hit with unwanted pesticides, it’s the $40 billion organic industry that’s most vulnerable. As more organic farms pop up, these kinds of disputes will only be more common. Kaci Buhl of the National Pesticide Information Center says there’s no clear picture of how common pesticide drift is for the nearly 20,000 organic farms nationwide. “The data would get better and possible resource allocation would increase if there was more consistent reporting,” she said.

Module: Glyphosate Causes Cancer -- Recently the WHO’s International Agency for Research on Cancer (IARC) put the system’s official seal on what we’ve long known: Glyphosate causes cancer. This module will assemble the evidence proving this. Glyphosate’s two main cancer causing mechanisms are: It is an endocrine disruptor, and it causes gene and cell damage. Each of these causations will be the subject of its own module.  Here’s the science the IARC emphasized, building from its 2014 review which emphasized glyphosate as a potent cause of non-Hodgkin’s lymphoma (NHL) and B cell lymphoma. *The IARC cites a series of epidemiological studies of farmers. The studies found a strong pattern of evidence that glyphosate causes NHL. These were a 2001 Canadian study, Swedish studies from 2002, this study also strongly linking glyphosate to hairy cell leukemia in addition to NHL, and 2008 (also a prior study from 1999 found the NHL link), and a 2003 US study. The authors of this study wrote, “Current medical research suggests that while farmers are generally healthier than the general U.S. population, they may have higher rates of some cancers, including leukemia, myeloma, non-Hodgkin lymphoma, and cancers of the lip, stomach, skin, brain, and prostate.” Another 2005 US study found a strong link between glyphosate and multiple myeloma, along with links to melanoma, colon, rectum, kidney, and bladder cancers. The IARC considered only evidence from 2001 onward. But the evidence goes back decades prior to that.

Module: Glyphosate Causes Birth Defects - A summary of the evidence.

• *Both Roundup and glyphosate by itself caused malformations in chicken and frog embryos at doses far below agricultural applications. This 2010 lab study, performed by Argentine scientist Andres Carrasco and his research team, gave laboratory confirmation of the kinds of birth defects which epidemiological studies (see below) find to be rampant among humans living in the industrial soy zone. The researchers identified glyphosate’s interference with the retinoic acid signaling pathway as the likely mechanism of toxicity. *A lab study from 2007 exposed rat mothers to Roundup during pregnancy and lactation. The doses were not found to be toxic to the mothers. Male offspring showed decreased sperm count, lower levels of sperm production, a heightened percentage of abnormal sperm, lower serum testosterone at puberty, and sperm cell degeneration.
• *A 2003 lab study found skeletal malformations in rat fetuses after their mothers had been given maternally non-toxic doses of Roundup.
• *A 2003 lab study found that commercial glyphosate formulation caused death and, at lower doses, malformations in tadpoles.
• *A Russian researcher found that female rats fed Roundup Ready soybean meal produced litters with over 55% of the pups stunted. This was 6-9X the rate found in two groups not given the Roundup-laced feed. The stunted rats died within three weeks, while the non-stunted survivors were sterile.
• *Monsanto’s own studies on glyphosate (they seem never to have tested Roundup) found that maternal exposure to glyphosate in rabbits and rats, at both maternally toxic and at lower, maternally non-toxic doses, caused birth defects in offspring.
• *A 2009 review of Monsanto’s own studies found that Roundup causes necrosis and apoptosis (two kinds of cell death) in human umbilical, placental, and embryonic cells.
• *A 2005 lab study found that glyphosate damages human placental cells and is an aromatase inhibitor. This highlights the fact that glyphosate is an endocrine disruptor and causes developmental harm in many ways because of this. I’ll be devoting a module to glyphosate as endocrine disruptor, where there will also be more birth defect evidence, because these overlap. Glyphosate’s interference with estrogen production also associates it with breast cancer.

NEIL YOUNG:   The Importance of GMO Labeling - A Message From Neil Young -  As I write this, the dark act is up for a vote in the House of Representatives; representatives of the people. The dark act takes away the rights of those people to vote for or against things like GMO labeling in their states. It does seem ironic. If the act is passed, it will truly be a dark day for America.  Monsanto is a corporation with great wealth, now controlling over 90% of soybean and corn growth in America. Family farms have been replaced by giant agri corp farms across this great vast country we call home. Farm aid and other organizations have been fighting the losing battle against this for 30 years now.  Dairy and meat farming is done in those white sheds you see from the freeway, no longer on the green pastures of home with the old farmhouses and barns. Those beautiful buildings now stand in ruin across the country. This has happened on our watch while the country slept, distracted by advertising and false information from the corporations. Monsanto and others simply pay the politicians for voting their way. This is because of "Citizens United", a legislation that has made it possible for corporations to have the same rights as people, while remaining immune to people's laws. Both Democratic and Republican front runners are in bed with Monsanto, from Clinton to Bush, as many government branches are and have been for years. This presidential election could further cement the dominance of corporation's rights over people's rights in America. If you have a voice you have a choice. Use it. On the human side, the film I would like you to see tells the story of a farming family in America, but the same thing is happening around the world. It is a story that takes 10 minutes of your time to see. It is a simple human one, telling the heartbreaking story of one man who fought the corporate behemoth Monsanto, and it illustrates why I was moved to write The Monsanto Years.  The film presents a rare opportunity to hear from the source as Mr. White is one of only four farmers who is still legally allowed to speak about his case as all the others have been effectively silenced.

If the DARK Act Passes, What Then?  - See here and here for more on what the DARK Act is about; it seeks to enshrine the “voluntary” labeling sham, along with ferocious pre-emption as I described here.

1. What would the preemption of labeling mean in itself? Labeling is certainly not sufficient, and is conceptually flawed if envisioned as a worthwhile goal in itself. It implies the continuation of industrial agriculture and food commodification, and globalization as such. It merely seeks Better Consumerism within that framework. If people saw labeling as a temporary measure within the framework of an ongoing movement to abolish industrial agriculture and build Food Sovereignty, that could be good. If people saw the campaign for labeling as primarily a movement-building action, an occasion for public education, for democratic participation in a grassroots action, and to help build a permanent grassroots organization, that would be good. POE as I call it – Participation, Education, Organization. But many of the advocates seem to see it as a panacea. They at least claim to expect miracles from it: Labeling = the end of Monsanto. This is highly doubtful. Just because a labeling initiative or law is passed doesn’t mean it will be enforced with any alacrity. It’s still the same old pro-Monsanto government which would be in charge of enforcement. That’s why getting an initiative or law passed would be just the first and easiest step. Then the real work of vigilance, forcing the enforcers to follow through, would begin. That, too, was a reason why the campaign needs to be, even more than just an intrinsic campaign, the building ground of a permanent grassroots organization. When we combine the picayune content of these labeling proposals with the fact that their advocates do often call them a self-sufficient panacea, and with the fact that the efforts have often been designed like one-off electoral campaigns rather than as processes of building permanent grassroots organizations, we can see the some of the inherent political limits of labeling campaigns.

Vandana Shiva: ‘We Must End Monsanto’s Colonization, It’s Enslavement of Farmers’  Citizens of the U.S. are being denied the right to know what they are feeding their families. Despite the fact that 90 percent of American citizens want GMO labeling on their food, big business is doing everything it can to prevent people from accessing their rights. Representative Pompeo’s bill, popularly known as the DARK Act (Denying Americans the Right to Know), has been written almost entirely by the biotech industry lobby. While American citizens are advocating for their rights to knowledge and healthy, affordable food, Monsanto’s legal team is busy on every legislative level trying to prevent this from happening. Monsanto’s subversion of democratic legal processes is not new. In fact, it is their modus operandi, be it the subversion of LA’s decision to be GMO free by amending the California Seed Law—equating corporations with persons and making seed libraries and exchange of seed beyond 3 miles illegal—or suing Maui County for passing a law banning GMOs. Decades before there was a “debate” over GMOs and Monsanto’s PR and law firms became the busiest of bees, India was introduced to this corrupting, corporate giant that had no respect for the laws of the land. When this massive company did speak of laws, these laws had been framed, essentially, by their own lawyers.Today, Indian cotton farmers are facing a genocide that has resulted in the death of at least 300,000 of their brothers and sisters between 1995 and 2013, averaging 14,462 per year (1995-2000) and 16,743 per year (2001-2011). This epidemic began in the cotton belt, in Maharashtra, where 53,818 farmers have taken their lives. Monsanto, on it’s own website, admits that pink bollworm “resistance [to Bt] is natural and expected” and that the resistance to Bt “posed a significant threat to the nearly 5 million farmers who were planting the product in India.” Eighty four percent of the farmer suicides have been attributed to Monsanto’s Bt Cotton, placing the corporation’s greed and lawlessness at the heart of India’s agrarian crisis.

Forget Banks - GMOs Are The New "Too Big To Fail' System - Mark Spitznagel and Nassim Nicholas Taleb - Before the crisis that started in 2007, both of us believed that the financial system was fragile and unsustainable, contrary to the near ubiquitous analyses at the time.  We were repeatedly told that there was evidence that the system was stable, that we were in “the Great Moderation,” a common practice that mistakes absence of evidence for evidence of absence. For the financial system to be viable, the solution is for it to resemble the restaurant business: decentralized, with mistakes that stay local and that cannot bring down the entire apparatus. As we said, the financial system nearly collapsed, but it was only money. We now find ourselves facing nearly the same five fallacies for our caution against the growth in popularity of G.M.O.s. First, there has been a tendency to label anyone who dislikes G.M.O.s as anti-science — and put them in the anti-antibiotics, antivaccine, even Luddite category. There is, of course, nothing scientific about the comparison. Nor is the scholastic invocation of a “consensus” a valid scientific argument. Second, we are told that a modified tomato is not different from a naturally occurring tomato. That is wrong: The statistical mechanism by which a tomato was built by nature is bottom-up, by tinkering in small steps (as with the restaurant business, distinct from contagion-prone banks). In nature, errors stay confined and, critically, isolated. Third, the technological salvation argument we faced in finance is also present with G.M.O.s, which are intended to “save children by providing them with vitamin-enriched rice.” The argument’s flaw is obvious: In a complex system, we do not know the causal chain, and it is better to solve a problem by the simplest method, and one that is unlikely to cause a bigger problem. Fourth, by leading to monoculture — which is the same in finance, where all risks became systemic — G.M.O.s threaten more than they can potentially help. Ireland’s population was decimated by the effect of monoculture during the potato famine. Just consider that the same can happen at a planetary scale. Fifth, and what is most worrisome, is that the risk of G.M.O.s are more severe than those of finance. They can lead to complex chains of unpredictable changes in the ecosystem, while the methods of risk management with G.M.O.s — unlike finance, where some effort was made — are not even primitive. The G.M.O. experiment, carried out in real time and with our entire food and ecological system as its laboratory, is perhaps the greatest case of human hubris ever. It creates yet another systemic, “too big too fail” enterprise - but one for which no bailouts will be possible when it fails.

How Big Water is trying to stop the National Park Service from cleaning up plastic bottles fouling the parks - The Washington Post: The National Park Service thought it had a good strategy for reining in the discarded water bottles that clog the trash cans and waste stream of the national parks: stop selling disposable bottles and let visitors refill reusable ones with public drinking water. But Big Water has stepped in to block the parks from banning the plastic pollutants — and the industry found an ally on Capitol Hill to add a little-noticed amendment to a House spending bill that would kill the policy.  As environmental groups and local officials campaign for a sales ban to reduce park waste and carbon emissions, the titans that manufacture Deer Park, Fiji, Evian and 200 other brands of water packaged in disposable plastic have mounted a full-court lobbying campaign on Capitol Hill to stop the Park Service’s latest effort at sustainability. “This is a prominent, misleading attack on bottled water that has no justification,” said Chris Hogan, vice president of communications for the International Bottled Water Association, which represents 200 bottlers from Glacier Springs to Evian and is leading the charge against bottled-water restrictions. Beyond the threat to its bottom line, the industry–which did $13 billion in sales last year– is warning the Park Service that its “misguided” attempt to help the environment is actually helping Coke and other “unhealthy” packaged beverages by forcing park visitors on hot summer days to guzzle them instead of water.

Investigation Finds Brazil’s Olympic Swimming, Sailing Venues Are Full Of Human Poop  An unprecedented amount of human poop is festering in Rodrigo de Freitas Lake and Copacabana Beach, where hundreds of swimmers and boaters are scheduled to compete in next year’s summer Olympics and Paralympics, an Associated Press investigation has found.  Published Thursday by reporters Brad Brooks and Jenny Barchfield, the investigation found “dangerously high levels of viruses and bacteria” from untreated sewage in the country’s Olympic venues. The high levels of contamination risk seriously sickening Olympic athletes, some of whom have already experienced fevers, vomiting, and diarrhea, according to the report. One expert told the AP that, if athletes ingest even three tablespoons of the water, they have a 99 percent risk of infection. “What you have there is basically raw sewage,” . “It’s all the water from the toilets and the showers and whatever people put down their sinks, all mixed up, and it’s going out into the beach waters.” The AP describes it like this:  Extreme water pollution is common in Brazil, where the majority of sewage is not treated. Raw waste runs through open-air ditches to streams and rivers that feed the Olympic water sites. As a result, Olympic athletes are almost certain to come into contact with disease-causing viruses that in some tests measured up to 1.7 million times the level of what would be considered hazardous on a Southern California beach.

9 Ways Climate Change Is Making Us Sick --Yes, climate change is causing hurricanes, droughts and making sea level rise. But it’s also making us sick. Illnesses related to a warming planet are on the rise. Here are nine specific maladies related to climate change that could be affecting you or those you love and five ways for dealing with them.

• 1. Asthma and respiratory ailments. Asthma is increasing across the U.S. Between 2001 and 2009, reports the Centers for Disease Control, the number of patients diagnosed with asthma rose by 4.3 million...plants are starting their pollination season earlier and it lasts longer.
• 2. Allergies In addition to asthma, the number of people suffering from hay fever and other pollen allergies is also on the rise.
• 3. Heart disease and stroke Extreme temperature changes, plus high particulate matter from burning coal and gasoline, can increase the risk for heart attack or stroke.
• 4. Poison ivy. As a result of higher global temperatures, poison ivy leaves are getting bigger, the vines are getting hairier and the oil in the leaves that makes you itch is getting more potent.
• 5. Dengue fever - a disease that was once restricted to the tropics is starting to show up in the southern U.S.. The Natural Resources Defense Council reports that two types of mosquitoes capable of transmitting dengue fever can now be found across at least 28 states.
• Read page 1
• 6. Lyme disease - Diseases carried by ticks are spreading, as well, especially in the northeast. There never was much concern because deer tick was not that prevalent inland from the coast. Now it’s everywhere.
• 7. Other infectious diseases.  in the wake of extreme weather events, various waterborne pathogens can cause diarrhea and may contaminate water supplies. These pathogens reproduce more quickly in warmer conditions as well.
• 8. Heat stroke.  Prolonged exposure to extreme heat can cause heat exhaustion, heat cramps, heat stroke and even death. Senior citizens may be particularly susceptible, particularly those who do not have air conditioning.
• 9. Mental health and stress - Stress, anxiety, depression, even post-traumatic stress disorder can occur when someone goes through a harrowing.

Picturing the Drought - Killing the Colorado - (photo essay) “Killing the Colorado,” a joint reporting project by ProPublica and Matter, set out to tell the truth about the American West’s water crisis. As serious as the drought is, the investigation found that mismanagement of that region’s surprisingly ample supply has led to today’s emergency. Among the causes are the planting of the thirstiest crops; arcane and outdated water rights laws; the unchecked urban development in unsustainable desert environments; and the misplaced confidence in human ingenuity to engineer our way out of a crisis — with dams and canals, tunnels and pipelines. “The hardest thing about photographing this project was that all of this was and is beautiful,” said photographer Michael Friberg. “Lake Powell looks like a prehistoric sea on the surface of another planet.” Four photographers — Christaan Felber, Bryan Schutmaat, Jake Stangel and Michael Friberg — were enlisted by photo editors Luise Stauss and Ayanna Quint to document man’s mistakes and their consequences. Friberg, who has lived in the West for the last decade, thought he knew the issues facing the Colorado River. He soon discovered he was wrong.

Why are thousands of migratory salmon dying before they can spawn? - — Unseasonably hot water has killed nearly half of the sockeye salmon migrating up the Columbia River through Oregon and Washington state, a wildlife official said on Monday. Only 272,000 out of the more than 507,000 sockeye salmon that have swum between two dams along a stretch of the lower Columbia River have survived the journey, said Oregon Department of Fish and Wildlife fisheries manager John North. "We've never had mortalities at this scale," said North. The die-off comes as U.S. West Coast states grapple with drought conditions and the Columbia is seeing the third-highest count of sockeye returning from the ocean to spawn since 1960, federal figures show. Hot air combined with abnormally low mountain snow melt has increased water temperatures and prompted fishing restrictions and efforts to save beleaguered fish, including trucking salmon to cooler waters. The Columbia River hit 70 degrees Fahrenheit in mid-June, about a month earlier than usual, and the fish were not able to adjust, North said.Warm waters are at least partially to blame for more than 400,000 additional salmon deaths this year, hatchery officials say. Snake River sockeye, which lay their eggs in lakes, in 1991 became the first salmon named to the U.S. Endangered Species List.

Bay Area water agencies start strong, hit conservation targets - SFGate: Whether driven by threats or an abiding virtue, Bay Area residents are showing a knack for saving water, meeting and even exceeding new state conservation targets that carry big fines for communities that fall short. The region’s widespread reductions in water use in June, which were as high as 40 percent in the Contra Costa Water District when compared to the same month in 2013, marked a vast improvement over previous months for most of the area’s big water suppliers. Water experts say indifference toward the drought has evolved into a deep understanding of the problem, prompting most homes and businesses to cut back. California has seen four consecutive dry years, and many of the reservoirs and aquifers that provide drinking water to the Bay Area are at near-record lows.

San Bruno: Regional transmission water line broken, 'millions of gallons' lost - Millions of gallons of water have been lost from a 54-inch regional transmission line that broke at Junipero Serra County Park in San Bruno on Monday night, a San Francisco Public Utilities Commission spokesman said Tuesday. The break was reported at 9:30 p.m. Monday at the entryway to the park on Crystal Springs Road, SFPUC spokesman Tyrone Jue said. The water is flowing back through the park and into a creek that runs into the Bay, so no property damage has been reported, Jue said. Jue did not have an estimate yet for how much water has flowed out of the broken pipe but said it was "easily millions of gallons." He said the water was still flowing as of shortly after 8:30 a.m. so crews have not been able to inspect the pipe for damage and do not know how long it might take to repair. The pipe supplies water to the Peninsula as part of the Hetch Hetchy Water System. Jue said customer service is not currently affected by the broken pipe. He said the SFPUC was working Tuesday morning with regional utilities connected to the line to set up backup water supplies.

Startling Footage of California Reservoirs Shows Devastating Impact of Epic Drought  - If you’re wondering how much damage four years of an epic drought can wreck, look no further than the condition of California’s depleted reservoirs. In new footage of the Folsom, Oroville and Shasta reservoirs—captured by the California Department of Water Resources (CA-DWR) on July 20—it’s genuinely startling to see how little water remains. The CA-DWR wrote on Facebook that Folsom Lake measured at 34 percent of capacity, Lake Oroville at 35 percent and Lake Shasta at 45 percent. Jay Famiglietti, senior water scientist at NASA’s Jet Propulsion Laboratory and a professor at UC Irvine, estimated that California’s reservoirs have only about a one-year supply of water remaining. These before-and-after images from the CA-DWR illustrate the extent of the drought’s damage even further. (But don’t be too alarmed, “reservoirs provide only a portion of the water used in California and are designed to store only a few years’ supply,” the Los Angeles Times noted). CityLab noted that 71 percent of California is currently experiencing “extreme” or “exceptional drought,” while 100 percent of the state is experiencing some form of drought. Meanwhile, conditions across the drought-wracked region are continuing to break records. Temperatures in the Northwest are in the 90s-100s, at 10 to 15 degrees above normal and even 20 degrees in a few locations, according Accuweather. Additionally, in a new study cited by Climate Central, “the amount of rain that California has missed out on since the beginning of its record-setting drought in 2012 is about the same amount it would see, on average, in a single year"

California Drought Could Wipe Cities Off Map If Their Water Runs Out « CBS Sacramento: Wells are going dry, jobs are harder to come by and families are already moving, either to different states or even Mexico in search of work.Before visiting Tulare County, a place where wells have gone dry and some people are living in third-world conditions, we went to a place deep in the Mojave Desert that offers a dire warning of what can happen when the water runs out.Desolate and deserted, Dave Leimbach is one of the few left in Lockhart. “We didn’t ask for this,” he said.Once home to hundreds, it’s an all but abandoned and forgotten ghost town in the Mojave that barely a half-dozen people call home.The sun set slowly on the old farming town when the nearby lake dried up.“I’ve been out here since 1980,” he said. “And they’re all gone. All of them.”Hundreds of miles away, communities similarly built on farming are struggling as water is scarce. Orchards have been ripped out, and farm jobs are few. Many worry new ghost towns could be on the horizon in Central California.In these parts, Donna Johnson is affectionately known as the water lady. She’s delivering water to a needy family in East Porterville, a devastated town we’ve visited before. Dozens more wells have run dry since our last trip. Most of the Tulare County community south of Fresno still has no water.

The bad news for Western drought: 'monster' hot El Nino on the way -  Across Western Canada this season, many may be recalling the old adage, "be careful what you wish for" as forest fires, drought and pestilence invite biblical comparisons.  More worrisome, though, than the sight of Saskatchewan, Alberta and British Columbia wilting under 30 degree temperatures in June and July — and rationing scarce water supplies in some areas — is that this might just be the start of an even bigger problem. Many meteorologists are chalking up today's weird and wacky weather in the West to the fact that this is an El Nino year, referring to the cyclical Pacific Ocean phenomenon that disrupts global weather patterns. The problem with that, according to Environment Canada senior climatologist David Phillips: "It's not even arrived in Canada yet." "We don't see the effects of El Nino until late fall, winter and early spring," he says. What that likely means is at least three more consecutive seasons of warmer, drier weather when farmers are already, quite literally, tapped out in the moisture department. As for what that could mean for drought conditions next summer and beyond, Phillips says it's "not looking good." Adding to the concerns is that this year's El Nino is gearing up to be what some scientists are calling a "super" El Nino, or a "monster" one.That's making a record-hot year seem almost inevitable, and a sobering new report about the Earth's temperature shows it's right on track to do just that.The latest monthly tally from the National Oceanic and Atmospheric Administration shows the average global temperature in June reached  16.33 C., breaking the old record set last year by 0.12 degrees C.  That makes the first six months of 2015 the hottest on record, according to the U.S. scientific agency.

One Way to Ease the Worldwide Water Crisis — End Privatization -- Gaius Publius -- Water is literally the stuff of life for living beings.  We must remain in water — retain and maintain our inner water — or we die. In the physical world, water is the god that gave us birth and keeps us living.  So why, in a drought, are we allowing water to be ring-fenced by the few, “appropriately priced,” marketed and sold back to us by the only people capable of buying it in quantity? Or does “promote the general welfare” have no meaning?  I want to explore two aspects of the water discussion here. First, the drought itself — it’s not ending anytime soon. Second, the way to end one of the great squeezes on our remaining water supply — end the death grip of privatizers.

Dr. Jeff Masters' WunderBlog : What to Expect from El Niño: North America - Some of the keenest interest in El Niño lies with Californians, who are suffering through Year 4 of an extreme drought that’s left Sierra snowpack in tatters and pushed statewide average temperatures far above anything on record over the last few months. The state needs a very wet winter just to get soil moisture back to near-normal levels, and a good deal more than that to bring California’s reservoirs and groundwater close to their long-term average. "It takes years to get into a drought of this severity, and it will likely take many more big storms, and years, to crawl out of it," said NASA’s Jay Famiglietti at an American Geophysical Union talk last December. Like other strong El Niño events, this one will almost certainly last just one winter. But at least for the coming wet season, it holds encouraging odds of well-above average precipitation for California. During a strong El Niño, the subtropical jet stream is energized across the southern U.S., while the polar jet stream tends to stay north of its usual winter position or else consolidate with the subtropical jet. This gives warm, wet Pacific systems a better chance to push northeast into California. During 1997-98, downtown San Francisco scored its largest number of days with measurable rain (119) and its second wettest rainfall season (47.22”) since records began in 1849, coming in behind only 1861-62 (49.27”). The 1982-83 event was the fifth wettest in San Francisco annals, with a wet-season total of 38.17”. In downtown Los Angeles, the 1982-83 and 1997-98 seasons came in as fifth and sixth wettest, respectively, with 31.25” and 31.01”. Records began in L.A. in 1877.

How this El Niño is and isn’t like 1997 -- It was the winter of 1997-1998 when the granddaddy of El Niños — the one by which all other El Niños are judged — vaulted the climate term to household name status.  Basically, it was the “polar vortex” of the late ‘90s.   And naturally, as the current El Niño event has gained steam, the comparisons to 1997 have been increasingly bandied about. The most recent came this week in the form of an image from the National Oceanic and Atmospheric Administration that compares satellite shots of warm Pacific Ocean waters — a hallmark of El Niño — from this June to November 1997, when that El Niño hit its peak. On the one hand, the two are comparable given that 1997 was the strongest El Niño on record and, at the moment, the best science indicates that the current event could match or rival that one — at least in terms of ocean temperatures. But on the other hand, each El Niño event is its own beast, the product of conditions in the ocean and atmosphere, of climate and weather that are unique in that particular place and time. In the, albeit very short, modern record of El Niños, “we cannot find a single El Niño event that tracked like another El Niño event,” Michelle L’Heureux, a forecaster with NOAA’s Climate Prediction Center, said. Forecasters like L’Heureux cringe at comparisons because there’s no guarantee the impacts of one El Niño will be just like that of a previous one, even if they look broadly similar. And it’s those impacts — like potential rains in drought-stricken California — that most really care about.  El Niño is not, as Farley’s sketch had it, an individual storm, like a hurricane. Rather it is a shift in the background state of the climate brought about by the sloshing of warm ocean water from its normal home in the western tropical Pacific over to the east. That redistribution affects how and where ocean heat is emitted into the atmosphere, which can alter the normal patterns of winds and stormy weather in the region.

El Niño helps, harms economies -- In California, they're counting on it to end a historic drought; in Peru, they've declared a pre-emptive emergency to prepare for devastating flooding. It's an economic stimulus and a recession-maker. And it's likely to increase the price of coffee, chocolate and sugar. It's El Niño — most likely, the largest in well over a decade, forecasters say. A lot more than mere weather, it affects lives and pocketbooks in different ways in different places. Every few years, the wind shifts and the water in the Pacific Ocean gets warmer than usual. That water sloshes back and forth around the equator in the Pacific, interacts with the winds above and then changes weather worldwide. This is El Niño. Droughts are triggered in places such as Australia and India, but elsewhere, droughts are quenched and floods replace them. The Pacific gets more hurricanes; the Atlantic fewer. Winter gets milder and wetter in much of the United States. The world warms, goosing Earth's already rising thermometer from man-made climate change. An El Niño means the Pacific Ocean off Peru's coast is warm, especially a huge patch 330 feet below the surface, and as it gets warmer and close to the surface, the weather “is just going to be a river falling from the sky,”  Around the world, crops fail in some places, thrive elsewhere. Commercial fishing shifts. More people die of flooding, fewer from freezing. Americans spend less on winter heating. The global economy shifts. This El Niño officially started in March and keeps getting stronger. If trends continue, it should officially be termed a strong El Niño early in August, peak sometime near the end of year and peter out sometime next spring. Meteorologists say it looks like the biggest such event since the fierce El Niño of 1997-18.

Iran city hits suffocating heat index of 165 degrees, near world record - Wherever you live or happen to travel to, never complain about the heat and humidity again.  In the city of Bandar Mahshahr (population of about 110,000 as of 2010), the air felt like a searing 165 degrees (74 Celsius) today factoring in the humidity. Although there are no official records of heat indices, this is second highest level we have ever seen reported. To achieve today’s astronomical heat index level of 165, Bandar Mahshahr’s actual air temperature registered 115 degrees (46 Celsius) with an astonishing dew point temperature of 90 (32 Celsius).  This 165 reading, recorded at 4:30 p.m. local time Friday, comes one day after the heat index soared to 159 degrees (70 Celsius) in the same location. Bandar Mahshahr sits adjacent to the Persian Gulf in southwest Iran where water temperatures are in the 90s. Such high temperatures lead to some of the most oppressive humidity levels in the world when winds blow off the sweltry water.

Water mafia: Why Delhi is buying water on the black market - BBC News: In the congested Delhi neighbourhood Sangam Vihar, home to 500,000 people, the air is fraught with anticipation. Rows of men and women are gathered in its narrow lanes, some sitting on their haunches. Large plastic drums are placed strategically in front of them. Suddenly a cry goes up: "It's here, it's here." A water tanker backs into the lane, and the place descends into chaos. Young men charge towards the truck, clambering onto the top with pipes, which are then lowered into the tank. Others push the drums in place - there's a mad scramble to fill them up with clean water. Fights break out as some people are pushed out of the way. Often there's a mad scramble to fill up drums with the clean water that's being provided by tankers "It's always like this," Jainisha Khatoon says. "People push and pull. We get abused. That's when I step back." In 15 minutes, the water runs out and the tanker drives away, leaving many desperate people behind. "It only comes once every 10 days or so," says Rupa Jha, another resident. "How do you expect it to last? We have to buy water from private suppliers. Water's always available but at a price." About 20% of Delhi's population have no access to piped water and have to be supplied by water tankers. But the difference between demand and supply is more than 750 million litres a day. About 20% of Delhi's population have no access to piped water So they have to rely on the black market - water supplied by private contractors, or "the water mafia", as it has come to be known. "It's always existed here. A network of people who steal water and then supply it to those who need it," says Anuj Porwal, a social activist from Sangam Vihar. "They have the backing of the police and local politicians. That's why no one can stop them," he alleges.

Firefighters make progress against Western U.S. wildfires | Reuters: Firefighters made progress Sunday against three wildfires burning in Montana and California, aided by cooler temperatures overnight. A blaze in the Sierra foothills near Lake Tahoe in California was burning rapidly toward the north despite calming overnight, and evacuation orders remained in place for several communities, the California Department of Forestry and Fire Protection said. Investigators do not yet know the cause of the blaze, dubbed the Lowell Fire, which started Saturday and prompted evacuation orders for the communities of You Bet, Red Dog, Lowell Hill and Chalk Bluff, the agency said. By Sunday morning, it burned 1,500 acres and was five percent contained. Southwest of Sacramento near California's storied wine country, the 6,900-acre Wragg Fire was 60 percent contained by Sunday morning, and evacuation orders had been lifted. In Montana, a wildfire at Glacier National Park along the west side of St. Mary Lake was 20 percent contained on Sunday morning but was expected to continue to advance toward the east and northeast, according to the U.S. Forest Service's InciWeb online fire information center. The so-called Reynolds Fire covered about 3,100 acres at mid-morning on Sunday, prompting the closure of an 18-mile section of Going-to-the-Sun Road in the park near the St. Mary Visitor Center, according to InciWeb.

Paradise Burning: Why We All Need to Learn the World ‘Anthropogenic’ - The wettest rainforest in the continental United States had gone up in flames and the smoke was so thick, so blanketing, that you could see it miles away. Deep in Washington’s Olympic National Park, the aptly named Paradise Fire, undaunted by the dampness of it all, was eating the forest alive and destroying an ecological Eden. In this season of drought across the West, there have been far bigger blazes but none quite so symbolic or offering quite such grim news. It isn’t the size of the fire (though it is the largest in the park’s history), nor its intensity. It’s something else entirely — the fact that it shouldn’t have been burning at all. When fire can eat a rainforest in a relatively cool climate, you know the Earth is beginning to burn.  And here’s the thing: the Olympic Peninsula is my home. Its destruction is my personal nightmare and I couldn’t stay away. With its more than three million annual visitors, the park barely trails its two more famous western cousins, Yosemite and Yellowstone, on the tourist circuit. Days of rain had come the weekend before, soaking the rainforest without staunching the Paradise Fire. The wetness did, however, help create those massive clouds of smoke that wrecked the view miles away on that blazing hot Sunday, July 19th.  Though no fire was visible from the visitor center — it was the old-growth rainforest of the Queets River Valley on the other side of Mount Olympus that was burning — massive plumes of smoke were rising from the Elwha River and Long Creek valleys.

Drones impede air battle against California wildfires. ‘If you fly we can’t,’ pleads firefighter - Drought stricken California is now fighting at least 14 large wildfires in at least ten counties across the state, engaging a force of some 7,000 firefighters plus National Guardsmen. They’re up against a triple-threat of three digit temperatures in some parts of the state, high winds that are spreading the fires rapidly and drought conditions furnishing fuel for the burning. A fourth threat is also emerging: Drones. Occasionally aircraft have been grounded by people flying drones, with a $75,000 reward now offered for the apprehension of anyone irresponsible enough to do so. One four-foot drone shut down evening operations over the Lake Fire, which burned an additional 3.5 square miles overnight Wednesday, KTLA news reported. “Low-flying air tankers cannot share the sky with drones because the small aircraft can be sucked into jet engines, causing the engines to fail and the planes to crash,” said a plea from the San Bernadino County Commissioners. “We don’t want to deal with unknown aircraft in our airspace,” Mike Eaton, forest aviation officer for the San Bernardino National Forest, told KTLA TV. “They’ve got enough on their mind already … difficult terrain, difficult weather, winds and other things. They don’t need to be worrying about model airplanes or drones.”

Canada, Alaska wildfire surge sends smoke plume to Texas -- Smoke from hundreds of wildfires in Alaska and northern Canada is drifting as far south as Texas, NASA images show. The monitoring service described the long, dense plume of smoke as “pretty remarkable”. According to Alaska’s forestry service, 2015 already ranks as one of the top 5 wildfire seasons on record, with nearly 5 million acres burned. A recent report by Climate Central found the region’s wildfire season had expanded 40% since the 1940s, with longer, hotter and drier summers.This map from the Alaska Interagency Coordination Center helps put Alaska’s wildland fire situation in perspective. pic.twitter.com/gQx8g2wkNs .Canadian forest monitors counted more than 5,000 fires covering more than 3 million hectares (8m acres) by 15 July this year.  By area, that is more than double the 10-year average. It states: “The National Preparedness Level continues to be at level 5, with several provinces/territories experiencing major incidents which may exhaust all national fire resources.” Wildfire risk is increasing across western America with human-caused climate change, according to the US National Climate Assessment.That in turn releases more carbon dioxide from forests and tundra, contributing to the greenhouse effect.

Alaska’s terrifying wildfire season and what it says about climate change - Hundreds of wildfires are continually whipping across this state this summer, leaving in their wake millions of acres of charred trees and blackened earth. About 3,500 smokejumpers, hotshot crews, helicopter teams and other workers have traveled to Alaska this year from across the country and Canada. And they have collectively deployed about 830 miles of hose this year to fight fires. An hour north of the state’s second-biggest city, firefighters were attacking flames stretching across more than 31,000 acres, including an area close to the Trans-Alaska pipeline system, which stretches from Prudhoe Bay to Valdez. And that’s just one of about 300 fires at any given time.“People don’t fathom how big Alaska is. You can have a 300,000-acre fire, and nobody knows anything about it, because nothing’s been done about it, because of where it is,” says Tim Mowry, spokesman for the Alaska Division of Forestry.The staggering 2015 Alaska wildfire season may soon be the state’s worst ever, with almost 5 million acres already burned — an area larger than Connecticut. The pace of the burn has moderated in the last week, but scientists say the fires are just the latest indicator of a climatic transformation that is remaking this state — its forests, its coasts, its glaciers, and perhaps most of all, the frozen ground beneath — more than any other in America.  Alaska has already warmed by more than 3 degrees Fahrenheit in the past half-century, much more than the continental United States. The consequences have included an annual loss of 75 billion metric tons of ice from its iconic glaciers — including those covering the slopes of Denali, the highest peak in North America — and the destabilization of permafrost, the frozen ground that underlies 80 percent of the state and whose thaw can undermine buildings, roads and infrastructure.

2015 Arctic melting season won't break records, but could wipe the 'recovery' | Neven Acropolis - After the record smashing 2012 melting season had ended, Arctic sea ice watchers awaited the following melting season with a mix of anticipation and apprehension.  But just as the previous record low reached in 2007 was followed by a short-lived rebound, the 2013 melting season proved to be sufficiently cold and cloudy to make up for the large amount of thin first year ice in the Arctic. When the following 2014 melting season was relatively cold again, with little wind to compact the ice and transport it to lower latitudes, extent and area numbers yet again ended up well above 2012 levels. Consequently, this year’s melting season started out with more volume and more multi-year ice. The ice age distribution map below shows how much more multi-year ice there was at the start of this melting season, compared to 2012: This year the melting season started out relatively cold during May and it took quite a while for melt ponds to start forming on the ice pack surface. At the end of June, slightly more preconditioning seemed to have taken place compared to 2013 and 2014, because overall temperatures were somewhat higher than in the two prior years. But the amount of melt ponds simply didn’t come close to that of big melting years like 2007 and 2012. Any expectation of 2015 ending up close to record territory despite having more multi-year ice and volume, was effectively put on ice.However...As said, despite the importance of preconditioning for the second half of the melting season, exceptional weather conditions can still turn the tables by building up melting momentum. And that’s exactly what the Arctic has seen in the past few weeks.Sunny weather and anomalously warm temperatures have dominated large parts of the Arctic, most importantly those areas where a lot of the thicker multi-year ice has been moved to during winter. The impact is slowly, but surely showing up on sea ice concentration maps, graphs and satellite image.

James Hansen Spells Out Climate Danger Of The ‘Hyper-Anthropocene’ Age -- James Hansen and 16 leading climate experts have written a must-read discussion paper on what humanity risks if it can’t keep total global warming below 2°C (3.6°F). The greatest risk they identify is “that multi-meter sea level rise would become practically unavoidable.” This is warning everyone should heed — not just because Hansen’s co-authors include some of the world’s top sea-level rise experts, such as Eric Rignot and Isabella Velicogna, but also given Hansen’s prescience on climate change dating back more than three decades. In 1981, Hansen led a team of NASA scientists in a seminal article in Science, “Climate Impact of Increasing Atmospheric Carbon Dioxide.”  They warned: “Potential effects on climate in the 21st century include the creation of drought-prone regions in North America and central Asia as part of a shifting of climatic zones, erosion of the West Antarctic ice sheet with a consequent worldwide rise in sea level, and opening of the fabled Northwest Passage.” Is there anyone else on the planet who can has been right for so long about climate change?Hansen and co-authors deftly dismiss those ill-informed Pollyannas who use Orwellian terms like “good Anthropocene.” They explain that we are far past “the era in which humans have contributed to global climate change,” which probably began a thousand years ago, and are now in “a fundamentally different phase, a Hyper-Anthropocene … initiated by explosive 20th century growth of fossil fuel use.”

James Hansen on CNN discusses rapid sea level rise --Dr. James Hansen gives his idea to curb climate change on CNN's Fareed Zakaria GPS,  - The following transcript is of an interview by host Fareed Zakaria with former director of the NASA Goddard Institute for Space Studies, Dr. James Hansen. They discussed Hansen’s hypothesis for the Earth’s future climate due to the unstable sea levels, the public’s skepticism, and his idea to curb climate change. Hansen’s hypothesis on sea levels rising as much as 10 feet within 50 years:“Not only would it be 10 feet, but it would imply that in the next decades after that it would be even more. Because where this water is coming from is the west Antarctic ice sheet, and then there’s another part of the east Antarctic ice sheet which also has several meters of sea level rise in its ice. So what that would mean is coastal cities would become dysfunctional. Parts of the city would still be above water, but it wouldn’t make sense to try to rebuild them partially because they know the water is going to keep rising. So we can’t let it go unstable. We would lose all the coastal cities in the world, and that’s enormous a cost, which would affect everybody, whether they’re living on the coast or not.”

Nonlinear: New York, London, Shanghai underwater in 50 years? --   Those under the impression that climate change is advancing at a constant and predictable rate don't understand the true dynamics of the issue. The rate of increase of the carbon dioxide concentration in the atmosphere, the main driver of climate change, went from 0.75 parts per million (ppm) per year in 1959 to about 1.5 ppm each year through the 1990s, to 2.1 ppm each year from 2002 to 2012, and finally to 2.9 ppm in 2013. The fear is that the ability of the oceans and plants to continue to absorb half the carbon dioxide human civilization expels into the atmosphere each year may have become impaired. That means more carbon dioxide is remaining in the atmosphere where concentrations are building at the fastest rate ever recorded in the modern era.  Permafrost across the most northern reaches of land on the globe wasn't expected the start melting until well into this century. Scientists were shocked to find gaping craters in Siberia where permafrost apparently is no longer permanent. It means carbon dioxide and methane--which absorbs about 80 times as much heat as carbon dioxide during its first 20 years in the atmosphere--will be unleashed from the melting permafrost much sooner than anticipated after being trapped for thousands of years. The release has the potential to speed up warming considerably. Now comes what must be labeled as the most important story of the year that shows us yet more nonlinear dynamics in the world climate system. New research from James Hansen, the world's most renown climate scientist, and 16 of his colleagues concludes that many of the world's coastal cities could become "uninhabitable" in just 50 years due to a rapid, nonlinear rise in sea level. This is far sooner than previous findings suggested.  The researchers give a range of 50 to 200 years before water covers much of what are now the coastal cities of the world. Even 200 years is still astonishingly fast for 10 feet of sea level rise to occur. But, we should not dismiss the low estimate of 50 years. The history of climate change shows that we've underestimated its pace and severity at every turn.

Climate change threatens China’s booming coastal cities, says expert-- A recent study led by Georgina Mace, ecosystem professor at University College London, indicated that governments across the world have failed to grasp the risk that population booms in coastal cities pose as climate change continues to cause rises in sea levels and extreme weather events. Mace is director of the UCL Centre for Biodiversity and Environment Research. Mace says population growth in coastal areas can lead to big increases in exposure to extreme weather. The biggest direct effect of projected climate change is heat waves. The number of people dying from extreme heat could increase twelvefold by the end of this century, as a result of global warming combined with increasing numbers living in affected areas. “People are increasingly living in the wrong places, and the demographic shift in China is enormous. China has a lot of old people who are vulnerable to extreme weather,” says Mace.  A report from China’s National Bureau of Statistics showed South China’s Guangdong province was the most popular immigration destination, with more than 20 million people from other provinces residing there in 2010, and central China’s inland province of Henan had the biggest population migration, with more than 10 million people from there living in other regions in 2010.

Florida leads nation in property at risk from climate change - Florida has more private property at risk from flooding linked to climate change than any other state, an amount that could double in the next four decades, according to a new report by the Risky Business Project. By 2030, $69 billion in coastal property in Florida could flood at high tide that is not at risk today, the report found. That amount is projected to climb to $152 billion by 2050.While projections for rising seas are not new, for the first time researchers tried to quantify the economic damage wrought by climate change by better understanding the risks to business and a rebounding economy. Growth in manufacturing and energy production have created a mini boom in the Southeast and Texas, the report said. But climate change threatens to undo that progress and cause widespread damage to the region’s economic pillars: manufacturing, agriculture and energy. For Florida, the blows are significant and not only for property. Higher temperatures and rising seas could slow labor productivity, stress the energy industry and dry up cash pumped into the state by tourists.

Human domination of the biosphere: Rapid discharge of the earth-space battery foretells the future of humankind -- Earth is a chemical battery where, over evolutionary time with a trickle-charge of photosynthesis using solar energy, billions of tons of living biomass were stored in forests and other ecosystems and in vast reserves of fossil fuels. In just the last few hundred years, humans extracted exploitable energy from these living and fossilized biomass fuels to build the modern industrial-technological-informational economy, to grow our population to more than 7 billion, and to transform the biogeochemical cycles and biodiversity of the earth. This rapid discharge of the earth’s store of organic energy fuels the human domination of the biosphere, including conversion of natural habitats to agricultural fields and the resulting loss of native species, emission of carbon dioxide and the resulting climate and sea level change, and use of supplemental nuclear, hydro, wind, and solar energy sources. The laws of thermodynamics governing the trickle-charge and rapid discharge of the earth’s battery are universal and absolute; the earth is only temporarily poised a quantifiable distance from the thermodynamic equilibrium of outer space. Although this distance from equilibrium is comprised of all energy types, most critical for humans is the store of living biomass. With the rapid depletion of this chemical energy, the earth is shifting back toward the inhospitable equilibrium of outer space with fundamental ramifications for the biosphere and humanity. Because there is no substitute or replacement energy for living biomass, the remaining distance from equilibrium that will be required to support human life is unknown.

Which State Is in the Most Ecological Debt of Them All? -- Maryland, Delaware, Connecticut, New Jersey, and Virginia all have serious IOUs—these states top the list of ecological debtors whose residents suck up far more resources than their natural surroundings can provide. On the other end of the spectrum, Alaska, South Dakota, Montana, Wyoming, and Nebraska have plenty to spare. How does your state stack up? Head over to National Geographic for a deeper dive into the data.

The 'mini ice age' hoopla is a giant failure of science communication -  This month there’s been a hoopla about a mini ice age, and unfortunately it tells us more about failures of science communication than the climate. Such failures can maintain the illusion of doubt and uncertainty, even when there’s a scientific consensus that the world is warming. The story starts benignly with a peer-reviewed paper and a presentation in early July by Professor Valentina Zharkova, from Northumbria University, at Britain’s National Astronomy Meeting. The paper presents a model for the sun’s magnetic field and sunspots, which predicts a 60% fall in sunspot numbers when extrapolated to the 2030s. Crucially, the paper makes no mention of climate.  The first failure of science communication is present in the Royal Astronomical Society press release from July 9. It says that “solar activity will fall by 60 per cent during the 2030s” without clarifying that this “solar activity” refers to a fall in the number of sunspots, not a dramatic fall in the life-sustaining light emitted by the sun. The press release also omits crucial details. It does say that the drop in sunspots may resemble the Maunder minimum, a 17th century lull in solar activity, and includes a link to the Wikipedia article on the subject. The press release also notes that the Maunder minimum coincided with a mini ice age. But that mini ice age began before the Maunder minimum and may have had multiple causes, including volcanism. Crucially, the press release doesn’t say what the implications of a future Maunder minimum are for climate.

40 percent of adults on Earth have never heard of climate change - Until now, most research into public attitudes on climate change have focused on Western nations, like the United States, Europe and Australia, leaving scientists with little knowledge of how much awareness there is about climate change in other parts of the world and how people feel about it. But a new study, published Monday in the journal Nature Climate Change, provides a more inclusive look at the issue, giving scientists greater insight into what factors are most likely to make people care about climate change — if they know it’s happening at all. The study focused on two major questions: what factors most influence whether a person is aware of climate change and, for those that know it’s happening, what factors influence how big of a risk that person thinks it poses. The researchers found that, worldwide, education is the biggest predictor of climate change awareness. Major factors that affected a person’s risk perception included understanding that climate change is caused by humans — this was especially true in the Americas and Europe — and noticing local changes in temperature, a particularly high indicator in many countries in Africa and Asia.The study draws on the Gallup World Poll conducted in 2007 and 2008, which surveyed people from 119 countries around the world. First, the survey classified participants as either aware or unaware of climate change. Then, out of those who were aware, the survey further classified them as believing the risk was serious or not serious.

Philippines to raise 10m signatures for pope’s climate petition --  Asia’s largest Catholic country has mobilised after the pope’s warning to tackle climate change, promising to gather 10m signatures for a petition that will be handed to world leaders at a Paris climate summit in November. The Catholic climate petition aims to pressure countries to drastically cut carbon emissions to keep the global temperature rise below the dangerous 1.5°C threshold, and to help the world’s poorest to cope with climate change. “We’re getting signatures as a representation of the Catholic’s voice on the issue of climate change, especially in pushing global leaders to urgently act,” said Lou Arsenio, in Manila, the local coordinator for the Global Catholic Climate Movement (GCCM), a coalition of more than 140 Catholic groups. Pope Francis’s June encyclical on the environment said the world must act on climate change and that a failure to do so presents an undeniable risk to a “common home” that is beginning to resemble a “pile of filth”. The Philippines, a country of 100 million, aims to deliver half of the 20m signatures targeted by GCCM and its partners. Its 76 million Catholics, who follow papal edicts closely, are aware of the disasters wrought by climate change on the archipelagic country. Typhoon Haiyan, the strongest typhoon known to ever hit land, flattened communities and killed at least 6,000 people in central Philippines in 2013. It is a tragedy that compelled the pope to visit in January to console the survivors. About a third of Filipinos see environmental problems as the greatest in the world.

Norway pumps up ‘Green Battery’ plan for Europe  -- Norway is hoping to become the “green battery of Europe” by using its hydropower plants to provide instant extra electricity if production from wind and solar power sources in other countries fade. Without building any new power stations, engineers believe they could use the existing network to instantly boost European supplies and avoid other countries having to switch on fossil fuel plants to make up shortfalls. Norway has 937 hydropower plants, which provide 96% of its electricity, making it the sixth largest hydropower producer in the world—despite having a population of only five million. Europe already has 400 million people in 24 countries connected to a single grid, with power surpluses from one country being exported to neighbours or imported as national needs change. Because supply from wind and sun sources fluctuates, the grid needs back-up plants to keep the power constant. At present, this means that many countries have to keep gas and coal plants on standby to make up any shortage. However, the Hydraulic Laboratory at the Norwegian University of Science and Technology (NTNU) in Trondheim believes it can engineer the country’s vast power plants so that they can themselves be a giant standby battery that can be turned on and off. When there is surplus wind or solar power in Europe, the electricity it generates can be imported to pump water uphill to keep re-filling the Norwegian reservoirs. This is, in effect, electricity that is stored, because when energy is needed again the generators can be turned back on to produce hydropower.

Japan approves increase in Fukushima compensation to $57 billion - Japan on Tuesday approved an increase in compensation payments for the Fukushima crisis to 7.07 trillion yen ($57.18 billion), as tens of thousands of evacuees remain in temporary housing more than four years after the disaster. Tokyo Electric Power Co (Tepco), the operator of the wrecked Fukushima Daiichi nuclear station, will receive 950 billion yen more in public funds on top of the 6.125 trillion agreed earlier, the utility and the government said. The increase, agreed after a request by Tepco, adds to the bill for taxpayers for the disaster in March 2011, when three reactors melted down after an earthquake and tsunami, in the worst nuclear crisis since Chernobyl in 1986, destroying businesses and livelihoods. Tepco has face a stream of legal cases seeking compensation over the disaster. Electricity bills for Japanese households have also risen 25 percent since the catastrophe as the country resorted to importing more fossils fuels with the gradual shutdown of all nuclear reactors for safety checks and upgrades.

Fossil fuels are far deadlier than nuclear power - IN THE wake of the nuclear crisis in Japan, Germany has temporarily shut down seven of its reactors and China, which is building more nuclear power plants than the rest of the world combined, has suspended approval for all new facilities. But this reaction may be more motivated by politics than by fear of a catastrophic death toll. It may be little consolation to those living around Fukushima, but nuclear power kills far fewer people than other energy sources, according to a review by the International Energy Agency (IAE). “There is no question,” says Joseph Romm, an energy expert at the Center for American Progress in Washington DC. “Nothing is worse than fossil fuels for killing people.” A 2002 review by the IAE put together existing studies to compare fatalities per unit of power produced for several leading energy sources. The agency examined the life cycle of each fuel from extraction to post-use and included deaths from accidents as well as long-term exposure to emissions or radiation. Nuclear came out best, and coal was the deadliest energy source.The explanation lies in the large number of deaths caused by pollution. “It’s the whole life cycle that leads to a trail of injuries, illness and death,” says Paul Epstein, associate director of the Center for Health and the Global Environment at Harvard Medical School. Fine particles from coal power plants kill an estimated 13,200 people each year in the US alone, according to the Boston-based Clean Air Task Force (The Toll from Coal, 2010). Additional fatalities come from mining and transporting coal, and other forms of pollution associated with coal. In contrast, the International Atomic Energy Agency and the UN estimate that the death toll from cancer following the 1986 meltdown at Chernobyl will reach around 9000. In fact, the numbers show that catastrophic events are not the leading cause of deaths associated with nuclear power. More than half of all deaths stem from uranium mining, says the IEA. But even when this is included, the overall toll remains significantly lower than for all other fuel sources.

Toxic Floods From Coal Mines and Power Plants Hit Vietnam’s Ha Long Bay World Heritage Site -- Ongoing downpours in northeastern Vietnam have resulted in toxic spills and flooding from multiple coal mine and power plant sites in the province surrounding the Ha Long Bay World Heritage Site. “The likelihood of both immediate and ongoing health and environmental hazards for locals and the rare environment are clearly increasing by the hour and the scale of this event cannot be understated,” said Donna Lisenby, Clean and Safe Energy campaign manager for Waterkeeper Alliance. The events of the last few days appear to be getting worse with news reports of severe flooding inundating the Lang Khanh harbor area and Dien Vong river with fresh leakages from the Quang Ninh coal-fired power plant. This coal plant is located on the waterfront that connects directly to world renowned Ha Long Bay world heritage site (see this map). “A disaster response team from the government has been deployed which is encouraging but we are deeply concerned by the pace of this unfolding disaster and its sheer scale,” said Robert F. Kennedy, Jr., president of Waterkeeper Alliance.

Furious Coal CEO Lets It All Out: "Obama Is Nation's Great Destroyer" -- Murray Energy CEO Robert Murray, who spoke to Republicans at the Lincoln Day Dinner on Wednesday, is "righteously mad" at President Barack Obama, who Murray says is to blame for the downturn in the coal industry.  The President, you see, is on a "bizarre personal and political" quest to destroy not only the coal industry, but the entire country and according to Murray, "radical environmentalists, liberal elitists, [and] Hollywood characters" aren’t doing anything to help the situation.  And make no mistake, this isn’t about money for Murray, this is all about the people. "Mr. Obama's actions are a human issue to me, as I know the names of many of the Americans whose jobs and family livelihoods are being destroyed," Murray said, adding that "these Americans are my employees." Or at least they were his employees. Murray laid off 21% of his company back in May, with the majority of the cuts coming in West Virginia, which is staring down a $195 million budget gap thanks to the slide in coal prices. [Murray] said President Barack Obama's administration has issued regulations that illegally bypass the states and their utility commissions, the U.S. Congress and the Constitution in favor of putting the U.S. EPA in charge of the nation's electric grid. Murray, speaking at a Republican gathering at the July 22 Lincoln Day Dinner, touted his company's four lawsuits being brought against the administration's Clean Power Plan, an effort to rein in carbon dioxide emissions.  Murray continued, saying that the coal workers affected by Obama's policies are among the highest paid in the regions where they live, but also have no one to sell their homes to when they lose their jobs. "Thus, these people are prohibited from working and fall to the negative side of the economic ledger for the rest of their lives," Murray said. "This is not the America that I have always cherished. Well, I am obviously not giving up. Nor should you."

Leaked Details Of Obama Power Plant Plan Include Later Deadlines For States --Leaked details of the Obama administration's forthcoming final rule for power plant emissions indicate that the deadline for states to begin cutting planet-warming emissions will be pushed back.  The New York Times and the Washington Post both reported Wednesday that the final rule limiting the emission of greenhouse gases from power plants, which are expected to be released in August, will give states two more years to get started on cutting emissions. The Environmental Protection Agency's draft rule, released in June 2014, called for a 30 percent overall cut in power plant emissions by 2030, while designating individual goals for each state. A source familiar with the rule-making confirmed to The Huffington Post that the final rule will give states until 2022 to begin making emission cuts. States would have to submit their compliance plans by 2018, a year later than previously expected, and would have two additional years to come into compliance with those plans.  The source also said that the EPA would begin a new clean energy incentive program by 2020, which would allow "for deeper cuts in carbon pollution in the long term." The source said that the program would prioritize investment in low-income communities.

Ohio ripe for fracking | marcellus.com – As the shale industry continues to industrialize once quiet, rural swaths of the northeast and midwest United States, demand for hydraulic fracturing wastewater dump sites — or injection wells — grows. Many local government officials said they feel the industry is exploding faster than it can be contained by federal regulation — and local control was “stripped” long ago. As of July 6, there are 18 active injection wells spread across Ashtabula County, according to the Ohio Department of Natural Resources, the state’s fracking oversight entity. Last year, almost 1.1 million barrels of frackwater were dumped in those wells — that’s up 42 percent from 2013. Ashtabula County took in the eighth-highest amount of frackwater barrels in 2014. Township officials and many other concerned community members from across the state who testified at a July 20 meeting in the Ashtabula County commissioners’ chambers — some came from as far as Athens County — agreed action needs to be taken now. That includes a moratorium backed by several heavily affected counties, including Ashtabula. “Stop this runaway train,” said Roxanne Groff, Bern Township trustee, at the July 20 meeting. “Enforce the rules we have and make tougher ones. Stop poisoning our people.” Another open public forum on the issue is set for 6-8:30 p.m. Monday in the auditorium of Jefferson Area High School, 207 W. Mulberry St., Jefferson. Trumbull Township board of trustees chairman Ron Tamburrino, one of several organizers, said the meeting is for the benefit of township trustees — to better inform their constituents about fracking operations in their area; the region’s emergency responders, who need more industry transparency to safely mitigate potential disaster; and the public at-large, whose testimonies will need to reach the ears of the Legislature.

Rejecting injection wells: Officials seek increased local control of fracking industry -  Roxanne Groff’s slideshow showed fireballs reaching the sky and pillars of smoke rising above communities — images from numerous injection well disasters across the country. But the debate over hydraulic fracturing operations and the injection wells that follow it isn’t just about explosions — it affects a community’s health, property records and values, county officials said Monday. Dozens of local government officials and residents of townships affected by the surge of hydraulic fracturing and injection well dumping operations in Ohio and Pennsylvania met Monday night Jefferson Area High School for a public forum on those issues. In 2014, about 250,000 barrels of fracking wastewater were produced in Ashtabula County, but 1.1 million barrels were dumped into county injection wells. Most of the frackwater coming into the county is from out-of-state, at a benefit to Ohio, but not the municipalities that host the wells, activists say. “They’re seeing the production; we’re seeing the waste,” said county Commissioner Casey Kozlowski, before testimony got underway Monday night from several concerned citizens and local government officials from around the state who have battled fracking on their own soil. Groff is a former Athens County commissioner and current Bern Township trustee who said she’s battled the industry throughout her political career. Next year, Athens County is poised to take the number one spot for frackwater dumping in the state, she said. Her message to Ashtabula County residents Monday was to stand up and fight against a host of “rogue agencies” whose push for shale industrialization doesn’t have local communities’ interests at heart.

Commissioners certify charter proposal - The Athens County Commissioners certified a proposed county charter to the county Board of Elections in a vote Tuesday, following a judge’s order. Despite reservations voiced by the commissioners about the proposal itself, the board acted in an administrative capacity and was not in a decision-making position on the proposal. If approved by voters, the measure will give Athens County a charter form of government that includes a community bill of rights with restrictions on certain oil and gas drilling activities (waste injection wells and using county water for oil and gas drilling). Serious questions remain, however, on whether those restrictions would be enforceable, since the state of Ohio regulates those activities. In a ruling earlier this month, Athens County Common Pleas Judge George P. McCarthy ordered that the proposal be put on the general election ballot in November. Following the commissioners’ certification, it’s now up to the elections board to proceed with putting the issue on the ballot. The commissioners acted last week in order to allow local residents time to file objection to the proposal with the Ohio Secretary of State. A local group called the Athens Liberty Coalition recently has formed, in part to oppose the proposal. On its Facebook page, run by former Athens City Council candidate Abe Alassaf and local resident Lori Zofchak-Linscott, an invitation went out to meet at the Board of Elections today (Monday) at 9 a.m. with the intent to file an objection. Objections must be filed by July 29.

County charter: You say you want a revolution? Well, no - The county charter/community bill of rights for Athens County appears headed toward the Nov. 3 ballot, but it’s important for residents to be aware of its limitations and potential consequences. This isn’t intended to recommend how residents vote on the proposed county charge (not yet), but rather that when they vote yes or no, they do so with eyes wide open. Or another way of putting it, the question isn’t whether stopping oil and gas injection wells and regulating fracking are worthy endeavors (I think they are), but rather whether city and county community bill of rights amendments will accomplish that goal. Evidence strongly suggests they won’t. Even if the Athens County charter/community bill of rights wins in a landslide, it likely will have no effect on oil-and-gas drilling activities (including injection wells) in Athens County. If you’re voting for this measure to protect county water resources and the environment in general, you’re probably going to be disappointed with the results. Courts in Ohio and elsewhere across the country have ruled against similar community bill of rights and charters purportedly designed to ban or restrict fracking and other oil and gas drilling activities. Nearly all of these laws were either written by, or based on measures written by, an insurgent outfit in Pennsylvania, the Community Environmental Legal Defense Fund (CELDF). CELDF’s legal rhetoric and strategies invite deep skepticism. A lot of the “natural rights” gobbledygook is reminiscent of arguments advanced by far-right constitutionalist and posse comitatus groups in the Rocky Mountain West back in the ’80s and early ’90s. I covered some of these groups for small-town Western newspapers, and vividly remember the delirious, consistently unsuccessful legal arguments set forth in their court filings.

Opposition group declines to file objection to charter proposal -- A new issue-oriented group in Athens County will not file an objection to a proposed charter initiative after learning they could only object to the validity of petition signatures for the proposal and not the charter itself. The Athens Liberty Coalition (ALA) was formed earlier this month to bring together conservatives and others in Athens County, and, in part, to oppose the charter proposal. A group of members met at the county Board of Elections on Court Street in Athens Monday morning, but declined to go forward with filing an objection. This means, pending action by the elections board itself, which is slated to meet next week, the path is clear for a proposal to turn Athens County into a charter form of government to go before voters on Nov. 3. One last “X” factor is what opinion will be issued by the Ohio Attorney General’s Office, which has been asked by the elections board through the county Prosecutor’s office to rule whether the measure is valid.

No Taxation Without (Oil and Gas) Representation - Last month, Republican lawmakers axed a proposed tax hike by Gov. John Kasich that would have raised Ohio’s near non-existent severance tax on oil and gas drilling. Currently less than 1 percent, Kasich’s proposed increase — to 6.5 percent on natural gas and oil and to 4.5 percent on natural gas liquids — was his third attempt at increasing the tax on non-renewable energy sources in what has been a three-year battle against Republican lawmakers. Statehouse Republicans and the oil and gas industry have fought against the tax, claiming the increase could lead to job cuts and stifle industry growth. During a June 16 press conference, Ohio Senate President Keith Faber (R-Celina) and House Leader Cliff Rosenberger (R-Clarksville) announced the cutting of Kasich’s proposed fracking tax increase from the two-year state budget, which Kasich signed into law June 30. Faber and Rosenberger are instead creating a task force that will consist of six lawmakers — two Republicans and one Democrat from each chamber — along with Kasich’s budget director, Timothy Keen, to discuss their differences and produce a report with recommendations by Oct. 1.   The task force’s recommendations will not ensure the tax is passed, and they won’t include a deadline. Faber defended the decision during the press conference, saying the move is not a GOP stalling technique, but rather a chance to work out a compromise between the two sides. “Make no mistake: There’s going to be a solution to this problem,” Faber said.  Environmental advocates and other progressive groups have criticized the elimination of the tax hike. Ohio’s oil and gas production has doubled in a year’s time and continues to grow in a state with one of the lowest taxes in the country for drilling. “We need the money that a frack tax would bring in, because fracking is costly to communities,” says Wendy Patton of liberal-leaning think tank Policy Matters Ohio. “Roads need widening and strengthening to carry tankers of brine used in drilling.

Oil, gas industry will bounce back from low prices -  – The oil and gas industry eventually will bounce back from low energy prices, an Ohio Oil and Gas Association spokesman says. Mike Chadsey, the association’s director of public relations, provided an update on the overall industry Thursday to the Youngstown/Warren Regional Chamber at Tippecanoe Country Club. Since the shale boom in 2011, the U.S. is producing the most oil in 30 years. But OPEC is not making any significant reduction in its production, which is not protecting the standard of $100 a barrel of oil. Therefore, the supply is high while global demand is weak, which caused oil prices to drop below $50 for the first time in five years, Chadsey said. And, gas has dropped below $2 per thousand cubic feet. “Now we’ve got too much,” he said. As of July 18, there are 1,980 horizontal-well permits issued in Ohio’s Utica Shale, of which 1,535 are drilled with 925 wells producing, and the rig count was at 20, according to the Ohio Department of Natural Resources. The drop in prices has caused several spending cuts throughout Ohio. At Vallourec Star, 2669 Martin Luther King Jr. Blvd., Youngstown, plant leaders announced early this month a workforce reduction of about 60 to 80 jobs effective in August. In February, company leaders decided on a three-week shutdown at that time. The company also offered a voluntary six-month layoff for workers interested. Prices will rebound eventually, Chadsey said. “What goes down must come up.”

New methanol and fertilizer plants to increase already-growing industrial natural gas use - Reversing a decline that lasted more than a decade, industrial natural gas consumption has grown steadily since 2009 as relatively low natural gas prices have supported use of natural gas as a feedstock for the production of bulk chemicals. Industrial facilities, including methanol plants and ammonia- or urea-based fertilizer plants, consumed an average of 21.0 billion cubic feet per day (Bcf/d) of natural gas in 2014, a 24% increase from 2009. Several new industrial facilities began service this year, with additional projects scheduled to come online through 2018. In the current (July) Short-Term Energy Outlook, EIA forecasts that new projects will help drive growth in industrial natural gas demand through the end of 2016. By the end of 2015, industrial natural gas consumption is expected to reach an annual average of 21.7 Bcf/d (3.4% above 2014 consumption). Industrial natural gas consumption is expected to increase by another 3.9% in 2016, to an average of 22.5 Bcf/d. In 2016, three methanol plants are expected to come online in the Gulf of Mexico area, with a combined capacity of almost 0.4 Bcf/d. Additionally, a large nitrogen fertilizer plant, estimated to use 0.1 Bcf/d of natural gas, is currently under construction on Louisiana's Gulf Coast and is expected to come online in 2016, according to Bentek Energy. Although most of the proposed new methanol plants are on the Gulf Coast, Northwest Innovation Works, a multinational company, is planning two methanol facilities for 2018 on the Columbia River in Washington and Oregon. The company plans to export methanol produced in the United States to a plant in Dalian, China, where it would be converted to olefins and used in manufacturing. Ammonia- or urea-based fertilizer plants are also being planned outside of the Gulf Coast region in agricultural areas by developers hoping to take advantage of higher domestic natural gas production. Later this year, a large fertilizer/urea plant in Wever, Iowa, is scheduled to come online, and two fertilizer plants are planned for towns less than 75 miles away in southern Indiana: Ohio Valley Resources has proposed a fertilizer plant in Rockport, Indiana, for 2017, and Fatima Resources has proposed a plant in Mount Vernon, Indiana, for 2018. Each of these plants would use close to 0.1 Bcf/d, supporting continued growth in industrial demand for natural gas.

Marcellus, Utica Driving 85% of Shale Gas Growth Since 2012 -  Increased productivity of natural gas wells in the Marcellus and Utica Shale basins is responsible for 85% of increased natural gas production in the United States since 2012, according to the Energy Information Administration (EIA). Natural gas from shale basins is now responsible for 56% of U.S. dry natural gas production. Collectively, shale production from the Marcellus and Utica regions increased by 12.6 Bcf/d from January 2012 to June 2015, making them the driving force behind overall growth. The EIA’s Drilling Productivity Report (DPR) tracks total production and rig productivity in major U.S. basins, illustrating how increased efficiencies have pushed production higher. In the Marcellus, new-well production per rig in January 2012 was 3.2 MMcf/d. By July 2015, that number increased 160% to 8.3 MMcf/d. The trend of new-well production per rig also follows the trend in overall production, which increased to 16.5 Bcf/d in July 2015 from 6.3 Bcf/d at the beginning of 2012. New-well production per rig in the Utica saw an even more significant increase during the same time period, increasing by a factor of 2230%. In July 2015, new-well gas production per rig in the Utica Shale was 6.9 MMcf/d, compared to just 0.31 MMcf/d in January 2012. Overall production in the Utica increased by a factor of 1730%, reaching 2.6 Bcf/d in July of this year from 0.15 Bcf/d in January 2012. According to the EIA, the increases in natural gas production from these two plays were largely the result of four factors:

• Greater use of advanced drilling techniques
• Increased number of stages used in hydraulic fracturing operations
• Increased use of techniques such as zipper fracturing
• Use of specific components during well completion that aid in increasing fracture size and porosity of the geologic formation being targeted

EIA: Marcellus, Utica provide 85% of U.S. shale gas production growth since start of 2012 - The productivity of natural gas wells in the Marcellus Shale and the neighboring Utica Shale is steadily increasing because of ongoing improvements in precision and efficiency of horizontal drilling and hydraulic fracturing occurring in those regions. Since January 2012, natural gas production in the Marcellus and Utica regions has accounted for 85% of the increase in natural gas production reported in EIA's Drilling Productivity Report (DPR) and has driven recent growth in total U.S. natural gas production. The DPR provides a month-ahead projection of both oil and natural gas production for the seven most significant shale formations in the United States. Although the DPR regions are grouped according to the name of the predominant shale formation, the report analyzes all drilling and production within each geographic area. In practice, this means natural gas production activity in the Marcellus region, which includes Pennsylvania and West Virginia, encompasses not only the Marcellus formation, but also portions of the Utica shale and conventional formations that lay beneath those states. The Utica DPR region, which includes resources that lay beneath Ohio, includes production from the bulk of the Utica formation as well as production from the Point Pleasant shale formation and (to a lesser extent) conventional resources. The DPR identifies trends in total production and rig productivity, expressed as new-well gas production per rig. The July edition of the DPR noted that average new-well gas production per rig in the Marcellus region was 3.2 million cubic feet of natural gas per day (MMcf/d) in January 2012. In July 2015, new-well gas production per rig increased to 8.3 MMcf/d. This trend corresponded with an overall increase in the amount of natural gas produced in the Marcellus region during the same period. The DPR also indicates that the Marcellus region produced an estimated 6.3 billion cubic feet of natural gas per day (Bcf/d) in January 2012, increasing to 16.5 Bcf/d in July. The Utica region also experienced significant gains in rig productivity and production. In January 2012, new-well gas production per rig in the Utica region averaged 0.31 MMcf/d. July 2015 new-well gas production per rig is 6.9 MMcf/d. The DPR also indicates that the region's total natural gas production increased rapidly over the same period: production in July 2015 was almost 18 times higher than in January 2013 (2.6 Bcf/d and 0.15 Bcf/d, respectively).

Utica and Marcellus activity in Ohio --Activity in the Utica and Marcellus Shale formations in Ohio have seen some changes compared to the last well activity update, and apparently injection wells are getting a lot of attention from the public. Monday evening, residents and town officials from townships that have been impacted by the boom of fracking and injection wells in Ohio and Pennsylvania gathered together for a public forum.  Roxanne Groff, one of the several attendees of the forum, provided a slide show that presented the numerous health and safety hazards of injection wells.  Her slideshow pictured “fireballs reaching the sky and pillars of smoke rising above communities,” in efforts to prove how such practices are affecting impacted communities health, property records and values. Groff, a former Athens County commissioner and a current Bern Township trustee, has fought against the oil and gas industry throughout her entire political career, and has made it clear she is against companies forcing the industry on small communities.  To make her point, Groff explained how Athens County is in the running for the number one frackwater dumping site in Ohio.  During Monday’s meeting, she said her main message to Ashtabula County is to “stand up and fight against a host of ‘rogue agencies’ whose push for shale industrialization doesn’t have local communities’ interests at heart.” As reported by the Star Beacon, “In 2014, about 250,000 barrels of fracking wastewater were produced in Ashtabula County, but 1.1 million barrels were dumped into county injection wells. Most of the frackwater coming into the county is from out-of-state, at a benefit to Ohio, but not the municipalities that host the wells, activists say. To read the Star Beacon’s full story regarding the issue and the public forum, click here.The following information is provided by the Ohio Department of Natural Resources (ODNR) and is through the week of July 18th. The ODNR reported 437 wells were permitted, 428 drilled, 189 drilling, 92 producing, 25 inactive, 24 in final restoration and three abandoned wells in Ohio’s Utica formation. This brings the total number of wells in the Utica to 1,980.The Marcellus Shale in Ohio remains unchanged from last week’s well report. The area is still sitting at 15 wells permitted, 11 drilled, 17 wells producing and one well inactive. There are a total of 44 wells in the Ohio Marcellus Shale.

Plummeting natural gas prices slash revenue of Marcellus shale producers -- The head of Pennsylvania’s largest shale gas producer concluded his quarterly earnings call Friday with a dark view of the situation confronting drillers in the Marcellus. “I have been in this business over 30 years. I’ve seen a lot of cycles, and this is one of those draconian, down markets,” Dan O. Dinges, CEO of Houston-based Cabot Oil & Gas Corp., said after spending an hour answering analysts’ questions, and talking about low natural gas prices and the promise of more pipelines. Cabot swung to a $27 million loss for the quarter from a $118 million profit the year before despite a modest increase in production. Expect to hear similar news from Appalachia’s other shale producers as they discuss financial results in the next weeks, based on the prices they have been getting for their gas — less than $2 per million British thermal units — and early word from a few companies.Cecil-based Consol Energy Inc. warned investors it would report an operational loss Tuesday, when fellow producers Range Resources and Southwestern Energy will share results from the quarter. Analysts expect losses at Consol, Anadarko and Chesapeake, and profits of less than 5 cents per share at Southwestern and Range, according to Bloomberg’s consensus of estimates.

Consol Energy reports deep loss, bigger Utica results - Consol Energy Inc. will stop drilling new wells through next year, is further slashing its spending and will consider options including an outside partner for its metallurgical coal mine as the company copes with low prices that resulted in large second-quarter losses.   Huge early gas flow from a new Utica shale well in Westmoreland County show the potential to increase production while spending less, though.  The Cecil-based gas and coal producer early Tuesday reported a net loss of $603 million, or $2.64 per share, during the quarter that ended June 30, even deeper than the $25 million, or 11 cents per share, loss it reported last year.  The results, which the company warned last week were coming, include an $829 million write-down of shallow, conventional gas and oil wells across Appalachia. Without that write-down and other one-time accounting entries, Consol still posted an adjusted loss of $84 million, or 37 cents per share.  Despite a 45 percent increase in gas production, total revenue fell nearly 31 percent to $649 million. “Consol is focused on managing through what continues to be a very challenging commodity price environment,” CEO Nick DeIuliis said in a statement.  The company cut its capital budget for drilling another 20 percent to $800 million and plans to spend $400 million to $500 million next year. It recently announced layoffs of more than 10 percent of its workers.

Natural gas as an electricity source: Is it sustainable? - While an international report predicts the rise of solar electricity worldwide, a different electricity revolution is already happening locally: the rise of natural gas. Natural gas recently overtook coal as the top source in the U.S. for electric power generation for the first time. Ray Dotter, spokesman for PJM Interconnection, which coordinates the movement of wholesale electricity in Pennsylvania and 12 other states, said the upward trend of natural gas began about five years ago. “Natural gas fire is now very competitive with coal,” Dotter said. “Ten years ago, that’s not something most people would’ve predicted in electricity.” At 36 percent, coal is still atop PJM’s generation by fuel type chart, according to its most recent report, but natural gas, at 17 percent, is quickly closing in on its competitor. Most new generation requests in the past five years have been for natural gas, Dotter said. Pennsylvania residents have already seen the benefits of the natural gas boom from drillers in the state’s Marcellus Shale formation.The future: The Bloomberg New Energy Finance report, which looks at the future of the world’s power market, predicts gas won’t be a viable option for long. The report suggests that few countries outside the U.S. will replace coal plants with natural gas, and utility-scale solar will be cheaper than natural gas production in the U.S. by 2036.

How Propane Could Completely Undermine One State’s Ban On Fracking -A group in New York may have found a way to get around the state’s so-called ban on fracking. Tioga Energy Parters, LLC, applied earlier this month to conduct propane fracking — a process similar to hydraulic fracturing, but that injects propane gas, not water, into shale formations to loosen the deposits of oil and natural gas underground. The state Department of Environmental Conservation (DEC) will review the application and determine whether a full environmental impact statement (EIS) is necessary. “It’s not a loophole. That ban does not apply to us,” Adam Schultz, a lawyer for the company, told ThinkProgress. Schultz said the permit application is going through the permitting process. New York environmentalists rejoiced when a state moratorium on fracking became an out-and-out ban earlier this year, but the law applies only to high-volume hydraulic fracturing — defined as extraction that uses 300,000 gallons or more of water per well, Schultz said. Propane fracking uses no water. It also injects a lower volume of fluid into the shale. It was not immediately clear who makes up Tioga Energy Partners, LLC — the company does not appear to have a website or previous projects — but Schultz said the group had “a great amount of experience and expertise with waterless fracking technology.”The application seeks to develop oil and gas on land owned by a group of farmers in Tioga County, in central New York, over part of the Marcellus Shale — the largest natural gas field in the United States. “This application has the support of the community and has the official support of the town of Barton,” Schultz said.

Interstate gas pipeline re-routed to avoid fragile NY forest  — A section of the planned Constitution Pipeline, designed to bring natural gas to New York City and New England, has been redrawn to avoid a 1,000-acre private forest with fragile wetlands. Christopher Stockton, spokesman for the 124-mile pipeline to bring cheap gas north from Pennsylvania’s shale fields, confirmed the route change Tuesday. Stockton said the change adds almost 3 miles to the route and affects 11 landowners, who recently signed right-of-way agreements. The new route avoids the private Charlotte Forest in Harpersfield, about 50 miles southwest of Albany. The property is owned by the heirs of forester Henry Kernan. Family members have managed the forest for 70 years and were among the pipeline opponents. Construction would have required clearing trees from a mile-long, 75-foot-wide swath across the Kernans’ forest between two ecologically rare sphagnum bog lakes. “Since we introduced this project more than three years ago, we have adopted more than 300 route changes affecting more than 50 percent of the project,” Stockton said. “Most of these route changes were the direct result of feedback received from landowners, permitting agencies and data collected as a result of field surveys.” The project has Federal Energy Regulatory Commission approval contingent on receipt of a water quality certificate from the state Department of Environmental Conservation and a Clean Water Act permit from the Army Corps of Engineers. The department has no timetable for completing a review of the project’s potential impact on streams and wetlands, spokesman Tom Mailey said Tuesday. Stockton said Constitution Pipeline LLC plans to start construction in September. The line will end in New York’s Schoharie County, where it will connect with existing lines. A second pipeline, the 325-mile Northeast Energy Direct project proposed by Kinder Morgan, is in earlier stages of planning on a roughly parallel route.

Pipeline Whack-a-Mole - -- Didn’t I write this column already? The one where I say, hey, it’s so awesome that New York state banned fracking, but companies are still trying to criss-cross our state with new pipelines that allow gas fracked in other places to get to market—whether that market is New England, or abroad via tankers. The one where I explain how these companies who care for nothing but a quick buck and destroying the climate in the process are using eminent domain and federal regulations to force us to allow them to transport stuff across our state that (a) does not benefit us and (b) needs to stay in the ground for the future of humanity. Oh right, I did. In January, about the Constitution Pipeline, which would run from Susquehanna County, Penn., to Schoharie County. And this time it’s about the Northeast Energy Direct pipeline, which will run from Wright, N.Y., to Dracut, Mass. Same company. Same problems. Whole new set of hearings to attend and letters to write. Just like the bomb trains, these pipelines are a disaster waiting to happen. The area around them is called the “incineration zone.” A Harvard engineering study found each year about 15 billion cubic feet of natural gas leaks out of the delivery system in the Boston region. So let’s that put that under the Hudson River? Brilliant idea. Poor Pete Seeger must be spinning in his grave. (Or, knowing Pete, he’s writing a searing protest song instead; hopefully he’ll whisper it someone’s ear.) Organic farms, priceless natural treasure, drinking water supplies—all in danger. And just like the bomb trains, they are a symbol of how determined the dirty energy companies are. The climate justice movement may have celebrated a victory over the Keystone XL pipeline, but much of what would have flowed through it has been directed instead onto unsafe rail. New York banned fracking here, but is still in danger from fracked gas. Pipelines are springing up everywhere.

Hey, I Have an Idea Where They Can Stick the Atlantic Coast Pipeline ... - Governor Terry McAuliffe of Virginia campaigned on green energy (and I hear some people may have believed him, though I haven’t met one) and then immediately backed the proposed construction of a giant fracked-gas pipeline through the mountains and farms of Virginia to carry fossil fuels from West Virginia to North Carolina. Dominion Virginia Power paid $1.3 million this year in legal bribes to candidates’ election campaigns, more than anyone else in Virginia except the two Parties. Every single bill Dominion opposed in the legislature died. Dominion, according to the dictionary, is “the power or right of governing and controlling; sovereign authority; rule; control; domination.”  In Virginia it’s easy to think of the evictions of the poor farmers 80 years ago to create Shenandoah National Park as something ancient that civilization has outgrown and would never do again. (And the old lyrics of the song Shenandoah, about giving the Native American chief liquor in order to steal his daughter, are not celebrated in this day and age.) But at least the injustice of the 1930s evictions created a park. At least there was some sort of public interest involved.  Now here comes the Virginia government as the bought-and-paid-for servants of their corporate masters at Dominion to claim a 40-yard-wide path of destruction and potential catastrophe right through the middle of numerous private properties and public properties for the sake of escalating the collapse of a livable climate on the planet, not to mention facilitating the destruction in West Virginia where the fracking frackers will do their fracking. What’s the public interest to justify it? It’s going to ruin parks and not create any.

Drillers Fracking at Much Shallower Depths Than Widely Believed -  The nation's first survey of fracking well depths shows shallow fracking is more widespread than previously thought, occurring at 16 percent of publicly recorded sites in 27 states, posing a potential threat to underground sources of drinking water. Stanford University scientist Robert Jackson and his colleagues reviewed about 44,000 wells and found that nearly 7,000 of the sites were fracked less than a mile below the surface, according to research published this week in the journal Environmental Science & Technology. "You'll hear from industry all the time that fracking only occurs a mile or two underground...it's something that they push really hard,"  That's because as concern has grown about fracking's potential threat to well water in recent years, industry has sought to reassure the public by saying that fracking occurs at depths far below the water table. Consequently, migration of fracking fluid or methane from a frack zone more than a mile underground (deeper than 5,000 feet) to a shallow aquifer (around 1,000 feet) would be nearly impossible, industry contends. While most fracking is occurring at those depths, said Williams, this paper reveals a "surprising" number of shallow wells "and that's a concern." Using well data from the website FracFocus spanning 2008-13, the researchers found well depths ranged nationwide from deeper than 3 miles to as shallow as 100 feet. Of the 27 states reviewed, 12 had recorded at least 50 shallow wells, defined as those drilled less than a mile deep. The three top states for shallow wells include Texas with 2,872 wells, Arkansas with 1,224 and California with 804.  Jackson told InsideClimate News the analysis "definitely" underestimates the practice because of limited reporting to FracFocus, an industry-backed database where companies post drilling information. For most states, company reporting to the online registry is voluntary.

Despite slump, Texas is about to break a 43-year-old record -- Despite thousands of layoffs and continuous price calamity, Texas is on route to produce a record amount of oil that hasn’t been reached in over 40 years, the Houston Chronicle reports. At a bi-annual state assessment of oil and gas, economist for the Texas Alliance of Energy Producers Karr Ingham noted that budget cuts and reduction in drilling activity haven’t deterred record production. Statewide oil output is expected to reach 1.28 billion barrels this year, exceeding the state’s record of 1.26 billion barrels set in 1972. According to a shocked Ingham, Texas output is up 17 percent from the same time last year, even with crude prices 45 to 50 percent lower. Since oil prices started falling last year, oil and gas rigs have fallen 60 percent in Texas, according to Baker Hughes and reported by Fuel Fix. . Ingham said drilling permits had fallen and that completions decreased by 33 percent. “I don’t see any way at all now that we don’t continue to grow production in Texas for the balance of the year,” he stated. “We certainly have for the first part of the year. It almost can’t drop fast enough to keep this from happening.” However, prices have (obviously) made an impact on what projects could have been completed if crude were still in the $70 to $90 per barrel range. According to a recent Wood Mackenzie report, globally, delays due to low market incentives equal to $200 billion of investment.

Texas push to export continues -- Texas is so over not being able to export its oil. While the state currently sits on billions of barrels of oil, an oil embargo in the 1970s bars it from exporting a single one. “It’s an enormous amount of oil and the current policy keeps us out of the world market for oil,” Texas Senator Kel Seliger told ABC 7 News. The ban on oil exports was originally intended to curb the dwindling gas reserves of the time, but Judy Stark of the Panhandle Property and Royalty Owner Association said the ban stands as an antiquated set-back in the midst of the current production high in the U.S. “We are now the world leader in oil and gas production,” Stark said. “We’ve never been in that position.” According to Stark, the embargo is to blame for more than 300 thousand jobs cut and a slew of oil rig closures. In related news, RRC Chairman David Porter lights up Congress with export ban testimony. If the U.S. could export oil, “drilling rigs would start back up, jobs (would) start back up,” Stark said. “I believe it’s like $23 billion (per) year in increased revenue to the United States by lifting the ban.” The fight to lift the ban isn’t new to the Lone Star State; Senator Seliger’s Senate Resolution 13 asks congress to lift the ban—a move he believes would mutually benefit the U.S. and overseas countries.

Magnitude 4.5 and 4.0 earthquakes recorded in Oklahoma - — Two moderate earthquakes have been recorded in central Oklahoma. The U.S. Geological Survey reports a 4.5 magnitude quake at 1:12 p.m. Monday and a 4.0 magnitude quake at 12:49 p.m. Both were about 3 miles northeast of Crescent, or about 35 miles north of Oklahoma City. The Logan County Sheriff’s Office and officials at Crescent City Hall say there are no reports of damage or injury. The Oklahoma Corporation Commission recently announced plans to place more than 200 oil and natural gas wastewater disposal wells under scrutiny as it investigates whether they are triggering earthquakes in the state. The Oklahoma Geological Survey issued a report in April saying it’s “very likely” most of the state’s recent earthquakes were triggered by the injection of wastewater from oil and gas drilling operations.

Series Of Earthquakes Strike Oklahoma Near Wastewater Disposal Wells -- Two relatively large earthquakes struck northwest of Oklahoma City midday on Monday within a span of about 20 minutes. The 4.0 magnitude and 4.5 magnitude quakes were accompanied by another 4.1 quake about seven hours later around 8:20 p.m. Two more smaller earthquakes also rattled the region throughout the day. The largest ever earthquake in Oklahoma was a 5.6-magnitude jolt in 2011. While there were no reports of damage due to Monday’s quakes, they could be felt as far across five states — Oklahoma, Kansas, Texas, Missouri, and Arkansas — according to the Weather Channel. The high level of seismic activity, especially in these closely linked swarms, follows a recent trend in fossil fuel-rich Oklahoma in which a dramatic spike in quakes has been tied to wastewater injection wells accompanying proliferating oil and gas drilling operations. In April, the New Yorker published an article on the recent surge in Oklahoma quakes that found that nearly two-dozen peer-reviewed papers have concluded disposal wells and quakes are likely connected. In recent months, Oklahoma’s government has embraced the research showing such links and has begun to try to address the problem. Earlier in July, state oil and gas officials put more than 200 new wastewater disposal wells under extra review as “Areas of Interest” for the possibility that they are contributing to the recent earthquake swarms. This was in addition to 300 wells originally placed under the directive in March. According to E&E News, the 4.5 magnitude quake on Monday centered less than three miles away from an oil and gas wastewater disposal well recently added to the list.

40 Earthquakes Hit Frack-Happy Oklahoma in Last 7 Days - Yesterday Oklahoma recorded five earthquakes centered near Crescent, Oklahoma, some of which were felt in at least five states—Oklahoma, Kansas, Texas, Missouri and Arkansas. Three of the quakes measured above 4.0-magnitude and the biggest of these was a 4.5-magnitude earthquake, the strongest earthquake in the region since a magnitude-4.9 near Conway Springs, Kansas, on Nov. 12, 2014. The strongest magnitude earthquake on record occurred on Nov. 5, 2011 and registered as 5.6-magnitude. Oklahoma has seen two sizeable earthquakes early this afternoon: 4.5 magnitude within the past hour. pic.twitter.com/vlCpnTgTfi   There was no reported significant damage from the earthquakes, but the rate of earthquakes in Oklahoma has increased by about 50 percent in the last two years, greatly increasing the chance for a damaging quake, according to the USGS. There have been eight quakes of magnitude 3.0 or larger near Crescent since Saturday and during the past seven days, Oklahoma has experienced about 40 earthquakes.“Noticeable quakes—above magnitude 3.0—now hit the state at a rate of two per day or more, compared with two or so per year prior to 2009,” reports Reuters.   This spring scientists confirmed that the state’s recent uptick in fracking activity has led to a dramatic increase in earthquakes in the state, citing the injection into deep underground wells of fluid byproducts from drilling operations as the culprit. “Oklahoma experienced 585 magnitude 3+ earthquakes in 2014 compared to 109 events recorded in 2013,” according to the state’s website, Earthquakes in Oklahoma.

Oklahoma Frackquakes Blamed on Trump’s “Blasphemy” - Oklahoma state legislator, Gomer P. Richards, (R) Lawton,  blames them on Trump’s “blasphemy,” telling NFW that, “These earthquakes are categorically not caused by fracking. They are God’s mighty revenge on America for letting the blasphemous and the idolatrous demagogue, Donald Trump, ride rough-shod over a great America, Senator McCain, who many regard as a kind of secular saint.”

ND gas flaring goals jeopardized by low oil prices — North Dakota’s top energy regulator says the low oil prices might jeopardize targets that require reducing the amount of natural gas that is burned off as a byproduct of the state’s oil production. State Mineral Resources Director Lynn Helms told some lawmakers Monday that the oil industry is exceeding rules that require reducing the amount of natural gas that is burned off as a byproduct of the state’s oil production. But he says low oil prices have put some natural gas projects on hold in North Dakota and that may make reaching new capturing goals difficult. The rules put in place a year ago require oil companies to capture 90 percent of natural gas by 2020. Helms says the industry is capturing 82 percent of the natural gas at present.

Hess experiments with tighter well spacing -  Hess Corp.’s second quarter 2015 production saw about an 11,000 barrels-per-day increase over the first quarter and the company says the rise is due in part to bringing on a high number of new wells. President and Chief Operating Officer Gregory Hill told analysts on July 29 that Hess only wants about 25 to 30 wells at any given moment left uncompleted in order to maintain cash flow. During the low oil price environment, the company has found ways to manage the business with some “self-help.” “First, we’ve reduced our capital spend from $5.6 billion in 2014 to $4.4 billion in 2015 and we will further reduce capital in 2016,” Chief Financial Officer John Rielly said. “During 2015, our cost reduction efforts have yielded over $600 million of savings and we continue to be focused on reducing costs further.” Reilly added that for every $1 rise in oil prices, cash flows increase by over $70 million.  “The entire industry is running deficits,” said John Hess, chief executive officer. “All the oil producers of the world are running deficits. And depending upon how low oil prices go and how long they go for, obviously that will figure in our calculus as well about how far we reduce our capex program next year,” he continued. “We have further flexibility to reduce in the Bakken and Utica and we also have flexibility to reduce in our offshore if it’s appropriate.” Hess’ eight-rig program includes six within the Bakken, and the company is experimenting with more wells per pad. The company has about 38 wells currently in eight- or nine-well spacings on 14 pads, but only 13 wells have been producing for more than 90 days. It plans to get 82 pilot wells in the ground by year-end.

Proposed BLM regulations draw industry criticism -  — On July 10, the Bureau of Land Management announced proposed updates to its 25-year-old oil and gas regulations in an effort to help ensure states, tribes and taxpayers get fair royalty returns on resources taken from public lands. The proposed rule changes, announced Friday, will update the BLM’s “Onshore Oil and Gas Order Number 3 (Order 3),” which was established in 1989 before many modern industry operations and technological advances, such as horizontal drilling, were in use. The proposed changes to federal regulations are intended to ensure that oil and gas produced from leases overseen by the BLM are “properly and securely handled,” according to a BLM press release. The new proposed rules will be available for public comment for a 60-day period ending Sept. 11. Janice M. Schneider — a President Barack Obama nominee who became assistant secretary for land and minerals management at the Department of the Interior in 2013 — said the proposed regulations will ensure increased accuracy and reliability of royalty payments from oil and gas leases on public lands. “The proposed rule represents an important step in the BLM’s modernization of its oil and gas regulations,” Schneider said in a statement. “These updates will help ensure that oil and gas produced from leases overseen by the BLM is properly measured, that American taxpayers receive fair value for public resources, and that Indian tribes and allottees, states and local governments receive the full royalties they are due.”

Judge: Oil field work caused Weld County man's death — A judge’s decision that the death of a Weld County oil and gas worker was caused by exposure to hydrocarbons could have major implications for the industry. Federal health officials are taking a closer look at the dangers of “tank gauging,” the practice of measuring oil levels after opening a tank hatch, The Denver Post reported Wednesday. In the Weld County case, a 59-year-old truck driver died after he inhaled a mix of deadly hydrocarbon chemicals. He was among nine oil field workers who died in the past five years while working at crude oil production tanks and measuring the level of oil or other byproducts in tanks. A state judge ruled this month that the widow of the Weld County worker is owed full workman’s compensation benefits. Jim Freemyer’s widow never believed her husband’s poor health abruptly killed him last summer, but, rather, what he encountered while working the Weld County oil patch. The ruling by Administrative Law Judge Peter Cannici on behalf of Connie Freemyer came over the objections of Now or Never Trucking in Greeley — Jim Freemyer’s employer — and Pinnacol Assurance, which denied a claim for death benefits. Connie Freemyer will receive nearly $530 per week until she dies. She will also get $7,000 to defray the cost of her husband’s funeral.

Oil, gas spill reports for July 27 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.Noble Energy Inc., reported on July 22 a site investigation was completed due to lack of vegetation growth. Historical oils impacts were located outside of Greeley. There was an unknown amount of oil spilled. Foundation Energy Management LLC, reported on July 21 that a flowline leak was discovered on July 20 outside of Raymer. Foundation Energy said they began repairs. The estimated oil spill volume was less than one barrel. Noble Energy Inc., reported on July 21 that a cow rubbed against the separator, damaging a valve outside of Eaton. It is estimated between five and 100 barrels of condensate was spilled. PDC Energy Inc. reported on July 20 that a dump washed out on a separator outside of Greeley. An unknown amount of oil and produced water was spilled. Whiting Oil and Gas Corporation, reported on July 17 that 14.5 barrels of oil was release due to a stuck dump valve on a separator, causing the tank to overflow outside of Raymer. Liquid was contained and free liquid was recovered with a vacuum truck and impacted soils were excavated.Kerr McGee Oil & Gas Onshore LP, reported on July 15 that on July 13 a valve was left open during a fluid transfer. About 10 barrels of oil was released. Excavation activities were initiated to remove impacted soil. DCP Midstream LP, reported on July 13 that an unmarked DCP Midstream line was struck by a KP-Kuffman excavator while doing work on a tank battery outside of Longmont. It is estimated that between one and five barrels of condensate was spilled.

Recent Spills Give More Reason to Move Beyond Big Oil  -- Big Oil has dealt North America a battering this month as we’ve seen spill after spill hit the headlines. Label it negligence or an inevitable reality of oil production, the impact is the same: oil and its byproducts are being dumped into our communities, our water supplies and the delicate ecosystems that we value. Despite the industry’s slick rhetoric of reassurance about the safety of oil extraction, it is undeniably clear that Big Oil is unable to contain its destructive product to the detriment of our health, communities and environment.  It is high time our elected leaders embrace this indisputable fact and start taking serious steps to reduce our exposure to these risks—starting by saying no to the most extreme projects like drilling in the Arctic and Atlantic coasts or tar sands development—and ensuring that whatever extraction does occur is held to stringent safety standards. Ultimately, however, what the recent headlines make abundantly clear is that we will only be safe from the harms of fossil fuel production when we succeed in moving beyond oil to clean alternatives—and there is no time to waste. Between four spills in July alone (described in the chart above), we have seen more than 1.3 million gallons oil foul our lands while an unknown quantity, up to another million gallons, was leaked in to Galveston Bay. Of the oil allowed to spill onto soil, 97 percent of it was near Ft. McMurray in Alberta, Canada. The 1.3 million gallons of emulsion (tar sands bitumen and water) leaked by tar sands leviathan, Nexen, constitutes one of the worst land spills in history and it evaded detection by the relatively new pipeline’s “failsafe” spill detection system.

U.S. sets new final rule on oil, ethanol trains -- The Obama administration on Wednesday released a new regulation intended to prevent explosive rail disasters such as the 2013 oil train derailment that killed 47 people and destroyed part of Lac-Megantic, Quebec. The new rule by the Federal Railroad Administration (FRA) requires two qualified railroad employees to ensure that handbrakes and other safety equipment have been properly set on trains left unattended while carrying dangerous materials such as crude oil or ethanol. A series of oil train accidents in recent years led the United States and Canada in May to announce sweeping new safety regulations that require more secure tank cars and advanced braking technology to prevent moving trains from derailing and spilling their contents. The new rule is directed specifically at trains left parked on main lines, side tracks and in rail yards.  “Requiring that an additional, trained individual double check that the handbrakes have been set on a train will help stop preventable accidents,” acting FRA Administrator Sarah Feinberg said in a statement. The new rule also contains requirements that involve briefings for train crews, exterior locks on locomotives and the proper use of air brakes. It applies to trains carrying substances that can cause harm if inhaled and any train carrying 20 or more cars of “high-hazard flammable materials.”

Arctic drilling: Obama gives Shell the go-ahead despite fears of oil spills - The Obama administration has granted permission to Royal Dutch Shell to drill for oil in the Chukchi Sea, off the northwest coast of Alaska. The company was given the final approval for its application to drill in the Arctic on Wednesday in what was a major loss for green activists who have fought the drilling plans. Shell has been granted permission start drilling exploratory wells about 140m off the coast of Alaska – one of the best prospective offshore areas in the world.  Currently Shell are permitted to drill "top holes" up to 1,300ft deep and not in areas where there is known to be oil. They will not be able to drill deeper and in areas where oil in known to be until their vessel is equipped with a "capping stack" to prevent oil spills, the Bureau of Safety and Environmental Enforcement (BSEE) at the US Department of the Interior ruled. The Finnish icebreaker, MSV Fennica, is Shell's only vessel with that capability but is attempting to reach a to port in Oregon for repairs afterdamaging its hull on a shoal earlier this month. Shell has said that they aim to begin drilling to depths of about 8,000ft below the ocean bottom within a month, once the area is clear of sea ice, their support vessels are in place, and the vessel, the Polar Pioneer is safely anchored over the well site. Protestors against the decision fear that drilling will irreparably damage the Arctic’s pristine and fragile environment, cause oil spills worse than the 2010 BP oil spill in the Gulf of Mexico  and further global warming. The Bureau of Ocean Energy Management in the US has said there is a 75 per cent chance of "one or more large spills" happening if extensive drilling takes place across the Arctic.

13 Climbers Suspended From Bridge Block Shell Oil Vessel From Heading to Arctic - Thirteen Greenpeace activists have suspended themselves from St. Johns Bridge in Portland, Oregon this morning to block a Shell Oil vessel—the MSV Fennica—from leaving port for Alaskan waters. The climbers have enough supplies to last several days, and are prepared to stay in Shell’s way as long as possible, according to Greenpeace. Shell’s icebreaker was supposed to leave for the Arctic last night. Then @GreenpeaceUSA climbers said #ShellNo: pic.twitter.com/Ygj6jsKXPe —Last week, the Obama administration granted federal permits that clear the way for the oil company to begin drilling in the Arctic Ocean. The company is only permitted to drill the top sections of its wells because it lacks the equipment to cap the wells in case of emergency. The ice breaker carrying the required capping stack for the wells, had been receiving repairs to its damaged hull in Portland and is now trying to leave the port. Once the Fennica is at Shell’s drill site, Shell can reapply for federal approval to drill into hydrocarbon zones in the Chukchi Sea.

Breaking: 13 Greenpeace Activists Suspended From Bridge Block Shell Oil Vessel - Shell Oil’s vessel, the Fennica, turned around today after being blocked by activists hanging from the St. John’s Bridge in Portland, Oregon. Thirteen Greenpeace activists remain suspended below the bridge to block Shell’s ice breaker from leaving the Portland port headed for the Arctic Ocean where the company plans to drill for oil. Greenpeace has been stationed on the bridge for more than 30 hours, and plans to stay put for the time being. The organization is urging President Obama to use his last chance to stop Shell’s Arctic oil drilling plans. The images streaming in from the event are stunning. #PDXvsShell showdown as climbers hung from a bridge to turn #Fennica icebreaker ’round, delaying @Shell‘s arctic plan pic.twitter.com/VX9DuSAe6U . Greenpeace wants to prevent the vessel from leaving the port because it’s “one of two primary icebreakers in Shell’s drilling fleet, and is equipped with a capping stack, which Shell is federally required to have on site in the Chukchi Sea,” says Greenpeace. “Until the MSV Fennica and the capping stack are on site in Alaska and Shell is granted federal drilling permits, the company can only drill top wells, thousands of feet above any projected oil.” Kristina Flores, a Greenpeace activist live-streamed the event via Periscope from the bridge. She is acting as one of the 13 “anchor supports” for the 13 activists suspended from the bridge below.Feeling victorious! The Fennica turned around and headed back to the port. Another successful day of blockading! #shellno arctic drilling!! — Kristina N. Flores

Activists Hanging From A Bridge Force Arctic Drilling Ship To Turn Around - “Not today, Shell!” an anchor support yelled from a Portland bridge as 13 climbers hung below for the 29th consecutive hour.  Cheers and chants were heard from land and water around 7:30 a.m. Pacific Time Thursday, as a Royal Dutch Shell ship slowly turned around in the water and retreated from the bridge. The Arctic-bound ship stopped in its tracks Thursday during its second attempt to reach a Shell drilling site. The oil company aborted its first attempt early Wednesday morning, when Greenpeace activists rappelled off of St. John’s Bridge in Portland, Oregon with the support of assistants and “kayaktivists” on the water, two hours before the icebreaking vessel was scheduled to leave. The ship’s second attempt also failed. The vessel, MVS Fennica, is meant to keep ice at bay during Arctic drilling and carries a crucial part of Shell’s spill response system, according to Kristina Flores, one of 13 anchor supports at the bridge, who documented the protest using Periscope.  “What we have on the water today is an eyesore,” she said. Activists considered the Fennica’s retreat a victory, but remained in position. Many climbers participating in the blockade, who risked arrest on felony charges, have access to social media. One live-tweeting climber posted when the ship retreated.

4 Videos Explain Why 13 People Would Hang From a Bridge to Say ‘No Arctic Drilling’ -  Thirteen Greenpeace climbers remain suspended below the St. John’s Bridge, blocking the Shell Oil vessel‘s route out of Portland, Oregon, for more than 24 hours. In case you’re wondering what would inspire 13 people to take such an action, here’s your chance. Four videos have been released by Greenpeace, where Kristina, Harmony, Georgia and Elizabeth share why they are hanging from the bridge. Watch here:

US Forces Succeed in Clearing Peaceful Environment Guardians, Escorting Shell Rig Through and Sending on to Arctic - Reporting from the scene: US forces cleared kayakers out of the way and cut the cables connecting suspended climbers, making space for the government-escorted Shell oil rig to move through and continue on to the Arctic to begin the fossil fuel extraction process. As the ship approached, one (hopelessly naive) onlooker shouted, “Where is President Obama?“, as if this were being done against his will. Obama in 2012: “Now, under my administration, America is producing more oil today than at any time in the last eight years. That’s important to know. Over the last three years, I’ve directed my administration to open up millions of acres for gas and oil exploration across 23 different states. We’re opening up more than 75 percent of our potential oil resources offshore. We’ve quadrupled the number of operating rigs to a record high. We’ve added enough new oil and gas pipeline to encircle the Earth and then some.”  Here is the oil rig passing through the cleared blockade: (video)

Arctic-bound ship leaves Portland after oil drilling protest — Authorities used boats, personal watercraft, poles and their bare hands to remove protesters in kayaks and hanging from bridges who had tried to block a Royal Dutch Shell icebreaker bound for an Arctic drilling operation. The Fennica left dry dock Thursday afternoon and made its way down the Willamette River toward the Pacific Ocean soon after authorities forced the demonstrators from the river and the St. Johns Bridge. Shell spokesman Curtis Smith said the Fennica was on its way to the Chukchi Sea where one of the energy giant’s vessels started initial drilling operations Thursday night. Several protesters in kayaks moved toward the center of the river as the ship began its trip, but authorities in boats and personal watercraft cleared a narrow pathway for the Fennica. Authorities also jumped into the water to physically remove some protesters who left their kayaks. Sgt. Pete Simpson, a Portland police spokesman, said “a number of people” were detained and it was still being determined whether any would face charges. Simpson earlier said safety was the main priority as authorities forced protesters from the area. “This is, obviously, a very unique situation,” he said.

Drilling Ship Heads To Arctic Despite Portland Bridge Protest -- After a showdown Thursday morning that was hailed as an environmentalist victory, Royal Dutch Shell’s Arctic-bound ship passed unobstructed under Portland’s St. John’s bridge just before 6 p.m. Pacific Time that day. The icebreaking vessel Fennica is on its way to Alaska to support Shell’s drilling efforts in the Arctic. Protestors hung from the bridge for 38 hours, obstructing the ship’s passage, before the U.S. Coast Guard and police removed them.Greenpeace, who organized the protest and blockade, has been fined $2,500 for every hour that it delayed the Fennica’s departure, beginning Thursday at 10 a.m., local time. Eight hours of violation at $2,500 per hour would total $20,000. A motion filed by Shell requesting the federal court to impose a fine said the daily rate paid by the oil company for the ship is $59,288. The fines would have increased every day had protesters not been removed Thursday evening.Protesters were asked to leave throughout the day by the Coast Guard, but they did not comply. “We’ve been here for 29 hours, and we’re ready to be here for another 29,” Greenpeace activist Kristina Flores said while broadcasting the protest on Periscope.The 13 climbers were accompanied by anchor supports on the bridge, “kayaktivists” and swimmers on the river, and a crowd of protesters on the nearest dock. Authorities used boats and even “jumped into the water to physically [remove] protesters who left their kayaks,” the Associated Press reported.The Fennica is designed to protect the drilling fleet from ice and carries the containment dome, a key component of Shell’s oil spill response system. It arrived in Portland last week for repairs on a meter-long gash in its side, and was headed back to the Alaskan Arctic when protesters created a blockade. Exploration and drilling plans could not go forward until the Fennica returned to the site.

#ShellNO:Climate Action Coalition Celebrates Historic Win in Raising Global Awareness on Urgency of Climate Crisis in Action in Portland  -- — In record heat, members and organizers with the Climate Action Coalition in Portland, OR, together with Greenpeace activists made history on Thursday when they forced the MSV Fennica, the Arctic icebreaker, to stand down, delaying its departure by approximately 40 hours. The Fennica is now headed for the Arctic where it will assist Shell Oil in drilling for oil.The non-violent direct action of “kayaktivists”—activists on kayaks—and Greenpeace climbers suspended from the St. John’s Bridge in Cathedral Park in Portland, OR, focused international attention on the recklessness of Arctic drilling at a time when scientists tell us we must leave all unproven and most proven reserves of fossil fuels in the ground if we are to avoid dangerous and possibly runaway climate change. As the Fennica approached, kayakers paddled toward the icebreaker and continued to impede its path.  Law enforcement out on the water intervened; approximately 25 kayakers and canoers were detained; 11 were taken to the Coast Guard and detained and issued $500 citations, and at least two others were also issued $500 citations. At least three may face serious legal charges. Local representatives of CAC received reports from some observers that Coast Guard and other law enforcement boats were ramming kayaks to knock people into the water. One law enforcement boat allegedly ran over a kayaker who was forced between the moving Fennica and the law enforcement boat.  Most disturbingly, a representative of the Backbone Campaign acting as part of the boat safety crew was detained by law enforcement while attempting to rescue two kayakers who had fallen in the Willamette River, creating a situation that could have been tragic. Portland Rising Tide activist Jonah Majure locked his neck to the railroad bridge before the boat attempted to come through, but was removed by police. Despite the hazards and risk of arrest, at least 500 people gathered on the shore, chanting, “Stop that boat! Stop that boat!” At one point, the Fennica did indeed stop when kayaks again flooded its path, but the ship eventually passed through the blockade.

Husky Energy profit falls 81 pct due to lower oil prices (Reuters) - Husky Energy Inc, Canada's No.3 integrated oil company, reported a nearly 81 percent fall in quarterly profit as it struggles to cope with weak oil and gas prices. The company's net income fell to C$120 million, or 10 Canadian cents per share, in the second quarter ended June 30, from C$628 million, or 63 Canadian cents per share, a year earlier. A one-time provision of $157 million for a corporate tax increase in Alberta and other items also affected the company's second-quarter net income. However, total production rose slightly to 337,000 barrels of oil equivalent per day from 334,000.

Weatherford announces cuts to workforce --Weatherford executives on Thursday announced plans to further cut costs and lay off another 1,000 employees after shedding 10,000 workers earlier this year. The company will also close 30 more facilities this year in addition to 60 closed across North America in the first half of 2015. Weatherford officials did not specify the regions where those cuts would happen, leaving it unclear to what degree those cuts will be felt in the Permian Basin. “Market conditions will not improve significantly in the balance of the year,” CEO Bernard J. Duroc-Danner said in a statement. “There will be modest activity increases in North America and selected international geographies but these will not be material.” Locally, Weatherford had about 1,100 employees before the downturn, according to a September 2014 annual survey published by the Odessa Chamber of Commerce. It is not clear where that employee count stands today. Weatherford is the only one of the four major oilfield services companies to announce cuts in a series of second quarter conference calls. And, taken together, the four biggest oilfield services companies offered tepid forecasts of a recovery in the oil and gas industry, supporting outside predictions that the worst of the layoffs are past.

Chevron pulls nearly 1,000 jobs in Houston  -- Chevron announced Tuesday that the company will lay off 1,500 oil and gas workers companywide, including over 900 positions in Houston. In a statement released to KPRC 2 News, Chevron said that due to cost reduction efforts approximately 950 positions will be reduced in Houston. Operations in San Ramon, California will experience a reduction of 500 jobs and internationally, 50 jobs were reported for expected cuts. Around 270 of the total job cuts are currently vacant positions that will not be filled. The international oil mogul counts roughly 8,000 Houston-area employees. Two years ago, the company had a count of nearly 9,000 in the area. “In light of the current market environment, Chevron is taking action to reduce internal costs in multiple operating units and the corporate center. These initiatives, which are currently underway, are focused on increasing efficiency, reducing costs and focusing on work that directly supports business priorities,” read the statement. Chevron spokeswoman Melissa Ritchie stated that additional cost savings are expected to be achieved across the enterprise. Chevron stated that the job cuts are a part of the larger goal of reducing costs by nearly $1 billion. Earlier this year, Chevron had canceled its exploration projects in Romania due to crashing oil prices and heated protests. In addition, the company had moved 100 jobs from its San Ramon corporate headquarters to Houston, which now seems all for nothing.

Chevron to Cut 1,500 Jobs  - Chevron Corp. will cut 1,500 jobs globally as the company aims to reduce internal costs in multiple operating units and the corporate center. The San Ramon, Calif.-based energy company will cut 950 positions in Houston, 500 positions in San Ramon and 50 positions internationally. Chevron is cutting jobs due to the current market environment and is “focused on increasing efficiency, reducing costs and focusing on work that directly supports business priorities,” Chevron spokesperson Melissa Ritchie said in an email to Rigzone. Chevron will be cutting 1,500 employee positions across the 24 groups that comprise the corporate center; 270 of the positions are existing vacancies that will not be filled. Additionally, 600 staff augmentation contractor positions will be cut in the corporate center. The cost reductions due to cuts in the corporate center are expected to total $1 billion with additional cost savings expected across the company. Ritchie said Chevron’s cost-cutting initiatives are currently underway and will continue in coming months. The company plans to have a majority of the cuts completed by mid-November of 2015 as well as cost-saving initiatives in place by 1Q 2016.

The Layoffs Return: Energy Giants Chevron, Saipem To Fire Over 10,000 Workers - In the beginning of 2015 the biggest threat to the economy as a result of the collapse in oil prices, both in the US and worldwide, was the surge in layoffs among highly-paid energy sector job. This was confirmed in April when we showed the Challenger layoffs data for the energy-heavy state of Texas, and the energy sector in general where the 37,811 job cuts in Q1 were some 3,900% higher than a year earlier. Then in Q2, after the price of oil staged a substantial rebound of about 50% from the year to date lows in the $40's, energy-related layoffs trickled to a halt as corporations hoped the worst is behind them, and as a result would merely bide their time before redeploying their workforce toward exploration and production. Alas, this was not meant to be, and as the events of the last month have shown, oil has resumed its downward slide. And, as expected, so have layoffs. Overnight, US energy major Chevron announced it will cut 1,500 jobs globally "as the company aims to reduce internal costs in multiple operating units and the corporate center." According to Rigzone, "the San Ramon, Calif.-based energy company will cut 950 positions in Houston, 500 positions in San Ramon and 50 positions internationally."   Chevron was the first major which in January suspended its stock buyback blaming the collapse in cash flows. Is the dividend next?  But it's not just the US, because moments ago Italy's biggest oil and gas industry contractor Saipem announced that not only is it cutting its guidance, sending its stock plunging, but also reported that it plans to cut 8,800 workers by 2017. According to ANSA, the reductions are part of a restructuring plan that follows more than 900 million euros in writedowns.

Oil companies slash spending, jobs as prices slide for second time – The stark reality of a much-feared second dip in crude prices is prompting global oil majors and nimble U.S. shale companies alike to ax spending once again a year after the first price crash started. Just days into the second-quarter earnings season, Chevron Corp and Royal Dutch Shell Plc said they would slash a combined 8,000 thousand jobs around the world. In North Dakota, Whiting Petroleum Corp , the top producer in the No. 2 U.S. oil patch, cut its capital expenditure budget days after optimistically raising it 15 percent on bets the renewed downturn in prices would be a temporary blip. ConocoPhillips , the largest U.S. independent, trimmed its 2015 budget for the third time on Thursday, by $500 million to $11 billion. More ominously, Linn Energy LLC , a small exploration and production company, suspended its quarterly distribution to investors on Thursday to conserve precious cash that has largely evaporated on the price drop. Its shares fell 26 percent. Conoco CEO Ryan Lance said the company was preparing for “lower, more volatile prices.” Crude prices have been on a roller coaster since mid-2014, when global oversupply started to chip away at levels higher than $100 a barrel. After hitting a bottom of $42 in March, U.S. crude rallied to around $60 in May, providing some breathing room to shale companies that saw a dramatic reduction in cash flow. But since June 23, when the latest rout started, oil has tumbled about 20 percent to around $49 a barrel. The second dip has dashed hopes raised in May that prices would hold steady at around $60 a barrel or inch towards $65, a level that many U.S. shale oil producers have said would allow them to add drilling rigs and emerge from their defensive crouch.

Shell and Centrica are cutting 12,500 jobs as oil prices fall - Royal Dutch Shell will slash 6,500 jobs in 2015 as part of a cost cutting drive. Another British firm Centrica will shed 6,000 jobs, partly due to a reduced focus on oil and gas production. The latest wave of job losses follow a period of relative calm for energy firms as global crude prices stabilized. But oil has resumed its slide over the past two months and now trades just below $49 a barrel. The American energy revolution and record OPEC output has created a massive supply glut at a time when global economic growth is depressing demand. The prospect of more oil exports from Iran as Western sanctions are lifted is also pressuring prices.

Here’s Why Oil Giant Shell Is Slashing Thousands of Jobs --There was no sugar coating on Shell’s earnings report Thursday: “Today’s oil price downturn could last for several years,” the company said.  In reporting a 25% decline in net income in the second quarter, the company said it would be combating the “prolonged downturn” in the oil industry by slashing 6,500 staff and contractor jobs this year and reducing capital investment by $7 billion or 20%. The company employs 94,000 worldwide. Shell’s dreary outlook on Thursday comes after its prediction in April that oil prices would return to $90 per barrel in three years. Crude oil has slumped 50% in the last year—at one point hitting a six-year low.  Shell isn’t alone in trying to grapple with cheap oil. This week Chevron said it would cut 1,500 jobs in an effort to cut costs by $1 billion. Likewise,ConocoPhillips said it’s continuing layoffs as it tries to reduce spending by $1 billion over two years.  Graves & Co., an energy consulting firm, estimates that the energy sector has lost 50,000 in the past three months—that’s on top of the 100,000 layoffs since oil prices began to tumble last fall.

Range Resources reports second-quarter loss - Range Resources lost $119 million in the second quarter despite cutting back on the number of rigs deployed and the amount of money spent to drill each well. The Fort Worth-based energy company lost 71 cents per diluted share versus earnings of $171 million, or $1.04 per diluted share, in the second quarter of 2014. The results were released Tuesday after the stock markets had closed. Revenue for the period was $248 million, a 68 percent decline from last year. This comes after Range slashed its drilling budget to $870 million this year, a $700 million reduction from 2014. The company is running only 10 rigs, five fewer than at the first of the year. Range plans to end 2015 with only six rigs in the field, the company reported. Along with the help of lower service costs, Range has reduced its well costs per lateral foot by about 43 percent since 2008, from $4.30 per thousand cubic feet to an estimated $2.42. At the same time, Range’s wells produced record volumes, averaging 1,373 million cubic feet of gas a day, a 24 percent increase over the same quarter last year. Most of that activity was in the Marcellus Shale in the Northeast.

Tumbling oil prices slam profit at Exxon Mobil, Chevron - Weak oil prices shriveled quarterly profit at Exxon Mobil Corp and Chevron Corp , compelling both companies to rethink operations and plan for what many expect to be a sustained period of cheap crude. Earnings at Exxon and Chevron, two of the world’s largest oil producers, also missed analysts’ expectations, adding to concerns that perhaps executives had not acted quickly enough to mitigate the impact of an over-50-percent drop in oil prices since last summer. The results also highlighted how smaller and more nimble U.S. shale oil companies had slashed costs faster and more aggressively than global majors. Some shale producers have cut back drilling by 60 percent or more. Exxon’s profit fell by more than half, with the biggest drop in its exploration and production business, where earnings slumped by nearly $6 billion Chevron’s profit plunged 90 percent, a starker drop and one exacerbated by a $2.22 billion loss in its exploration and production division. Though production grew at both companies, they missed the estimates of many analysts who had expected the energy giants to pump more.  Shares of both fell about 4.6 percent in morning trading.

Exxon Earnings: Carnage -- Moments ago energy titan Exxon Mobile, which not too long ago was bigger than AAPL by market cap, and is now roughly half the size of the phone maker, reported earnings which were, in a word, carnage. Starting at the bottom, EPS of $1.00 was not only a big miss to already reduced expectations of $1.11, but also the worst quarter since 2009. This was down a whopping 51% from a year ago, when the company made $2.05, and unlike other companies which mask the divergence between profits and EPS through countless gimmicks, XOM's Earnings also plunged by a comparable number, or about 52%. Revenues of $74 billion, while modestly better than expected, were also a debacle, plunging 33% from a year ago, and yet US upstream ops lost $47 million, down a massive $1.2 billion from a year ago, while non-US upstream ops, generated only $2.1 billion vs $4.6 billion a year ago. So revenues higher, but margins and profits lower, how come? Simple: boosting volumes to offset declining prices, and as has been the case with so many other companies, Exxon's oil-equivalent production increased 3% from 2014, with liquids up 8.9 percent and natural gas down 3.6 percent. The problem, again, was margins. A bigger problem is that while EPS and revenues crashed by 51% and 33%, CapEx was down just 16% from $9.8 billion to $8.3 billion. Expect Q3 capex to be slashed across the board. As a reminder, the main revision in GDP had to do with fixed investment. Well, as more companies tighten the belt on capital spending, GDP is poised to go in one direction only - down.

Hercules Offshore Files for Bankruptcy --- Hercules Offshore Inc., an offshore oil field services company, will declare bankruptcy next month as part of a major financial restructuring plan to wipe out its $1.2 billion in debt. According to Reuters, in April, Hercules retired several rigs and last November, laid off 324 employees in response to dropping oil prices and decreasing demand for its shallow water drilling services in the U.S. Gulf of Mexico. None of these actions were be able to prevent the company from filing a Chapter 11. Two-thirds of Hercules’s debt holders back the reorganization plan granting them nearly 97 percent of the company’s shares. “The new capital structure will provide a better foundation for Hercules to meet the challenges in the global offshore drilling market due to the down-cycle in crude oil prices and expected influx of new-build jack-up rigs over the coming years,” Hercules CEO John Rynd said in a written statement. Other highlights of the restructuring plan include shifting ownership of the company to its creditors and a backstop of $450 million to cover the remaining construction costs of the new drilling rig, the Hercules Highlander, as well as liquidity to fund company operations. “Hercules has sufficient liquidity to fund its operations through the period in which the restructuring contemplated by the Agreement will take place, which is important in our ability to meet our existing and future obligations to our customers, employees and vendors,”

BP Reports Second-Quarter Loss as Oil Spill Settlement Takes Toll — The British oil giant BP said on Tuesday that it had lost $5.8 billion in the second quarter, reflecting a huge settlement over the 2010 Gulf of Mexico oil spill. The roughly 40 percent fall in oil prices since last year is also sharply cutting into profits at BP and at other oil companies. BP had an operating profit from oil and gas exploration and production of $494 million in the second quarter, compared with $4.7 billion a year earlier. Besides lower prices, the central causes of the drop were sharply diminished production in the Gulf of Mexico because of maintenance and a write-down on exploration in Libya because of the political turmoil there. BP made $9.8 billion in provisions in the second quarter for the $18.7 billion agreement in principle that the company reached on July 2 with the United States authorities to settle penalties and damage claims arising from the explosion of the Deepwater Horizon rig in 2010. Total provisions for the explosion, which killed 11 workers and spilled millions of barrels of oil, are now $54.6 billion.

Sudden Drop in Crude-Oil Prices Roils U.S. Energy Firms’ Rebound - WSJ: U.S. energy companies are planning more layoffs, asset sales and financial maneuvers to deal with a recent, sudden drop in U.S. crude-oil prices to under $50 a barrel, the lowest level in four months. The companies had been banking on a rebound in oil prices in the second half of 2015 after falling sharply late last year. Prices began to regain ground in the spring, rising so quickly that some American producers started hiring back drilling rigs to pump more crude. That speedy return to the oil patch and the threat of new Iranian oil production have pushed down prices more than 20% over the past six weeks to $48.14 as of Friday , bringing storm clouds back to the energy patch. Oil-field services providers that help drill wells have quietly revealed job cuts that were deeper than initially announced, and warned of more layoffs to come. Halliburton Co. HAL -1.44 % and Baker Hughes Inc., BHI -1.01 % two big service companies that plan to merge, disclosed last week that they had cut 27,000 jobs between them, double the 13,500 they announced in February. Initially, Halliburton expected to reduce its workforce by 8%, but ultimately cut it by 16%. Baker Hughes first announced it would cut about 10% of its jobs, but cut 21%. Nearly 50,000 energy jobs have been lost in the past three months on top of 100,000 employees laid off since oil prices started to tumble last fall, according to Graves & Co., a Houston energy consultancy. Initial rounds of layoffs this year tended to be blue-collar jobs, such as roughnecks on drilling sites, fracking crews and workers at industrial-equipment manufacturers. Now the job cuts are starting to extend to engineers and scientists.

Fracking Not Profitable: US Taxpayers Foot the Bill (as usual) This analysis neglects to include the contribution methane makes to global warming (being that it is on the average 86x more potent than C02), which would suggest that the Oil & Gas Industry are even LESS profitable than described below. It is fairly well understood by now that releasing carbon dioxide and other greenhouse gases into the atmosphere imposes an economic cost, in the form of climate change impacts. In most cases, however, those responsible for carbon emissions are not required to pay that cost. Instead, it’s borne mainly by the world’s poor and low-lying countries, and of course by future generations, as many of the worst impacts of climate change will emerge years after the emissions that drive them. People sometimes refer to the unpaid cost of carbon pollution as a subsidy, or an “implicit subsidy,” to polluting businesses. The IMF recently issued a report saying that total worldwide subsidies to energy, mainly fossil fuel energy, amounted to $5.2 trillion a year. The reason that number is so high is that the IMF includes implicit subsidies — the social costs imposed by businesses (including climate damages) that they don’t have to pay for.Vox’s Brad Plumer raised some questions about whether that’s a misleading use of the term “subsidy.” Whatever you call it, though, it makes for an unsustainable situation, literally. It can’t go on.As climate change gets worse and the chance to avoid harsh impacts dwindles, governments are getting serious about putting some sort of price on carbon emissions, whether explicit (a tax) or implicit (regulations). By next year, a quarter of the world’s carbon emissions will be priced in some way. Businesses that now emit carbon pollution for free (or cheap) will soon see their costs rise.In other words, carbon pollution is a business risk. It’s a bubble that’s going to pop, probably soon. The Carbon Tracker Initiative has popularized a term for this looming liability: “unburnable carbon.” With proper accounting, the fossil fuel business doesn’t look like such a moneymaker.

Debt is destroying the fracking revolution - Business Insider: The shares of Chesapeake Energy, second largest natural-gas driller in the US, crashed nearly 10% yesterday, to $9.29, the lowest price since August 2003, down nearly 70% since oil began to plunge a year ago. The company’s $1.1 billion of 5.75% notes fell to an all-time low of 84.88 cents on the dollar. And its 4.875% notes dropped to 81.25 cents on the dollar, from 86 last week, according to S&P Capital IQ LCD. All this in the wake of its announcement that it would suspend its dividend for the first time in 14 years. It’s trying to conserve cash, and that dividend costs $240 million a year. It’s dumping assets as fast as it can, including some Oklahoma fields that will save it another $75 million a year in preferred dividends. It’s cutting operating costs and capital expenditures. It’s trying to stay alive. It has been cash-flow negative in 22 of the past 24 years, according to Bloomberg. The only thing surprising is that it took so long, that Wall Street kept funding its cash-flow negative operations and dividends for all these years. Chesapeake used to be mostly a natural gas producer. But the price of natural gas plunged over five years ago and has remained below the cost of production for most wells for much of that time. The only saving grace was that these wells also produced natural-gas liquids and oil, which sold for much higher prices. As its natural-gas business model collapsed, Chesapeake began chasing after oil-rich plays. But a year ago, the price of oil collapsed. Among natural gas drillers, Chesapeake isn’t in the worst shape. Much smaller Quicksilver Resources filed for Chapter 11 bankruptcy in March. It listed $2.35 billion in debts and $1.21 billion in assets. The difference has been forever drilled into the ground. Stockholders got wiped out. Creditors are fighting over the scraps.

Low prices threaten to curb rising rig count - Permian Basin producers added another three rigs in the week ending Friday, according to the widely-watched Baker Hughes rig count. But observers met the ongoing uptick in drilling activity with concern that it might be short-lived, after another dip in oil prices in July threatened to erase the gains of the previous months. The latest build in Permian rigs left 245 drilling in the region. That represented an addition of 13 drilling in the region during the past three weeks. Nationally, oil and gas producers added 21 oil rigs in the past week, offset somewhat by a decline of two rigs drilling for gas. But West Texas Intermediate oil prices continue to hover at about $50 per barrel — about half the peak price of this time last year. And the regional benchmark Plains-West Texas Intermediate posting ended at $44.50 per barrel on Friday. Rigs are generally contracted weeks or months ahead of time, and those added this month were likely based on oil company executives’ confidence in oil prices in the $60-per-barrel range, said Kirk Edwards, president of Latigo Petroleum in Odessa. That is where Edwards said he was coming from when he contracted for a rig in the Panhandle earlier this month that is set to drill in the next few weeks. A well can take about 30 days to drill. “I’m hoping in the next two to three months, once that well gets online and producing, prices will have recovered to the $60 to $70 range,” Edwards said. “That’s what we are betting on, and if it hasn’t, we’ll stop our drilling again just like everybody else.” In the meantime, the rig count might continue to rise in the next week or two, Edwards said, but it should drop again after.

Rude awakening for those who ignored the energy markets' warning signs -- Back in February (see post) numerous equity investors refused to believe that any crude oil recovery will be unsustainable. Many viewed this as a buying opportunity - just as they did in 2011 when such strategy worked. Look at the declines in oil rigs many argued - US crude production is about to dive. Even some in the energy business were convinced that crude oil recovery is coming and we will be back at $70/bbl in no time. It was wishful thinking. There is no question that North American production of crude oil is stalling. However for now it remains massively elevated relative to last year.  More importantly, many fail to understand just how flexible US crude production has become - the time to bring capacity on/off-line has shrunk dramatically. Furthermore, a great deal of production in the US is now profitable at $60/bbl and even lower as rig efficiency rises. Many view this as unsustainable because new exploration is halted and existing wells are being reused. But there is enough staying power here to continue flooding the markets for some time. That's why we saw US rig count unexpectedly increase last week. This creates a natural near-term cap on crude prices, above which production can rise quickly. To add to the market's woes, the Iran deal threatens to bring materially more crude into the market in 2016, while immediately releasing a great deal of stored crude the nation currently holds.   Moreover, the Saudis are ramping production to record levels, as OPEC members are now fending for themselves. The Saudis will attempt to recover some of the lost revenue in higher volume. Crude prices in the US fell below $50/bbl in response to some of these developments. So much for the "recovery".

Knife-Catching Hedge Fund Oil Bulls Dump Crude At Fastest Pace In 3 Years -- Hedge Funds' net long position in WTI Crude collapsed 27% (the biggest single 'dump' in over 3 years) ahead of the big plunge last week (and is now down almost 60% in the last month - the most since 2010). Part of a broader deflationary collapse in commodities, as Bloomberg reports, long positions dropped to a two-year low while short holdings climbed 25%, erasing more than $100 billion in market value from the 61 companies in the Bloomberg E&P stock index. With crude supplies still almost 100 million barrels above the five-year average, "there's a lot more room for prices to slide," warned one trader, "it's going to take a long time for this to work itself out." Speculators’ conviction that oil will rally weakened at the fastest pace in three years, just before futures tumbled into a bear market. As Bloomberg details, the net-long position in West Texas Intermediate contracted 28 percent in the seven days ended July 21, U.S. Commodity Futures Trading Commission data show. Long positions dropped to a two-year low while short holdings climbed 25 percent. Hedge Funds dumped their spec longs en masse...

Pessimism Amongst Oil Traders Reaches 5 Year High - With oil prices hitting their lowest levels since March, a renewed sense of gloom has washed over oil markets, and with it, fears over deeper trouble for U.S. shale companies are spreading. After hitting $43 per barrel in March, oil prices jumped to $60 per barrel by May and then stayed around that level for almost two months, raising confidence that a rebound was underway, albeit at a slow pace. A few companies, including EOG Resources, Pioneer Resources, Occidental Petroleum, and Diamondback Energy, suggested that they were considering stepping up rig counts and drilling activity this year on the heels of stronger oil prices. Having weathered the worst, drillers had cut costs and planned on bouncing back with gusto. But the optimism is a thing of the past. WTI dipped below $48 per barrel on July 27, not far from the March lows. The low oil prices will likely force a fresh round of layoffs across the shale patch. Halliburton and Baker Hughes have eliminated 27,000 jobs combined, twice as much as they originally announced in February, according to the Wall Street Journal. Months ago job cuts were centered on rig workers and other blue-collar jobs at drilling sites, but now the layoffs are moving up the food chain, hitting engineers and scientists. Usually that is something companies try hard to avoid, for fear of losing irreplaceable talent.

U.S. crude stockpiles fall 4.2 mln barrels in latest week - EIA – U.S. crude oil inventories declined far more than expected last week, while gasoline stocks decreased amid robust demand for the motor fuel, data from the Energy Information Administration (EIA) showed on Wednesday. Crude inventories fell 4.2 million barrels to 459.68 million in the week to July 24, more than twenty times analysts’ expectations for a decrease of 184,000 barrels. U.S. crude imports fell last week by 396,000 barrels per day (bpd). At 2.7 million barrels for the week, that is more than half the week’s decline in total U.S. crude oil inventories. Crude futures turned higher and rallied after the release of the EIA report. U.S. crude was up $1.02 at $49 a barrel at 11:13 a.m. EDT (1513 GMT), well above its session low of $47.39. Brent crude was up 58 cents at $53.88, having dropped to $52.51 earlier in the session.

Crude Oil Rises on Unexpected Declines in Supplies, Production - WSJ: Oil prices rose Wednesday on unexpected declines in U.S. crude-oil supplies and production. Prices have slumped this month on renewed fears that the global glut of crude oil could last longer than investors initially expected. This comes as production in the U.S. and elsewhere continues to exceed consumption. Wednesday’s data offered some hints that the oversupply of crude oil is starting to shrink, but analysts warned that the trend might not continue and prices could resume their decline. Light, sweet crude for September delivery settled up 81 cents, or 1.7%, to $48.79 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 8 cents, or 0.2%, to $53.38 a barrel on ICE Futures Europe. Domestic crude inventories fell by 4.2 million barrels to 459.7 million barrels last week, the U.S. Energy Information Administration said Wednesday. Analysts surveyed by The Wall Street Journal expected stockpiles to be unchanged in the week. Though refineries processed less crude into gasoline and other fuels compared with the week before, crude-oil inventories still declined due to a drop in imports and production.  U.S. crude-oil production fell by 145,000 barrels a day to 9.4 million barrels a day, the largest one-week decline since October 2013. Excluding Alaska, which saw a small rise in output, the drop totaled 151,000 barrels a day.“The most interesting thing is the pretty big adjustment downward in crude production,” The EIA’s weekly production figures are based on a statistical model, not reported production.

U.S. oil storage becomes big business  -- Commercial crude stocks across the United States rose by 105 million barrels early this year to peak at 490 million barrels, the highest level in eight decades. Despite some draw downs in recent weeks, which have reduced inventories to 460 million barrels, stocks are still 92 million barrels higher than this time last year.. And stocks could rise again at the end of the third quarter when U.S. refineries enter the traditional autumn turn around season. Yet the cost of storing crude has remained relatively modest throughout thanks to a big increase in tank farm and pipeline capacity added in recent years. Working storage capacity at refineries, tank farms and underground storage facilities in the United States has increased by 85 million barrels, almost 19 percent, since 2011. More than 45 million barrels of extra working capacity has been added in just the last two years, according to the U.S. Energy Information Administration (EIA). Over half the extra working storage capacity was in states along the U.S. Gulf Coast, with most of the rest added in the Midwest. In the same period, the amount of crude needed to fill pipelines and in transit by barge, tanker and rail has also jumped by 17 million barrels, as new oil pipelines and oil trains were added. Crude stocks at the end of March were 82 million barrels higher than in March 2013, according to the EIA (“Working and net available shell storage capacity” May 2015). But with an extra 17 million barrels of oil in line fill and transit, and 46 million barrels of extra working capacity, the storage utilization rate rose comparatively modestly from 56 percent to 63 percent.

House leader Boehner to support axing U.S. oil export ban (Reuters) – U.S. House of Representatives Speaker John Boehner will for the first time express his support on Wednesday for repealing the 40-year-old ban on domestic crude oil exports, two industry sources said. Boehner is scheduled to hold a news conference on Wednesday on legislation the chamber will deal with after the August recess. U.S. oil producers hope Congress will repeal the trade restriction, which they say has led to an oil glut that threatens to choke the drilling boom. A bill introduced by Representative Joe Barton, a Texas Republican, this year has more than 100 co-sponsors.

US Oil and Natural Gas Rig Count Down 2 to 874 - ABC News: Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by two this week to 874. Houston-based Baker Hughes said Friday 664 rigs were seeking oil and 209 explored for natural gas. One was listed as miscellaneous. A year ago, 1,889 rigs were active. Among major oil- and gas-producing states, New Mexico gained three rigs, Louisiana gained two and North Dakota, Ohio, Texas and Wyoming each gained one. Kansas lost four rigs, Utah declined by three, Alaska and Pennsylvania each lost two and Colorado and West Virginia each declined by one. Arkansas, California and Oklahoma were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999

U.S. Oil-Rig Count Increases to 664 - WSJ: The U.S. oil-rig count rose by five to 664 in the latest week, according to Baker Hughes Inc. BHI -0.92 % The number of U.S. oil-drilling rigs, which is a proxy for activity in the oil industry, had fallen sharply since oil prices headed south last year. The rig count had dropped for 29 straight weeks before rising for two weeks and then falling again. Now it has risen for two straight weeks. Oil prices fell nearly 60% from June 2014 to a six-year low in March, as soaring production from the U.S. and other countries overwhelmed global demand. There are still about 59% fewer rigs working since a peak of 1,609 in October, though the pace of declines has slowed considerably recently. In late May, several U.S. shale-oil companies said they were ready to bring rigs back into service, setting up the first big test of their ability to quickly react to rising crude prices. According to Baker Hughes, gas rigs were down by seven to 209 this week. The U.S. offshore rig count was up three to 34 in the latest week, though it is still off 24 from a year earlier. For all rigs, including natural gas, the week’s total was down two to 874, which is down 1,015 rigs from the same period last year.

OPEC says oil should not fall further, sees stability in 2016 - OPEC expects increasing oil demand to prevent a further fall in prices and sees a more balanced market in 2016, its secretary-general said on Thursday, the latest sign the group is sticking to its policy of defending market share. Oil has dropped about 15 percent this month and halved in value in the past year but neither OPEC nor Russia, the world’s top producer, have cut output to support prices, hoping cheaper oil will hit U.S. shale and other rival sources. “I would not expect they (prices) are going to fall because demand is growing,” OPEC Secretary-General Abdullah al-Badri told reporters in Moscow. OPEC pumps around 40 percent of global oil production. “The current situation is a test for all producers and investors. While the prices … no doubt will rebound, it is still too early to say when this will happen,” Badri said. He did not indicate what price he expected. OPEC faces a further challenge from the prospect of rising output from Iran, which has been lobbying for other OPEC members to curb supply to make way for a hoped-for rise in its exports following Tehran’s deal with world powers over its nuclear work. But Badri, indicating confidence in the outlook, was quoted by Russia’s Interfax news agency as saying the market could accommodate extra oil from Iran as demand increased – echoing the view of Gulf OPEC members. Russian Energy Minister Alexander Novak, who met with Badri earlier in the day, said they did not discuss coordination to help the market rebound. Badri added that even if OPEC had cut output by as much as 2 million barrels per day (bpd) – equal to around half of Russian exports – it would not have helped prices.

Top Factors Undermining Any Oil Price Recovery -- Global oil prices have returned to a state of flux. This is hardly news to any who follow the oil markets closely and yet prices continue to drive international headlines. While oil prices are notoriously difficult to predict, it has failed to deter the speculators. There are those warning that the latest dip is a precursor for $40 a barrel, a catastrophe for oil markets in some minds. On the other end of the spectrum are the optimists betting on a return to $100 by 2020. The World Bank has taken a typically middle-of-the-road approach, with forecasts of $57 a barrel in 2015. That said, given Iran’s potential revitalization, Russia’s murky outlook, and U.S. shale supply limits uncertain, prices will be responsive to supply and demand trends; at least in the short to medium term. The Iran deal could be a game changer for global oil supply. Lifting oil sanctions could pave the way for foreign capital to return to the country, contributing to a resurgent Iranian oil industry. The Iranian oil ministry is optimistic about the nation’s recovery, predicting 400,000 barrels per day of exports almost immediately and an additional 600,000 barrels per day over six months. Such a swift return is unlikely. Iran was once the second largest oil producer in OPEC before Europe banned purchases of its crude in 2012. Since then, oil production has declined from around 3.6 million barrels per day in 2011to just 2.85 million barrels today.The nation is still OPEC’s fourth largest producer but its output is far closer to Mexico’s than Saudi Arabia’s. Oil exports have declined by 1 million barrels per day during this time. Iran has significant onshore and offshore reserves but has lacked the technical capacity and capital to develop them in line with its ambitions.Executives from Shell have reportedly met with Iranian officials to express their interest in re-entering Iran. U.S. companies, meanwhile, risk losing out unless Congress decides to lift its own decades-old restrictions on dealing with Tehran.

The New Politics of Oil Abundance - The oil-price shocks of the 1970s and '80s marked the dawn of the modern era of United States energy policy.  Over time, environmental concerns have gradually gained prominence as a rationale for measures meant to decrease U.S. reliance on oil. It was the first President Bush who took the large step of signing the UN Framework Convention on Climate Change, which set global, long-term goals to limit greenhouse-gas concentrations and anthropogenic climate change. Environmentalists had long hoped that a depletion of domestic oil supplies would force Americans to turn to renewable energy, despite its major flaws and steep price tag. For a long time, it appeared as if their wish might come true.  Then, in 2009, the trend in domestic oil production reversed. By 2014, U.S. crude-oil output was 73% above its 2008 level — an increase that came in spite of drilling bans that caused major declines in outputs in Alaska, California, and, after the Deepwater Horizon oil spill, on the Outer Continental Shelf. The surging output of tight oil (sometimes called shale oil) is the main source of this new supply. New techniques, notably horizontal drilling and advanced hydraulic fracturing, have unlocked oil from tight rock formations; before these technological innovations, such "tight" oil could never have been extracted at a profit. The resulting onshore oil boom has yielded widespread benefits for the country as a whole. The President's Council of Economic Advisors estimates that rising oil and gas output has been lifting America's yearly gross domestic product growth rate by about 0.2 percentage points. More domestic oil output has reduced imports and improved terms of trade for the United States. The turnaround in domestic oil production is the closest thing to an energy revolution to occur since 1973. The new oil boom has transformed the political landscape around energy policy. Yet it has also sparked a fierce new policy debate. The stakes in this debate are high, and it is being waged with much heat, but clear logic and sound evidence have both often been in short supply.

The Economist explains: The global addiction to energy subsidies | The Economist: ENERGY prices have been falling for a year. Over the last month that trend has accelerated. On July 24th, the price of a barrel of oil in America reached a low of $48. In spite of this, governments are still splurging on subsidies to prop up production. Fossil fuels are reaping support of $550 billion annually, according the International Energy Agency (IEA), an organisation that represents oil- and gas-consuming countries, more than four times those given for renewable energy. The International Monetary Fund’s estimates are substantially higher. It said in May that countries will spend $5.3 trillion subsiding oil, gas and coal in 2015, versus $2 trillion in 2011. That is equivalent to 6.5% of global GDP, and is more than what governments across the world spend on healthcare. At a time of low energy prices, high government debt and rising concern over emissions there is scant justification for such spending. So why is the world addicted to energy subsidies? Governments have devised several different ways of giving handouts for fossil fuels. Most surveys analyse “consumption” subsidies, rather than support or tax breaks for producers. Traditional “pre-tax” measures keep prices below supply costs for folk filling up their cars, or switching on the lights, and are particularly popular with developing countries. In oil-producing nations like Nigeria and Venezuela, low fuel prices are seen by poor populations as one of the few benefits of having large natural resource endowments. Rich countries subsidise too—the IMF says America is the world’s second biggest culprit, spending $669 billion this year—but mostly by “post-tax” systems which fail to factor the costs of environmental damage into prices.

$40 Oil May Force Russia Into an Emergency Rate Hike, Economists Say - If oil hits $40, Russia is in trouble. Already faced with recession and sanctions, a further drop in crude might force the country's central bank into an emergency rate hike — after four cuts already this year — according to 65 percent of economists surveyed by Bloomberg from July 24-29. Thirty-nine percent of analysts said the government might impose Greek-like capital controls and 22 percent predicted a takeover of at least some of the country's banks. When asked about the central bank's own analysis of the $40-per-barrel oil scenario, which found a roughly 600 billion ruble capital deficit and two-fold increase in the share of non-performing loans, 69 percent of economists said it has accurately estimated the risks to the Russian economy and banking sector. The impact on growth from $40 oil would be particularly severe, weakening the ruble to 65 against the U.S. dollar by end-2015 and causing the economy to contract by 5 percent this year and 1 percent in 2016. Compare that to the far less pessimistic baseline consensus provided by Bloomberg's monthly economic survey, which currently forecasts a 3.5 percent contraction in 2015 and a 0.5 percent expansion in 2016.

Gas production at Gazprom set to hit post-Soviet low - FT.com Gazprom’s gas production is on track to fall to a fresh post-Soviet low this year as the state-controlled energy group is buffeted by recession at home, declining demand in Europe and Russia’s dispute with Ukraine. Output at the world’s largest gas company fell 13 per cent in the first half of 2015 compared with a year earlier and is set to reach 414bn cubic metres for the full year, according to data from the Russian economy ministry published on Tuesday. That would be the lowest level since Gazprom, the former Soviet gas ministry, was established in its present form after the break-up of the Soviet Union, according to Valery Nesterov, oil and gas analyst at Sberbank. The forecast implies a 6.7 per cent drop from last year’s output of 444bn cubic metres — already a post-Soviet low — and a dramatic fall compared with Gazprom’s plan, announced in May, to produce 485bn cubic metres this year. Mr Nesterov estimates that, together with a fall in gas prices, the drop in production will lead to a 27 per cent fall in Gazprom’s revenue this year to $106bn, although the impact on profitability will be cushioned by the fall in the rouble, which has reduced costs. The company last year accounted for 9 per cent of total Russian budget revenues. Gazprom has plentiful spare production capacity but demand for its gas has fallen both at home and abroad. Sales to Europe, the main driver of the company’s revenues, fell 6.2 per cent in the first half of the year as milder winter weather cut consumption and customers held off purchases waiting for contract prices, which are tied to oil prices but with a time lag, to follow the cost of crude lower.

Who Is To Blame For The Global Oil Supply Glut In Charts (Hint: Not Iran) - When crude oil decidedly broke its recent support level, and slid right back into the $40-handle range which served as a springboard for the dead oil bounce earlier this year, many blamed the imminent surge of Iran oil deliveries for as a the downside catalyst. The reality, however, is that a long time will pass before significant Iran oil may flood developed markets, and yet even without Iran oil the market has recently seen a surge in supply and production over the past few months - it is this sudden oil glut that has been the true driver of most recent slide in prices. But who is the culprit? We present the answer on the following several charts showing oil exports from both OPEC and non-OPEC oil producing countries. Note that Iran has gone exactly nowhere - it is "others" who are to blame for the most recent downturn in oil prices. What about non-OPEC production: despite speculation that the US production is peaking (and Saudi Arabia is winning), US production is virtually at its all time highs. So with everyone is overproducing, is global oil demand rising? Nope. In fact, while everyone knows that the US has just a modest oil "glut", this has moderated in recent months, but as the highlighted chart the oil glut across the entire OECD region has never been greater. End result? This: Absent either a dramatic slowdown in oil production, mostly by Saudi and Iraq, (where we hope the marginal producer is not ISIS) or a just as dramatic surge in oil consumption (now that the world is rapidly running out of places to store drilled oil) the price is going lower.

185 Billion Reasons Why The US Agreed To Nuclear Deal With Iran -- Many have questioned just why President Obama was so keen to get the Iran nuclear deal done - apparently with almost no real concessions - in the face of allies home and abroad deriding the agreement. Well, if one were so inclined, OilPrice.com explains that Iran's deputy oil minister for commerce and international affairs, Hossein Zamaninia, told Reuters that the country has already identified 50 oil and gas projects it will offer for bids - with the government pegging the value of these properties at $185 billion... via OilPrice.com,Important news last week -- from a place that's quickly becoming the world's focus for high-impact oil and gas projects. That's Iran. Where government officials said they are on the verge of revolutionizing the country's petroleum sector. Which could provide big profit opportunities for foreign investors. Iran's deputy oil minister for commerce and international affairs, Hossein Zamaninia, told Reuters that the country has already identified 50 oil and gas projects it will offer for bids. With the government pegging the value of these properties at $185 billion. And officials are hoping to get these fields licensed out soon. With Zamaninia saying that the government plans to offer all of the blocks over the next five years. Perhaps most importantly, Iranian officials say they have designed a new petroleum contract structure for international investors. Which they are calling the "integrated petroleum contract" or IPC. Officials said that the IPCs will last for a term of 20 to 25 years. A substantial improvement over the older, shorter-term contracts -- which have been a major stumbling point for the world's oil and gas companies.

The Balance of Power in the Middle East Just Changed, U.S.-Iranian Relations Emerge from a 30-Year Cold War  - Don’t sweat the details of the July nuclear accord between the United States and Iran. What matters is that the calculus of power in the Middle East just changed in significant ways. Washington and Tehran announced their nuclear agreement on July 14th and yes, some of the details are still classified. Of course the Obama administration negotiated alongside China, Russia, Great Britain, France, and Germany, which means Iran and five other governments must approve the detailed 159-page “Joint Comprehensive Plan of Action.” The U.N., which also had to sign off on the deal, has already agreed to measures to end its sanctions against Iran.  If we’re not all yet insta-experts on centrifuges and enrichment ratios, the media will ensure that in the next two months — during which Congress will debate and weigh approving the agreement — we’ll become so. Verification strategies will be debated. The Israelis will claim that the apocalypse is nigh. And everyone who is anyone will swear to the skies that the devil is in the details. On Sunday talk shows, war hawks will fuss endlessly about the nightmare to come, as well as the weak-kneedness of the president and his “delusional” secretary of state, John Kerry. There are two crucial points to take away from all the angry chatter to come: first, none of this matters and second, the devil is not in the details, though he may indeed appear on those Sunday talk shows. Here’s what actually matters most: at a crucial moment and without a shot being fired, the United States and Iran have come to a turning point away from an era of outright hostility. The nuclear accord binds the two nations to years of engagement and leaves the door open to a far fuller relationship. Understanding how significant that is requires a look backward.

The Ongoing Starvation of Yemen -- Lara Jakes reports on the continuing deterioration of conditions in Yemen: An estimated 25,000 additional Yemeni civilians each day are being pushed toward starvation [bold mine-DL] as fighting continues in the nation’s civil war and an ongoing Saudi Arabia blockade limits food, water, fuel and other aid from entering the country, Oxfam International concluded in a new report Monday. It bears repeating that much of Yemen’s current suffering owes to the Saudi-led intervention and blockade of the country, and the U.S. has backed both for the last four months. Thanks to the blockade, the civilian population is being deprived of essential food, medicine, and fuel. As I mentioned last week, Yemen is also suffering from serious water shortages and the related outbreak of disease because of a lack of fuel and damage to the country’s infrastructure. Yemen already had serious problems with food insecurity and inadequate water supply before the war, but the intervention has made all of the country’s many problems so much worse.

Oil Heading for Fall as Diesel’s Engine Sputters -- Mainland-listed shares in China’s national oil champion are up 27% so far this year, while their Hong Kong-listed equivalents are down 9%. The former have, of course, been juiced by Beijing’s desperate measures to prop up the mainland stock market. The latter are more reflective of what is really happening with oil supply and demand. China is showing signs of strain. While official gross-domestic-product data continue to helpfully meet Beijing’s targets, other numbers—and the stock-market panic— point downward. The latest, preliminary reading of the Caixin China Manufacturing Purchasing Managers’ Index hit a 15-month low. The State Council promptly announced measures to boost trade. Broad-based drops in the prices of industrial commodities from iron ore to copper serve as warnings of cooling China growth. Oil hasn’t escaped. If current futures prices hold, Brent crude will average about $57 a barrel in 2015, down 42% from 2014’s average and the lowest in a decade. U.S. benchmark West Texas Intermediate’s implied average is about $51.40, which would be the lowest since 2004. Yet even those averages look vulnerable; they rely on both grades rising through the fall and winter. For example, Brent futures for December trade at almost $57 a barrel, versus a current price of less than $55. Analysts are more optimistic, with a consensus forecast for the fourth quarter of around $65, according to FactSet.  As refiners take advantage of cheaper crude, turning it into gasoline to meet demand, they are also producing a lot of distillate. That is a catchall term for other products, chiefly diesel, which is heading into storage. In its latest monthly report, the International Energy Agency showed stocks of middle distillates in the industrialized world in May were higher for that month than in each of the past three years. It said that “middle distillate spot prices posted the sharpest falls across all surveyed markets in June.”

China losing control as stocks crash despite emergency measures - Telegraph: Chinese equities have suffered the sharpest one-day crash in eight years, sending powerful tremors through global commodity markets and smashing currencies across East Asia, Latin America and Africa. The Shanghai Composite index fell 8.5pc despite emergency measures to shore up the market, with a roster of the biggest blue-chip companies down by the maximum daily limit of 10pc. The mood was further soured by news that corporate profits in China are now contracting in absolute terms, falling 0.3pc over the past year. The violence of the moves unnerved investors worldwide, stirring fears that the Communist Party may be losing control after stoking a series of epic bubbles in property, corporate investment and equities to keep up the blistering pace of economic growth. Brent crude prices slid to a five-month low of $53.34, re-entering a bear market. The DB-UBS commodity index fell to 2002 levels, obliterating the gains of the resource "supercycle". The FTSE 100 fell 1.27pc to 6.497, dragged down by mining groups and energy companies. All of the year’s advances have been wiped out.  Chinese authorities appear to have been testing the waters to see what would happen if they stopped intervening. The market verdict was swift and brutal. “They have got themselves into a very difficult situation. They have put a lot of credibility on the line to shore up prices and this credibility has been badly damaged,” he said. The Shanghai index looks poised to test its 200-day moving average, now just below 3,600, a crucial support level watched with trepidation by China’s authorities.

Chinese Stocks Suffer Second Biggest Crash In History, 1,500 Companies Halted Limit Down -- This was not supposed to happen. After pledging, investing and otherwise guaranteeing the Chinese stock market to the tune of10% of GDP, and intervening on at least 40 different occasions in the past month ever since China's stock bubble burst in late June, with the subsequent crash nearly taking the Shanghai Composite red for the year, overnight China officially lost control for the second time, when after a weak start to the Monday trading session, things turned very ugly in the last hour, when the Shanghai Composite plunged by 8.48%, closing nearly at the lows, and tumbling some 345 points for its biggest one-day drop since February 2007 and its second biggest crash in history!

Can All Chinese Debt Be Rated Top Quality? - WSJ: In China, Evergrande Real Estate Group Ltd.’s domestic bonds are seen as among the safest bonds going. Overseas, however, the company’s more than $3 billion in debt, denominated in both dollars and yuan, is rated below investment grade, or what is commonly called junk. The discrepancy between bullish ratings by Chinese ratings firms on local bonds versus much lower ratings by the major global bond-rating companies is becoming an increasing concern as China opens up its $6.5 trillion local bond market to foreign investors. “We take [China’s] local rating agency ratings with a pinch of salt for now,” said Ben Bennett, a London-based credit strategist at Legal & General Investment Management, which oversees US$585 billion in assets. The firm has been buying offshore U.S. dollar bonds by Chinese companies but hasn’t started buying local bonds. “We’d be much more likely to buy bonds rated by the three main international ratings agencies.” Just under 3% of the country’s bond market is open to foreigners, up from near zero since 2010, and only Chinese local ratings firms can rank those bonds. Around 97% of existing yuan-denominated bonds hold ratings of double-A to triple-A—the best a company can get. And for many investors, that raises the question of how dependable local ratings are.

Chinese Stocks Plunge 8.5%, Biggest Decline Since February 2007 -- The crash in Chinese stocks continued today following a respite last week. Shares on the Shanghai index plunged 8,48%, the Biggest One-Day Plunge Since February 2007.  The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 8.6 percent, to 3,818.73, while the Shanghai Composite Index .SSEC lost 8.5 percent, to 3,725.56 points. The drops were the biggest since Feb. 27, 2007. It wasn't immediately clear what caused such a sharp tumble in the afternoon session. At midday, the two indexes were down about 2.5 percent. "The recent rebound had been swift and strong, so there's need for a technical correction," It should be immediately clear stocks are in a bubble, so there is no need to search for a "reason" for the plunge. If anything, one might wonder why the stocks rose to such absurd valuations in the first place.

Three-Day Selloff Knocks 11% From China Shares - WSJ: China’s shares fell for a third straight day as the second wave of heavy selling this month hit the market, raising questions as to whether Beijing will roll out new measures to prop up stocks. The Shanghai Composite Index finished down 62.56 points, or 1.7%, at 3663, having fallen as much as 5% and risen as much as 1% earlier. The index has shed 11% since Friday and is down nearly 30% from its mid-June high. The smaller Shenzhen Composite closed down 48.39 points, or 2.2%, at 2111.70, after falling more than 6% earlier Tuesday. Cautious investors also steered away from riskier startups; the ChiNext board, which lists small-capitalization stocks, closed down 101.48 points, or 3.7%, at 2581.96. The losses are casting doubt on Beijing’s ability to contain a slide that has wiped trillions in value from Chinese equities, and have left investors and analysts wondering what officials might do next to reverse it.

China’s Stock Market Meltdown Not Over Yet -- After a few weeks of stabilizing, China’s stock markets are once again in turmoil. China’s stock markets peaked in June following a dramatic spike over the past year. But then markets suddenly spiraled out of control in mid-June, falling by around 30 percent in just a few weeks. After aggressive intervention by the Chinese government to stop the bleeding, including suspending large market players from trading for six months, injecting new liquidity into the market, and slashing interest rates, the crisis seemed to subside. Companies also put off fresh IPOs and many suspended trading in order to prevent their share prices from falling further. By early July, it appeared that a full-blown meltdown had been averted. Two to three weeks of relative stability seemed to confirm that the ship had been righted. But the worst may not be over. The Shanghai Composite dropped 8.5 percent on July 27, once again throwing China’s financial stability into doubt. The one-day loss was worse than anything experienced last month, and in fact, it was the largest single-day decline since February 2007. The move came following negative data on Chinese industrial profits, portending a broader economic slowdown. With China’s economy sputtering, the highs of the stock markets appear increasingly detached from reality, sparking fears of a bubble bursting. 

The dark side of China’s heavy-handed response to its plunging stock markets - The Chinese stock markets plummeted Monday in the biggest one-day drop since 2007. The Shanghai Composite Index fell 8.5 percent, weighing on Japanese, Hong Kong and U.S. markets. The trend is raising doubts about the effectiveness of Beijing’s recent efforts to prop up the market, as well as the health and direction of the world's second-largest economy. The Chinese government has gone to huge lengths to support its volatile stock markets in Shanghai and Shenzhen, which climbed to dizzying heights in mid-June and then shed about a third of their value over the following month. By early July, the Chinese government seemed to have halted the carnage by announcing a truly massive array of measures to support the market. It encouraged banks and other financial institutions to increase lending to investors, froze initial public offerings, cut interest rates, forced state-owned companies and funds to buy shares, and threatened to prosecute short-sellers. At one point, over half of the listed companies on the exchanges had suspended trading in their shares to stem further losses. The state-owned China Securities Finance Corp pledged to loan 21 securities firms about $42 billion to purchase shares. But Monday’s precipitous drop shows that even these extreme measures haven’t been successful in restoring investor confidence. “The lesson from China’s last equity bubble is that, once sentiment has soured, policy interventions aimed at shoring up prices have only a short-lived effect,"

China’s Naked Emperors, by Paul Krugman - We’ve seen strange goings-on in China’s stock market. In and of itself, the price of Chinese equities shouldn’t matter all that much. But the authorities have chosen to put their credibility on the line by trying to control that market — and are in the process of demonstrating that, China’s remarkable success over the past 25 years notwithstanding, the nation’s rulers have no idea what they’re doing. ... China is at the end of an era — the era of superfast growth... Meanwhile, China’s leaders appear to be terrified — probably for political reasons — by the prospect of even a brief recession. ... China’s response has been an all-out effort to prop up stock prices. Large shareholders have been blocked from selling; state-run institutions have been told to buy shares; many companies with falling prices have been allowed to suspend trading. ... What do Chinese authorities think they’re doing? In part, they may be worried about financial fallout. It seems that a number of players in China borrowed large sums with stocks as security, so that the market’s plunge could lead to defaults. This is especially troubling because China has a huge “shadow banking” sector that is essentially unregulated and could easily experience a wave of bank runs. But it also looks as if the Chinese government, having encouraged citizens to buy stocks, now feels that it must defend stock prices to preserve its reputation. And what it’s ending up doing, of course, is shredding that reputation at record speed. Indeed, every time you think the authorities have done everything possible to destroy their credibility, they top themselves. Lately state-run media have been assigning blame for the stock plunge to, you guessed it, a foreign conspiracy against China, which is even less plausible than you may think: China has long maintained controls that effectively shut foreigners out of its stock market, and it’s hard to sell off assets you were never allowed to own in the first place.

China vehicle sales may shrink first time in 17 years, Ford says: AUTOMAKERS may sell fewer vehicles in China this year for the first time since at least 1998 as demand slows in the world’s largest market, according to the low end of Ford Motor Co.’s revised projection. Ford is estimating industrywide sales to be between 23 million and 24 million units this year, Chief Financial Officer Bob Shanks said Tuesday, compared with the 23.5 million sold last year. The low end of that forecast would represent the first decline in at least 17 years, according to official sales data. Before 1998, only production figures were available. “It’s clear we’ve seen a market slowdown in the market there in the industry,” said Mark Fields, Ford chief executive officer, according to a transcript of the call. “We’re still very bullish on China, but it’s going to go through its fluctuations and that’s what happens in emerging markets and we’re going to work our way through it in a positive way and grow the business.” Ford’s forecast is the bleakest assessment to date by a major multinational carmaker of demand in China, where sales have slowed due to a combination of slowing economic growth, registration curbs and a volatile stock market. The state-backed China Association of Automobile Manufacturers this month slashed its 2015 growth forecast to a 3 percent increase, the slowest expansion in four years. “This may not be the last downward revision from automakers,” said Steve Man, Hong Kong-based analyst with Bloomberg Intelligence. “If another city caps new car registrations, the weak sales may continue through 2016.”

China credit card transactions hit 15.2 trillion yuan in 2014 - Shanghai Daily: (Xinhua) -- Credit cards are gaining increasing popularity among Chinese, with payments totalling 15.2 trillion yuan (2.49 trillion U.S. dollars) last year, a report by China Banking Association showed on Tuesday. The volume was up 16 percent from the previous year. In 2014, around 64 million new credit cards were issued, bringing the total to 460 million. The report also highlighted rising risks in the industry. In 2014, credit card repayments delayed by more than half a year were up 42 percent year on year to 35.76 billion yuan in 2014, according to the report. China's multi-trillion bank card clearing market has been monopolized by China UnionPay Co, the national bank card association founded in 2002. It was the sole company approved by the central bank to provide clearing services for bank card transactions in the country. To gradually open up the market to bring in competition, China's State Council announced detailed regulations in April to widen the market for bank card clearing services. Starting from June 1, companies with a standard bank card clearing system and a registered capital of no less than one billion yuan are qualified to apply to conduct bank card clearing services in China.

China Debt Woes Present a Growing Threat to Supply Chains - Report - WSJ: China’s troubled debt market is a growing threat to global supply chains, according to a new report from the Chartered Institute of Procurement and Supply. Companies doing in business in China could see suppliers fall into disarray overnight if the People’s Bank of China moves to rein in the debt market, either through monetary policy or by allowing more borrowers to default, said John Glen, a CIPS economist. Even suppliers with good credit could be forced to cut costs or delay shipments if they are able to borrow less, he said. “There’s probably going to be … a significant amount of defaults, and what you have to make sure of is that default doesn’t cause dislocations in your supply chain,” Mr. Glen said.The Chinese economy is grappling with slower growth and a stock market plunge that has seen the Shanghai Composite Index fall nearly 30% in just a few weeks. That’s complicating efforts by China’s central bank to channel lending toward boosting growth while reining in bad loans and the amount of cash heading into the country’s stock markets. China was the top factor behind a jump in the CIPS risk index to its highest level since late 2013, when Europe’s economic and credit problems drove uncertainties for supply chain managers to a 20-year high. The index, scheduled to be released later this week, rose to 80.1 in the second quarter, from 78.7 in the first three months of 2015. CIPS put China’s contribution to global supply chain risks on par with India, which is typically viewed as a more dangerous place to do business.

IMF Seeks More Overhauls as China Pursues Reserve Status for Yuan - WSJ—The International Monetary Fund said it wants more financial-system overhauls from China as Beijing pushes for the IMF to label the yuan a reserve currency.  The comments Thursday appear to mirror the U.S. position on China’s bid to have the yuan included in the IMF’s basket of reserve currencies: Washington has hedged its support, trying to leverage Beijing’s endeavor to encourage a stronger revamp of the financial sector. Managing Director Christine Lagarde has said the IMF is likely to award the yuan reserve-currency status at some point, but left the timing open. Meanwhile, IMF staff have been gathering data, studying China’s markets and talking with investors and government officials as the fund prepares an official recommendation for the executive board to consider.  “An important part of those discussions are financial market reforms in China,” IMF spokesman Gerry Rice said.  U.S. Treasury Secretary Jacob Lew and other senior administration officials have said over the last several months that Beijing’s reserve-currency effort is fortuitous timing. The U.S. views the bid as incentive for China’s government to move forward with promised policies that will help liberalize its financial markets. China’s central bank chief, Zhou Xiaochuan, has outlined Beijing’s plans to move forward with financial-market liberalization. But recent turmoil in China’s markets, questions about Beijing’s market interventions and a deceleration in economic growth are fueling doubts about the government’s commitment to deliver on policy overhauls.

The Rise Of The Yuan Continues: LME To Accept Renminbi As Collateral --As far-fetched as the notion may be to those who are wedded - by choice, by misguided beliefs, or by virtue of being completely beholden to the perpetuation of the status quo - to idea that the dollar will forever retain its status as the world’s reserve currency, the yuan is set to play a critical role in global finance, investment, and trade going forward.  We’ve long argued that the BRICS bank, the AIIB, and to an even greater extent, the Silk Road Fund, will help to usher in a new era of yuan hegemony in international investment and trade. A number of recent developments support this, including Beijing’s push for the renminbi to play an outsized role in loans doled out through the AIIB, the denomination of loans from the BRICS bank in yuan, and China’s aggressive investment in Pakistan and Brazil via the Silk Road initiative (here and here). As for financial markets, China recently confirmed the impending launch of a yuan denominated gold fix which conveniently dovetailed with the LBMA’s acceptance of the first Chinese banks to participate in the twice-daily auction that determines London gold prices.Now, in the latest sign of yuan proliferation and penetration, the renminbi will be accepted as collateral by the LME along with the dollar, the euro, the pound, and the yen. Here’s WSJ with more:China’s domestic stock market may be in turmoil but the country’s currency, known as the yuan or renminbi, is making a seemingly relentless push deeper into the global financial system. The latest step: the London Metal Exchange, the world’s largest venue for trading metals where $15 trillion of metals was traded last year, is set to accept yuan as collateral for banks and brokers that trade on its platform. Chinese currency joins the U.S. dollar, the euro, the British pound and Japan’s yen, which are all currently permissible as collateral on the LME’s platform.

Corporate giants sound profits alarm over China slowdown - FT.com: Some of the world’s largest companies have sounded the alarm about the slowdown in the Chinese economy, warning that weaker growth would hit profits in the second half of the year. Car companies such as PSA Peugeot Citroën, Audi and Ford have slashed growth forecasts while industrial goods groups such as Caterpillar and Siemens have all spoken out on the negative impact of China. The warnings are a sign that China’s weaker growth and its stock market rout this month are creating a headache for global corporates that have long relied heavily on the world’s second-largest economy to drive revenues. Audi and France’s Renault both cited China as they cut their global sales targets on Thursday, with Christian Klingler, sales chief at Audi parent Volkswagen, predicting “a bumpy road” in the country this year. Peugeot slashed its growth forecast for China from 7 per cent to 3 per cent while earlier this week Ford predicted the first full-year sales fall for the Chinese car market since 1990. China’s slowdown, which follows years of extraordinary growth, has been particularly startling in recent months, with figures last week showing that the country’s factory activity contracted by the most in 15 months in July. The poor figures coincide with a time of turbulence on the Chinese stock market. The Shanghai Composite shed 8.5 per cent on Monday, its steepest drop since 2007. The fall came despite a string of interventions by Beijing to stem the slide in equities, including a ban on short selling and an interest-rate cut.

China's economy is getting sick. Will it infect America? - China's economy is at risk of catching a nasty flu -- and infecting the rest of the world in the process. After years of explosive expansion, China is cooling off. Growth has fallen to its lowest level since 2009, and investors believe it might be even worse because Beijing may be fudging the official numbers.  China is now the second biggest economy in the world. The fear is that China will pull other major economies -- including the U.S. -- down with it. That would be scary given how slowly the global economy is currently growing and how little ammo governments have left to jump start business. "We need all the growth we can get. A slowdown in China wouldn't help," Investors around the world went on high alert when China's stock market began to crumble in late June and early July, causing prices for oil, gold and copper to tumble. Chinese equities stabilized for a few weeks after massive government intervention but the rout resumed Monday, with stocks slumping 8.5%.  Here are the main ways that China's economic turbulence could wash ashore in the U.S.

How China and Russia Are Running Rings Around Washington’s Designs to Control the Planet - Let’s start with the geopolitical Big Bang you know nothing about, the one that occurred just two weeks ago. Here are its results: from now on, any possible future attack on Iran threatened by the Pentagon (in conjunction with NATO) would essentially be an assault on the planning of an interlocking set of organizations -- the BRICS nations (Brazil, Russia, India, China, and South Africa), the SCO (Shanghai Cooperation Organization), the EEU (Eurasian Economic Union), the AIIB (the new Chinese-founded Asian Infrastructure Investment Bank), and the NDB (the BRICS' New Development Bank) -- whose acronyms you’re unlikely to recognize either.  Still, they represent an emerging new order in Eurasia. Tehran, Beijing, Moscow, Islamabad, and New Delhi have been actively establishing interlocking security guarantees. They have been simultaneously calling the Atlanticist bluff when it comes to the endless drumbeat of attention given to the flimsy meme of Iran’s "nuclear weapons program."  And a few days before the Vienna nuclear negotiations finally culminated in an agreement, all of this came together at a twin BRICS/SCO summit in Ufa, Russia -- a place you’ve undoubtedly never heard of and a meeting that got next to no attention in the U.S.  And yet sooner or later, these developments will ensure that the War Party in Washington and assorted neocons (as well as neoliberalcons) already breathing hard over the Iran deal will sweat bullets as their narratives about how the world works crumble.

Taiwan Q2 GDP growth unexpectedly slumps to 3-yr low as demand from China cools (Reuters) - Taiwan's economic growth slowed more sharply than expected to a three-year low in the second quarter, hurt by a collapse in exports as a slowdown in major market China chilled demand for its line of key technology products. The growth slump in Taiwan, an important hub in the global supply-chain for tech giants such as Apple Inc. and Hewlett-Packard Co, reflects a broad downturn in exports in regional economies with close trade ties to struggling China. Gross domestic product grew 0.64 percent year-on-year, sharply below the 2.67 percent forecast by analysts, and the weakest rate since the second quarter of 2012, data from the Directorate General of Budget, Accounting and Statistics showed. The number was also much weaker than the annual 3.37 percent growth in the first quarter, and prompted many analysts to downgrade their full year forecasts, with the statistics agency also saying it would cut the current 3.28 percent full year GDP target next month. "The big problem is weak overseas demand from China and other markets. The only market that has had stable demand is the United States," said Andy Lu, analyst with Taipei-based Taishin Securities.

Hong Kong Exports Fall For Second Month, More Than Forecast: Hong Kong's exports declined for the second straight month in June at a faster-than-expected pace, figures from the Census and Statistics Department showed Monday. Exports slid 3.1 percent year-over-year in June, exceeding economists' expectations for a 2.6 percent decrease. In May, exports had fallen 4.6 percent. The value of domestic exports plunged 13.4 percent in June from a year ago and re-exports went down by 3.0 percent. Imports dropped at a slower pace of 2.0 percent annually in June, following a 4.7 percent decline in the prior month. The expected rate of decline was 3.4 percent. The trade deficit for June widened to HK$45.8 billion from HK$43.1 billion in the same month of the previous year. Economists had expected a shortfall of HK$39.1 billion. In May, the deficit was HK$40.11 billion. During the first six months of the year, total exports rose 0.1 percent yearly, while imports decreased by 1.0 percent. The visible trade deficit narrowed to HK$2.42 billion from HK$2.63 billion last year.

The warning signs of trade stagnation - FT.com: With Greece out of the spotlight, global investors have returned to worrying about a future rise in US interest rates and the volatility that could bring to markets. They appear to be supremely unconcerned by the stagnation in world trade this year. However that could turn out to be a costly mistake. The latest World Trade Monitor showed the volume of world trade falling in May by 1.2 per cent. It has slid in four out of five months in 2015 and risen just 1.5 per cent in the past 12 months — less than the growth in global output and far below the long-term average of about 7 per cent a year.  The problem has been getting worse for some time. Trade bounced back fairly well in 2010 after the global recession but it has disappointed ever since, growing by barely 3 per cent in 2012 and 2013. Now it seems the world cannot manage even that. The prevailing view is that we do not need to worry about this weakness because it is largely structural. According to this argument, exceptional forces that conspired to make growth more trade-intensive in the 1990s and 2000s are now coming to a natural end. Those decades brought a historic decline in trade barriers and global transportation costs, together with the dramatic entry of emerging market economies into the world trading system — notably China. All that, in turn, helped produce a much deeper division of international labour, which sent different links of a single production chain to far-flung parts of the world. A recent study by the International Monetary Fund calculated that in the 1990s, every 1 per cent rise in global income generated a 2.5 per cent rise in global trade, much more than in the past. But not any more. Obviously, global growth could not become more trade-intensive forever. In fact, the volume of trade in services is still going up. But in manufacturing, rising costs and greater self-sufficiency in emerging markets, and changing production techniques around the world, have led many of those intricate global value chains to be unpicked. Since 2013, every 1 per cent of global growth has pro­duced a trade bump of just 0.7 per cent.

BRICS Bank, AIIB Pledge Partnership, Loans To Be Issued In Yuan -- Three China-led ventures are set to supplant traditionally dominant supranational lenders on the way to embedding the yuan in international trade and investment.  The new ventures are the BRICS bank, the Asian Infrastructure Investment Bank, and the Silk Road Fund. We’ve discussed each of these at length and we’ve also shown that in one way or another, they all represent a shift away from the multilateral institutions that have dominated the post-war economic order.  In short, they are a response not only to the IMF’s failure to provide the world’s most important emerging economies with representation that’s commensurate with their economic clout, but also to the perceived shortcomings of the IMF and ADB. In other words, they are far more than a new foreign policy tool for Beijing to deploy on the way to cementing its status as regional hegemon.The role of these new institutions in helping the yuan to replace the dollar as the world’s reserve currency (something which many still claim is an absurd proposition despite all evidence to the contrary) was made clear when, in April, we noted that although Beijing has sought to play down the degree to which the ventures will serve to help establish a new world economic order with China at the helm, the fact that Beijing "may encourage the $100b AIIB and $40b Silk Road Fund to issue loans directly in yuan" (via Bloomberg) and the fact that "the AIIB will establish a currency basket with China set to push for the yuan to take a prominent role" (via The South China Morning Post) suggested otherwise. Now that the AIIB and the BRICS bank have officially launched (see here and here) and are expected to begin operations soon, it appears that not only will the yuan play a key role for both lenders, but in fact, the two development banks may effectively merge.

Philip Morris sues Australian Government over plain packaging -- More than $50 million of taxpayer money is expected to go up in smoke defending cigarette plain packaging in a secretive international tribunal in Singapore.But costs will pile much higher if Australia loses on its first defence that Philip Morris indulged in cynical “venue shopping” by shifting its headquarters to Hong Kong to sue Australia.The West Australian can reveal the Attorney-General’s Department, which is running the case in defence of plain packaging, called former Labor treasurer Wayne Swan as a witness before a special tribunal sitting in Singapore back in February.Philip Morris, which is claiming the plain packaging regime harms its intellectual property in such famous brands as Marlboro, Peter Jackson and Longbeach, called its own high-profile witnesses, also at considerable cost.Among Philip Morris’ witnesses have been former High Court judge Ian Callinan who gave evidence on administrative law.If the tribunal finds unfavourably against Australia in a preliminary decision, expected in September, former health minister Nicola Roxon and her former departmental secretary Jane Halton are among those likely to be hauled before the tribunal later this year.

Stage set for 'final' negotiations on proposed TPP trade deal - Officials from 12 Pacific Rim countries on Monday wrapped up four days of talks on the Trans-Pacific Partnership free trade agreement, setting the stage for what many hope will be the final round of negotiations on the most ambitious trade deal in decades. Akira Amari, Japan’s minister in charge of TPP negotiations, said significant progress was made as a result of “tough” bargaining between chief negotiators in the run-up to a crucial four-day ministerial session starting Tuesday on the Hawaiian island of Maui. “I have an impression that there has been substantial progress,” Amari told reporters after arriving in Hawaii. The minister reiterated that he hoped this round of talks would be the last, and said that he believed “each nation shares the same thoughts.” Although Washington, which has led the TPP initiative, is putting pressure on other members to finalize a deal, some negotiation sources are skeptical about whether the ministers will be able to agree on details in Hawaii given huge remaining gaps in some areas. Among the more difficult issues include liberalization of protected industries, the length of patents for new medicines, and reform of state-owned companies heavily protected in some economies. Amari admitted that negotiations on intellectual property had been extremely difficult during the chief negotiators’ meeting.

Japan to accept effective tariff cut for imported wheat at TPP talks - The Japan Times: Japan is poised to accept an effective tariff cut for imported wheat from the United States and Australia as part of talks on the proposed Trans-Pacific Partnership, it was learned Tuesday. The government, Japan’s exclusive importer of wheat, plans to reduce the markup on import wheat prices that it includes in its wholesale wheat price for flour millers and others, informed sources said. The markup, considered an effective import tariff, is currently set at some ¥17 per kilogram. Wheat is one of Japan’s five key farm product categories for which it aims to maintain import tariffs. The United States and some others are pushing Japan to halve the effective wheat tariff. Although Japan plans to refuse to cut the effective tariff by half, it now thinks that some concession is “unavoidable in the final stages” of the trade negotiations, a government source said. On Tuesday, the 12 participating countries kicked off TPP ministerial talks on the Hawaiian island of Maui. Following a plenary session the same day, Japanese TPP minister Akira Amari told reporters that the countries hope to reach a broad agreement during the meeting. Also on Tuesday, Amari held bilateral consultations with his U.S., New Zealand and Australian counterparts on the sidelines of the talks.

Key Shift on Malaysia Before Trans-Pacific Partnership Deal - With the Obama administration pushing to conclude a vast Asian trade pact, the State Department on Monday upgraded its assessment of Malaysia’s efforts to combat human trafficking, a move that could ease the country’s inclusion in the trade deal.Though the human trafficking report from the State Department is released annually, this year it carries added weight because of the administration’s desire to make final the Trans-Pacific Partnership, a trade agreement spanning the Pacific Rim.Congress recently granted President Obama fast-track powers to complete negotiations on the deal, but it included a caveat that prohibited him from doing so with countries listed in Tier 3 of the State Department report — that is, countries that are not making a significant effort to combat human trafficking. Malaysia, whose relatively large economy makes its inclusion in the pact a priority for negotiators, was among the roughly two dozen countries in Tier 3 in last year’s report. Its upgrade this year to what is known as the Tier 2 watch list, an intermediate step that indicates a country is trying to tackle human smuggling, immediately drew the anger of critics, who sought to link the improved standing of Malaysia to the trade deal. “It appears to us that this is a political move to ensure a seamless trade relationship,” said Matthew F. Smith, the executive director of Fortify Rights, an advocacy group that investigates criminal organizations and government officials involved in human trafficking. “The message being sent is, ‘Trade trumps human rights.’ ”

Final day: Malaysia, Vietnam just saying no to parts of TPP - - Malaysia and Vietnam, the Trans-Pacific Partnership's two emerging economies, have offered compromises regarding service sector liberalization but remain steadfast in other "sensitive" areas. With hours to go before ministerial-level talks are to wrap up at a resort hotel here Friday at noon, negotiators are scurrying between meeting rooms to finalize a deal and tie up differences over intellectual property protections, market access and other matters. Meetings are being held bilaterally and collectively at both official and ministerial levels among trade representatives of the 12 TPP countries. The goal is to finalize an agreement this week. Under a draft agreement, Malaysia would loosen its distributive trade guidelines to allow 30% foreign shareholding participation in convenience store operators. The offer is not surprising. Representatives of Maybank Investment Bank said investors have been anticipating such a move for some time now. The country's convenience store sector is currently dominated by 7-Eleven Malaysia Holdings, which operates over 1,850 stores through a franchise arrangement. The Malaysian company is adding 200 stores annually under a three-year expansion plan. Malaysia is also expected to relax financial sector rules to allow banks from other TPP countries to open up to 16 branches in the country. Malaysia now limits foreign banks to eight branches. Banks from Canada, Japan, Singapore and the U.S. already operating in Malaysia would benefit.

India plans to give $11 billion lifeline to ailing state banks - Planning to inject $11 billion of capital into debt-laden state banks over the next four years, Finance Minister Arun Jaitley on Friday sought parliament's approval to boost budget spending by $4 billion in the current fiscal year. High levels of non-performing assets in state-run banks have made it hard for the government of Prime Minister Narendra Modi to revive investment or accelerate growth in Asia's third largest economy. After initial hesitation, Jaitley agreed with a plea by the Reserve Bank of India to provide more capital to banks. Jaitley plans to provide 250 billion rupees ($3.90 billion) each in the current and next fiscal year, while 200 billion rupees would be provided during 2017/18 and 2018/19, the finance ministry said in a statement. Having allocated $1.24 billion for the state banks in its February budget, the finance ministry aims to inject an extra $1.9 billion, if parliament approves. Later, it will seek an additional $50 billion rupees for capital infusion into banks. The country's top six banks will get $1.6 billion, the ministry said.

Pakistan Judicial Commission Report; Recurring Floods; ISIS Threat; Japan Re-Militarization - How will judicial commission report impact Pakistan Tehreek e Insaf (PTI)? Will there be a split in PTI? Will it hurt Imran Khan’s and his party’s popularity? Will Nawaz Sharif and his PMLN colleagues behave badly after the report? Is a new political party emerging in Pakistan with many disgruntled members of existing parties? Is the Pak military behind it? What will such a party look like? Why are there recurring floods in Pakistan almost every year? Meting glaciers? Heavier monsoons rising from increasing fresh water layer in Bay of Bengal? What can or should be done about it?  Who will fill the vacuum left in Afghanistan by US troop withdrawal? Taliban? ISIS? Al Qaeda? Afghan government? Why is Japan militarizing? Is it to counter rising China? How will it impact Asia? Viewpoint From Overseas host Faraz Darvesh discusses these questions with Misbah Azam (www.politicsinpakistan.com) and Riaz Haq (www.riazhaq.com). https://vimeo.com/134619588

Pakistan Boosts Electronic Surveillance to Fight Terror -- Pakistan is building digital surveillance capacity to rival America's NSA with broad public support in the country, according to a report by London-based Privacy International. "Attacks against civilian targets in Pakistan’s cities have also fed popular support for communications surveillance and other efforts to register and monitor the civilian population, including national databases and mandatory SIM card registration", says the report. Pakistan requires universal SIM card registration by fingerprint, and maintains a national biometric ID database.  Pakistan has seen nearly 60,000 of its citizens die in incidents of terrorism since the US invasion of Afghanistan in 2002, according to data reported by South Asia Terrorism Portal (SATP). What is happening in the country now follows a familiar pattern seen elsewhere in the world: Faced with growing terror threat, people are willing to trade privacy for security. Like the US National Security Agency (NSA) surveillance program, the Pakistani effort includes both voice and data communications. Over 70 per cent of the country's population uses mobile phones, and an estimated 11 per cent of the population has internet access, the report says. This makes surveillance in Pakistan advanced and comprehensive as there are currently 50 operational internet providers and five mobile phone operators. Pakistan government has acquired technology and purchased equipment for surveillance from local as well as some foreign companies such as Ericsson, Alcatel, Huawei, SS8 and Utimaco.

Pak Army Builds Over Half of CPEC Western Route in Record Time - “The Frontier Works Organization (FWO) has built roads with 502 kilometers length on the western alignment of China Pakistan Economic Corridor (CPEC) to link Gwadar with other parts of the country. The FWO took up the challenge to extend the benefits of Gwadar port to rest of the country by building roads in rugged mountainous terrain and highly inaccessible areas. The gigantic task was undertaken on the directives of Chief of Army Staff General Raheel Sharif." Frontier Works Organization. Of the three land routes being constructed as part of the China-Pakistan Economic Corridor (CPEC) project to connect Pakistan's deep sea Gwadar Port on the Arabian Sea with western China, the western route is the most challenging.  In addition to the difficult mountainous terrain in KP and Baluchistan provinces, the western route runs through Panjgur and Turbat where there is an active Baloch insurgency believed to be aided by India via Afghanistan. It's being built by Pakistan Army's Frontier Works Organization. Frontier Works Organization (FWO) is an administrative branch of the Pakistan Army that includes active duty officers and civilian scientists and engineers which has been involved with the construction of bridges, roads, tunnels, airfields and dams in Pakistan, on the orders of the civilian government of Pakistan, according a Reuters report.The completion of construction of 502 km of the 870 km length of the western alignment represents a significant milestone for Pakistan Army and the Frontier Works Organization.  It is expected to become operational by the end of 2016.

Global Downgrades Surpass Upgrades as geopolitical, economic risks Increase | Cairo Post - Standard & Poor’s Ratings Services downgraded 244 issuers worth $1.2 trillion in rated debt and upgraded 125 issuers with $621 billion in rated debt in the second quarter of 2015. Downgrades eclipsed upgrades around the world as geopolitical and economic risks rose, including Greece’s potential exit from the eurozone (the “Grexit”), a slowdown in economic growth in China, and the credit effect from interest rate normalization on part of the Federal Reserve System in the U.S., according to Standard & Poor’s “Global Corporate And Sovereign Rating Actions And Outlook–Downgrades Surpass Upgrades Around The World As Geopolitical And Economic Risks Increase,” published today on RatingsDirect. “Downgrades surpassed upgrades across the globe in the second quarter of 2015, with most regions seeing two downgrades for every one upgrade—slightly above historical averages,” said Diane Vazza, head of Standard & Poor’s Global Fixed Income Research Group. “Europe was the lone exception, where downgrades still exceeded upgrades, but at a tighter margin of 1.7 to 1; the three downgrades of Greece (Hellenic Republic) in the second quarter boosted Europe’s share of downgraded debt to account for nearly two-thirds of the global total.” Under Standard & Poor’s policies, only a Rating Committee can determine a Credit Rating Action (including a Credit Rating change, affirmation or withdrawal, Rating Outlook change, or CreditWatch action). This commentary and its subject matter have not been the subject of Rating Committee action and should not be interpreted as a change to, or affirmation of, a Credit Rating or Rating Outlook.

Demand Troubles Risk Cementing a Decade of Anemic Global Growth - Failure of the world’s largest economies to fix their underlying demand problems—despite record central-bank injections—is setting the stage for weak global growth for years to come. That is a key message in the International Monetary Fund’s latest report detailing distortions in the global economy caused by too much saving in some countries and not enough demand in others. In particular, if countries such as Germany and China don’t act to boost domestic demand, the IMF is worried they could cement a decade of anemic global growth. Inaction by governments in the world’s most important economies “is the enemy of progress on the growth and stability agenda,” Mr. Lipton said. Those imbalances have serious real-world effects. Accumulated distortions in the global economy in the last decade fueled the 2008-09 global financial crisis that sparked severe recessions and made hundreds of millions of people jobless. In the wake of the worst economic crisis in nearly a century, the world’s economic counselor launched an annual study of how badly the global economy is being warped by the policies of the most systemic countries. The IMF assesses how exchange rates, trade imbalances, currency reserves, government budgets and capital flows are creating eddies and headwinds to growth. The biggest offenders are well known, accounting for the largest shares of global imbalances. Germany and China’s current account surpluses—the widest measure of a country’s trade and financial position relative to other economies—mean they are relying far too much on exports and aren’t contributing enough to global demand, the IMF says.

Global Consumer Sentiment Is Souring, Except Where You’d Expect -- Six years after the financial crisis sent shockwaves through the global economy, consumers around the world are still fretting about the outlook for growth. According to Nielsen’s second-quarter report on consumer sentiment around the world, more than half of respondents representing more than 2 billion people in 60 of the world’s largest economies believe their country’s still in recession. “There’s a lot of volatility we’re observing, and so they don’t see their local economy on a robust path going forward,” said Louise Keely, a senior vice president at Nielsen and president of The Demand Institute. “So while global consumer confidence has been rising slowly to reach near-optimistic levels in the past year, there is still evidence that consumers feel uncertain about their countries’ futures.” Recessionary concerns rose in particular in South America, where several economies are already shrinking. To a much smaller extent, there was also greater fear in the U.S. after a bad first quarter forced many economists to lower their forecasts. But feeding contrarian bets, Nielsen said two regions that have captured much of the headlines in recent weeks–Europe and China–are showing improving consumer sentiment. European consumers are slightly more upbeat as the economy appears to have avoided a triple-dip recession. That’s despite the ongoing Greek crisis and a warning from the International Monetary Fund that persistently high unemployment and debt levels put the region at risk of another contraction if it were to be hit by another economic shock. Much of the improvement came from Russia, however, as consumers start to recover after hunkering down for more than a year amid plummeting oil prices and international sanctions. To be sure, a host of European countries–including two of its largest economies, Italy and France–remain at the more pessimistic end of Nielsen’s sentiment spectrum.

Africa is more ready to make than it is to consume - FT.com: As US President Barack Obama tours east Africa, with hopes high for an ac­companying increase in investment in the region’s fast-growing economies, some foreign companies are meanwhile concluding the continent’s middle-class is not the big, dynamic market they had hoped. Swiss food manufacturer Nestlé, for ex­ample, is closing offices and cutting jobs. But the idea that the continent’s im­proving economies would prove a paradise for consumer goods salesmen was always a fantasy. When poor regions take off, they create opportunities for production long before they become significant markets for consumption. The problem is not that Africa has a missing class of people but rather a missing class of organisation. The founts of productivity are organisations, such as businesses, that make ordinary people productive by harnessing the potential of scale and specialisation while preserving worker motivation. Africa is short of such organisations: its private sector lacks scale while its public sector lacks motivation. Global businesses, by contrast, perform the al­chemy of combining these factors every day. They will be needed in the coming decades for three specific transformations, visible in Nigeria and Ethiopia. First, Africa needs functioning infrastructure. The model of aid-financed public sector construction and operation has failed. The future is for aid to be used to leverage private investment, rather than substitute for its absence. Appropriately, Britain is now increasing by £735m its funding for CDC, its vehicle to support private investment in Africa. African leaders see this too. They know they will need global construction companies to build the power stations, grids, railways and ports vital to growth; global utility companies to operate them to international standards; and global private finance to pay for it all. Second, infrastructural development will be focused on cities. Between now and 2050 Africa’s urban population will triple. The efficient city is the crucible of growth: it provides connectivity; it enables exporters to cluster, securing the benefits of scale, and proximity to ports or airports for access to markets. It enables workers to live near jobs. It provides a population dense enough to allow local services such as bakeries with markets sufficiently large to support scale and competition.

World Bank Peddling Private, For-Profit Schools In Africa, Disguised As Aid - Private, for-profit schools in Africa funded by the World Bank and U.S. venture capitalists have been criticized by more than 100 organizations who’ve signed a petition opposing the controversial educational venture. A May statement addressed to Jim Kim, president of the World Bank, expressed deep concern over the global financial institution’s investment in a chain of private primary schools targeting poor families in Kenya and Uganda and called on the institution to support free universal education instead. The schools project is called Bridge International Academies and 100,000 pupils have enrolled in 412 schools across the two nations. BIA is supported by the World Bank, which has given $10 million to the project, and a number of investors, including U.S. venture capitalists NEA and Learn Capital. Other notable investors include Bill Gates, Mark Zuckerberg, Pierre Omidyar and Pearson, a multinational publishing company. In a speech delivered in April, Kim praised BIA as a means to alleviate poverty in Kenya and Uganda. Critics responded that many Kenyans and Ugandans cannot afford private education, further arguing that this type of investment merely supports Western businesses at the expense of local public services.

In Brazil, Household Monthly Purchasing Power Plunges by R$ 16 Billion - 28/07/2015: The goods and services consumption of Brazilian families over the last month has shrunk by R$ 16 billion (US$4.7 billion) this year . With rising inflation and unemployment, in addition to credit constraints, the purchasing power of families, which have been the main driver of the economy in recent years, is in its first decline since 2003 and should remain low in the coming months. A study by Tendências consultancy, obtained by Folha, shows that households' purchasing power was R$ 240 billion (US$ 71.3 billion) in the monthly average from January to May -6.2% lower than in the same period in 2014 (R$ 256 billion, or US$76 billion). "After years of increasing consumption, it is difficult to admit to the empoverishment of Brazilians, but that's exactly what's happening," said Rodrigo Baggi, an economist at Tendências. In May alone, the purchasing power was R$ 229 billion (US$ 68 billion), which represented a setback to the level recorded in January 2012 (R$ 228.5 billion or US$67.9 billion). To get to these numbers, the consultancy considered the total income of families (including social security benefits), discounting inflation, credit offer (with real estate) and families' expenses with debt payments. Households' purchasing power has plunged because inflation has eroded the income of Brazilians and the pace of new credit awards has slowed down - a fundamental component to consumption.

Brazil records worst deficit in nearly 2 decades - The government registered a primary deficit of $470 million (1.6 billion real) in the first half of 2015, according to figures from the National Treasury on Thursday, O Globo newspaper reported. The deficit is the worst result since 1997. In the same period last year, the government recorded a surplus of $5 billion (17 billion real). “The deficit comes from the drop in federal revenues and the fact that budget cuts are still waiting to be approved,” said Rodrigo Zeidan, associate professor of economics and finance at Brazil’s Fundação Dom Cabral business school. Last week, the government’s economic team reduced its primary surplus budget target for the year from 1.2 percent of GDP to 0.15 percent of GDP. The change was met with a negative reaction from the markets and saw the currency plunge to a 12-year low to $3.34 against the dollar. The move also prompted ratings agency Standard & Poor's to threaten to downgrade Brazil’s investment-grade rating. Brazil’s current economic woes are compounded by the end of the commodity boom and a huge corruption scandal at the state-run oil giant Petrobras. After nearly 12 years of positive growth - including a peak of 7.5 percent GDP in 2010 - the economy is expected to shrink by least 1 percent this year with mixed opinions on whether it will return to growth in 2016

Brazil's real sinks on debt data; Mexico peso up on intervention -- Brazil's currency sank its most in nearly three months on Friday after worse-than-expected government debt data raised investor fears of a credit downgrade, while Mexico's currency gained following new government efforts to support the struggling peso. Other currencies in the region were little changed, though Colombia's peso posted a modest rebound after hitting its weakest in nearly 12 years on Thursday. The Brazilian real started the trading session slightly higher against the dollar but moved into negative territory after the central bank reported a much wider-than-expected primary budget deficit for June. Brazil's public accounts continue to suffer under a weakening economy, contributing to investor expectations that the country could lose its investment-grade credit rating. The real sank to 3.41 per dollar in early-afternoon trading, a closing level since March, 2003. Traders said part of the day's volatility was also due to end-of-the-month positioning, when the so-called Ptax rate, used in some financial contracts, is set. Meanwhile, Mexico's peso moved in the opposite direction, posting its biggest one-day gain in over four months. Mexico substantially bolstered its intervention program on Thursday in an effort to defend the peso as the central bank warned the currency could slump further after a recent string of record lows. On Friday Mexico's Central Bank chief, Agustin Carstens, said policymakers could raise interest rates at any time to defend the peso, independently of what the U.S. Federal Reserve does. "Even if the peso continues to depreciate against the dollar, it would do so at slower pace than other emerging market currencies,"

Analysts see worsening economic picture in Brazil -- Analysts expect Brazil's economy to contract by 1.76 percent this year, marking its worst performance since 1990, with the inflation rate hitting 9.23 percent, the Central Bank said Monday. The latest forecast is more pessimistic than the one released last week, when analysts said they expected the gross domestic product (GDP) to contract by 1.70 percent and inflation to come in at 9.15 percent. The GDP and inflation estimates come from the Boletin Focus, a weekly Central Bank survey of analysts from about 100 private financial institutions on the state of the national economy. Analysts' pessimism was fueled by the government's announcement last week that it would not meet the 1.1 percent primary fiscal surplus target it set for this year and that the goal was now to cut public spending by the equivalent of 0.15 percent of GDP. The government plans to slash the budget by 8.6 billion reais ($2.66 billion), a move that will further slow economic activity and deepen the contraction.

Emerging currencies hit 15-year lows - FT.com: Emerging market currencies were steadier in Asian trading on Wednesday, having slumped to 15-year lows as China’s equity rout and free-falling commodity prices reverberate throughout the global economy. Raw-material exporters Brazil, Russia and Colombia have suffered some of the heaviest sell-offs as falls in the price of commodities such as oil, copper and iron ore continued unabated this week, with Brent crude falling to its lowest level since February. The turbulence is expected to increase once the US Federal Reserve chooses finally to increase interest rates from near-zero levels, a move which will probably have a chilling effect on developing markets. James Lord, emerging market strategist at Morgan Stanley, said the Fed was an “ever-present risk. “Any change in expectations about the first US rate hike driven by strong US economic data could add to the existing volatility,” he said. Approaching the close of Asian trading on Wednesday, the Thai baht was down 0.31 per cent against the dollar, the South Korean won was up 0.53 per cent, while the Malaysian ringgit and Indonesian rupiah were flat. Currency markets act as a bellwether for investor sentiment, so the slump raises the likelihood of a deeper sell-off in equity and debt markets. The MSCI Emerging Markets stock index is down 10.9 per cent this year while government and corporate borrowing costs in emerging economies including Brazil, Turkey and Russia have increased. “The next risk is that continued volatility in Chinese financial markets will trigger a further reaction in global capital markets, especially if other risks also materialise,"

Emerging currencies feel pain of global stress - FT.com: Eighteen years ago a currency collapse in Thailand sparked contagion throughout Asia, triggering a brutal financial and economic crisis. Now echoes of that collapse are resounding once again. Currencies across Asia are bearing the brunt of a global recoil from emerging markets in anticipation of the first US interest rate rise in nearly a decade against a backdrop of collapsing commodity prices and escalating concerns over China’s economy. Investors who have benefited in recent years from pumping money into emerging market economies in Asia are reassessing their portfolios as global macro risks grow more acute. Once more, the most sensitive market has been that of currencies, which traditionally act as a barometer of shifting investor sentiment. "Emerging market currencies are coming under attack from a number of different directions,” “The possible Fed rate rise, dollar strengthening, lower commodity prices and a slowdown in China have all reared up in the past. What’s different now is that they are all in play at once.” The sell-off in emerging market Asia has pushed the Thai baht to a six-year low of Bt34.9 a dollar while currencies in Malaysia and Indonesia have fallen to levels unseen for nearly two decades. Just as in 1997, global investors are preoccupied by US monetary policy and on Wednesday will scrutinize the latest Federal Reserve policy statement for clues about when the onset of tighter money beckons. In a further parallel, the stronger dollar is encouraging money to flow out of risky, emerging Asian economies and into the rich world, with the biggest losers likely to be those countries with the largest current account deficits. But this time around there is another catalyst: China.

Outflows from emerging market funds accelerate - FT.com: Outflows from emerging market funds have accelerated over the past week, as fresh volatility in Chinese stocks, a rising US dollar and falling commodity prices further damp sentiment. Investors pulled a net $4.5bn from EM funds in the week through July 30, according to data from EPFR, compared with $3.3bn a week earlier. A total of $14.5bn has now been redeemed from EM funds over the past three weeks alone. Emerging Asian equities have borne the brunt of withdrawals, with the cumulative $12.1bn taken out over the past three weeks marking the swiftest exit from stocks in the region since the data set began in 2004, according to ANZ. “It’s almost like a perfect storm at the moment in emerging markets,” said Adrian Mowat, head of EM equity strategy at JPMorgan. Emerging market assets have been rocked by renewed price declines in commodities such as oil and copper, key exports for many developing nations including Brazil and Russia. Oil prices sank to a six-month low earlier this week, in part due to a stronger US dollar. “The macro environment remains challenging for EM assets,” wrote credit analysts at Barclays. “Many commodities reached new multiyear lows this week, concerns about China are elevated and the looming Fed tightening cycle dampens prospects of EM bond fund flows turning more positive.” Some EM currencies — notably the Malaysian ringgit and the Turkish lira — have also been hit by political uncertainty. Many currencies are now trading at or near 15-year lows against the dollar.

The world gears up for a surge in the US dollar - FT.com: As a symbol of how the US punches above its weight, nothing beats the pre-eminence of its currency. The US may account for just a fifth of global gross domestic product, but dollar assets make up three times as great a proportion of global reserves. Most commodity trading uses the greenback as the medium of account. This influence is telling. A working paper from the Bank of International Settlements found almost $8tn of dollar credit issued to non US borrowers. More recently the IMF pointed out how past episodes of dollar strength have coincided with a rash of emerging market crises. Now that the greenback is surging again — the dollar index is up 20 per cent since last autumn — the implications are moving into focus. Although the dollar index rose from 80 in October to 100 in March, such price action is run-of-the-mill when examined over a longer period. Between 1981 and 1985, the same index soared from 90 to 160, before a co-ordinated international effort pushed it all the way back within three years. Dissecting the dollar is something of an art; a bet on its strength can reflect confidence in the US, or darkening clouds elsewhere and a rush to safe assets. The same IMF paper has shown that rising US rates are beneficial when they reflect optimism about growth, but not if driven by tighter money. On many occasions dollar strength has coincided with fears about growth; last autumn, for example, a spell of global deflation may have helped propel the dollar on its recent run. Of late, attention has focused more closely upon how well the US is doing. Indeed, it is striking how US monetary policy pays little direct attention to the dollar’s globe-trotting role. Peruse Federal Reserve statements, or recent comments by its chair Janet Yellen, and you will struggle to find much reference to the world beyond US borders. Ms Yellen is focused on the data, but the data in question is all domestic: unemployment, inflation and GDP. The global economy only matters insofar as it might impact upon the US. This week GDP revisions strengthened the chance of a rise in the rate some time before Christmas.

Should Emerging Markets Fear A Fed Lift-Off? - Though this week’s FOMC statement is still being parsed, market participants generally expect the Federal Reserve to raise policy interest rates this September. In contrast, the European Central Bank has significantly eased monetary policies over the past year and is expected to maintain accommodative policies for a substantial period of time. Should emerging markets fear the consequences of the so-called Fed liftoff and the likely increase in U.S. long-term bond yields?  Analysis in the IMF’s latest Spillover Report suggests the answer is “no”. Good news about economic growth in the U.S. raises economic activity in emerging markets and in other advanced economies (henceforth referred to for convenience just as ‘emerging markets’), despite the associated rise in bond yields. Bond yields in major advanced economies such as the United States could rise for many reasons. The analysis in the IMF’s report–and in a comprehensive background note–tries to uncover the underlying shocks behind the rise and show that the impact on other countries depends on why bond yields rise in the first place.

The Ideology of the S&P Threat to Downgrade Brazil to Junk -- S&P has issued a negative outlook regarding Brazilian sovereign debt. The S&P’s announcement stated that “Over the coming year, failure to advance with (on- and off-budget) fiscal and other policy adjustments could result in a greater-than-expected erosion of Brazil’s financial profile and further erosion of confidence and growth prospects, which could lead to a downgrade. The ratings could stabilize if Brazil’s political certainties and conditions for consistent policy execution–across branches of government to staunch fiscal deterioration–improved. It is our view that these improvements would support a quicker turnaround and could help Brazil exit from the current recession, facilitating improved fiscal out-turn and provide more room to maneuver in the face of economic shocks consistent with a low-investment-grade rating.” This warning has been echoed by other credit rating agencies threatening to downgrade Brazilian sovereign debt to junk. But, should anyone trust credit rating agencies? Once more, credit rating agencies are clueless in their assessments. They have specialized in making wrong assessments regarding sovereign government’s capacity to pay its local-currency debt. They have downgraded sovereign governments like the US, UK, Japan, and now Brazil. Paradoxically, credit rating agencies, which have a track record ranging from arbitrary, imprecise, and clueless (Here, Here , here, here) still can dictate the outcomes of fiscal policy of sovereign governments. Recent downgrade warnings by CRAs and market pundits have triggered discussions inside the Brazilian government to implement austerity measures, including welfare programmes and public investment initiatives.  President Dilma Rousseff is under pressure to impose a fiscal-austerity agenda to avoid a downgrade by credit agencies.

Canada GDP shrinks 0.2% in May - --Canada's economy shrank for the fifth straight month in May, weighed down by weak results in manufacturing output, oil and gas extraction and wholesale trade. Gross domestic product, the broadest measure of goods and services produced in the economy, fell 0.2% to 1.64 trillion Canadian dollars ($1.26 trillion) in May from the previous month, Statistics Canada said. The results follow a 0.1% decline in April's GDP. Market expectations were for Canada's GDP to remain unchanged in May, according to economists at Royal Bank of Canada. The GDP data is likely to fuel the debate over whether Canada entered a recession - which is commonly defined as two consecutive quarters of contraction - during the first half of 2015. The Canadian economy shrank 0.6% on an annualized basis in the first quarter, and the Bank of Canada earlier this month cut its second-quarter forecast to a contraction of 0.5%

What Is Wrong with the West’s Economies? by Edmund S. Phelps - What is wrong with the economies of the West—and with economics? It depends on whether we are talking about the good or the just. Many of us in Western Europe and America feel that our economies are far from just, though our views on justice differ somewhat. One band of economists, led for decades by the British economist Anthony Atkinson, sees the West as being in another Gilded Age of inequality in income and wealth.1 Adopting Jeremy Bentham’s utilitarian view, they would redistribute income from those in high brackets to those farther down—until we reach the highest “sum of utilities.” It is a question, though, whether this doctrine captures intuitive views of what is just. Philosophers over these same decades have been more interested in the work by the American philosopher John Rawls. His book A Theory of Justice argues for a fundamental shift away from Bentham: economic justice is about the distribution of “utilities,” for him a word usually denoting the satisfactions of consumption and leisure, not the sum of those utilities.2 It is about the terms on which each participant contributes to the fruit of the society’s economy. For Rawls, justice requires the state to use taxes and subsidies to pull up people with the lowest wages to the highest level possible. That way, the least advantaged get the largest possible portion of the gain from people’s cooperation in the economy.

Deflation Is Winning - Beware! -- Chris Martenson - Deflation is back on the front burner and it's going to destroy all of the careful central planning and related market manipulation of the past 6 years. Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. Tanking commodity prices are confirming that idea.Whole groups of enterprises involved in mining and energy are about to be destroyed. And the commodity-heavy nations of Canada, Australia and Brazil are in for a very rough ride. Whether the central banks can keep all of their carefully-propped equity and bond markets elevated throughout the next part of the cycle remains to be seen.  We know they will try very hard. They certainly are increasingly willing to use any all tools at their disposal to keep the status quo going for as long as possible. Whether it’s the People’s Bank of China stepping in to the market to buy 10% stakes in major Chinese corporations in a matter of weeks, the Bank Of Japan becoming the majority owner of key ETFs in the Japanese markets, or the Swiss National Bank purchasing $100 billion of various global equities, we see the same desperation. Equity prices are being propped, jammed and extended higher and higher without regard to risk or repurcussions.  It makes us wonder: Why haven’t humans ever thought to print their way to prosperity before? Well, that’s the problem. They have.  And it has always ended up disastrously.  History shows that the closest thing that economics has to an inviolable law is: There’s no such thing as a free lunch. Sadly, all of our decision-makers are trying their hardest to ignore that truth.

Falling Prices Were Boon for Eurozone Households -  Falling prices may be a sign of economic weakness, but they were a boon to eurozone consumers in the first three months of the year. Many economists believe falling consumer prices are bad for economic growth over the long-term because they discourage spending and investment and push real debt levels higher. That’s why central banks have tried so hard to avoid slipping into deflation, with the European Central Bank launching a new program of quantitative easing as the first quarter drew to a close. But there is no doubt the decline in prices between December 2014 and April 2015 helped deliver a much needed boost to real incomes in the eurozone. Figures released Wednesday by the European Union’s statistics agency show real disposable income per capita–a measure of how much consumers have to spend on goods and services–jumped by 0.9% in the first quarter, the sharpest rise since the first quarter of 2009. One reason for that jump was a 0.5% rise in wages and other forms of income. But a further boost came from a 0.4% fall in prices over the period. Rather than save their windfall as they did in 2009, households chose to spend, with consumption per capita rising by 0.8%, the largest quarterly increase since at least 2004. It’s doubtful incomes will continue to rise at that pace during the rest of 2015. Prices have stopped falling, and while wages are likely to increase, high rates of unemployment will limit those gains.

IMF warns of gloomy eurozone outlook - The International Monetary Fund has warned the eurozone faces a gloomy economic outlook thanks to lingering worries over Greece, high unemployment and a banking sector still battling to shake off the financial crisis. The IMF’s latest healthcheck on the eurozone found it was “susceptible to negative shocks” as growth continues to falter and monetary policymakers run out of ways to help. It called for an urgent “collective push” from the currency union to speed up reforms or else risk years of lost growth. “A moderate shock to confidence – whether from lower expected future growth or heightened geopolitical tensions – could tip the bloc into prolonged stagnation,” said Mahmood Pradhan, the IMF’s mission chief for the eurozone.  Near-term fillips such as the European Central Bank’s (ECB) massive money-printing programme, low oil prices and a weak euro could only spur the economy for so long, IMF staff said after its annual discussions with eurozone policymakers. In the Fund’s view the medium-term looks subdued because of “a chronic lack of demand, impaired corporate and bank balance sheets, and deeply rooted structural weaknesses”. The IMF’s review said: “The recovery is strengthening, underpinned by lower oil prices and the ECB’s expanded asset purchase programme. But the medium-term outlook remains weak, weighed down by the legacies of insufficient demand, lagging productivity, and weak bank and corporate balance sheets.

Inflation Data Suggest More ECB Support - A recent ECB publication suggests that underlying inflation might not have reached a steady turnaround point. The publication’s conclusions, if accurate, could open the door for more ECB support to the eurozone economy, or at least put off any debate about tapering. The paper published Monday, a box in the central bank’s forthcoming economic bulletin, looks at the indication of underlying inflation known as HICPX, or inflation excluding food and energy. It stood at 0.8% in June, down slightly from 0.9% in May, but higher than the all-time low of 0.6% reached in March. For comparison’s sake, headline inflation was 0.2% in June, down from 0.3% in May. In March it was negative 0.1%. The publication said that six-month annualized data in the HICPX indicator shows a “a relatively persistent increase since the start of the year, but still reveals considerable volatility, making it difficult to conclude that the recent upturn relates to a true cyclical turning point.” Using a specific measure generally applied to the business cycle would suggest that “on average, developments in a certain direction should be observed for seven to eight months in order for the signal from the cyclical component to dominate over the short-term noise in the series.” This suggests “that the recent upturn needs to be viewed with some caution.” The analysis says that measures for underlying inflation have gone up from low levels, “in line” with the HICPX path foreseen in the latest ECB staff surveys. But “on the basis of the out-turns observed so far, it remains too early to identify a turning point in underlying inflation from a statistical point of view.

Finland is the poster child for why the euro doesn’t work - Sometimes bad things happen to good economies. Take Finland. Its schools are among the best in the world, its government is among the least corrupt, and, for rich countries, its public debt is among the lowest. But despite the fact that the fundamentals of its economy are strong, its economy is not, in fact, strong. Finland is actually stuck in its longest recession in living memory. Why? Well, the short story is the euro. The slightly longer version is Finland has had some bad luck that the euro has turned into a bad recession, or at least a worse one that it had to be. It started when Apple made Nokia go from being synonymous with smartphones to being synonymous with old smartphones. As Finland found out, it isn't easy to replace a company that, at its peak, made up 4 percent of your economy. Obsolescence came for the timber companies next. There was nothing they could do to make people need as much paper, which until now had been a major export, in a post-paper world. And, on top of that, Finland has felt the effects of Russia, one of its biggest trading partners, staggering under the weight of low oil prices and Western sanctions. Put it all together, and Finland was always going to have a tough time. But it's been tougher than it needed to be, since Finland hasn't been able to do what a country would normally do in this situation: devalue its currency. That's because Finland doesn't have a currency to devalue. It has the euro.

Italy's Jobless Rate Rises Unexpectedly In June: Italy's unemployment rate increased unexpectedly in June, the statistical office Istat revealed Friday. The jobless rate rose to a seasonally adjusted 12.7 percent from 12.5 percent in the previous month. It was forecast to fall to 12.3 percent in June. The number of unemployed totaled 3.233 million in June, up 1.7 percent from the prior month and 2.7 percent from the previous year. The youth unemployment rate aged between 15 and 24 came in at 44.2 percent in June, up 1.9 percentage point from the prior month. The number of persons employed was 22.3 million, down 0.1 percent from the previous month and 0.2 percent from a year ago. Employment rate for persons aged between 15 and 64 was 55.8 percent, down 0.1 percentage points from the prior month and remained stable from a year earlier.

Italy Youth Unemployment Hits Record High 44.2%, Concerns Rising "Recession Exit May Be Unsustainable"  -- Earlier today, Eurostat released the two most important data points for Europe: inflation and unemployment. On the former,  there was no surprise at the headline level which remained at 0.2% for the another month, in line with expectations, but core CPI excluding energy, food, alcohol and tobacco, rose to 1.0%, the highest print in 2015 and one which pushed Bund prices well lower. But it was the unemployment number which showed something unexpected. While the overall unemployment rate for the Eurozone also stayed unchanged at 11.1%, fractionally worse then the consensus estimate of a decline to 11.0%..... it was renewed concern about what is going on in Italy, where unemployment rose from 12.5% to 12.7%, proving consensus expectations about a strong improvement to 12.3% dead wrong... ... and posing a question just what is going on in the country with the biggest debt load in Europe, and more importantly how is it that Rome is still unable to benefit from the ECB's QE which has pushed Italian yields far below those of the US despite an economy which is suddenly taking on water. And nowhere was this more visible than in Italy's youth unemployment rate, which surprisingly jumped by nearly 2% to 44.2%, a record level, and one which is starting to rival some of Europe's most troubled nations, such as Spain and of course Greece.

Why Italy is the most likely country to leave the euro: What do you call a country that has grown 4.6 per cent - in total - since it joined the euro 16 years ago? Well, probably the one most likely to leave the common currency. Or Italy, for short. It's hard to say what went wrong with Italy, because nothing ever went right. It grew 4 per cent its first year or so in the euro, but almost not at all in the 15 years since. Now, that's not to say that it's been flat the whole time. It hasn't. It got as much as 14 per cent bigger as it was when it joined the euro, before the 2008 recession and 2011 double-dip erased most of that progress. But unlike, say, Greece, there was never much of a boom. There has only been a bust. The result, though, has been the same. Greece and Italy have both grown a meager 4.6 per cent the past 16 years, although they took drastically different paths to get there. Part of it is that Italy, as the IMF points out, has real structural problems. It's hard to start a business, hard to expand one, and hard to fire people, which makes employers wary about hiring them in the first place. That's led to a small business dystopia, where nobody can achieve the kind of economies of scale that would make them more productive. But, at the same time, Italy had these problems even before it had the euro, and it still managed to grow back then. So part of the problem is the euro itself. It's too expensive for Italian exporters, and too restrictive for the government that's had to cut its budget even more than it otherwise would have.

Swiss franc shock hits central bank for $50B: The Swiss National Bank (SNB) revealed on Friday that abandoning its currency cap on the euro in January cost the central bank 50.1 billion Swiss francs ($52 billion) in the first half of the year. In its interim earnings release, the central bank detailed the full extent of its balance sheet pain, as unlike most of its major counterparts, the SNB is privately run and has shareholders to report to like a regular company. "(The) appreciation of the Swiss franc led to exchange rate-related losses on all investment currencies," the SNB said in a news release on Friday. The central bank said that 3.2 billion Swiss francs had also been lost on its holdings of gold. SNB shares are listed on the stock exchange, with approximately 55 percent held by public shareholders (including regional member states of Switzerland, called cantons). Ipek Ozkardeskaya, a market analyst at London Capital Group, said that SNB dividends might also be squeezed by the central bank's heavy losses over the last six months. This could prove problematic she said, given the economic slowdown in Switzerland. For 2015, the SNB's dividend is 15 Swiss francs per share, before tax.

The Swiss National Bank Is Long $94 Billion In Stocks, Reports Record Loss Equal To 7% Of Swiss GDP -- Exactly three months ago, the Swiss National Bank issued a report which everyone was eagerly anticipating: its interim results for the quarter ended March 31 in which it laid out just how much it had loss after it took on an "artificially strong" Swiss Franc market back in September 2011... and admitted defeat when on January 15 in a shocking statement, it announced it would remove the EURCHF 1.20 peg despite reiterating just days earlier the peg was rock solid. The result: a record loss of CHF 29.3 billion ($32 billion). Earlier today, the SNB which is perhaps the most transparent hedge fund of all central banks and actually lays out its financial statements in a respectable manner every quarter, released its results for the second quarter (and first half) of 2015. The result: another absolutely epic loss, amounting to €50.1 billion ($51.8 billion) of which €47.2 billion on currency positions - a whopping 7% of Swiss GDP - meaning that in Q2 the SNB lost another €20 billion even though the CHF crosses barely registered any of the mammoth moves experienced in the first quarter, suggesting that the SNB was hit by the double whammy of its own currency devaluation in Q1, followed by the launch of ECB's QE which crushed the EUR in Q2, and which happens to be the currency in which the bulk of SNB FX holdings are denominated. Amusingly, the FX loss was despite a CHF530 gain resulting from negative deposit rates charged on sight deposit account balances since January 22, 2015 when Switzerland went full-NIRP.

French Protesters Try to Derail Beach Takeover by Saudi King and His Massive Entourage -- Protesters greeted King Salman of Saudi Arabia when he arrived in the French Riviera city of Nice on Saturday. Some locals are upset that the king has fenced off a beach for the exclusive use of his 1,000-member entourage. By law, all French beaches are open to the public. More than 100,000 residents have signed their names to a petition against closure of this particular stretch of sand halfway between Cannes and Antibes, Reuters reports.  Salman, who ascended to the throne in January, has plans to remain in the Cote d'Azur city of Vallauris for three weeks. The royal family's villa there, purchased by the late King Fahd in 1979, has previously played host to celebrities and dignitaries such as Rita Hayworth and Prince Aly Khan, who celebrated their wedding there, as well as Winston Churchill and Elizabeth Taylor.  Besides closing a tunnel that allows access to the beach, protesters object to the fact that workers at the villa have poured a slab of concrete in the sand and plan to install an elevator from the estate to the beach.

French unemployed number creeps up to new record - The number of unemployed people in France rose slightly in June to hit a new record high, data from the Labor Ministry showed Monday. The number of "category A" job seekers--defined as registered job seekers who are fully unemployed--rose by 1,300 in June from May to 3,553,500 the ministry said. The number is 4.7% higher than June 2014. Unemployment has continued to rise throughout the presidency of Francois Hollande despite a recent uptick in economic growth and a host of initiatives including state-sponsored jobs and tax breaks to spur recruitment in the private sector. In an interview earlier this month, Mr. Hollande said he wouldn't run for reelection in 2017 if he failed to get unemployment to start falling.

French farmers block access from Germany and Spain over falling food prices --  Over a thousand French farmers have blocked roads from Spain and Germany to stop foreign produce entering the country. The protest follows a week of action against a fall in food prices, pushing them towards bankruptcy. The blockade in France's northeastern region of Alsace began at 10:00p.m. local time (2000 UTC) on Sunday and was expected to continue until at least Monday afternoon. According to President of the Departmental Federation of Agricultural Holders' Union (FDSEA ), Franck Sander, more than a thousand agricultural workers took part in the blockades, forcing a dozen trucks to turn back from the French-German border overnight. "We let the cars and everything that comes from France pass," Sander said. Local French newspaper "L'Alsace" reported 60 tractors blocking the French side of the "Bridge of Europe," close to Strasbourg and the German town of Kehl.  Similar action was also seen in southwestern France on the A645 motorway, near to the Spanish border, causing tailbacks stretching up to four kilometers (2.5) miles. Around 100 farmers were also seen ransacking dozens of trucks travelling from Spain in the Haute-Garonne region, threatening to unload any meat or fruit en route to the French market.

Is the Ugly German Back? Flames of Hate Haunt a Nation - Germany these days is a nation split in two. On the one side is a populace that is showing greater solidarity with refugees than ever seen before. Initiatives have been created across the country to assist asylum-seekers in their everyday lives. The other half of the country is extremely difficult to tolerate in some places. Racist violence is on the rise. The German Interior Ministry registered 173 instances of criminal right-wing offenses against accommodations for asylum-seekers during the first six months of this year, almost three times as many as during the same period the previous year.  Between January and June of 2015, racists attacked facilities providing accommodations for asylum-seekers on an almost daily basis. It's a grim statistic, but the real figures may be even higher, because many refugees are afraid to report incidents to police. "We have to assume that further crimes will be committed against accommodations for asylum-seekers," says Holger Münch, the president of Germany's Federal Criminal Police Office.

How Germany Prevailed in the Greek Bailout - At the height of crucial negotiations over the latest bailout of Greece this month, Germany circulated a proposal that undercut decades of promises about the march toward deeper European unity: Greece, it said, could be offered a temporary exit from the euro.The proposal reflected some muscle-flexing by hard-liners in Berlin. But it was first broached privately not by the Germans, but by Slovenia, a tiny eurozone member whose finance minister demanded a “Plan B” for a leftist Greek government he compared to the former Yugoslavia’s Communists.Slovenia’s proposal was a double triumph for Germany. Greece’s continuing economic crisis has not only done nothing to soften Germany’s insistence on strict adherence to rules, fiscal austerity and dire consequences for countries that fail to live up to their obligations, it has also actually reinforced the willingness of Germany’s allies in Europe to impose even harsher conditions on Athens. From Lisbon to Latvia, from creditor countries to debtors, among some left-wing leaders as well as conservative governments, the response to Greece reflected a deep aversion to government spending as a tool to fight economic slumps and faith in deregulated labor markets. It is a vision of austere, market-based policies that are a break with Europe’s past. Germany persuaded European leaders to rally more firmly around what might be called the Berlin consensus by a combination of patient diplomacy and clever brinkmanship and by exploiting alarm over the antics of Greece’s leaders, numerous participants in the crisis talks recounted in interviews.

Greece, the Sacrificial Lamb -  Stiglitz — AS the Greek crisis proceeds to its next stage, Germany, Greece and the triumvirate of the International Monetary Fund, the European Central Bank and the European Commission (now better known as the troika) have all faced serious criticism. While there is plenty of blame to share, we shouldn’t lose sight of what is really going on. I’ve been watching this Greek tragedy closely for five years, engaged with those on all sides. Having spent the last week in Athens talking to ordinary citizens, young and old, as well as current and past officials, I’ve come to the view that this is about far more than just Greece and the euro. Some of the basic laws demanded by the troika deal with taxes and expenditures and the balance between the two, and some deal with the rules and regulations affecting specific markets. What is striking about the new program (called “the third memorandum”) is that on both scores it makes no sense either for Greece or for its creditors. As I read the details, I had a sense of déjà vu. As chief economist of the World Bank in the late 1990s, I saw firsthand in East Asia the devastating effects of the programs imposed on the countries that had turned to the I.M.F. for help. This resulted not just from austerity but also from so-called structural reforms, where too often the I.M.F. was duped into imposing demands that favored one special interest relative to others. There were hundreds of conditions, some little, some big, many irrelevant, some good, some outright wrong, and most missing the big changes that were really required.Photo The frayed flag over Athens last week. Credit Alkis Konstantinidis/Reuters Back in 1998 in Indonesia, I saw how the I.M.F. ruined that country’s banking system. I recall the picture of Michel Camdessus, the managing director of the I.M.F. at the time, standing over President Suharto as Indonesia surrendered its economic sovereignty. At a meeting in Kuala Lumpur in December 1997, I warned that there would be bloodshed in the streets within six months; the riots broke out five months later in Jakarta and elsewhere in Indonesia. Both before and after the crisis in East Asia, and those in Africa and in Latin America (most recently, in Argentina), these programs failed, turning downturns into recessions, recessions into depressions. I had thought that the lesson from these failures had been well learned, so it came as a surprise that Europe, beginning a half-decade ago, would impose this same stiff and ineffective program on one of its own.

Slavoj Zizek: How Alexis Tsipras and Syriza Outmaneuvered Angela Merkel and the Eurocrats - The double U-turn that the Greek crisis took in July 2015 cannot but appear as a step not just from tragedy to comedy but, as Syriza’s Stathis Kouvelakis noted, from tragedy full of comic reversals directly into a theatre of the absurd. After all, how else can one characterize this extraordinary reversal of one extreme into its opposite, one that would bedazzle even the most speculative Hegelian philosopher? Tired of the endless negotiations with the EU executives in which one humiliation followed another, the Syriza referendum on Sunday, July 5 asked the Greek people if they support or reject the EU proposal of new austerity measures. Although the government itself clearly stated that it supported a “no” vote, the result was a surprise for the government: 61 percent voted “no” to European blackmail. Rumors began to circulate that the result— victory for the government—was a surprise for Prime Minister Alexis Tsipras who it was said secretly hoped that the government would lose, as a defeat would allow him to save face in surrendering to the EU demands. (“We have to respect the voters’ voice,” he had said.) However, the morning after, Tsipras announced that Greece is ready to resume the negotiations, and days later Greece negotiated a EU proposal which is basically the same as what the voters rejected (in some details even harsher)—in short, he acted as if the government has lost, not won, the referendum.

Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges - A secret cell at the Greek finance ministry hacked into government computers and drew up elaborate plans for a system of parallel payments that could be switched from euros to the drachma at the "flick of a button". The revelations have caused a political storm in Greece and confirm just how close the country came to drastic measures before premier Alexis Tsipras gave in to demands from Europe's creditor powers, acknowledging that his own cabinet would not support such a dangerous confrontation.  Yanis Varoufakis, the former finance minister, told a group of investors in London that a five-man team under his control had been working for months on a contingency plan to create euro liquidity if the European Central Bank cut off emergency funding to the Greek financial system, as it in fact did after talks broke down and Syriza called a referendum. The transcripts were leaked to the Greek newspaper Kathimerini. The telephone call took place a week after he stepped down as finance minister. "The prime minister, before we won the election in January, had given me the green light to come up with a Plan B. And I assembled a very able team, a small team as it had to be because that had to be kept completely under wraps for obvious reasons," he said.

Yanis Varoufakis denies wrongdoing over tax hacking in ‘Plan B’ - FT.com: Yanis Varoufakis has insisted he did nothing improper as part of a five-month clandestine project he ran as Greek finance minister that prepared for his country’s possible exit from the euro. The scheme, which was almost completed but not fully implemented, involved hacking into Greece’s independent tax service to set up a parallel payment system — accessing individuals’ private identification numbers and copying them on to a computer controlled by a “childhood friend” of Mr Varoufakis. It would have allowed transactions to continue in case of a prolonged bank holiday and the imposition of capital controls. Mr Varoufakis described the project in a 25-minute teleconference with private investors on July 16. A tape of the call was released on Monday by the London-based Official Monetary and Financial Institutions Forum, which hosted the session, after portions were published at the weekend by the Greek newspaper Kathimerini. “We decided to hack into my minister’s own software programme in order to be able to bring it all, to just copy, just copy the codes of the tax systems’ website on to a large computer in his office, so he can work out how to design and implement this parallel payment system,” Mr Varoufakis said on the call. “We were ready to get the green light from the prime minister when the banks closed in order to move into the general secretariat of public revenues, which was not controlled by us but is controlled by Brussels, and to plug this laptop in and to energise the system.” Political opponents expressed outrage at the plan. Greek media reported that 24 MPs from New Democracy, the largest opposition party, had asked Alexis Tsipras, prime minister, whether Mr Varoufakis should face a judicial inquiry.

Greek doctors, nurses leaving in droves for jobs abroad -- An increasing number of Greek doctors, especially those in highly specialized fields, have been leaving for jobs abroad, according to the Athens Medical Association (ISA), which warns of major staffing shortages in the years to come. ISA figures show that from 2010 and to the present, more than 7,500 doctors have emigrated from Greece, when the average up until 2009 was at around 550 per year. In the first six months of this year alone, it issued 790 certificates of competence (one of the papers needed for medical staff to work abroad). “One of the biggest losses in the crisis has been that of great minds,” ISA chief Giorgos Patoulis told Kathimerini. “In a short time the national healthcare system will have an aged personnel and will be unable to staff services.” Qualified nurses – around 8,000 of whom are unemployed – are also having trouble finding work, with the Greek Nurses’ Union saying that it issued 74 certificates in 2010, 357 in 2012 and 349 last year.

Greece Negotiations Already Starting to Look Wobbly - Yves Smith -  I thought that given that the Greek government had prostrated itself and had complied with the creditor demand to pass legislation double-plus-quick or else, that the worst of the hurdles to getting the third bailout passed had been surmounted.  I should know better than to let any optimism cloud my view as far as Greece is concerned. And I have to confess it was out of a hope that Greece would not longer be front page news pretty much every day.  We are again in the midst of what Lambert calls an “overly dynamic situation” with respect to the Greek negotiations. And it’s going to be a bit in flux because the parties are again fighting over process, or what is often called “shape of the table”. That’s already a bad sign, since it has the potential to create rancor even before the two sides get to working out substantive issues. And it’s not as if the parties to these talks harbor much in the way of good will toward each other to begin with. So rather than do anything in depth, let’s just flag some key issues:

• The row over the IMF debt reduction seems overdone. That isn’t to say this issue doesn’t have to be negotiated, but the IMF’s noise level has come to have a “the lady doth protest too much” quality to it.
• The IMF has raised the bar by taking its funding left in the old bailout off the table. This is a key point that appears to have not been widely recognized.
• The creditors want more reforms passed before they hand out more money. From their point of view, the rash of legislation passed over the last two weeks was just to give Greece its €7 billion of bridge finance, which went for an ECB payment due July 20 and IMF arrearages, repayment of the borrowing from the Greece’s reserve account. and a small new payment due.
• The IMF and Greece are again at loggerheads about the IMF getting access to information. Recall that the protracted fight between Greece and its lenders was also in very large measure about process. Greece wanted debt reduction discussions to be included in getting the last part of its “second bailout” money from the Eurozone lenders.

Debt conundrum to keep Greek banks in months-long freeze | Reuters: Greek banks are set to keep broad cash controls in place for months, until fresh money arrives from Europe and with it a sweeping restructuring, officials believe. Rehabilitating the country's banks poses a difficult question. Should the euro zone take a stake in the lenders, first requiring bondholders and even big depositors to shoulder a loss, or should the bill for fixing the banks instead be added to Greece's debt mountain? Answering this could hold up agreement on a third bailout deal for Greece that negotiators want to conclude within weeks. The longer it takes, the more critical the banks' condition becomes as a 420 euro ($460) weekly limit on cash withdrawals chokes the economy and borrowers' ability to repay loans. "The banks are in deep freeze but the economy is getting weaker," said one official, pointing to a steady rise in loans that are not being repaid. This cash 'freeze' is unlikely to thaw soon, although capital controls may be slightly softened, such as the loosening on Friday of restrictions on foreign transfers by businesses. "Ultimately, you can only lift the capital controls when the banks are sufficiently capitalized," said Jens Weidmann, the head of Germany's Bundesbank, which pushed the ECB to pare back bank funding, leading to their three-week closure.

For Greek banks, it's business as unusual -- Now that the rather bizarrely termed “bank holiday” has come to an end in Greece after three weeks - although domestic and external capital controls - continue, it is appropriate to take stock of the situation and inquire where do we go from here. As the Greek real economy has been turned into a predominantly cash-based economy, citizens and businesses have reluctantly had to learn to live without domestic banks being open for business. What this experience has exposed so far is revealing in terms of the country’s social fabric and society’s relation to commercial banks.

• * The long queues of pensioners waiting in the July heat to gain access to a bank branch in order to collect parts of their pension in cash has highlighted how many people in Greece either do not own a cash card for electronic withdrawals or are not familiar with the glossy proclamations of fast-track e-banking.
• * Reports have surfaced suggesting that citizens have started to turn to bitcoin transactions and outright barter trade.
• * The mostly patient and resigned behaviour of citizens waiting in front of bank ATMs illustrated that today’s bank runs need not include panic and endlessly long queues that make for front-page photo shots in newspapers or social media.
• * Citizens and businesses proceeded to pay down private and corporate (tax) debt, respectively, frequently through electronic transaction alternatives available via foreign bank accounts.
• * In anticipation of possible soft “bail in” legislation, which was adopted in Wednesday’s omnibus bill, citizens and businesses started to draw down their current account deposits as much as possible. Nobody wants to be caught off guard with too much liquidity in their bank accounts if and when current speculation about a bail in may become the harsh reality in the near future.

Troika to extend the unsustainable Greek debt by decades -- The Euorzone leadership remains uneasy with the third bailout of Greece. This unease can be seen in the recent delay to the start of the negotiations, with the Troika staff in Athens siting "technical reasons". The actual reason has to do with the fact that Greece's creditors have yet to reach an agreement among themselves. Apparently some Eurozone nations are still pushing for additional requirements that go beyond the austerity measures the Greek parliament recently passed. The challenges surrounding the new bailout are severe. The intrusive nature of reform enforcement by the creditors is likely to worsen the already intense animosity in Greece toward the Troika institutions. Furthermore, the negotiations will once again be taking place "under the gun" as the next payment to the ECB of over €3bn is due on August 20th. Assuming the deal will be completed in August as the can gets kicked much further down the road, Greece is being set up for a massive maturity wall, with little chance of principal repayment. And any chance of debt forgiveness is off the table.Natixis: - [Greek debt forgiveness] is unlikely to come about given the opposition of many Member States (Germany notably), the position of the Eurogroup over this issue (“nominal haircuts on the debt cannot be undertaken”) and the legal obstacle (measure would be in breach of Treaty). Under these conditions, this leaves one option, namely a re-profiling of Greek debt without touching the principal. According to Natixis here is what the liability term structure is expected to look like after the completion of this third bailout. How Troika lenders can possibly get comfortable leaving a small nation with this type of a debt profile is unfathomable, And yet, this is the most likely outcome of the upcoming negotiations.

ECB warned to pump more money to save eurozone as Varoufakis denies hacking into Greek tax system -- The European Central Bank should stand ready to use the full force of its financial firepower to stop the eurozone from falling into renewed turmoil in the wake of the Greek crisis, according to the International Monetary Fund.  It its annual health-check of the eurozone, the IMF made a controversial claim for the ECB to extend its unprecedented programme of quantitative easing beyond a provisional September 2016 end date. Despite praising the ECB's €1.1 trillion QE blitz, the report said the ECB "should ensure that banks continue to have access to ample liquidity and maintain orderly conditions in sovereign debt markets".  "If financial conditions tighten significantly, the ECB should consider further loosening monetary policy through an expansion of its asset purchase program," recommended the report.  The call will not be well received in Berlin, where Bundesbank chief Jens Weidmann has been a fierce opponent of the ECB's relfationary intervention to buy up government bonds and continued emergency support for Greek banks. The report also called on dominant creditor nations such as Germany to make full use of their strong financial position to boost investment and help contribute to rebalancing in the currency zone.  The IMF has been engaged in an arduous tug-of-war with its European partners over how to proceed with a third Greek bail-out programme.  Negotiators from the Troika of the ECB, European Commission, and IMF began official talks over a new programme in Athens on Monday. Their return marks the first presence of external bail-out monitors in Greece for over a year.  Officials were forced to leave the country following the election of the Syriza government in late January. However, the Greek parliament may need to pass a further set of "prior actions" legislation before any disbursement of an €86bn bail-out can begin.  The start of talks was overshadowed by an explosive audio recording of former finance minister Yanis Varoufakis discussing Greece's "Plan B" for an alternative currency.

Varoufakis unplugged The transcript - Financial Times - The London-based Official Monetary and Financial Institutions Forum, headed by two ex-Financial Times scribes – chairman John Plender and managing director David Marsh – on Monday released a 24-minute audiotape of a teleconference they held nearly two weeks ago with Yanis Varoufakis, the former Greek finance minister. Details of the call were first revealed by the Greek daily Kathimerini, and much of most sensational revelations Varoufakis made were about a surreptitious project he and a small team of aides worked on to set up a parallel payments system that could be activated if the European Central Bank forced the shutdown of the Greek financial system. But Varoufakis also made some other interesting allegations, including claims the International Monetary Fund believes the Greek bailout is doomed and that Alexis Tsipras, the Greek prime minister, offered him another ministry shortly after he was relieved as finance minister.We’ve had a listen to the entire call, and transcribed most of it – excluding some inconsequential asides to the teleconference’s hosts, Messrs Marsh and Norman Lamont, the former UK finance minister. The recording starts with an apparent interruption of the speakers; the teleconference operator announces that the call is now being recorded. Then Varoufakis begins:

Contingency Plans - Paul Krugman  - People are apparently shocked, shocked to learn that Greece did indeed have plans to introduce a parallel currency if necessary. I mean, really: it would have been shocking if there weren’t contingency plans. Preparing for something you know might happen doesn’t show that you want it to happen. Someday, maybe, we’ll know what kind of contingency plans the United States has had over the years. Plans to invade Canada? Probably. Plans to declare martial law in the event of a white supremacist uprising? Maybe.  The issue now becomes whether Tsipras was right to decide not to invoke this plan in the face of what amounted to extortion from the creditors. I think he called it wrong, but God knows it was an awesome responsibility — and we may never know who was right.

Treason charges: What lurks behind the bizarre allegations | Yanis Varoufakis - The bizarre attempt to have me indicted me on… treason charges, allegedly for conspiring to push Greece out of the Eurozone, reflects something much broader. It reflects a determined effort to de-legitimise our five-month long (25^th January to 5^th July 2015) negotiation with a troika incensed that we had the audacity to dispute the wisdom and efficacy of its failed program for Greece. The aim of my self-styled persecutors is to characterise our defiant negotiating stance as an aberration, an error or, even better from the perspective of Greece’s troika-friendly oligarchic establishment, as a ‘crime’ against Greece’s national interest.My dastardly ‘crime’ was that, expressing the collective will of our government, I personified the sins of:

• Facing down the Eurogroup’s leaders as an equal that has the right to say ‘NO’ and to present powerful analytical reasons for rebuffing the catastrophic illogicality of huge loans to an insolvent state in condirion of self-defeating austerity
• Demonstrating that one can be a committed Europeanist, strive to keep one’s nation in the Eurozone, and, at the very same time, reject Eurogroup policies which damage Europe, deconstruct the euro and, crucially, trap one’s country in austerity-driven debt-bondage
• Planning for contingencies that leading Eurogroup colleagues, and high ranking troika officials, were threatening me with in face-to-face discussions
• Unveiling how previous Greek governments turned crucial government departments, such as the General Secretariat of Public Revenues and the Hellenic Statistical Office, into departments effectively controlled by the troika and reliably pressed into the service of undermining the elected government.

It is amply clear that the Greek government has a duty to recover national and democratic sovereignty over all departments of state, and in particular those of the Finance Ministry. If it does not, it will continue to forfeit the instruments of policy making that voters expect it to utilise in pursuit of the mandate they bestowed upon it.

Mark Ames of Pando Interviews Your Humble Blogger on Greece - Yves Smith - I hope you’ll enjoy this interview with Mark Ames: Naked Capitalism: “We are in the business of making trouble.” It’s unlocked only for the next 48 hours, so please check it out soon!  Also, there’s one small correction that didn’t get into the version that Mark put up. Hopefully it will be revised soon, but in case you see the article before Mark makes the update, I make a statement about “negative interest rates” that should read “negative real interest rates”.

Greece starts bailout talks with dispute on upfront actions-- Greece’s latest cycle of talks with its creditors started with a quarrel, as officials argued over what upfront commitments the government has yet to implement in order to tap emergency loans next month. Technical experts from the European Central Bank, the International Monetary Fund, the European Stability Mechanism and the European Commission are in Athens to negotiate with their Greek counterparts on the list of policies that must be legislated over the next three years in exchange for a lifeline of as much as 86 billion euros ($95 billion). A so-called Memorandum of Understanding would need to be agreed upon in the next two weeks, so that a bailout can be in place before a payment on bonds held by the ECB comes due on August 20. Failure to do that might force another bridge loan to avert default, which may also come with strings attached. The latest talks will focus on changes to the Greek pension system, labor market, fiscal policy, and market regulation. Creditors want Tsipras to restore trust by legislating some measures now, including sales tax increases, before talks on a new bailout can begin. In two votes over these so-called prior actions, held earlier this month, about a quarter of his Syriza- party lawmakers defected, stripping the premier of his parliamentary majority and forcing him to rely on opposition backing. A Greek Finance Ministry official on Monday told reporters that Greece has already voted through Parliament all the measures it needed to implement before work on a deal can commence.

Another Bridge Loan Likely as Greek Talks Break Down; Shocked Over Parallel Currency Plans? Why? --  Greece insists it has met all of the conditions for another bailout, but only one vote matters, that of the creditors who say Greece hasn't. One of the stickiest issues is hiking taxes on farmers. But if tax hikes is what the creditors want, that's what they will get. Greece should realize that by now. Nonetheless, the bickering continues, and it will continue until Greece finally is forced out of the eurozone. Meanwhile, Denials Fly in War of Nerves Over Greek Debt Talks. Any hope of a fresh start in fraught relations between Greece's leftist government, purged of its most radical members, and the institutions representing its creditors, appeared to be dashed by the flurry of assertions and rebuttals. The two sides couldn't even agree on when the talks began.Differences included the pace and conduct of bailout talks, whether or not Greece needs to enact further laws before a deal, the reopening of the Athens stock exchange, and the activities of former finance minister Yanis Varoufakis, who continues to heap abuse on the creditors in his blog.  Greek official said suggestions that Greece needed to pass further reform legislation before a bailout deal were not justified by the euro summit statement or subsequent exchanges. However, euro zone officials made clear that Athens must enact measures to curb early retirement and close tax loopholes for farmers before any new aid is disbursed. Greece needs more finance by Aug. 20, when it owes a 3.5 billion euro payment to the European Central Bank.

VAT hikes to make Greek destination less popular - The country’s tourism package will become much dearer as of October, when tax hikes to related services such as food service, accommodation and transport come, into full application. As of last Wednesday, Greece has the fourth highest value-added tax rate in the European Union in food service (23 percent), behind only Hungary (27 percent), Denmark (25 percent) and Romania (24 percent). From October it will also have the sixth biggest VAT rate in accommodation (13 percent), trailing only Denmark, Slovakia, Britain, Hungary and the Czech Republic in the EU. A comparison of Greece with rival destinations shows how damaging the VAT hike will likely be for the country’s tourism: Croatia has a 13 percent rate on both accommodation and food service; Bulgaria charges 9 percent on hotels and 20 percent on catering, Italy and France have 10 percent in both categories and Cyprus has just 9 percent. The increase in the tax deposit enterprises have to pay, from 55 percent to 75-100 percent, shows the problems tourism firms will soon face.

More on the IT Implications of a Grexit  -- Yves Smith - Yves here. It has been surprising to see how much resistance readers voice to the fact that making large-scale IT changes with major financial firms is extremely time consuming and that most large scale projects fail. That means the difficulty of converting IT systems to incorporate drachma is an major process not just at single institutions, but even more so across complex and fragmented systems like electronic point of sale devices, like credit card terminals, and ATMs. That is why it took eight years of planning and three years of conversion for the introduction of the euro to go smoothly. And the size of the code base and the volume of transactions running over these systems has increased, while most of the legacy code on mainframes from that era remains in place. Members of the commentariat also seem unable to grasp how changing this code is very labor intensive. As reader Andrew Williams put it:  What many of you “it’s easy” people fail to understand is that mainframe programming is nothing like today’s coding. COBOL, PL/I etc. do not support modern concepts like objects, polymorphism or anything else. Think assembly language with nicer mnemonics. XML? Hah, there is virtually no such thing for the mainframe. There’s no git, no mercurial etc. Virtually none of the tools that exist for Wintel/Linux are available to mainframers. In large organizations there are hugely cumbersome change management processes. Where I am, a simple code change might take a minimum of eight weeks to deploy, and we only have a dozen systems. Actual application changes like envisioned here would take at least six to twelve months for coding and testing, and then another four months for deployment. For large banks, I would expect the timeframes to be even longer because the systems are so critical.

Lagarde Says No To IMF Aid For Greece - Over the course of six painful months of negotiations between Athens and its creditors, one concern lurking in the background was whether the IMF would be on board with a third program for Greece.  Questions over the IMF's role in the new €86 billion aid package came to a head this month when two consecutive "leaks" showed that according to an internal analysis of Greece's debt sustainability, the Fund would not be able to participate in the new bailout unless EU creditors were willing to write down their portion of Greece's debt.  This touched off a politically charged and explosive debate which pitted the IMF (and, by implication, the US) against Brussels (and, by implication, Berlin) on how to go about providing debt relief for the Greeks - the IMF pushed for haircuts, while Brussels favored "re-profiling." Now, we get the first sign that the IMF may be ready to officially pull out. Here's FT, with the breaking story: The International Monetary Fund’s board has been told Athens’ high debt levels and poor record of implementing reforms disqualify Greece from a third IMF bailout of the country, raising new questions over whether the institution will join the EU’s latest financial rescue. The determination, presented by IMF staff at a two-hour board meeting Wednesday, means that while IMF staff will participate in bailout negotiations currently under way in Athens, the Fund will not decide whether to agree a new programme for months – potentially into next year.

IMF Reiterates Greece Disqualified for Bailout, Participation Depends on Debt Relief and Reforms - Once again the IMF is back in the news in regards to Greece.  The IMF staff told the board of directors Greece Disqualified from New IMF Program.  Yet, Germany insists IMF be a part of the program. The reason for the latter is Germany will have to pony up lots more money if the IMF is not involved. The staff presented this message to the board this week, along with the message eurozone bailout lenders first need to agree on "debt relief". The International Monetary Fund’s board has been told Athens’ high debt levels and poor record of implementing reforms disqualify Greece from a third IMF bailout of the country, raising new questions over whether the fund will join the EU’s latest financial rescue.The determination, presented by IMF staff at a two-hour board meeting on Wednesday, means that while IMF staff will participate in bailout negotiations currently under way in Athens, the fund will not decide whether to agree a new programme for months — potentially into next year.The IMF’s assessment adds another source of complexity, just as Athens and its bailout monitors begin discussions to try to conclude a deal before a tight August 20 deadline. According to a four-page “strictly confidential” summary of Wednesday’s board meeting, IMF negotiators will take part in policy discussions to ensure the eurozone’s new bailout “is consistent with what the fund has in mind”. But they “cannot reach staff-level agreement at this stage”. The fund will decide whether to take part only after Greece has “agreed on a comprehensive set of reforms” and, crucially, after eurozone bailout lenders have “agreed on debt relief”.

IMF Staff Attempts to Spread Discord Over Greek Bailout to IMF Board  - Over the past few weeks I’ve been covering growing discord between different factions of the IMF over official IMF policy to Greece. This revolt, which hasn’t been clearly reported on up until now, has now been made crystal clear by recent developments. The FT headline reads “Greece disqualified from new IMF bailout, board told”. This headline explicitly acknowledges that the “board” is being told something and thus for the first time acknowledges the IMF as an organization with constituent parts. In this case the development is that the IMF staff is directly telling the board that it “cannot reach staff-level agreement at this stage”. To ensure this agreement among the staff ,Greece will have to agree “on a comprehensive set of reforms” and creditors will have to be “agreed on debt relief”. This is an important development but it must be reiterated that despite reports to the contrary, IMF staff agreement with a policy is not required by the Articles of Agreement. Ultimately its the board’s decision to bailout a country . Therefore the more important question is how has the staff briefing affected the Board? Spiegel reports on the Board’s comments this way: According to the board minutes, several non-European board members — including from Asia, Brazil and Canada — gave warning over the need to “protect the reputation of the fund”, and the document says Ms Lagarde acknowledged their concerns.“[Ms Lagarde] stressed that in their engagement they have to be mindful about the reputation of the fund,” the summary says. This signals that it is “just” the usual suspects who were already amenable to the staff’s message before they were briefed officially. It is very interesting and important that the Peter Spiegel doesn’t report objections emanating from the United States or European board members. Remember that the U.S. Represents 1/6 of the board and the EU represents a 1/3. Together they make up half the board vote. They can more or less push through a deal over staff objections on their own.

The wheels on the bus - I have an image in my mind. Its a bus running downhill, and its brakes have failed. There are four men in the front cab. The two men in the middle are both trying to control the steering wheel to keep the bus on the road. The man to their right has control of the accelerator, and is pushing on the gas hoping this will crash the bus to the right. The fourth man to their left controls nothing, but as his pleas to stop pressing the accelerator fall on deaf ears, he begins to wonder whether it would be better for the passengers to grab the wheel and crash the bus to the left. The three other drivers do not agree on very much, except that it is all the fault of the guy on the left, and now appear to be thinking about throwing him off. As the bus hurtles downhill swerving from side to side, its passengers are battered, some injured, and a few are jumping off.  I do not need to explain the symbolism. I tried to change the image to explain why the man on the right refuses to stop pressing on the accelerator of growing primary surpluses, but gave up because the real reason is that he wants to crash the bus anyway. (The argument that the Eurozone’s rules do not allow debt write-offs is just nonsense.) Otherwise I think the image works well. The two men in the centre represent Tsipras and maybe Hollande. Hollande is saying that if only you would let me have the wheel (‘structural reform’) all would be well, but in truth the main reason the passengers are being injured (unemployment and welfare cuts) or are jumping (migration) is the speed of the bus. The central question is whether the men in the middle are delusional. By keeping the Greek economy on the road that is the Eurozone are they only going to prolong the agony with the same inevitable crash which is Grexit?

'Iron lady' set to play central role in next act of Greek bailout drama - Delia Velculescu, the Romanian economist chosen to lead the International Monetary Fund’s negotiating team in Greece, was dubbed the “iron lady” during the fraught talks over Cyprus’s bailout. Given the poor relationship between Athens and its creditors, her toughness will be tested anew in the coming days. Velculescu arrives in Athens on Thursday amid uncertainty over the IMF’s willingness to throw its weight behind a third bailout for the stricken eurozone state. Alexis Tsipras, the Greek prime minister, hopes to negotiate a deal before 20 August, but the IMF will subject any agreement to rigorous examination. The IMF has indicated that it regards Greece’s debt burden as unsustainable, and any new deal must include debt relief. It is far from clear whether Athens’ eurozone creditors are ready to offer this. Velculescu will have to decide what role the Washington-based lender is willing to play in any new rescue – and what should be expected of Greece in return. Velculescu holds a masters and PhD in economics from Johns Hopkins University in Maryland, and has been at the IMF since 2002. She co-authored an earlier IMF review of the Greek economy in 2009, and this, coupled with her time in Cyprus as the IMF’s chief representative between 2012 and 2014, has led to her securing a prominent role in trying to resolve the ongoing crisis in Greece.

How could the third Greek bailout change without the IMF? -- The Financial Times reported yesterday that the IMF is unlikely to be taking part in the third Greek bailout – at least not immediately and not until Greece has a begun implementing reforms and until the Eurozone has agreed to significant debt relief for Greece. This could take some time. However, it was not entirely surprising. Since the first leaked debt sustainability analysis, it was abundantly clear that the differences between the Eurozone and IMF on debt relief were “very large” (as the IMF reportedly put it). The IMF requires there to be a clear possibility/willingness to reform and debt sustainability over the long term in order to join any programme. These factors have of course been fudged in the two previous Greek bailouts. Many had assumed the same would happen this time around, however, clearly the broader membership as well as the staff of the IMF believe doing so would further damage its credibility. Working on the assumption that the bailout will total around €86bn (it could well end up being more given the economic decline in Greece) the IMF would have been expected to provide between 10% (as in the Cypriot bailout) and a third of the funding (as in the Irish, Portuguese and Greek bailouts). This leaves the Eurozone having to stump up between a further €8.6bn and €28.7bn. Given that the Klaus Regling, Head of the Eurozone’s bailout fund the ESM, has suggested that he believed the ESM share would total €50bn, it could well be closer to the latter. In terms of specific country exposure this could see Germany’s exposure jump by a further €1.7bn and France’s by €1.3bn (an upper bound). The funding situation, which already looked questionable given the IMF hesitancy, now looks precarious and poses some tricky questions for a number of countries.

Bailout Money Goes to Greece, Only to Flow Out Again - The Greek businessman was nervous as he carried a suitcase stuffed with cash through security at the Athens airport a few months ago. But the distracted and overworked officials waved him through.A few hours later the man touched down in Frankfurt, where he quickly deposited the money in a German bank.The stash was part of 40 billion euros, or about $44 billion, that businesses and individuals have withdrawn from Greek banks since December, exacerbating the country’s financial woes.The cash exodus is a small piece of a bigger puzzle over why — despite two major international bailouts — the Greek economy is in worse shape and more deeply in debt. It is a politically charged issue that will color the negotiations on a new financial assistance package worth €86 billion, about $95 billion.  Much of the previous bailout funds have gone to pay off Greek bonds held by private investors and other eurozone governments, rather than stoke growth. Within Greece, the money was supposed to help replenish banks’ capital, to get them lending to revive the moribund economy. Instead, it sat in banks’ coffers as bad debts piled up, and it bought time for Greeks and foreign investors to get their money out.

Greek Bonds Plunge As Tsipras Threatens Snap Election - 10 year Greek bond yields are spiking this morning (and prices therefore plunging) as trading actvity picks up in the dormant peripheral capital markets. The 2025s are downover 5pts from their last traded price back in late June with yields spiking back up toward 12.5%. This derisking comes after, as we detailed earlier, not only is the Greek economy collapsing but while Brussels is "satisfied with the smooth and constructive cooperation with the Greek authorities and that should allow us to progress as swiftly as possible," Greek PM Tsipras is threatening snap election as rebellion within 'his' party grows.

Greece's Tsipras asserts control over party with congress vote -- Greece's ruling Syriza movement backed a call on Thursday from Prime Minister Alexis Tsipras to hold an emergency party congress as he seeks to assert his control over rebel lawmakers balking at new bailout talks. At a meeting of the Syriza movement's 200-member central committee held in an old cinema hall, Tsipras defended his decision to accept harsh bailout terms as the best deal anyone could win for Greece. He threw down the gauntlet before his critics by proposing an immediate membership ballot on the bailout negotiation, but said his preference was for Syriza to hold an emergency congress in September to deliberate strategy. After hours of debate, the committee backed his proposal in a show of hands. The emergency congress will allow Tsipras to bring in new members and capitalize on the wider public support he has secured over the past two years, making it easier to defeat the far-left camp. "We are telling the Greek people, loud and clear and with no remorse, that this is the deal we managed to bring to them and if there is someone who thinks that they could have achieved a better deal, let them come out and say that," he told the session that included dissenters like parliament speaker Zoe Konstantopoulou.

Capital controls are eased but companies see it as insufficient - The government has proceeded to a further relaxation of capital controls regarding the international transactions of enterprises, as companies and market entities warn about the impact of restrictions on the country’s production structure. With a new legislative act the government has expanded the daily limit of money that can be forwarded abroad per client from 100,000 euros to 150,000 euros, the cumulative limit per systemic bank from 3.4 million euros per day to 5 million (with a proportionate adjustment for smaller lenders) and the daily limit that banks committees can approve from 15 million euros to 22 million. The new act also provides for the special Banking Transactions Approval Committee at the State General Accounting Office to grant some flexibility to bank committees so that they can create regional sub-committees according to their geographical dispersion and better serve the demands of their clients. Market associations, however, warn that steps to ease capital controls are only on paper, adding that the increase in the limits is not sufficient to cover the needs of the corporations and the economy. The Greek International Business Association (SEVE) noted in a letter sent to Alternate Finance Minister Dimitris Mardas that “the easing of capital controls, though generating expectations in the business community, are not put into practice, creating indignation among producing and exporting enterprises. For instance, banks delay indefinitely the approval even of the early ending of time deposits of corporations as provided by the legal framework.”

The Challenges of the Greek Crisis -- The Greek crisis has abated, but not ended. Representatives of the “troika” of the European Commission, the European Central Bank and the International Monetary Fund returned to Athens for talks with the Greek government about a new bailout. This pause allows an accounting of the many challenges that the events in Greece pose to the international community. The main challenge, of course, is to the Greek government itself, which must implement the fiscal and other measures contained in the agreement with the European governments. These include steps to liberalize labor markets as well as open up protected sectors of the economy. While these structural reforms should promote growth over time, in the short-run they will lead to layoffs and reorganizations. At the same time, Prime Minister Alex Tsipras must oversee tax rises and cuts in spending. The combined impact of all these measures, which follow the virtual shutdown of the economy during the protracted negotiations with the European governments, will postpone any resumption in growth that past efforts may have generated.It is not clear how long the Greek public will endure further misery. Any form of debt restructuring may give policymakers some justification to continue with the agreement. New elections will clarify the degree of political support for the pact. But the possibility of an exit from the Eurozone has not been removed, either in the eyes of Greek politicians or those of officials of other governments.The Greek crisis, however, is not the only hazard that the Eurozone faces. The Eurozone’s government have yet to come to terms with the effects of the global financial crisis on its members’ finances. A split prevails between those countries that ally themselves with the German position that debt must be repaid and those that seek with France to find some sort of middle ground. Other European countries with debt/GDP ratios of over 100% include Belgium, Portugal, and Italy. Weak economic growth could push any of them into a situation where the costs of refinancing could become daunting. How would the Eurozone governments respond? Would they bail out another member? If so, would the terms differ from those imposed on Greece? Would European banks be able to pass the distressed debt on to their own governments?

2,100 migrants try to storm Eurotunnel site in Calais - : (AP) — About 2,100 migrants tried to storm the area surrounding the Eurotunnel early Tuesday before being repelled by police, an official in the northern French port of Calais said. The official, who spoke on condition she not be named because she wasn't authorized to speak publicly, said police arrested 200 of the migrants. She said it was the largest such attempt by migrants to enter the site. Calais is a key port for sea and land crossings to Britain. In recent months, thousands of migrants from Eritrea, Sudan and beyond have camped out around the city, and some try to sneak across the English Channel by getting onboard trucks and freight trains. The encampments have soured relations between Britain and France, which blame each other for failing to cope with the crisis. On Tuesday, British Home Secretary Theresa May announced that her government has agreed to provide an extra 7 million pounds ($10.8 million) to boost security at the Channel Tunnel railhead in Coquelles. May disclosed the extra funding following a meeting between British and French officials.

Migrants in Calais Desperately Rush the Channel Tunnel to England, Night After Night - The barbed wire cut her hands, but she did not feel the pain. The police seemed to be everywhere. She thought of her 5-year-old son back in Africa and ran, zigzag through the falling shadows, once almost colliding with an officer in a helmet. But before she could hurl herself onto the train bed transporting trucks filled with Britain-bound produce, a French officer caught up with her, she recalled in an interview on Thursday. Blinded by tear gas, she stumbled and bruised her right ankle. After being ejected from the complex around the tunnel, it took her five hours to limp the nine miles back to the refugee camp of makeshift shelters that its 3,000 inhabitants call the “jungle.”The desperate scene playing out each night and day in Calais, with migrants trying to vault fences or cut their way through them and climb onto trains or into trucks going across the Channel to England, is just one chapter in a painful drama playing out across Europe. For many of the migrants who have been coming to the Continent from Africa, the Middle East and beyond, Calais, a mere 21 miles from the white cliffs of Dover, is their last stop. If they make it across to Britain, many believe they will have reached safety and a better life. Some are attracted to Britain because they speak some English, others because they see better job prospects there than on the Continent. A few even cite a strong pound. Those who make it as far as this port city often express striking and implacable certainty about their right to go the rest of the way, having come so far.

EU referendum 'within a year': David Cameron fast-tracks vote on Britain's membership of European Union to June 2016 - UK Politics - UK - The Independent: David Cameron is set to hold the in-or-out referendum on Britain’s future membership of the European Union in June next year and will announce the fast-tracked date as the centrepiece of his party’s annual conference in October. Although the Queen’s Speech in May promised the British electorate would be given its first chance since 1975 to have a say on EU membership, the Government did not name a date for the vote, only that it would be held before the end of 2017. Chancellor George Osborne was believed to be keen for the referendum to be held later rather than sooner to maximise chances of securing the best possible deal for Britain, but the Prime Minister has now calculated that a 2016 vote will give him a better chance of promoting what may end up being a limited package of EU reforms, and of highlighting the economic risks Britain could face if it left the EU. The Independent on Sunday has learned that Mr Cameron has decided to pencil in June of next year.  The source insisted that the 2016 date, and the parliamentary bill to approve it, would not prove to be a barrier in the House of Lords.

UK Government Admits 250,000 Porn Websites Visited On Parliament PCs - Prime Minister David Cameron vowed in 2013 to block pornographic material from "the darkest corners of the internet." Cameron announced in July that most households in the UK would have pornography blocked by their internet provider unless they chose to receive it.  Online pornography was "corroding childhood" and "distorting" children's understanding of sex and relationships, he argued. The UK's biggest internet service providers have agreed to the filters scheme meaning it should cover 95% of homes. But one of Mr Cameron's advisers, Wikipedia co-founder Jimmy Wales, said the plans were "absolutely ridiculous". It appears he better start at home...  Thanks to a Freedom of Information request by the Daily Express, RT reports, over 247,000 attempts were made to visit X-rated websites from the UK Parliament’s computer network last year, with the numbers spiking during parliamentary recess in April...

Obese people who refuse to lose weight could see benefits cut, David Cameron to announce - - Overweight people who refuse to lose weight could see their benefits worth around £100 a week cut or suspended, David Cameron will announce. “We must look at what we do when people simply say no thanks and refuse that help but expect taxpayers to carry on funding their benefits,” he will tell reporters during a trade visit to Singapore. The aim of the policy will be to make sure more people seek treatment, the PM, who was described by one newspaper as “portly” when he was pictured topless on a Cornwall beach two years ago, will say. He will add: “Over the next five years I want to see many more people coming off sick benefit and into work,” according to The Telegraph. Professor Dame Carol Black, chair of the Nuffield Trust, will conduct a major review of the welfare system and will report back to the Prime Minister “on how best to achieve that”. The cost of obesity to the NHS is £5 billion a year and £27 billion to the wider economy each year, according to the Department of Health. Around 90,000 people also claim sickness benefits whose illness is primarily due to their drug or alcohol addiction, meaning that around 25 per cent of alcoholics and an estimated 80 per cent of heroin and crack users claim benefits, according to figures released by Downing Street.

3-Year-Old London Child Deemed "Extremist"; Placed In Government Reeducation Program -- The United Kingdom has gone batshit crazy. There’s simply no other way to put it. I warned about Britain’s “war on toddler terrorists” earlier this year in the post: The War on Toddler Terrorists – Britain Wants to Force Nursery School Teachers to Identify “Extremist” Children. Here’s an excerpt: Nursery school staff and registered childminders must report toddlers at risk of becoming terrorists, under counter-terrorism measures proposed by the Government. The directive is contained in a 39-page consultation document issued by the Home Office in a bid to bolster its Prevent anti-terrorism plan. The document accompanies the Counter-Terrorism and Security Bill, currently before parliament. It identifies nurseries and early years childcare providers, along with schools and universities, as having a duty “to prevent people being drawn into terrorism”. Never fear good citizens of Great Britain. While your government actively does everything in its power to protect criminal financial oligarchs and powerful pedophiles, her majesty draws the line at toddler thought crime. We learn from the Independent: A three-year-old child from London is one of hundreds of young people in the capital who have been tipped as potential future radicals and extremists.As reported by the Evening Standard, 1,069 people have been put in the government’s anti-extremism ‘Channel’ process, the de-radicalization program at the heart of the Government’s ‘Prevent’ strategy.